CHICAGO-A deregulated marketplace characterized by aggressive competition will bring new challenges to traditional telecommunications companies in the future, according to “Vision 2010: New strategies for communications enterprises,” an Andersen Consulting/Economist Intelligence Unit study.
Companies will be compelled to embrace alliances, joint ventures and outsourcing to enhance shareholder and customer value. Conversely, telecommunications companies that do not adopt teaming relationships in this environment risk losing up to 30 percent of their customers.
“It is possible that as the competitive floodgates open, telcos could lose 15 to 30 percent of their customers each year,” said Joellin Comerford, Andersen Consulting global managing partner for outsourcing in the communications and high technology industries. “Customers are becoming much more sophisticated and will gain new delivery options.”
About 60 percent of survey respondents said changing customer demands are forcing them to alter operations to add customer-facing expertise in the quickest, most cost-efficient manner.
About 83 percent of the respondents predicted meeting customer needs will force them to alter their structures by 2010. Many said they expect to do so by aligning with companies that can provide such expertise as well as spinning off satellite companies to service the parent company.
“The next 10 years will see more change in the telecommunications industry than has occurred in the last 100 years. The industry’s reorganization is much nearer the beginning than the end,” Comerford said.
Telcos will spin off nontraditional functions to create more entrepreneurial environments free from interference, according to the report. Among the benefits, respondents say, is that it is easier to create a more risk-taking culture in a smaller entity rather than trying to introduce broad changes in a large, established parent organization.
The study also suggests in order for telcos to meet customer demand for more personalized service, lower prices and consolidated billing, companies will be forced to align with other firms providing the necessary expertise. Respondents said that while 18 percent of their total business depends on alliances today, they see that percentage will more than double to 42 percent by 2010.
Three distinct business models will emerge in the future, according to the report.
The domination of a piece of business-a company becomes a dominant player in one business area such as long distance, mobile service or broadband networks.
Horizontal expansion-telcos such as AT&T Corp. expand their operations to nearly all the businesses in the communications industry, from traditional phone service to Internet access and cable.
Becoming a solution provider -companies, or subsidiaries of companies, act as brokers and integrators, assembling the best services into customized, bundled product for customers. Under this model, they own little, if any, of the physical infrastructure, and manage few of the services themselves.
