The digital economy presents both opportunities and challenges for Communications Service Providers (CSPs). Behind both is the biggest challenge of all: changing the culture and mindset of a large organization. That’s why many operators have chosen to dip their toes in the water of the digital economy - through digital divisions or external investment - rather than embrace it wholeheartedly into the core of their business.
This is understandable. A CSP wishing to become a Digital Service Provider needs to move from a world view where the CSP is at the center of a tightly held universe to one where the CSP is an integral part of one or more ecosystems. A new way at looking at operations, interfaces, and interactions is required for emergent DSPs.
At the heart of the cultural change required by CSPs: the adoption of openness, building partnerships, and focusing on enhanced customer experience. This interlinked trio forms the levers to driving monetization in the digital economy, and all are dependent on a further factor: simplification of operations - to drive profitability and success in the market.
Telecom Asia e-Brief: Digital transformation
Any new business model for transitioning CSPs demands opening up the organization to access from outside, involving multiple partners, and working in new industry verticals. Openness is at the center of an ecosystem business model that demands a high degree of transparency and sharing. Standardization of processes and interfaces, and embracing industry standards wherever possible, simplifies partner on-boarding and ongoing operations, as well as facilitating continuous improvement.
Partnerships exploit this new openness, bringing in a wide range of products and services, including expert business solutions that the CSP could never offer in its own right. Managing partners - making it easy to connect, provision offers, collect customer payments, and share revenue - is fundamental to the digital business model. Premium partners will scrutinize the emergent DSP’s capabilities prior to agreeing to work together, unwilling to risk their brand with an inferior user experience.
Which brings us to customer experience and how it drives monetization. DSPs looking to the long term need to differentiate their market positioning from mainstream OTT providers. While they have the advantage of an ongoing relationship with their customer base, they struggle when offering me-too products to the market, driving differentiation with price rather than value.
Focusing on the unique value proposition that the close coupling of digital products and network quality of service that DSPs can offer their customers will help shape market offerings. For example, the integrity of cloud services, premium video or eHealth offerings is highly reliant on the underlying communications network. Service and delivery need to be managed in unison to create a compelling market offering that can be offered at a premium.
So emergent DSPs have a lot to focus on - from building partnerships, to opening up their business, to providing the experience their customers demand. To achieve this, many will find that simplification will streamline transition to the digital economy. Simplification means standardizing processes and systems, removing silos, and removing overly customized and configured systems.
Traditional CSP practices saw high investment in customized and in-house systems and processes. These investments may have delivered unique features that drove competitive differentiators in the past, but now they simply block an operator’s ability to adapt. Evolving CSPs are focusing on flexibility, offering SaaS or SaaS-like experiences to their partners and customers. Often they are commoditizing their infrastructure and software to simplify their operations, and are turning to managed services arrangements to transform and manage their BSS as a service. This frees valuable skills to develop the partnership and product strategies required for building the digital business.
The way forward
We will see both CSPs and DSPs move to simplify their infrastructure in the coming years. The CSP will have a focus on operational excellence, efficiency and low cost, perhaps offering a handful of partner products to create a market niche. The DSP on the other hand will focus on innovation and fast time to market, embracing openness, sharing and the adoption of a wide range of industry standards to underpin market success. For both there is much to gain and many challenges to overcome, but with the right mindset, they can find a successful path to growth.
Ian Watterson is managing director of APAC at CSG International
This article was first published in Telecom Asia e-Brief: Digital Transformation