In brief
Over the past five years, changing market dynamics have led to a steady erosion in market capitalization among telecommunication companies (telcos). Forward-thinking telcos are embarking on an organization-wide digital transformation journey to expand their reach and enter untapped markets, with the aim of creating new value propositions in the fast-evolving environment. This journey may involve targeting the B2B segment currently underserved by the industry.
In a bid to increase revenues, telcos have started to transform their B2C business through product rationalization and digitization. However, the B2B segment’s customer journeys have remained largely unchanged, and the industry has not fully addressed its pain points. While some telcos have attempted to expand their B2B revenue by leveraging 5G to offer new solutions, overstretching beyond core competencies has resulted in limited success.
Furthermore, complex IT legacy and loosely integrated billing systems still impede the organic growth of many telcos. However, more advanced players are already experimenting with new generative AI technology to help accelerate development of sales proposals and simplify multicountry and multiproduct B2B ordering. While this helps improve the efficiency of B2B sales, telcos need to rethink their B2B business to adequately serve this segment.
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Read moreTelcos first need to shift their business model from selling connectivity to becoming a trusted advisor to businesses while developing a robust digital infrastructure. They can consider adopting a two-pronged strategy that combines a top-down go-to-market (GTM) approach with the development of digital infrastructure capabilities through a bottom-up approach.
Enterprise customers are primarily interested in holistic solutions that address their complex needs. In this context, telcos must shift from traditional service models where relationships are maintained at the infrastructure or connectivity layers to a model where relationships are maintained at a solution provider level by offering integrated software-as-a-service (SaaS) solutions. This strategic pivot demands a deep understanding of customers’ industries to create solutions that are not only technologically advanced but also present a strong business case for the customer. Therefore, telcos should adopt a product- or service-led perspective that focuses on addressing inherent problems faced by their customers.
The transition toward cloud-based workloads and growing complexity of connectivity requirements highlight the critical need for a robust foundational infrastructure in the telco industry. A strong focus on enhancing infrastructure-as-a-service (IaaS) and network-as-a-service (NaaS) capabilities is necessary to support the advanced solutions-as-a-service layer effectively. These are key capabilities that telcos can leverage as they play to their strengths since they are strongly aligned with their connectivity business.
Concurrently, the bottom-up digital infrastructure development approach is critical for building operational capabilities to support the platform-as-a-service (PaaS) and SaaS stack above the infrastructure layer. This involves a comprehensive assessment and enhancement of telcos’ foundational infrastructure elements, such as network capacity, flexibility, reliability and scalability.
This EY-Parthenon report examines how the telco industry can build a strong proposition for its underserved B2B segment.
The following are key considerations on how telcos can better capture B2B opportunities.
A well-developed digital infrastructure forms the backbone of telcos’ service offerings, enabling them to handle large volumes of data, maintain high levels of uptime and offer the kind of seamless connectivity that modern businesses require. Some strategic digital infrastructure imperatives for telcos include strengthening NaaS and IaaS capabilities and focusing on private networks.
Telcos should focus on enhancing NaaS and IaaS capabilities to become a core enabler that provides enterprises with scalable and flexible solutions. This helps them improve their connectivity business and maintain its competitiveness against non-telco players.
Private networks provide the opportunity to build hyper-localized, cost-efficient zones with better network, storage and computing performance for new B2B use cases. Telcos should focus on building 5G zones or partnering with system integrators (SIs) and network equipment providers implementing 5G projects for private networks.
In a competitive environment where tech companies have strong relationships with enterprises, telcos may find it difficult to compete on providing solutions that do not require end-to-end verticalization. Therefore, it is essential for telcos to focus on vertically integrated solutions that leverage critical digital infrastructure. Vertically integrated solutions require integration across IaaS, PaaS and SaaS — a comprehensive approach where different network, computing and front-end software layers are combined to create a complete, end-to-end service or product.
Telcos can focus on owning the customer relationship at the SaaS layer and orchestrating the rest of the stack through strategic partnerships. It is crucial for telcos to own and operate the NaaS and IaaS layers so that they can better leverage their core competencies to remain relevant in the value chain and consistently deliver quality, reliable services.
Another option is to partner with multiple SIs or SaaS providers offering Industry 4.0 solutions but with the telco owning the PaaS and IaaS layers and a strong orchestration platform that can reduce integration time and cost for partners.
PaaS has been gaining prominence among telcos over the last few years, particularly for Internet of Things connectivity platforms, communications platform-as-a-service (CPaaS) and multi-access edge computing platforms. Of these platforms, CPaaS is the most natural extension of the telco’s core capabilities.
However, the telco’s role within CPaaS has been largely confined to that of a network infrastructure provider, with only a few companies developing their own application programming interface (API) marketplaces. The launch of 5G services should present many opportunities, with the next CPaaS phase expected to focus on programmable networks with 5G APIs using business-to-business-to-everything (B2B2X) business models. Network-critical operational applications are expected to be the primary use case, providing telcos with an additional opportunity to build open API marketplaces.
Telcos should focus on open APIs and alliances for their PaaS initiatives — especially those relating to CPaaS and orchestration platforms — to be effective. This would allow enterprises and developers to use standard API calls for seamless integration across offices and factories in multiple geographies. Telcos should also move up the value chain by offering microservices and end solutions to B2B customers. This involves leveraging the strength of digital infrastructure to enable PaaS and SaaS services on top, which will differentiate the telco from competitors.
A significant opportunity exists for telcos to move beyond selling connectivity to become a technology partner for enterprises. However, they need to focus on building a strong digital infrastructure that can support new business models, have a solution-led approach for go-to-market initiatives and explore “as-a-service” platform models (including CPaaS) to effectively seize this opportunity. This will require an organization-wide mindset shift, which can eventually transform the telco into a techco.
Bastien Puech, EY-Parthenon Partner, Technology, Media & Entertainment and Telecommunications Strategy, Ernst & Young Solutions LLP and Anshul Mahendra, EY-Parthenon Associate Partner, Technology, Media & Entertainment and Telecommunications Strategy, EY Corporate Advisors Pte. Ltd. also contributed to this article.
Telcos can better serve the B2B segment by shifting from traditional service models to one supported by well-developed digital infrastructure and offering vertically integrated solutions. They need to go beyond selling connectivity to become a trusted advisor to businesses and explore “as-a-service” platform models.
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