Telco Cloud Services: How can traditional telecoms operators become successful cloud service providers?
The first in a series of blog posts looking at the challenges facing telco operators attempting to break in to the SaaS market.
As the steep decline in telco voice revenues continues apace in developed markets, the stark reality that the traditional telco business model is no longer viable has surely dawned upon even the most optimistic of operators. With projections of the decline in core mobile service revenues in major European markets over the next 2-3 years ranging from 19% to 47%, there is no time for mobile operators to bury their heads in the sand – the race to the bottom in mobile tariff plans is well and truly underway and a change in strategy is required if the major operators are going to survive. Albeit at a rate that would appear to indicate some lingering complacency about the fate of their core business, operators have begun to seek alternative revenue streams to fill the gap, and many see cloud services as the ideal fit. In contrast to the decline in mobile voice, IDC predicts the global SaaS market will grow at a rate of 17.6% per annum generating revenues of $50.8bn by 2018. It’s no surprise then that the struggling telco industry sees SaaS as a significant area of opportunity and feels that it has every right to play in this market. Given some key telco assets like their existing monthly billing relationships that sit neatly with the SaaS subscription payment model, a veritable monopoly in the provision of the mobile devices on which SaaS applications are increasingly consumed, and being the providers of the high-speed connectivity on which the success and adoption of SaaS is so reliant, it does appear logical that Telcos should aim to take their share of the SaaS pie. However, product diversification is rarely an easy feat, and this is particularly true of large industries like telecoms with deeply imbedded structures that are often resistant to change – in terms of agility, telcos tend to be more akin to oil tankers than speed boats and, as such, changing direction can a be a slow and difficult process. Like any new departure in business, there is a multitude of factors to consider as a telco moving in to the CSP space. Chief among these are the choice of which SaaS applications to take to market, aligning the SaaS offering with core service propositions, putting in place the technical infrastructure and processes to successfully provision and support these new services, sales readiness and incentivisation, and customer awareness, usage, and retention. Over the course of the Secret Service Provider series, we will elaborate on the aforementioned, typical challenges facing telcos as they try to diversify into cloud services, the potential pitfalls that must be navigated, and the strategies that telcos should adopt in order to maximise their likelihood of success. A word of warning to our telco readers, however – there is no silver bullet to success in this venture, and it is inevitably a combination of lots of small things done well that will make for the smoothest transition from traditional telco to cloud services provider.