Tech Challenges Hold Back Service Providers

Communications service providers (CSPs) have high expectations when it comes to the value partners will deliver to their businesses, but strategy execution is lagging mostly due to technological challenges.

That’s according to a new study by BearingPoint. The telco sample included 85 executives representing tier one and tier two CSPs across Europe, Asia and the United States; and 440 executives across the IT, technology, automotive, transport, banking and insurance sectors.

This study reveals:

BearingPoint’s Angus Ward

Angus Ward, BearingPoint’s CEO of digital platform solutions, tells Channel Partners the research focuses on the No. 1 issue for CEOs of CSPs today.

“If I am to counter commoditization, win customers and grow my revenues, dividend and share price, then I must be able to: systematically create new, more sophisticated and compelling products and services that are harder for … competitors to simply copy; (and) retain direct customer relationships and not be disintermediated by OTT players,” he said. “Few innovations (improvements or new services alike) are created solely in-house, so I must build the right partner ecosystem with the right DNA when it comes to innovation so that I can create and become more relevant and add more value to achieve.”

Some 69 percent of CSPs put business model innovation, and introducing new digital products and services, as their No. 1 priority; however, only 26 percent are currently engaged in developing those new digital services.

“This benchmarks against 34 percent of all industries,” Ward said. “So CSPs are the stragglers across the six industries we looked at. There is a gap between knowing what to do and overcoming the barriers to change.”

The top three partners selected by CSPs are other CSPs (67 percent), IT and technology (62 percent) and utilities (54 percent).

“All these companies look exactly like CSPs,” Ward said. “Where are the startups and new digital players? What’s interesting is CSPs are predicting this will change fundamentally over the next two years where it will switch more to partnering more with manufacturing, insurance, mobility providers, so they are starting to think about the digital use case such as for the internet of things (IoT).”

Almost half (49 percent) of CSPs see partners as pivotal to their business model innovation, according to the study.

“Actually, I am surprised it is not higher,” Ward said. “Too many seem to back a ‘walled garden approach’ and think they can innovate without partners.”

Strong cultural/organizational barriers and pressure from institutional investors to focus on paying high dividends and not investing in new products and services are holding back CSPs, he said.

“That a third of CSPs appear ‘stuck’ in the analysis phase is concerning,” said Henri Tcheng, BearingPoint’s global leader of consumer industries. “It reflects how much CSPs (still rely on) rapidly commoditizing products rather than proactively moving to differentiate to win new customers and protect revenues and profits. It’s important they begin to develop their ecosystem by putting the right strategy in place. Crucially, this should complement business objectives, identify appropriate partners and go-to-market offerings, and move to execution quickly, if the benefits they expect are to be realized.”