|North America 2012
|The eight “Cs” for success in 2012: Opportunities, enablers, and challenges for communications service providers
|Vice President, Strategy
|NetCracker Technology Corp.
Sanjay Mewada is Vice President, Strategy in NetCracker Technology Corp. Since joining NetCracker in 2005, Mr.Mewada has been instrumental in leading the company’s growth through strategic initiatives which have accelerated the company’s growth and success. In his current role of Vice President of Strategy, Mr.Mewada is responsible for the company’s image and market development, corporate communications, media relations, and brand management.
Prior to joining NetCracker, Mr.Mewada worked at Yankee Group as the Vice President of the Telecom Software Strategies (TSS) Decision Service. There he managed research and programs to improve Communications Service Providers’ business results. Specifically, he helped clients make decisions regarding the use of business and operations support systems (BOSS) software and services. Before joining Yankee Group, he worked at MCI, Intelsat, and the World Bank in Product Management and Technology Evaluation functions.
Sanjay Mewada holds a Bachelor’s degree in Physics and an MBA from Bombay University. He also holds a Master’s degree in International Business from the Fletcher School at Tufts University.
This article spells out eight great ‘C’ factors for success in 2012, factors that span from opportunities to enablers and to challenges. It describes the potential of Content, Cloud and Customer experience. To quote: “If content was King in 2011, it will be the Emperor in 2012” – CSP may nurture their own content or develop their ecosystem. Convergence and Connectivity are the big enabler ‘Cs’, where Telecom converges with IT and connectivity is boosted by faster broadband technology, now rolling out. The challenges are marked with – Commoditization, Cost and Consolidation. These challenging ‘Cs’ mean that in seeking cost cutting, commoditization can strip away differentiation and result in consolidation of products, systems, vendors and operators.
2012 will be a year of significant opportunity, change, and challenge for communications service providers (CSPs). New revenue will be there for the taking, but the game will be played in an increasingly hyper-competitive marketplace. While factors like content, cloud services, and customer experience will frame opportunities, and forces like convergence and exponential growth in connectivity will be great enablers, CSPs will have to manage their way through challenges like commoditization, cost, and consolidation in order to win. These “8 Cs”, and the relationships among them, are likely to define whether 2012 is a year of prosperity or adversity for service providers.
If content was King in 2011, it will be the Emperor in 2012. Text and voice are now just applications: consumers are using mobile devices as much to play games and watch movies as to make phone calls. It is becoming critical for CSPs to own content and to facilitate the many opportunities relating to consumer demand for more content.
The stakes are particularly high for cable operators because TV is no longer the only, or even the primary, source of entertainment and news for most consumers. PCs and mobile devices are as much a part of the experience now as TV once was. Operators in Canada and Europe often create their own content, sometimes as a result of their ownership of sports franchises and established production companies. While it’s not possible for every operator to replicate their models, it’s clear that creating compelling content may be as important as delivering it.
In wireless, apps have exploded, and as a result, partnerships will be critical in this arena. Operators can’t create every app, so they need to continue developing strong ecosystems. Some will try to own a large part of the end-to-end value chain, as Apple has done in owning both the marketplace and the delivery. Others will thrive by forming partnerships with content producers. Singtel, for example, has partnered with content producers like Sony to bring unique and exclusive music content to market. CSPs need to create relationships with content providers to create unique content while enabling a compelling user experience around it.
Maximizing content revenue is all about sourcing and reusing, which makes the CSP’s role as facilitator extremely important. For CSPs, it’s not a matter of choosing one model or another – they need to generate revenue from the numerous different roles they can play from creators to distributors and particularly as major facilitators across many different industries and media types.
While there is plenty of discussion about CSPs using cloud strategies to reduce operating expense, the bigger opportunity lies on the revenue side. Facilitating the next-generation of cloud applications will be a massive opportunity for CSPs in 2012. Applications like machine-to-machine (M2M) which uses many principles of the cloud (ubiquitous access to apps and content) and mobile money are all examples of cloud-based revenue opportunities that will emerge in 2012 and that CSPs must seize to achieve long-term prosperity. The cloud opportunity leverages many potential CSP strengths, such as connectivity and convergence of networks with IT. The demand for cloud services across many industries should benefit CSPs throughout 2012 as long as they are appropriately aligned to meet it.
3. Customer Experience
The pressure to deliver superior customer experience will increase in 2012 because of revenue opportunities in content and cloud services. Digital content is all about engaging consumers and delivering an entertainment experience that raises the bar every time. Cloud services are all about performance, responsiveness, reliable access, and security. These new services also need excellent support, which CSPs have the experience and resources to facilitate. Of course, making payments easy and safe for consumers is a top priority, particularly as more payment methods – and customer preferences – arrive on the scene. CSPs haven’t mastered customer experience yet, but those who prioritize it in 2012 can win big.
CSPs have invested significantly in network and IT convergence over the past decade. Making these elements work together harmoniously in 2012 can give CSPs a strong advantage – particularly in the case of cloud services which embody the power of widely available, high-performance networks that provide access to an unlimited array of IT-based applications and services. CSPs can play a decisive role in the marketplace by facilitating convergence for partners and customers who want to offer or benefit from powerful customer experiences based on content and the cloud.
CSPs are often criticized for things that others feel they are doing wrong. There’s no question that what they’re doing right, however, is building out their networks. Sometimes the enormous effort and capital required to make network advances come to life is taken for granted. But we’ve seen CSPs double and triple bandwidth every six to seven years. 2012 will be the year when the world connects to megabit and gigabit access. Most countries will be 2.5G and 3G by the end of the year, and many will have delivered 4G/LTE .We can expect more good things in 2012, including the shift to 4G wireless and the adoption of 100 megabit and even gigabit access in the wireline world. This burst of connectivity is what will put CSPs in a position to be the dominant facilitators and beneficiaries of the economic growth generated by cloud, content, and customer experience.
Despite the opportunities before them, CSPs will continue to battle against the force of commoditization in 2012. CSPs will have to be increasingly active as facilitators and players in the ecosystem and not allow commoditization to undermine them. Price pressure on traditional services like voice, and established services like text and access, will continue to increase. Intense competitive pressure from over-the-top providers will also increase. So, as beneficial as new network access capabilities are, if they aren’t enhanced with winning factors like content, cloud services, superb customer experience, and harmonious convergence, commoditization could damage CSP revenues.
Similarly, cost is an increasing concern for CSPs. Revenue is actually flat today, while traffic growth is exponential. This requires massive capital outlays for network connectivity in order to keep up with demand. The only way for CSPs to balance the equation is to bring costs down. To that end, systems consolidation becomes a given, which in turn plays into the product consolidation trend that is increasingly evident in the market. CSPs need to work with fewer vendors in order to gain greater control over cost. The days are gone when multi-hundred million dollar investments were made up front in anticipation of a projected, long-term payoffs. Cost control leads to smaller projects rather than huge investments, and a strong focus on paying for the delivery of systems benefits, as opposed to promises. Cost concerns can be very healthy for the industry, but the ability to manage through cost pressures will be a deciding factor in 2012.
In addition to systems consolidation in the face of cost pressure, industry consolidation will continue to be a factor in 2012. Consolidation and divestiture among suppliers will continue, as we’ve seen recently with companies like Alcatel-Lucent and Nokia Siemens. In the BSS space, the major acquisitions of the past year, like Ericsson-Telcordia and Amdocs-Bridgewater, are likely to continue if not accelerate. It will become more difficult for smaller players in the OSS/BSS space to remain successful on their own as carriers seek larger strategic partners and shift away from experimentation in pursuit of solving broader problems. Of course, CSPs will continue to consolidate as well. Though AT&T’s massive attempt to acquire T-Mobile USA hasn’t panned out, it demonstrates the industry’s appetite for consolidation. Consolidation will also take hold in areas like spectrum and intellectual property.
Any significant acquisition activity for CSPs can be a disruptive and distracting force, particularly amidst the massive changes occurring in the industry. Among 2012’s winners will be those CSPs who manage their way through consolidation to cut cost, avoid commoditization, increase connectivity, and seize revenue opportunities in content, cloud, and customer experience.