CSPs bullish on digital transformations in theory but lacking in execution

According to a study, communications service providers need to foster new partner ecosystems to increase revenues. (Pixabay)

While communications service providers (CSPs) realize the importance of implementing digital transformation strategies via partner ecosystems, the follow-through has largely been lacking.

According to a study by BearingPoint, 69% of the respondents in a survey rated digital transformation as their top priority, but just 26% were actually engaged in implementing the new business models and digital offerings.

Furthermore, the survey found that 27% of the communications service providers surveyed were ready to embark on their digital transformation journeys while 14% were just getting started. On the low end, 2% hadn't even considered new business model innovations and the development of new digital offerings.

"The telecom industry clearly understands that priority number one is creating digital business models and new products and services," Angus Ward, CEO of digital platforms solutions at BearingPoint, said in an interview with FierceTelecom. "The reality is that only 26% are actually embarking on creating these new digital services compared to 34% across the other industries that were surveyed. There's a gap between knowing and doing."

CSPs will only gain value from creating partner ecosystems if they make the right choice on who to partner with. Ward said that there's a decided lack of in-house innovation at most CSPs, which is not helped by partnering with other CSPs that were in the same boat. The survey found that 67% of the CSPs were partnering with other telcos, 62% with ICT companies and 54% with utility companies.

"So at the moment, they are partnering with people that are looking exactly like them," Ward said. "They are not partnering with startups and other types of digital players. They're not partnering with people that can bring that innovation edge, that have innovation start up thinking within their DNA."

"Also, bring the customer into the fold to be part of the mix for innovation. Often we find that companies' product management teams create something without a customer being involved."

CSPs face commoditization of their services as they struggle to win new subscribers and increase their bottom lines. There's also the threat from over-the-top (OTT) providers such as Amazon Web Services.

In addition to finding more innovative partnerships, Ward said that CSPs needed to create more sophisticated and more compelling new products and services.

BearingPoint's research found that companies that adopted digital platform-based business models grow at twice the rate of those that don't. Half of the survey respondents expected their revenues to increase by more than 16% over the next two years while 12% anticipated revenue of growth of more than 25% over the same time frame.

"There's huge expectations for what innovation and new product and services, along with successful partner ecosystem, can actually deliver," Ward said.

BearingPoint is a technology consulting and management company, which includes offering tools for digital transformations. Ward said BearingPoint's Tier 1 customers included Orange Group, Deutsche Telekom and BT.

The study was conducted by Coleman Parkes in March and April. It included 85 Tier 1 and Tier 2 CSP executives across Europe, Asia and the United States. In addition, 440 executives across the IT, technology, automotive, transport, banking and insurance were also surveyed.