As an independent management and consulting firm with clients around the world, BearingPoint can either be a partner or competitor to traditional service providers that target enterprise customers, especially multi-national businesses seeking transformational enhancements to systems, processes and results.
The company -- which has seen multiple transformations itself over the years -- has three units: Consulting, Solutions and Ventures. These divisions work together or separately, said Angus Ward, CEO of Digital Platform Solutions at the firm, in an interview with Broadband World News.
Year of Convergence, Opportunity & Partner Ecosystems
"Finding and partnering with the right technology partner that can advise on where to focus efforts means CSPs can build and monetize new products and services quicker."
— Angus Ward, Partner and CEO of Digital Platform Solutions at BearingPoint
BBWN Editor Alison Diana asked Ward to share some of his thoughts on the year that was and the year ahead. Here are his edited responses:
Broadband World News: Was there any misinformation or misconception in 2018 that the industry had to address?
Angus Ward: The industry is realizing that digital transformation is much more than improving operations and digitizing customer experience or channels. It is substantially also about new business models. Our recent research shows 55% of CSPs have a fully defined digital strategy and 69% have business model innovation as a key component of that strategy -- recognition that digital strategy must address more than just cost efficiency. It must look at future revenue growth and how to build customer loyalty by launching compelling new products and services while avoiding the inexorable path to commoditization and disruption. This includes offering "total telecoms," rather than breaking into internal product silos.
There is also a good level of understanding about the best model to innovate those new products and services: working with partner ecosystems. In fact, 67% of CSP rated the importance of extending partner ecosystems to underpin their strategic growth.
There are a couple of "buts," however, when it comes to execution. Firstly, while 69% of CSP ranked business model innovation as priority #1 in their digital strategy, only 26% have actually embarked on creating new digital offers. This compares to an average of 34% for all other industries. Secondly, if you look at who CSPs are partnering with for co-innovation, then by far the more popular ecosystem partner is another CSP (69%) rather than automotive, banks, insurance or manufacturing who you would naturally assume would bring the complementary capabilities needed to target the white space between traditional industry silos and create new, more connected services that embed new technology like IoT and eSIM (embedded SIM).
So what hurdles do CSPs face in doing this?
AW: If you look at the major obstacles preventing CSPs from moving forward, the top three are all IT related -- lack of the right technology to monetize partner ecosystem offers (55%), over-complex internal IT as a barrier to change (51%) and having the right technology and digital business platform to manage the partner ecosystem (48%). Although not cited, we expected some of the softer challenges like visionary leadership, culture and capabilities as well as overcoming barriers like shareholders.
To make sure digital transformation is not their next big miss, operators must stop focusing solely on network and operations, start talking to digital players and change their mindset for good.
BBWN: Assuming they do this, will 2019 be better -- in terms of profits and revenue as an overall industry?
AW: 2019 is being dubbed the year of the "enterprise" by CSPs and vendors alike -- and I agree, it should be. Enterprise represents the last bastion of interesting growth for most service providers. But will it be better for service provider profits and revenue? Yes, for those who get it right, but the clock is ticking.
The enterprise market is far more complex than retail. It represents large, global companies from multiple vertical industries -- automotive, financial services, government, manufacturing and transport. Selling to this market, therefore, requires greater business flexibility and agility to package and sell tailored products to the different industry needs, which help them to be more successful with their end customers. The steps service providers take in 2019 will be crucial if they are to stand any chance of adding new revenue streams for the enterprise market, let alone IoT.
BBWN: The biggest barrier is...?
AW: The biggest barrier to change will be making their enterprise sales organizations fit for purpose. This means up-skilling sales teams as they move beyond commoditized connectivity offers to sell new products and services in order to perfectly solve problems their enterprise customers own. This means moving from generic connectivity products to tailored offerings that blend the capabilities of partner ecosystems in each vertical to deliver the use cases and outcomes customers are looking for.
BBWN: What effect will 5G have on your company, on the industry overall, on service providers in 2019? How much will end-customers (however you wish to define, from residential through enterprise to government...) demand 5G?
AW: In 2019, we expect 5G to be a huge success from a technological standpoint, but a dismal failure from a revenue perspective.
The "build it and they will come" narrative is already in full force -- as it was with 4G and 3G before it. While 5G will indeed certainly deliver the technology needed to many new use cases, the vast majority of CSPs are not set up to deliver on them commercially. The reality for many CSPs is that, with luck, a new wave of enterprise over-the-tops with the vertical industry expertise to create the compelling new enterprise and IoT services, will allow CSPs to take a 5% cut of total revenue for each 5G use case. We would see this "reality" as a disaster for the industry as it will provide little or no ROI on 5G investment. An opportunity lost...
AW: Only by taking swift action to position themselves as MVNE (mobile virtual network enabler) for OTT players: orchestrators of the full range of critical enterprise services (needed by enterprise OTTs to create use cases) and supported by an ecosystem of partners. Only be extending their role can CSPs hope to widen their share from 5% to maybe 40% to 50% of the revenue from each use case. It means focusing on building the business of 5G, rather than proclaiming the technology for 5G.
BBWN: Will any region stand out?
AW: We expect Asian service providers to take a significant lead when it comes to generating 5G innovation and ROI given their focus on the business case. If 4G is anything to go by, European service providers are likely to take a more conservative line and drop behind in their progress. U.S. service providers will be more ambitious.
As we head into 2019, it'll become clear that 5G is fundamentally a fifth-generation technology built on a second-generation business model.
BBWN: What complementary technologies do you anticipate being most important to service providers?
AW: As CSPs become more digital, they will need to learn to design solutions that perfectly solve problems. To do this, they need to combine products and services with data and content to create convenient and compelling experiences, which customers then pay for as they consume. These offerings will sit in-between traditional vertical industries -- like mobility services, for example, and, of course, be digital in nature. This is the "white space" where many of the new opportunities lie for services providers.
The range of complementary technologies that are, therefore, important to CSPs is enormous. Far more than any one company could integrate on its own. It's only by developing an ecosystem of partners across a range of sectors that service providers will be able to target this "white space" for future growth. They must build an ecosystem of partners that can generate new ideas, drive innovation, integrate new technologies and offer consumers something new and compelling. With a powerful partner ecosystem in place, service providers can acquire the capabilities, technology assets and knowledge to create the products and services that will drive new revenue.
BBWN: That sounds time-consuming, though, in an age where time truly is money. Is that accurate?
AW: Building an ecosystem of partners can help with shortcuts too. On average, CSPs that want to start their IoT business are looking at three years. In a digital world, this is not good enough. Finding and partnering with the right technology partner that can advise on where to focus efforts means CSPs can build and monetize new products and services quicker. A good example is Amazon Web Services. By leveraging AWS IoT services and AWS Marketplace for instance, service providers can pick and choose the modules that will address their most pressing needs and therefore expand their offerings in a short period of time and then scale when necessary.
— Alison Diana, Editor, Broadband World News. Follow us on Twitter or @alisoncdiana.