There is a distinction to be made between modernization which is necessary for any business to remain current, improve its products, grow its brand and boost revenues; and transformation which is a once-in-a-generation fundamental change to the identity of the business.
Like most successful businesses, service providers have done an excellent job of sustaining their market, responding to customer demands and delivering value. They invest heavily in R&D and brand management to maintain leadership positions in the market.
However, service providers traditionally avoid disruptive technology until it is proven to threaten their market position as was the case with data, video and mobility services. When forced, service providers profitably modernized technology and bought and built their way into the markets they wanted to enter.
However, all of this occurred without service providers having to endure significant business transformation. Why now?
Picking up the pace
Change is happening relatively rapidly. The deployment of LTE and IP access networks combined with virtualization and cloud platforms dramatically alters our view of the network. All traffic becomes data and all services are, essentially, applications.
As the volume and variety of applications increases, every consumer and business customer becomes unique. That is a fundamental change to the identity of service providers which have traditionally been network operators delivering connections, not services.
At a time when customers, not service providers, are dictating when, where and what products are delivered, service providers that want to compete in the digital services arena aren’t willing to manage connections, security and applications on their own. Providers of digital services need to bundle in simplicity as well as connectivity. Specifically:
- The right applications, features and functions are not available as an integrated connected service that can seamlessly support users regardless of location or device.
- Services are too complex and require substantial after-market integration or user training to ensure interoperability, reliability and performance.
- Services are difficult for consumers to buy and configure. Likewise, the majority of businesses do not have the staff or skills required to integrate IT infrastructure, network infrastructure, applications, storage and data into a secure and reliable operational system.
Service provider as enabler
Customers want an enabler, a genuine service provider that removes the complexity, bundles the necessary elements into a service and bills accordingly. While many businesses would prefer to buy from service providers, the absence of integrated digital services offerings leads customers to look for the desired services elsewhere. Customers are drawn to the providers that deliver the greatest level of integration and seamless access. (see figure below: What do enterprises want?)
Becoming a preferred digital services provider, rather than a bit pipe plumber, needs a business and cultural mindset change that embraces innovation, manages productivity and tolerates risk. When the economy is booming and the business is growing, profitability is easy. However, when faced with a perfect storm of consolidation, over-the-top competitors, exploding demand and challenging economy – leadership becomes essential.
And the leadership required to guide an organization through digital transformation is what we’ll look in my next post next week – stay tuned.