Features and Analysis

Evolving telecom business models in the Internet of Everything

Authors: Gopkiran Rao, VP, Industries and Strategic Markets, Apttus; Varun Ravichandran, Manager of Industries and Strategic Markets, Apttus

The Internet of Things (IoT) is comprised of many elements – it is big data, embedded sensors and a network of networks. Above all, it is a revolution that strikes right at the heart of global communications and infrastructure companies. IoT requires not just a complete rethinking of data carrier channels, but more importantly it gives communications service providers an unprecedented opportunity to rework their business models.

Traditionally telecom companies have been enablers, both for businesses and consumers. In what we can think of as the first phase of modern communications, they have been the channel for voice and data packets. They developed intricate business models to monetize the channel with fixed line, mobile and data services. When it came to monetizing and selling these services, they could make do with product-centric customer relationship management (CRM), pricing and quoting solutions and revenue processes.

In stage two of the evolution, service providers realized they could drive premium services and provide even more compelling customer value propositions if they moved up the value chain into content. If the first phase was centered on the transformation of the medium of communication, the second phase witnessed a transformation in the consumer and producer paradigm, with operators vertically integrating into content creation and presentation.

Blurred lines

The lines between communications and media started to merge. BT’s forays into sports broadcasting and AT&T’s acquisitions including DirecTV are just two examples of this trend that has enabled operators to provide ever more compelling bundles and position content as a key element in their competitive strategy. From a quote-to-cash standpoint they had to determine how to create compelling new bundles of content and delivery and worry about downstream issues like service levels and churn.

In both of these models, though, stripped to the very basics, global telecom might be viewed as a network of pipes (though the reality is, of course, much more complex), with the dominant business model being centered on ways in which to monetize the pipe based on what can be provided through the pipes and how it can be provided better and faster.

The emerging IoT economy, however, promises to transform these business models in fundamental ways. Global service providers will have to make a choice – do they just focus on rolling out network-optimizing technologies like 4G, 5G and beyond, which, let’s say, would be improvements on the pipes, where they steadily become more efficient carriers of new forms of data? Or do they rethink their role in the digital world and turn into drivers of positive outcomes? Can network operators utilize big data analysis to provide actionable recommendations, to become fundamental partners to manufacturer and service provider customers in developing new revenue strategies and strategic decision-making, instead of being mere enablers?

IoE live

Outcome-based transformation

Communications is already transforming industries like healthcare, automotive and manufacturing, but IoT will usher in a new era of outcome-based transformation. Take General Electric (GE), for instance. The industrial giant is reinventing itself to be on top of the industrial Internet, even moving its headquarters to Boston to be closer to the pool of talent that will help drive its digital transformation. GE is already leveraging data from its connected machines – whether in healthcare, aviation or automotive – to help significantly improve performance.

Or consider Canadian service provider TELUS’s venture into healthcare. TELUS-Health provides, among various other services, Home Health Monitoring, which connects patients with chronic conditions to their doctors with real-time monitoring of health indicators transmitted to monitoring and diagnostic tools at clinics. The targeted customer base for health monitoring and proactive diagnosis is, of course, even larger, with activity trackers like Fitbit on peoples’ wrists. For network operators making a shift to becoming value-added providers of devices, providing information and value-enhancing recommendations based on connected product insights is arguably a shorter hop given that they have been doing this with their own data, systems and processes for years.

Leading the revolution

As other industries catch up, communications service providers will by necessity play a central role in most IoT rollouts and thus have a unique opportunity to lead this revolution, provided they are willing to re-examine their traditional roles and revenue models. What are some of the key elements that will characterize the new telecom?

  • They need to become more data-centric, with sophisticated analytics engines, to drive superior network monetization and provide more relevant, personalized customer experiences.
  • Automation is critical to survive in this new world, along with moving OSS/BSS to the cloud.
  • Being able to provide true omnichannel customer interactions through the sales process, and beyond, is a necessity; and
  • Quote-to-cash capabilities have to look ahead now and incorporate the best of product lifecycle management, outcome-based pricing models, usage-driven subscriptions, partnership pricing with device partners, and embedded device-to-device and device-to-network services that defy conventional product-centric CRM enterprise resource planning and catalog solutions.

Ultimately an increased focus on outcome-based sales is only a good thing where prices are tied not to products or services but to delivered improvements in performance. This will need to go hand in hand with pay-for-performance contracting and smart revenue sharing and billing capabilities. The internal quote-to-cash systems will need to be aware of these changing requirements.

It’s a brave new world for telecommunications, but the service providers that are proactive in adapting to the new paradigms will not only thrive but also will become agents of widespread positive transformation across industries.

Come talk to our team of industry experts at the Apttus booth #256 during the TM Forum Live! event: May 9-12, Nice France.

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    About The Author

    Gop has over 16 years of publishing, value consulting and software product marketing experience in the global technology and life sciences verticals. In his current role, Gop is responsible for industry strategy and programs.

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