B2B will drive the 5G revolution – will CSPs rise to the challenge?
The 5G hype extends beyond the telecoms industry – it’s now a global political and business issue. But are CSPs ready to seize the opportunity?
Nik Willetts30 Aug 2019
B2B will drive the 5G revolution – will CSPs rise to the challenge?
Business customers need 5G. Many see it as a critical enabler for their own digital transformation. In other words, the hype extends beyond the telecoms industry – it’s now a global political and business issue. But are communications service providers (CSPs) ready to seize the opportunity?
For CSPs, the 5G market scenario is very different from 4G. First and foremost, established and complex enterprises in almost all industries are digitalizing, seeking to simplify, connect and automate as many of their processes as possible. As such, they stand ready to leverage the benefits of low-latency 5G and edge compute. A decade ago, they were not.
Today’s enterprise customers are placing higher and higher expectations on connectivity. Burdened by their own legacy technology and technical debt, there is a high motivation to move critical IT workloads and capabilities to public multi-cloud infrastructure. Enterprises are also getting serious about the potential of automation, mobile edge computing and artificial intelligence (AI), and recognize the growing importance of high reliability and secure connectivity.
But the industries transforming today come with significantly more complex operating models and scenarios than the digital revolution at the turn of the century. The stakes are much higher in terms of financial or human impact if something goes wrong. Decisions to digitalize won’t be made lightly and will come with stringent expectations for service level agreements for latency, security, privacy and reliability.
Enterprise customers expect connectivity providers to deliver the kind of flexibility and autonomy they get when buying their cloud computing and software-as-a-service solutions. Competition to meet these demands is heating up, and the competitive landscape for CSPs in the enterprise market is changing rapidly.
Firstly, there’s the ‘traditional’ competition. Most mature markets have three to four mobile operators and a handful of mobile virtual network operators (MVNOs). Typically, the two to three dominant operators are equipped for a serious play in B2B. This landscape can change quickly, as we’ve seen with well-funded disruptors such as Reliance Jio and Rakuten, and in the next few years it’s likely we will see more B2B challengers and industry-targeted MVNOs emerging on the scene.
Enterprises taking matters into their own hands with private networks are another threat. Just look at the recent private LTE network agreement forged by Port of Kokkola, Ukkoverkot and Nokia. In fact, 33% of 800 industrial companies (and a remarkable 47% of large companies) surveyed by CapGemini said they plan to apply for private 5G licenses. Early signs from leading regulators in the UK and US markets are that they will only encourage this kind of localized spectrum licensing and experimentation.
Enterprise business units for major telecoms equipment manufacturers are gearing up for the opportunity, as is the consulting business direct to enterprises in this space. So far, we’ve seen several B2B 5G trials with mobile operators in the mix, but their involvement may not be a prerequisite if enterprises go the private network route.
Finally, there is the ever-present threat of hyper-scalers such as Amazon, Google and Microsoft which already have phenomenal WAN capabilities. Edge compute will be a significant prize, but seizing it almost certainly demands a partnership with CSPs. That’s starting to happen – just look at AT&T and Microsoft’s recently announced $2 billion, multi-year deal to collaborate on cloud, AI and 5G.
But such deals also carry risk that the partner could hone in on the CSP’s core business, as McKinsey noted in a recent report:
All that said, mobile operators have several unique capabilities to build on that give them a distinct advantage:
So the question is: How can CSPs capitalize on these strengths and rise to meet the enterprise 5G challenge?
There are several factors to consider, but first and foremost is strategy. Operators need to set a clear ‘north star’ and decide where to play: whether to provide network as a service, connectivity as a service, or a more complete platform play with a set of digital services.
They also need to decide whether to focus on a generic B2B play or specialize and go deep in a small number of verticals. Wherever they decide to aim for, CSPs need to be willing to self-disrupt and challenge the way they think about their enterprise business, which has for many years been an afterthought.
CSPs also must develop a strategy around data and intelligence, with a goal toward becoming truly data-driven in order to automate operations and deliver self-service capabilities to customers.
And despite some inherent risk associated with developing partnerships, CSPs must forge them where they do not have the necessary expertise (for example, cloud infrastructure and AI). If an operator is not ready to go to market with the right branding, relationships and salesforce, they won’t be able to credibly understand their customers’ needs, quote services, scale to meet the demands and reliably deliver those services.
Finally, and perhaps most importantly, CSPs must figure out how to go beyond simply delivering 5G connectivity to understanding how to assure it, automate it and extend flexible self-service capabilities to customers. This is what enterprises want and need. Through automation and transforming their operating model, operators will be able to increase flexibility, reduce time to market and dramatically cut operating costs. This is the path to greater profitability and competitive advantage.
This change requires a radically different replacement for traditional operational and business support systems, which is addressed in TM Forum’s Open Digital Architecture – one that is wholly interoperable as enabled by our Open APIs. Several of our Catalyst proof-of-concept projects are exploring how to implement this new architecture.
For example, the Skynet Phase II project shows how operators can work together to provide network slices connecting hospitals in an interesting use case that focuses on managing epidemic outbreaks. Another project called 5G Optimized Capacity & E2E Experience project demonstrates how service providers can effectively orchestrate network resources across partners’ boundaries in real time. (You can learn more about all our Catalyst projects here.)
For CSPs, the 5G market scenario is very different from 4G. First and foremost, established and complex enterprises in almost all industries are digitalizing, seeking to simplify, connect and automate as many of their processes as possible. As such, they stand ready to leverage the benefits of low-latency 5G and edge compute. A decade ago, they were not.
Today’s enterprise customers are placing higher and higher expectations on connectivity. Burdened by their own legacy technology and technical debt, there is a high motivation to move critical IT workloads and capabilities to public multi-cloud infrastructure. Enterprises are also getting serious about the potential of automation, mobile edge computing and artificial intelligence (AI), and recognize the growing importance of high reliability and secure connectivity.
But the industries transforming today come with significantly more complex operating models and scenarios than the digital revolution at the turn of the century. The stakes are much higher in terms of financial or human impact if something goes wrong. Decisions to digitalize won’t be made lightly and will come with stringent expectations for service level agreements for latency, security, privacy and reliability.
A different competitive landscape for B2B 5G
Enterprise customers expect connectivity providers to deliver the kind of flexibility and autonomy they get when buying their cloud computing and software-as-a-service solutions. Competition to meet these demands is heating up, and the competitive landscape for CSPs in the enterprise market is changing rapidly.
Firstly, there’s the ‘traditional’ competition. Most mature markets have three to four mobile operators and a handful of mobile virtual network operators (MVNOs). Typically, the two to three dominant operators are equipped for a serious play in B2B. This landscape can change quickly, as we’ve seen with well-funded disruptors such as Reliance Jio and Rakuten, and in the next few years it’s likely we will see more B2B challengers and industry-targeted MVNOs emerging on the scene.
Enterprises taking matters into their own hands with private networks are another threat. Just look at the recent private LTE network agreement forged by Port of Kokkola, Ukkoverkot and Nokia. In fact, 33% of 800 industrial companies (and a remarkable 47% of large companies) surveyed by CapGemini said they plan to apply for private 5G licenses. Early signs from leading regulators in the UK and US markets are that they will only encourage this kind of localized spectrum licensing and experimentation.
Enterprise business units for major telecoms equipment manufacturers are gearing up for the opportunity, as is the consulting business direct to enterprises in this space. So far, we’ve seen several B2B 5G trials with mobile operators in the mix, but their involvement may not be a prerequisite if enterprises go the private network route.
Finally, there is the ever-present threat of hyper-scalers such as Amazon, Google and Microsoft which already have phenomenal WAN capabilities. Edge compute will be a significant prize, but seizing it almost certainly demands a partnership with CSPs. That’s starting to happen – just look at AT&T and Microsoft’s recently announced $2 billion, multi-year deal to collaborate on cloud, AI and 5G.
But such deals also carry risk that the partner could hone in on the CSP’s core business, as McKinsey noted in a recent report:
“Platforms raise difficult questions for CEOs of incumbent companies pushing ahead with their digital transformations. Should they emulate the front-runners, join forces with them or not play at all? Not playing may seem risky in a world where ‘platforms beat products’. Yet building your own platform, in a majority of markets where global platforms are already thriving, may be akin to arm wrestling with a bulldozer.”
Rising to the challenge
All that said, mobile operators have several unique capabilities to build on that give them a distinct advantage:
- They are regulated, and many have government and security clearance and experience. Many of their targeted B2B customers have the same restrictions. This helps enterprises trust mobile operators.
- CSPs know how to build, manage and operate reliable networks.
- They have highly localized infrastructure, a local workforce, and they understand the local markets they operate in.
- In today’s strained geopolitical climate, enterprises may prefer to work with providers in the same jurisdiction.
So the question is: How can CSPs capitalize on these strengths and rise to meet the enterprise 5G challenge?
There are several factors to consider, but first and foremost is strategy. Operators need to set a clear ‘north star’ and decide where to play: whether to provide network as a service, connectivity as a service, or a more complete platform play with a set of digital services.
They also need to decide whether to focus on a generic B2B play or specialize and go deep in a small number of verticals. Wherever they decide to aim for, CSPs need to be willing to self-disrupt and challenge the way they think about their enterprise business, which has for many years been an afterthought.
CSPs also must develop a strategy around data and intelligence, with a goal toward becoming truly data-driven in order to automate operations and deliver self-service capabilities to customers.
And despite some inherent risk associated with developing partnerships, CSPs must forge them where they do not have the necessary expertise (for example, cloud infrastructure and AI). If an operator is not ready to go to market with the right branding, relationships and salesforce, they won’t be able to credibly understand their customers’ needs, quote services, scale to meet the demands and reliably deliver those services.
Beyond connectivity
Finally, and perhaps most importantly, CSPs must figure out how to go beyond simply delivering 5G connectivity to understanding how to assure it, automate it and extend flexible self-service capabilities to customers. This is what enterprises want and need. Through automation and transforming their operating model, operators will be able to increase flexibility, reduce time to market and dramatically cut operating costs. This is the path to greater profitability and competitive advantage.
This change requires a radically different replacement for traditional operational and business support systems, which is addressed in TM Forum’s Open Digital Architecture – one that is wholly interoperable as enabled by our Open APIs. Several of our Catalyst proof-of-concept projects are exploring how to implement this new architecture.
For example, the Skynet Phase II project shows how operators can work together to provide network slices connecting hospitals in an interesting use case that focuses on managing epidemic outbreaks. Another project called 5G Optimized Capacity & E2E Experience project demonstrates how service providers can effectively orchestrate network resources across partners’ boundaries in real time. (You can learn more about all our Catalyst projects here.)
If you’d like to find out how you can participate in the important, collaborative work TM Forum members are doing to address 5G challenges for enterprises, please feel free to contact me.
