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What are the emerging B2B hotspots for telcos?

Many communications service providers (CSPs) believe that the opportunity for strong revenue growth lies in providing new services to large enterprises. But how do CSPs go about being highly competitive players in those complex new value chains?

26 Nov 2021
What are the emerging B2B hotspots for telcos?

What are the emerging B2B hotspots for telcos?

Many communications service providers (CSPs) believe that the opportunity for strong revenue growth lies in providing new services to large enterprises. But how do CSPs go about being highly competitive players in those complex new value chains? Dean Ramsay draws on extensive industry surveys to analyze vertical industry opportunities and looks at what CSPs are doing to improve their prospects in the next two to three years in this excerpt from the report ‘Enterprise verticals: placing the right bets’.

While communications service providers (CSPs) are still in a speculative phase of diversifying B2B services, many are developing relationships with large enterprises in specific industries as a way of understanding how they can become key partners for digital transformation.

Several hotspots of current and future revenue potential are emerging, centered around providing connectivity services and associated technology bundles.

Yet no killer B2B application has emerged to give CSPs immediate and sustained business growth.

Consequently, the approach taken by many TM Forum CSP members has been to develop capabilities to address opportunities in an IT-centric way.

The industry idiom of increased agility and flexibility can be translated as the need to quickly and easily be able to pivot from the core service model of providing communications packages to also providing other adjacent products and services.
As such, many of the technologies that CSPs are now deploying for 5G era operations are part of the effort to broaden reach or are being packaged up and sold as a service to boost the IT-centric capabilities of B2B offerings.

A prime example of this is the use of the cloud by CSPs.

Cloud native software in operational and business support systems (OSS/ BSS) and network management is becoming the de facto model for telecoms IT development and delivery. Cloud-based networks are at the core of the next phase of 5G, and cloud hosting for all kinds of data is now widespread. The cloud allows CSPs to become digital-first service providers, engaging their customers with high levels of automation, flexibility and scalability.

CSPs are experiencing good cloud services revenue growth, as the chart above reveals, with a tangential connectivity-as-a-service (CaaS) model for business customers, as our recent study into the growth of new lines of business shows.

Current revenue sources

Some industry-specific service solutions are emerging as current sources of new revenues for CSPs, with healthcare, smart city, automotive, retail and utilities all experiencing growth. The specifics of these solution types are examined in more depth within the report Enterprise verticals: Placing the right bets, but one thing common to many is that they are representative of the current phase of digital transformation within CSPs.

For example, we are not currently seeing any hyper-automated industrial IoT solutions in manufacturing, such as standalone 5G (SA 5G) providing network slices to autonomous factory equipment and a maintenance workforce with augmented reality headsets.

What we are seeing are relatively simple IoT solutions in healthcare, featuring a bundle of connectivity, devices and applications. The current set of IoT solutions available understandably track the technological capabilities of the operators involved.

Examples in industries such as retail are interesting, as CSPs have been providing services to this market for decades. But we are now seeing extensions of connectivity lines of business in retail, with the emergence of software-defined wide area networking (SD-WAN) and various mobility services.

The conclusion we can draw is that CSPs are not yet sufficiently transformed digitally to address these new business opportunities both in terms of the network technology – SA 5G, multiaccess edge computing (MEC), edge cloud, SDN – and in the above IT stacks in OSS and BSS to be able to support the service management, revenue management, fulfillment, orchestration, ordering and so on of these new service models.

The support system solutions are essential in terms of being able to build an end-to-end automated service management ecosystem and effectively scale and monetize any new vertical-specific service model that works well, or fail fast on experiments that don’t work.

The next 2-3 years

In our survey of industry decisionmakers we asked CSPs which industries they think the big opportunities will come from in the next two to three years.

While healthcare and financial services had strong responses, the spread amongst the rest of the answers was distributed quite evenly, indicating the broad range of thinking on the subject, as the chart below illustrates.
What came through in our CSP interviews, however, was that scenarios like industry 4.0 and the longer-range potential of automated agriculture and autonomous vehicles are seen as the big money tickets that could improve the poor return on investment models for 5G so far.

As such, the evolutionary path that many CSPs are now on to develop new IT-centric capabilities around their core connectivity business are essential stepping stones on the journey to those larger opportunities.

Building capabilities

The automotive industry is a good example of CSPs trying to build partnerships with enterprises centered around mobile connectivity, but with an eye on a longer-term – and probably more lucrative – goal.

There has been a buzz around the auto industry for some time, but little in the way of large-scale progress. Recent announcements from AT&T, Deutsche Telekom and others have seen the operators forming agreements to provide eSIM solutions for all new cars being produced by companies including General Motors and BMW.

These provide a 4G or 5G connection to vehicles for telemetry, entertainment, ground-based GPS and for software updates to electronic management systems. These relationships are interesting on their own merits, but they are also commercial foundations for a much more technologically involved scenario for self-driving cars and other types of autonomous vehicles that will be on the roads within the next decade.

This brings us back to the title of this report, Enterprise verticals: placing the right bets. CSPs are making significant investments to establish these relationships now based on current capabilities, but such examples also demonstrate that the journey to becoming a trusted partner for much more ambitious use cases is well underway.

Making the right evolutionary strategy choices in telco software, architectures and processes are as much a part of this as 5G radio access network (RAN) capabilities. Being able to show a broad capability to address any new service model, but also the agility to add specialist capabilities to become disruptive and competitive in specific verticals, is the outward vision that CSPs are sharing with their partners and prospects.