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Which service model works best for B2B?

A new TM Forum report, Is BSS ready to monetize enterprise 5G?, looks at which verticals and service models CSPs are targeting and main revenue opportunities.

20 Oct 2021
Which service model works best for B2B?

Which service model works best for B2B?

In a new report entitled Is BSS ready to monetize enterprise 5G? one of the questions we addressed was which vertical industries CSPs are targeting and which service models - connectivity, end-to-end services, or platform models – they see providing the most significant revenue opportunities.

Our analysis was based on a recent TM Forum benchmark survey and examined a subset of 173 respondents who are responsible for BSS and/or related processes and are employed directly by 61 different CSPs worldwide. We found that CSPs across all verticals see significantly greater revenue opportunities in end-to-end service and connectivity models than platform models.
Fig. 1Rating service model opportunities
For example, Figure 1 shows which service models the entire group and service industry subgroups rate as providing the most significant revenue opportunities for their organizations:

  • In each of the financial services and media & entertainment industry subgroups, 74% of CSPs see end-to-end service models providing the most significant revenue opportunities.

  • While 58% of CSPs in financial services see connectivity as a significant revenue opportunity, only 47% of those in media & entertainment do.

  • More of the manufacturing subgroup sees significant revenue opportunities in the platform model than any other vertical - 41%, or 3% greater than the group average. Only 66% of CSPs targeting the manufacturing vertical see connectivity models as the best path to revenue while 58% favor the end-to-end model.

  • The healthcare subgroup is more balanced. 60% see significant opportunities in end-to-end service models while 59% see significant opportunity in connectivity models, while a solid 40% see value in the platform model.

  • On the other hand, CSPs targeting the financial services vertical far prefer the end-to-end service model (74%) and are least optimistic about the platform model (31%)

The end-to-end service model preference among CSPs across most vertical industries makes sense given most CSPs’ histories of sustaining long term relationships with customers that generate recurring revenue. Ownership of the customer relationship has been a key concept and strategic goal for CSPs for well over a decade.

As the market shifts, however, and CSPs compete in B2B verticals both with and against hyperscale cloud providers, questions may arise as to whether striving for customer ownership will continue to provide an advantage. “There’s an opportunity for end-to-end services,” says George Glass, CTO, TM Forum, “but the hypercloud companies are happy to provide compute and storage on demand and not have to always strive to own the end customer.”

Market demand in B2B verticals is taking different forms, from customers still ordering nailed up circuits the old-fashioned way to those now consuming network services via APIs. As a result, CSPs are keeping their options open across different or even hybrid revenue models. Even if CSPs would prefer to own the customer in long term relationships, our survey suggests CSPs recognize they will play different roles in different models across the ecosystem and can find significant revenue opportunities without being married to a single approach.