We believe network operators that transform themselves into IT companies will succeed in the future incarnation of 5G
We believe that 5G offers a unique opportunity to all Telcos to transform themselves once and for all to be deep IT solutions and value added managed providers as opposed to remaining as basic network providers that they have been in the past. Gone are the days when carriers used to walk into enterprise sales pitch with stats about 5G network speed and bandwidth (better, faster, cheaper). The recent mature 5G trend is beyond the basic connecting technologies (which are still part of the overall value proposition) and all about end to end solutions, services, and end users’ experiences.
Carriers need to put an internal roadmap and strategy on how they are going to transform from being basic network operators to full-service IT solution providers if they want to avoid being marginalized. There are three critical DNA aspects that needs consideration to be a full-service IT house: Excelling at core IT skills such as software programming, system integration and a specific set of core horizontal technologies (Cybersecurity, AI, Cloud etc.), Demonstrating capabilities to put together these latest and complex technology pieces to create vertical specific solutions with fast proof of value realization and Changing the internal Telco culture to behave, act like an IT company on all aspects of Telco operation. Most of the latest technology disruptions in Telco space are IT plays and have a minimal network-only play.
Top Technology Trends
This is further evident by IT giant Microsoft’s confident acquisition of telco solution provider Affirmed Network to merge the two domains. IT players are invading into Telco space knowing that they are coming from a position of strength and can create a value proposition for end customers.
In our views, the landscape for Telcos are shifting extremely fast, and unless Telcos adapt to the changing world swiftly in the next 3-5 yrs, they will lose most of the competitive advantage of their networking DNA. Below are some of recent partnerships formed across various industry players.
Recent Industry Partnerships
But Telcos cannot simply use the same stripes to transforms themselves from being Zebras to Tigers. In other words, they cannot take incremental approaches with Telco DNA at the core and form loose partnerships across industry players that only address immediate skills gaps. It does not solve the fundamental DNA transformation needed that we discussed earlier. These are just several reactionary measures by Telcos to stay relevant in the marketplace when what Telcos really need are fundamental transformation of their networking DNA.
Below is a summary of several obstacles ranging from internal cultural to strategic misalignment with external market forces that we think Telcos need to address if they want to get off the ground and be core players in the 5G ecosystem.
Telco DNA Issues
Hence 5G transition should be seen by Telcos as a positive opportunity to address the above drawbacks and do that lifelong transformation in order to change the nature of conversations they are having with the customers - from a basic infrastructure/pipe play to a services play, to an orchestration and automation play, and that levels the competitive playing field with IT players and makes the business model more fun.
Our view is that 5G will have more immediate value position for enterprise/industrial use cases and opposed to consumer space that needs time to mature, with more 5G devices and applications like gaming and virtual reality. This need is a fundamental shift from how other wireless communication standards positioned themselves. In the short-term horizon, our thesis is that the 5G uses cases that will actually turn into real projects/real deals will mostly be in Industry 4.0 or Smart Factory or Smart Education. Next in the medium-term horizon we will see 5G deployment excitements in Autonomous Transportation, NexGen Enterprise, Connected Health (complex and risk averse industry ecosystem) and Agriculture/Farming. These verticals will have positive business cases that will lead to enormous scale effects across other parts of the economy and could include large scale government initiatives.
We opine that Telcos must understand the needs of their customer base better and they must partner with other vertical ecosystem players that know specific business challenges better. They need to shift to a more customer-focused and vertical focused mentality to change the way their networks have been historically designed with throughput perspective, the gigabits they can deliver. We foresee large multinational corporations will be the immediate and biggest source of 5G revenue for many of those use cases we mentioned, but Telcos may not be there primary 5G partner given the need for IT DNA for their transformation. This could pose some challenges for the Telcos. However, we foresee that midsized companies will be positive about working with Telcos as primary 5G partners, which makes sense given their relative lack of in-house network engineering talent.
/Service Ventures Team
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