Long-needed change is stirring in the telecoms business model.
A seemingly irreversible decline in consumer revenues co-exists with longstanding neglect of small to medium-sized enterprises (SMEs) — the vast majority of business customers in every developed market. That neglect represents money left on the table for many Communication Service Providers (CSPs).
The revenue opportunity to be gained from taking a more enlightened approach to business customers (and to SME customers in particular) is clear. So is the growing threat posed by ‘hyperscale’ digital competitors, ready to tempt a disenchanted customer base with a superior ‘new world’ experience and further undermine B2B revenues for telcos.
Bridging the Business/Consumer Divide
Changing dynamics in business-to-business (B2B) commerce are not unique to the telecoms sector. Winds of change are blowing across many industries, fanned by the evolution of ICT and the internet, and the changing expectations this has fostered in every kind of customer — including business customers, who have come to expect a better, faster, more ‘digital’ experience. The expectations of businesses and consumers are converging. Once, there was clear blue water between consumer and business markets. Consumers were ‘mass market’ and were offered a product or service that was intended to be supplied and used with only minor variations by very large numbers of customers. This dynamic meant that consumer products — sold in high volumes, with relatively low, or only cosmetic variation — lent themselves to mass production and automation, which kept the cost of production and support low and maximized margins. Development was optimized around this model and successful consumer products were those that struck the right balance between benefits to the customer, cost of production and price.
Large enterprise sales were always different. Comparatively low volume but higher — often much higher — value, big business customers demanded greater input to the design of products and services, reflecting their often highly specific requirements and the amount that they were willing to pay to see them met. Historically, telcos have been successful in dealing with these large, bespoke, often network-oriented projects (although these too are starting to come under threat from competitive hyperscalers).
There is a middle ground, however, that telcos have always struggled to satisfy — the small to medium-sized enterprises that actually make up the vast majority of businesses. These organizations also have varied and unique requirements but must try to meet them with relatively low budgets.
Vendors have traditionally found it hard to meet these requirements at low cost. They have either offered SMEs a thinly disguised mass-market proposition (in terms of products, services and support) or have dealt with SMEs using the same labor-intensive processes as they would use for an enterprise customer. The first approach rarely delights the SME (limiting their revenue potential), the second means that SMEs have come to be seen as a barely profitable overhead rather than a potentially rich market.
Telcos need to look carefully at how they can transform service provision to the SME market to maximize its revenue potential. In particular, they need to:
drive down operational costs to maintain margins for commoditized (typically connection) services,
allow small businesses to tailor premium services more closely to their own requirements, building greater loyalty and stickiness (through self-configuration);
and be aware of the particular requirements of SMEs by creating services that are dedicated to them — such as multi-site/multi-device offers and business-focused convergent bundles, perhaps supported by account transparency, analytics and comprehensive service/support packages with clear SLAs.
Addressing the particular constraints and requirements of the SME will help telcos gain a greater share of the SME budget. Extending account transparency and self-management into the SME sector will help reduce costs without damaging the customer experience.
What Has Changed? Automation and the Cloud
How feasible might this be? Ongoing transformation within the consumer sector provides some cause for optimism.
Across many industries, IT-driven automation of manufacturing and service enablement has meant that less and less costly human intervention is needed to turn an order — whether for a car, a computer or a communications service — into a consumer deliverable. That automation can include a high degree of variation, so consumers increasingly expect the kind of bespoke tailoring that hitherto would have been the preserve of enterprises or VIP customers.
The movement of customer service and sales to the cloud has hastened this change. Consumers often benefit from a high degree of direct engagement with suppliers, and with the products and services they use, through app-based interfaces that let them manage their own orders, payments and support and give them clear visibility of their usage and account status. They can tailor their service and gain highly responsive support. Meanwhile, enterprises, particularly at the small to medium-sized end of the spectrum, are starting to feel they are missing out and getting the worst of all possible worlds.
Can the advantages of a digital telco (as demonstrated by many ‘flanker’ or challenger brands) be introduced to SME markets? The answer to this question must be ‘yes.’
New Horizons for the SME Market
Advanced apps, real-time charging platforms and flexible product catalogs mean that small businesses can certainly be empowered to monitor and self-manage their communications environments, giving them a much better and more engaging experience (as well as reducing operator cost-to-serve).
More than this though, SME markets represent a large and relatively untapped source of new revenue. They comprise many businesses which themselves are transforming and need help not only with advanced communications (such as 5G private networks or IoT support) but with additional premium services and solutions that draw on (for example) edge computing and business applications provided ‘as a service.’
Operators’ historic relationships with small businesses mean they are very well positioned to offer services such as these, which would not only bring in additional revenue but would be extremely ‘sticky’ in terms of customer loyalty and extended lifetime revenue.
The opportunity exists as does the capability to address that opportunity through advanced, real-time business support systems. As important, a compelling threat exists from hyperscale cloud providers. Telcos are at real risk of not only missing out on new revenue, but of seeing existing revenue evaporating fast. They need to move now.