The Digital Drivers of the Telco Transformation

1989

4 minutes read

 

The pace of change in the telecommunications industry is staggering. Fueled by an increasingly hyperconnected world, new competitors and changing consumer expectations, telecommunications companies today have a choice.

Drive innovation or be driven out of business.

For companies that choose to innovate, the potential is huge. There are four main drivers pushing the rapid rate of innovation and each has in it great opportunity. Big Data, connectedness, mobile broadband and virtualization are all crucial in the telecommunications industry today.

Recognizing the role these drivers play is an essential step in forging tomorrow’s products and services. Companies that consider new business models and new business processes can reap the rewards in this digital economy.

The global village

Before we take a closer look at those four drivers, it’s wise to consider the scope of our global, connected village.

More than 95 percent of the world’s population lives in an area that’s covered by at least one mobile cellular network. There are some 7 billion mobile cellular connections worldwide.

We are hyperconnected in nearly every part of our lives. Connections shape how we work, shop, pay, play and live. For nearly every possible interaction, there’s an app. In the first half of 2015, time spent on mobile applications exceeded time spent watching television among U.S. consumers for the first time.

In 2015, on the Chinese holiday Single’s Day, Alibaba used a shrewd marketing campaign for online commerce to take in $5 billion in sales … in the first 90 minutes. During the day, Alibaba made $14.3 billion. That’s three times the commerce as on Cyber Monday.

Driver 1: Big Data

The amount of data that smartphones, tablets, sensors and other mobile devices generates is expected to double every two years. With so much data available, successful companies will be the ones that learn how to leverage the information effectively.

Communications service providers can use Big Data in a number of ways, including personalized services, monetized services or new data-driven business models.

Ufone, a Pakistan-based mobile service carrier, is using customer detail records to understand usage patterns. Ufone uses this information to create individual service packages to individual customers. The customers receive these offers by voice or text. If they do not respond, that information is used to offer different packages and respond to customer preferences. The program’s aim is to reduce the churn rate of customers each month by providing the right package to retain their business.

Big Data analytics programs can review a customer detail record in 30 seconds, compared to the hours it used to take for manual analysis. Using predetermined rules, the analytics can recommend a solution to market to the consumer.

Driver 2: Connectedness

The Internet of Things allows for more connected devices than ever before. So-called “smart devices” are those with software, sensors, or wireless connectivity built in. Some experts predict there will be as many as 50 billion smart devices by 2020. These devices are able to collect, store and transmit data; in some cases, the devices can detect maintenance or repair needs and send alerts.

Smart devices provide possibilities for new vertical business and the creation of value-added services. With sensors everywhere, telecommunications companies can transform industries by leveraging these connected devices.

Take WeChat, China’s popular chatting app, with 697 million monthly users. In addition to text messaging, voice chat and video chat, the app has a social network component, games, shopping and branded accounts.

In the past year, WeChat has invested heavily in a money transfer service, WeChatPay. The service lets users make peer-to-peer money transfers, make payments online, and in a few cases, use it to pay in offline locations.

The company has already collected $46 million in bank transfer fees. In one month, WeChat processed nearly $50 billion in bank transfers, putting it on a pace to almost double the transfers PayPal processes.

Driver 3: Mobile broadband

Mobile data traffic is expected to grow eight fold by 2019.

This demand is already having a profound effect on telecommunications companies as consumers expect different models for service and usage.

WhatsApp is one such example. In early 2016, the app passed the 1 billion user mark, meaning nearly 1 in 7 people worldwide use it. WhatsApp recently announced it will be free to all users worldwide.

With free messaging available, WhatsApp and similar services are projected to cost wireless carriers $54 billion in 2016.

Driver 4: Network virtualization

Network virtualization and software-defined networking offer the promise of faster time to market, new revenue streams, and a new industry ecosystem.

In 2015, for example, six prominent telecommunications companies demonstrated the power of service chaining. The example showed that by tagging data packets, traffic can be directed through service addresses instead of hardware.

Even across multiple service providers, this virtual delivery method accelerates delivery by bundling functions together across a shared virtual network. No longer reliant on hardware, these service chains let, for example, video intended for mobile to be delivered than video for laptops.

Conclusion 

Expectations are changing rapidly. The world relies more on mobile devices that are always on, always connected.

Telecommunications companies are already leveraging the hyperconnected world in dramatic new functions, providing new services to consumers. There is more data available, more broadband access, and virtual service delivery possible. Companies that see these drivers as assets are positioned best for future success.

To read more, download SAP’s latest whitepaper “From Telcos to Digital Service Providers:  Enabling the Digital Life”

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