CSPs can win in the enterprise business with a strong business and operating model encompassing talent, capabilities, a partners ecosystem, and the right strategy.
CSPs need a transformative business and operating model to win in B2B
Technology has advanced incredibly in recent years and brought along opportunities for companies to venture into new dimensions of differentiation. Along with exponential technologies comes a lot of hype and promises that could open up several B2B growth opportunities for communications service providers (CSPs) in the rapidly growing software defined network (SDN)/IoT/edge market. Unfortunately, the path to success and change has not been an easy one. Eventually the new domains will generate success and revenue, but only for the most adaptable and nimble players. CSPs are confronted with a closing window of opportunity in the B2B solutions market. On one hand, there’s a decline in average revenue per user (ARPU) in legacy products, a market share erosion due to lack of differentiated offerings, shifts in demands towards custom enterprise solutions and fully integrated solutions for small and medium businesses. It all highlights the need for rapid innovation and incubation of ideas. On the other hand, intense competitive momentum from digital hyperscale challengers require CSPs to focus on capabilities that will accelerate market creation; capabilities like product orchestration, network virtualization, a strategic ecosystem. This will help CSPs to capitalize on opportunities fast. CSPs need to transform and evolve to be relevant, however, most continue to be plagued and inhibited by seismic gaps in their capabilities – fragmented end-to-end customer experiences, suboptimal market orchestration by sales teams, a legacy mindset in their solutions and delivery, siloed IT legacy systems and support processes, etc. The CSP evolution of 2020 hallmarks the trend in CSPs to evolve fast. The key question however is:
We have analyzed this in depth leading us to the following recommendations: Challenge #1: ARPU decline in legacy products and competition from digital hyperscale players. Our recommendation: Build B2B business platforms by transforming business model and capabilities to create, enable and deliver a wide array of high-margin, high-value turnkey, fully integrated solutions; co-created and co-delivered with industry innovators. To retain and strengthen their position in the B2B market and best compete with hyperscale players, CSPs need first to drive new revenue growth with high-margin, high-value SDN/IoT/edge offerings. All the major CSPs have created – with mostly still pale business impact – a variety of offerings catered to small, medium and enterprise customers including: IoT, smart monitoring and management, security, data, cloud, etc. To really win in this rapidly growing market, CSPs need to fundamentally transform their business models, reimagining how SMB and enterprise clients explore, buy, and dynamically consume a range of solutions. They will have to shift their capabilities to a set of next-gen cognitive platform capabilities and become a cross-industry ecosystem integrator and orchestrator, co-creating and co-delivering unique, intelligent turnkey solutions to SMB and enterprise customers. CSPs need to evolve from providers of basic connectivity to become the end-to-end solution owners. That is obviously not an easy undertaking. To achieve that status, they need to go through incremental stages of maturity and solutioning (see illustration below).
To capitalize on the B2B market opportunities and establish themselves as leading end-to-end providers, CSPs need a platform-based business model that leads them on an accelerated path to scale, maintain trust and revolutionize the business solutions market. This includes several model and technology requirements, such as, but not limited to: Obviously, a change of business model is not a quick and easy undertaking. To mature and scale quickly, CSPs have to follow a thoughtful in considering strategy design, business planning, mobilization, go-to-market strategy, partnering strategy and engagement. Challenge #2: Fragmented organizational structures for sales, solutioning, delivery and support. Our recommendation: Create a modern go-to-market organization with integrated pre-sales, solutioning, delivery and support. Changing the business model alone is not enough. To win, CSPs need to evolve their go-to-market and post-sales strategies and capabilities from a product-led model to a services revenue operating model. This allows them to effectively co-create innovative solutions with clients. Thus, their operating model, organizational structure, leadership and talent/skills have to radically evolve to ensure their teams. CSPs must: Challenge #3: Complex and siloed IT and network legacy systems and support processes. Our recommendation: Modernize IT, network and operations with support processes. Work towards automation and self-service, deploying talent to high-value touchpoints, in an ever-evolving cloud-enabled business platform. To compete with nimbler digital hyperscale invaders and win, CSPs need to reimagine how they service and operate their businesses, ensuring it is efficient, effective and lightweight, to drive economics. Therefore, they must ensure they:
Competition for CSP’s, especially from digital hyperscale challengers is fierce. They need to accelerate and increase their SDN/IoT/edge investments in a smart way to not be left behind; the next two years are determinant in establishing a strong presence in this new market. Highly adaptable and nimble CSPs can win in the enterprise business if they are armed with a strong business and operating model, one that encompasses talent, capabilities, a partners ecosystem, and the right strategy to radically shift capabilities to high-margin and high-value offerings while maintaining trust, streamlining deals, facilitating ordering and implementation, and delivering a flawless service support. With contributions from: Renata Kuchembuck, Partner – Digital Strategy, IBM Indy De, Associate Partner – Enterprise Strategy, IBM