Telco to Techco? Why CSPs Need to Upskill to be More Like the Internet Giants
After so many years of investing in CAPEX, telcos have become reliant on partners to develop new products for them. Now, they have the chance to become self-sufficient.
When people started watching Netflix on their phones a decade ago, many telcos weren't happy. They had spent billions building their infrastructure. Suddenly, here was Netflix 'squatting' on the network – and making all the money.
This was just one example of the tension between CSPs and the many over-the-top (OTT) tech players that relied on expensively built telco networks to deliver their services.
Fast-forward 10 years and the tension is still there, but the dynamics are slightly different. Today's telcos are in the middle of a transition to agile, cloud-native networks hosted on a mix of partner cloud platforms and their own. As such, they don't just want to find a way to work with technology companies—they want to be technology companies.
It Comes Down to Money
Telcos have obvious reasons to make the transition. Consider market valuation, for example. According to an analysis by STL Partners, the world's top telcos and the world's top Internet firms have roughly the same collective income, but the market cap of the techcos is nearly 5x more.
In short, the markets think the Internet firms are better equipped to monetize in the future. Why? Because they are agile—quick to identify opportunities and nullify threats.
By contrast, telcos are not. It also comes down to investment. Telcos have tended to spend more on capital expenditure (CAPEX) – towers, cables, radio antennas and other equipment – than on R&D. In fact, STL Partners estimated that telcos spend less than 3 percent of revenue on R&D, while techcos spend up to 25 percent.
Because of this, telcos have limited their ability to innovate. They have become reliant on technology partners to develop new products for them. But now, the tide may be turning. In the evolution to cloud-based networks, telcos have a historic opportunity to transform into techcos.
The Age of Innovation
However, this change will require telcos to develop specialist knowledge and skills in technologies such as cloud, artificial intelligence and machine learning. They need to be proficient in developing or co-developing their own code and inserting it into partner solutions. It will also require new operational concepts like agile development and DevOps. In short, telcos will need to be more self-sufficient and innovative.
They will also need to collaborate inside new ecosystems, within groupings of related companies, that work together to deliver new services to customers.
A Platform for Collaboration
Netcracker Digital Platform gives telcos an open, modular and digital-native foundation. It is available in a SaaS delivery model on any hyperscaler platform. The platform gives telcos the chance to be B2B2X enablers in the center of complex partner ecosystems across exciting new industry verticals. In addition, it provides CSPs with the skillset, tools and autonomy to develop, onboard and configure new technology, services and features.
This kind of transition means a major shift in culture, organization, partner management and internal automation. Co-creation is now a must-have requirement for modern IT environments. CSPs are looking for partners who will support their deeper dive into IT and cloud solutions, enrich their joint development setup, upskill on co-creation and allow them to balance between outsourcing and self-sufficiency.
It’s fair to say that some CSPs have struggled in their transformation efforts because they do not have the right skillsets to build their own cloud platforms, partner with hyperscalers or co-develop features. Instead, CSPs need to become more innovative, self-sufficient and cloud-savvy.