November 26, 2015

Partnering in a Digital Ecosystem Requires a Major Business Model Shift

CSPs will need to leverage strong relationships and new ways of doing business to succeed in today’s digital landscape.

Communications service providers (CSPs) need to play significant roles in one or more ecosystems and enter into strong partnerships if they are to succeed in the digital world. However, as business models change to embrace a 2-sided approach, the ‘customer’ and the ‘supplier’ can be one and the same, which should be reflected in the way CSPs do business.

Across the digital landscape, traditionally closed markets, such as telecom and cable, are seeing their markets challenged by businesses from outside that believe they can do a better job at a lower return on investment. As a result, partnering becomes even more critical and forces CSP senior management to consider new ideas, including:

  • Share the burden and the rewards: Rather than simply taking a product or service from a supplier, develop a mutually beneficial business relationship.
  • Acknowledge partner contributions: The end customer will increasingly choose the supplier, and partners must be flexible enough to accommodate this.
  • Don’t take ownership of the end customer relationship for granted: Open channels of communication among all partner organizations are essential.
  • No finger-pointing: The extended value chain includes a lot of potential for problems. Open management protocols and processes are vital to help the customer get the appropriate experience.

Accepting change in the entire digital value chain is essential if CSPs are going to alter their business models, culture and routes to market. The good news is that the digital ecosystem will include billions of things supporting trillions of transactions and fueling an almost infinite number of business model permutations. But in this environment, partnering is not limited to the customer-facing side of the CSP’s business.

Suppliers to the CSPs are also looking to enhance their market position and value. Opportunities at this level will include partnering to build the IT infrastructure necessary for a digital business, as well as buying network and service components as a service from third parties. The benefits are felt not only in terms of reducing CapEx and OpEx but also in becoming a more streamlined organization that’s better able to respond to market conditions.

If You Can’t Beat Them, Join Them

At the consumption end of the value chain, CSPs’ attempts to compete with OTT players will transform into a partnering model; for example, entering into deals with players such as Netflix. Some will sell the service via their own platforms and bill for it, while others will provide just the platform.

All of these things coming together could mean the removal of differentiation. In reality, cloud, virtualization, the explosion of devices and apps/content mean more specialization and a need for the building blocks to fit together through APIs that are open to the industry players. The interdependencies among participants in the ecosystem mean that mutual respect and understanding of relative capabilities will result in things running smoothly.

The focus for the CSPs needs to be on getting the new extended infrastructure right and allowing the right hooks for services to operate efficiently. Stretching investment and developments too far along supply chains will result in diminished service experience for business and consumer customers alike. 

Photo by Harrison Weber with Creative Commons license


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