By Niall Norton, CEO, Openet

Let’s be frank, over the past five years’ operators have had their worlds turned upside down. New digital technologies have had a disruptive effect on the telecommunications market, and incumbent operators have increasingly found themselves competing against new, nimble digital-native players with innovative business models. The rules have changed, and operators are being forced to contemplate their roles in this shiny, new digital future.

To make matters worse, as the digital market and its natives thrive, operators are being forced to re-evaluate the very business models on which they depend. Monthly tariffs are being called into question, and it’s no surprise given the rise in popularity around low-cost SIM-only contracts, and the fact that the price of mobile data is in a steady decline.

It is clear that operators will need to seek new revenues. The growing demand for data and content, and consistent technological innovation, will ensure that there are growth opportunities available. However, the digital market operates at a far faster pace and so operators must embrace the same speed, or quality of service delivery as the digital natives to seize these opportunities. Continuing to function under the current business models, with the same legacy technologies will only have one outcome: certain death.

On the other side of the coin, you have vendors. All vendors talk about enabling operators to change and disrupt the market. However, in reality, the vast majority of telecoms vendors are stifling innovation by acting as though the technology from 2005 will still be fit for purpose in 2018. The hard truth is it’s not in their interest to drive change because this means shorter service contracts, reduced licence fees and removing the shackles of vendor lock-in. As a result, the BSS market has failed to prioritise the changing business needs of operators, and adopt new technologies in a manner that would allow solutions designed more for digital services than traditional telco offers.

When faced with this argument, many vendors will point to the handful of operators that have successfully transformed into entertainment companies and banks over the last year. And it’s true, change is happening. But let’s not kid ourselves, this change is not happening quickly enough to give operators the edge they need to compete in the current digital market.

Breaking the cycle

With the digitisation of the telecoms market, the mismatch between what operators need and what the vendor community is offering is widening. While large vendors are proudly shouting about operators spending exorbitant sums of money on BSS transformation projects, the operator customers are seeing a decline in ARPU, and their margins are being cut to the bone.

Despite providing a boost to the large vendors’ next quarter’s earnings statements, these multi-year deals are not good for operators. They are too expensive, take too long to implement, and require constant upgrades and patches on a legacy system environment. This is just not viable in today’s digital market.

When telecoms margins from voice and text were fat, operators would happily pay for large projects from a handful of large vendors. The economics have now changed, and as such operators are focusing on the value delivered by these solutions. Critically, operators now have a choice.

Instead of long-running service contracts, operators should look for agile business partnerships that use internet-style pricing models. New commercial models, new technology and new delivery models have removed the operator need for super-sized, lengthy and hugely expensive deals from mega-vendors in order to transform. Full stack models from a single vendor are being replaced by open ecosystems that can comprise of best of breed solutions that are made up of open proprietary software and open source software. These can be managed by the operators, their SI partners, and the vendors themselves.

Changing the game

Operators and vendors alike need to embrace this new reality, and make the leap to a new way of doing business. Luckily there are some fundamentals that are driving change in how technology can be used and deployed to enable operators to be more ‘web scale’ and less ‘phone’ company.

Technology alone is not the answer, instead vendors must embrace a cultural, commercial and deployment model change to offer greater flexibility. The proactive solutions to this problem are built around operators having the confidence and technological freedom to do things differently. This includes the rise of DevOps, web scale technologies and network automation as ‘new ways of thinking and new approaches’ operators must take. Network automation, the rise of NFV and the need to enable new business models are all component parts of achieving digital transformation for operators – but only if vendors and operators are prepared to ‘change the game.’
    
The telecoms industry need to change, from one laden with legacy software and problems resulting from vendor lock-in, into one promoting innovation, agility, fast time to market and disruption. Operators cannot enact change with their hands tied behind their backs, and so vendors need to adapt to market changes at the same pace (or faster) than the operator’s business does. It’s time to fix what has become a dysfunctional vendor/operator model.

 

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