Finding new revenue sources for telcos

Operators needed to look for different revenue streams to complement their profits
B2B, BT, Enterprise services, Ericsson, Globitel, Middle East, MTN, Orixcom, Revenue, Sectors

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Enterprise services may constitute a significant part of the future revenue for telecoms, as operators needed to look for different revenue streams to complement their profits.

CommsMEA: How are enterprise services helping operators to increase their revenues?

McQuaid: As the amount of data in the world accelerates exponentially with the cost efficient and widespread penetration of smart devices, improved global connectivity and the move to cloud the growth of enterprise services which underpin these has increased dramatically.

Operators are in the fortunate position of being a key part of this value chain through professional services, network and security services, co-location and managed services that they provide are all are starting to add significant value to the bottom line through the volume and size of the industries and the enterprises they support.

Luc Scherer: For operators, enterprise services help them to diversify their offering, in particular in a segment where over the top (OTT) competition is still not that visible. SMEs in particular have an inherent need to control their ICT spending.

They are very much inclined to go with bundled offerings that address all of their ICT needs in one shot; this goes beyond voice and data, but also includes more advanced services such as Platform as a Service (PaaS) or Software as a Service (SaaS). The increased need for Mobility also means there is an increased demand for Unified Communication (as a Service - UCaaS) and integration with the enterprises existing IT systems. Consulting and System integration opportunities can arise if operators build-up the skills to address these.

Nyati: Today network operators are facing challenges on the consumer side of the business. In order for operators to continue to grow they need to find new sources of revenue. Most operators have identified the enterprise segment as the right segment to focus on to grow and fill the revenue gaps. What is key here though is that they need to offer more than communication services. They need to offer IT services because enterprise clients have a greater need for IT versus communication services.

CommsMEA: Should telcos partner to extend their capabilities and offerings?

Luc Scherer: Partnering strategy needs to be setup in order to address the gaps in offerings and capabilities.

McQuaid: Yes, telcos should be looking to partner to extend their capabilities and offerings – this provides real and tangible benefits in terms of skills, go-to-market expertise and speed.

Telcos are coming from a very different space and have strengths in commercial models, systems and products that suit fixed and mobile services. All the research and industry success stories in this area have shown that partnering is a critical factor in determining the ability of an operator to be successful in the cloud space.

Nyati: Yes, telcos should partner. Traditionally telcos have not been strong when it comes to partnering because they have been very successful on their own. But going forward, in this new world where they have to extend their offerings beyond the network, it is critical that they look for partners to work with. There are two ways of working with others. One is through partnerships, the other is through acquisitions. Both of those strategies will help extend the offerings of telcos.

CommsMEA: How important are the SMEs for operators?

Luc Scherer: For large enterprise, there are often large IT departments that want to solve the ICT needs in-house or that will directly interact with ICT vendors, rather than going through the operators. In addition the relationship between telcos and these large enterprises as often been tense and more of a volumes and discounts-based interaction rather than a partner discussion on business problems. For SMEs the situation is different, operators can build on a good bundled voice and data offering and can expand from there.

Nyati: The SME segment, in almost all markets is usually the only segment that continuously grows. At the same time, when the market is declining, the only segment that tends to be resilient to that economic decline is the SME segment. The SME segment is therefore a very important segment for operators. At the same time, for other companies, like MTN, where we see SMEs as an economic engine, of a country, it is beyond just looking at SMEs as a way of getting growth or revenue, it is also a way of giving back. By providing services which enable SMEs to thrive, you are actually helping the economies of countries to grow as well.

McQuaid: Extremely, SMEs are the lifeblood of economies in the region. Here in UAE the figure is around 95% and the Ministry of Economy expects small and medium enterprises (SMEs) contribution to Gross Domestic Product (GDP) to increase from 60% to 70% by 2021 with new laws announced to encourage SME growth. This trend is representative across the region as SMEs continue rise to greater prominence in the coming years as the emerging countries of the region develop.

CommsMEA: How could LTE shape the offerings to enterprises by the operators?

Luc Scherer: For enterprises LTE has multiple advantages. Besides the increased bandwidth that it provides, we also see an increased demand coming from M2M, especially due to the improvements in latency.

McQuaid: The ongoing and rapid expansion of LTE services is a key driver of content growth as the usage of smart devices and consumption of mobile data continues to explode. Enterprises have started to adopt and embrace mobile applications as part of their enterprise systems and part of business processes.

As a result of this accelerated growth and adoption, services such as enterprise mobility are set to become more and more common.

Operators are taking note of this and developing services that support this new enterprise behaviour and requirements.

CommsMEA: According to different studies, telcos face a tough challenge convincing enterprise customers that they can be trusted providers of additional services beyond voice and data. How should operators improve this trust?

Luc Scherer: The relationship between telcos moves from a wholesale or retailer-only business to a business that is more focused on enterprise pain points. In order to achieve that, telcos are likely to acquire enterprise-specific skills; an option to translate the operators’ offering into value that is tangible for the enterprise.

Nyati: I don’t think it is right to say that operators are not trusted, but rather that operators have difficulty in selling these new services. The people that we have only know the language of data and voice. So it is not that the customers do not trust us, it is that we do not have the skills to connect with the customers and talk solutions.

To address this, it goes back to partnerships. Partnerships can help operators to increase their offerings, but also, through aligning with trusted and renowned partners, operators can leverage the existing relationship those partners have with customers. The other way of addressing this, is through acquisitions of companies that are already selling to enterprises and have experience in selling to enterprises.

McQuaid: Skilled people, senior management commitment and excellent customer support are key here. Enterprise customers are well used to dealing with telcos for their communication needs but when it comes to other services they are naturally reluctant – historically telcos are established experts in telecommunications but not IT. For telcos to convince enterprises it requires them to critically evaluate if they have the required skills, teams and commercial structures in place to provide these additional services. Enterprises demand high standards from their IT providers and this doesn’t change if the provider just also happens to be a telco. Operators need to put themselves under scrutiny and decide to invest in building the teams and business units that support these additional services, if they don’t then enterprise customers will choose to use an alternative provider – the world of cloud means there is a world of competition on their doorstep.

CommsMEA: How does offering enterprise services enhance the operators’ business model?

Luc Scherer: The operator business model is today primarily focused on consumers through direct relationships. Through adequate enterprise services, operators can have opportunity to be part of more and more complex value chains. This means that they need to leverage not only B2C business models, but also B2B and B2B2C.

Nyati: It enhances it in two areas. One is, initially operators used to be the providers of voice and data to the customer but now operators offer a lot more to the customer, increasing the value of the operator to the customer and enabling the customer to get a bigger share of the customers’ wallet. The second area is that by offering the customer more and more services, the relationship shifts from a supplier/vendor relationship to a strategic partner relationship with that customer adn the operator.

McQuaid: Offering enterprise services enhances operators’ business model as they become a more valued and credible provider to the enterprise space. It enables operators to diversify into additional areas and offer a range of services to potential customers who may previously have not been among their traditional customer segment or even within their target market. It opens up the operator to provide services to a wider base of existing and new customers which generates value and growth on the bottom line.

CommsMEA: What are the trends in the MEA region for enterprise services?

Halawa: We see an increasing demand for enterprise solutions in the MEA region. Service providers are faced with increased competition in many industries. Security is already a trend in the region, our meetings start about business transformation, how the company can deliver innovative solutions to the customers, and the end of the meeting when we talk about how we are going to deliver this service to the customer, immediately, we talk about security. While doing this, security is the topic. Around two areas, Mobility, integration of social media and the ability of customers to use different solutions.

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