December 10, 2012

Ovum Takes a Look at Telecom Trends for 2013


Every year around this time, the good folks at UK-based research firm Ovum  look at the year past and have their experts gaze into their respective crystal balls to predict what lies ahead in various sectors for the coming year. The forecasts on telco operations and telco IT spending issues caught my attention.   

Big changes are in the wind

The best place to start is with the underlying premise of the year to come. It is that, despite or because of the ongoing global debt crisis and rapid transformation of all markets—fixed and mobile, residential and enterprise, OTT and cloud initiative changing the centrality of telcos in markets and emerging ecosystems, the move to all-IP and data center centricity, growing customer disloyalty, etc.— traditional telecom service providers will move and invest at a pace that they are not accustomed to moving at. This is now a case, especially given falling margins in legacy services like voice, where doing the same old thing will not work. Customers and competition are now firmly ascendant in driving markets.

With this in mind, Ovum provides a comprehensive list of key messages for the industry in 2013:

  • The ongoing debt crisis meant that economic growth continued to slow in 2012 in developed markets in North America and Europe, but remained strong in the BRIC countries, MEA, and the developing areas of Asia-Pacific.
  • Global mobile connections growth is expected to slow to 7 percent in 2013. Growth highlights include:

o   Emerging markets will account for 89 percent of net additions;

o   Mobile broadband connections will grow by 27 percent;

o   LTE connections will increase by 150 percent; and

o   Fiber will grow by 28 percent.

  • Telco capital intensity will remain flat and OpEx will continue to come under pressure. To manage these costs, telcos must ensure that they: address the end-to-end customer experience, including assuring network quality and availability, and ensure that any burden to resolve technical shortcomings does not fall on customer service functions.
  • Telcos need to monetize new business models, leverage customer data by investing in analytics, and define their response to over-the-top (OTT) players.

o   In the enterprise market in 2013: The impact of the full-scale rollout of unified communications-as-a-service will begin to be felt; operators will take a new approach to M2M, with more partnering to deliver services; mobility strategies will be extended to “bring your own device, with telcos supporting a range of mobility deployment strategies; and tier-2 players will bid for smaller IT service deals with enterprises, meaning that tier-1 operators will need to position themselves accordingly.

  • Wholesale carriers will continue to face declining revenues and margins as a result of domestic regulation and intense competition.
  • The regulation and policy priorities for national regulatory authorities (NRAs) and governments include: ensuring the appropriate treatment of OTTs; evolving interconnect regimes to encompass alternative charging principles once mobile termination rates (MTRs) fall to fixed call termination levels; identifying more spectrum for mobile; and reviewing plans for ubiquitous broadband.
  • Technology trends: The LTE-to-HSPA rollout ratio will continue to shift in favor of LTE; small-cell product deployments are expected to accelerate in 2H13; and laser for 100G will be the largest growth segment in the components sector in 2013.

Ovum also does a little prognostication about supplier performance and the device markets where it appears major sea changes are unlikely. Ericsson is predicted to continue to dominate the mobile radio access market, but they caution all traditional suppliers will have to contend with software vendors continued encroachment into core parts of the telecoms software stack. And, no surprise here, they see the personal device market as a two OS (Android and iOS market) with Samsung and Android taking a bite out of Apple’s growth prospects.

Selling IT solutions to telcos is changing

It is in the area of telco IT where Ovum’s analysts hit their stride in terms of accurately describing the changing landscape and what IT vendors need to do to help their telco customers. After noting all of the rapid changes roiling the service provider market, Ovum says:  

Whether it is reducing operating costs by consolidating silos of subscriber data, enabling policy driven service personalization, providing personalized advertising, or simplifying customers' interactions with various service departments, it all starts with intelligently using customer data. Forward looking telcos treat subscriber data as an asset – the oil that will fuel their future growth. Some telcos are taking the idea so far as to redefine themselves as data services companies in the next five years. Efforts to target the right customers with the right services will make the difference between success and failure. In 2013, telcos will emphasize innovative ways to leverage customer data to create new revenue streams.

They also rightly notethat all vendors need to understand that their decision-maker landscape within the telcos is changing as well. Therefore they recommend, “Vendors must concentrate on embedding themselves within their telco customers and becoming part of their operating model. Vendors' professional services capabilities are central to accomplishing this goal. In addition, vendors must be in constant dialog with various departments in the telco such as the CIO, not just IT departments, because telcos are changing how they make IT decisions. More decisions are being made by strategy focused executives rather than IT.”  

It is all about the customer data

The bottom line is that for telcos to thrive, along with transforming themselves internally to leverage the needed transformation to a more data center/apps centric infrastructure, and cloud-based infrastructure, it is all about capturing, collating, and analyzing customer data (aka “business intelligence”) into actionable insights. 

This is a common refrain not just from the analyst community but from suppliers of such things as operations support systems and software (OSS/BSS), billing companies, and all of the IT vendors from “big data” vendors to CRM suppliers to contact center solutions providers. The goals are driven by the fact that customer data by necessity will be the driver of new sources of revenues along with drivers of changed business models and ecosystem relationships.

Customer data will drive new sources of revenue for telcos. On this score, there is violent industry agreement. What has been fascinating in following these trends the past many months is the lack of agreement by observers as to how fast and how willing the telcos are at embracing the need to invest in change, culture as well as technology. And, while there is agreement on the directionality of the technology necessary, and the absolute need to break down silos so as to extract and share business intelligence that can/should make a difference, whether internal cultures can change fast enough in a world where “E”verything is accelerating remains problematic at best.

We all know that the three steps to purchasing are awareness, consideration and then purchase. It appears there is ample awareness and lots of consideration. However, context is important, and in this case that means culture. I would like to be as optimistic as Ovum about the winds of change that impact telco purchasing in 2013. That said, even Ovum notes that spending is likely to be flat. The good news is that part of the reason is that there are still tons of costs to be wrung out of existing operations, particularly as things like virtualization take hold and more operations go from manually intensive to automated. Yet, that is only part of the story.

If purchasing of solutions for true transformation are to manifest themselves in a big way in 2013, the learning curve and execution of deploying and getting the full benefit of improved analytics and translating them into changed behaviour, internal and external, is going to have to accelerate at historic levels. In three words, “we shall see!” Let’s hope the Ovum report next year at the time matches their prediction that 2012 is going to be a year of major change.




Edited by Rich Steeves



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