Here’s how to go from telco to ‘techco’


This article was originally composed and produced for ‘The Fast Mode‘.

Here’s how to go from telco to ‘techco’

Telcos stand at a crossroads. Their markets are, by and large, fully penetrated, forcing established competitors into increasingly zero-sum battles for share. New entrants, from hyperscalers to billionaires backing satellite constellations, are joining the fray. Revenue growth has slowed. Margins are slim.

There are two paths forward. The first is to lean into being a telco, providing connectivity services and physical infrastructure, focusing on reliability, and innovating incrementally. The world needs communications services and infrastructure, after all, even if it’s increasingly commoditized.

The second path is to continue furnishing communications services and infrastructure as telcos historically have, but to emphasize the development of a broader range of digital services to leverage the reach, reputation, and technical capabilities of a telco in exploiting new opportunities. In other words, to transition from telco to “techco.”

It’s not for every telco, but rather for market leaders with the vision and wherewithal to shoulder the investments in software and platforms needed to fuel the rapid innovation of other software and platforms. The goal is to enable new, more lucrative business opportunities built on their intellectual property and their own platforms rather than reselling vendor offerings. Crucially, that builds telcos a competitive advantage rather than leaving that advantage to the vendors they’ve historically relied on. But how does a telco get there? Becoming a techco requires a dual focus on operational excellence and business-model innovation.

Operational excellence as prerequisite

The telco-to-techco transition requires investments in operational excellence. You don’t want to spend precious development resources on expanding and maintaining core ERP backend systems handling accounting, finance, HR, procurement, and the like. I worked a major regional telco whose in-house, custom ERP system was developed and maintained by a team of 2,000 FTEs. That’s an extreme example, but given the resources involved in upgrading a staid telco into a nimble techco capable of offering a growing menu of digital services to a diversifying customer base, telcos must operate with maximal efficiency across the board. That increasingly requires the clean core of a cloud-based ERP to standardize and automate backend finance, procurement, HR, and other processes.

Techco transformation demands agility and flexibility throughout the underlying business processes supporting the ideation, development, monetization and delivery of the innovative offerings comprised of complex packages of a telco’s own services and partner offerings. It’s about enabling an ecosystem-driven model in which telcos harness their core capabilities to serve as central orchestrators. To this end, cloud-based ERPs enable telcos to tap into their formidable capabilities in flexible and composable ways.

The overarching goal is to provide the digital foundations for the continuous, rapid delivery of innovative products and services – and, when innovations catch on in the marketplace, an ability to scale them fast. It’s about enabling a flexibility from conception through development through fulfilment that then feeds seamlessly into unified, cloud-based core systems so you can notch early wins on multiple fronts and establish competitive beachheads from which to grow.

Business model innovation as growth engine

It’s already happening. BT Group moved 11 legacy finance platforms to a unified cloud platform, boosting productivity, opening doors to strategically valuable insights previously masked by IT complexity, and saving millions of dollars annually. The move also enabled the integration of cloud-based employee, contingent-worker, talent-acquisition, and customer-experience systems. Those efficiencies will come in handy as its innovation arm, Etc. at BT Group, bears fruit. Among Etc.’s nascent initiatives include piloting a remote preventative-care program to monitor and reduce the risk of cardiovascular events among patients with chronic conditions.

Vodafone Group’s move to a cloud-based ERP standardized 85% of core business processes spanning HR, procurement, finance, and more across 24 countries. A single data model throughout its footprint has enabled the automation of more than 70% of those core processes, boosting efficiency, lowering error rates, simplifying maintenance, and improving user experience. That frees up resources and helps enable Vodafone’s digital services initiatives, which include an analytics platform, a mobile application development service, a multi-access edge computing service, an AI assistant, AI visual-inspection and mixed-reality offerings, and even a business drone-detection service (to protect and secure airspace).

An innovative platform with diverse revenue models

Finally, consider a shining example of a telco pushing to be a techco through business model innovation. Singapore-based telco Singtel’s Paragon platform helps business customers cut the complexity and time required to adopt 5G, edge-computing, and low-latency applications and services. Those services have included augmented-reality (AR) training, AR vision picking for warehouse personnel, immersive mixed reality, real-time location tracking, telemedicine, factory automation, drone-enabled remote inspections, and other applications in which network and application proximity are critical to real-time, high-performance operations.

Just as innovative are the ways Singtel can make money on its Paragon investment: platform licensing revenue (Singtel has already licensed Paragon to Spanish operator Masmovil); SaaS licensing revenue; API revenue; infrastructure-as-a-service revenue; hyperscaler revenue sharing; and network value-added services revenue through analytics, 5G slicing, and location services.

As BT, Vodafone, and Singtel are proving, telcos have what it takes to become techcos. They’ve recognized that staying profitable despite crowded, commodifying markets for generic telecommunication services will depend on that transition.

Based on their strengths, market positions, and customer needs, telcos will move into new digital services in their own ways. Universal, though, should be a recognition that telco-to-techco evolution depends on operational excellence and business-model innovation, both of which, in turn, hinge on digital transformation and an embrace of the cloud.

Gary Pan - Author of the article

About the author 

Gary Pan is an industry director in SAP’s telecommunications business unit and is responsible for SAP’s go-to-market strategy for the global telecommunications industry. He has more than two decades of experience in the industry and has spent the last 14 years with SAP, guiding customers through their digital transformation projects from his base in Shanghai.

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