Telecom cloud

Strategies To Transform Telcos Into Digital Services Providers

Author: Forrester Research Principal Analyst Dan Bieler
Author: Forrester Research Principal Analyst Dan Bieler

Since our last major strategic reassessment of the telecoms landscape in 2011, digital transformation has further raised the need for change of the telco business model. Our key observation still holds true: The traditional connectivity-centric business model will work only for few telcos with a low-cost base. The biggest challenge facing the other telcos is to remain relevant to customers. The classic telco position is eroding due to competition from alternative connectivity providers, IT services firms, and over-the-top providers. However, we also see positive change.

More than ever before, telcos are embracing new technologies and experimenting with new business concepts. This, in turn, offers opportunities for enterprise customers to work with telcos as partners for their digital transformation. In the report The Future of Telecoms: Strategies To Transform Telcos In Digital Services Providers, we analyze the extent to which telcos could move beyond their traditional role of network infrastructure and connectivity provider — and what needs to be done to get there.

Three major network-related trends are affecting enterprise CIOs’ own digital transformation efforts:

  1. Cloud-based on-demand service delivery is complementing on-premises IT systems;
  2. programable network infrastructure aimed at supporting specific use-case scenarios is partially replacing passive networks; and
  3. network data-driven systems of insights are complementing systems of record.

It is against this demand scenario that telcos have an opportunity to emerge as credible digital services providers.

Forrester research shows that telcos are not the primary choice of digital transformation partner by enterprise customers today. Customer-obsessed businesses like Amazon, Google, Salesforce, Tencent/WeChat, or Alibaba are “top of mind” as digital services providers for both CIOs and consumers. Still, telcos can develop new offerings as digital services providers in several areas. To get there, telcos must first recognize and accept their own limitations — and be prepared to transform radically. In essence, telcos must first transform fundamentally internally before they can become reliable external digital service providers.

This report aims to help business and IT leaders to determine if, and for which offerings, they should consider telcos as digital services providers.

Dan Bieler is principal analyst at Forrester Research. Read more Forrester blogs here.