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Friday, January 9, 2015

Rethinking the Telco Business

There is a major difference between the business mentality of Telco & IT industries today. This difference is normally not spoken out loud. However, who ever understands the business priorities of the two industries should be able to feel this difference. For everyone’s sake, let me give you a flavor of what this difference in mentality of Telco & IT industries sound like from a very high level:
Telco industry believes
We provide the fundamental communication infrastructure that is driving today’s Internet & mobile services. Every connected product, either hardware or software & services, require our connectivity infrastructure to function & generate revenue. If we do not deliver connectivity, then no one could deliver connected products. Therefore, we are THE driving force behind the growth of digital economies & keeping the IT industry alive. Period.
IT industry believes
We are the ones who develop software & services for every industry & directly influence our customers’ business. Our customers do not care how our products work, as far as they deliver what they expect from them. We are the real innovators because we keep on introducing new software & services very rapidly independent of the underlying communication infrastructure. We see connectivity as a commodity and expect it to be everywhere every time, whenever we need. If we don’t deliver our software & services, then no one would require connectivity. Therefore, we are THE driving force behind the growth of digital economies & keeping the Telco industry alive. Period.
Okay! I do understand that this is a controversial discussion to have and many of you may disagree in one way or the other with what is expressed above. However, for a few moments lets be very honest on the priorities of Telcos & IT industry:
  • The Telcos want to sell as much connectivity as possible regardless of who is the service provider (think Vodafone! works behind services of Amazon Kindle, BMW, Daimler, Audi, VW, TomTom, etc.).
  • The IT companies want to sell as much software & services as possible regardless of who is the connectivity provider (think Whatsapp! works with any type of internet connectivity (2G, 3G, 4G, DSL, VDSL, WiFi, etc.), regardless of the provider).
This is a fact & major difference in how these two industries operate, today!
Let’s stick to the Telcos’ perspective in this discussion.

Telco transformation into IT

In spite of the staggering rate of growth of IT services today, the Telcos’ main business driver remains providing connectivity by selling more and more SIM cards. This does not mean that Telcos do not realize that their connectivity is becoming a commodity. They really do! However, the Telco industry today is very very brand conscious. Every Telco provider believes they are a brand that everyone loves. Also, there is an oblivious belief among Telcos that they are a consumer brand that their subscribers adore. This perspective of Telcos is not completely wrong, but it is not completely right either. Unfortunately, what most Telcos do not seem to realize is that they are not a brand that consumers love, like they love Apples, Samsungs and Googles of today. Once, I asked a senior Telco executive that “how many times have you seen people queued up in front of your stores since 4 a.m. in the morning just because they want to be the first ones to buy your product?” What I got in response was utter frustration & anger that made me the center of attention, as if I have done a crime.
I’m not saying that Telcos are not consumer-loved brands. They are, indeed! However, not to the level what many IT companies (including startups) have achieved. This is because what Telcos provide (connectivity) is hidden behind the scenes and not noticed by the consumers, until it malfunctions. All consumers see is that their Whatsapp, Google Maps, Mail, Games etc. work great and have exciting user experience. They tend to give all the good credit to the services running on top of the Telco connectivity. As soon as the connectivity fails, all the blame goes to the Telcos (Oh my God, what a crap Internet connectivity!). How many times do we hear consumers appreciating the connectivity, while they are enjoying the service experience? For exactly this reason, the Telcos need to understand that if they want to compete with brands like Apple, Samsung & Google, WhatsApp, Facebook, Twitter etc., then they must deliver software & services that are NOT restricted to their networks only. The Telcos need to leave their egos behind and start to work collaboratively. Think about it! What if consumers could buy a service from one Telco and use it over the network of the other Telco - seamlessly? This is a complete opposite of how Telco industry thinks today. However, it is not too far when the connectivity business of the Telcos will become a low cost commodity to afford, just like water, electricity and gas, leaving them to be used as dumb data transmission pipes. Every one will (or perhaps already!) expect connectivity to just BE THERE. That’s when the services that Telcos provide will differentiate them from the competition & help them introduce new revenue streams. The Telcos must become software hubs and develop their own services in-house, instead of merely taking third party services and reselling them as a white labeled solution. White labeling services won’t generate any IPR for Telcos, but becoming software hubs will. Telcos must invest!
Once the Telcos become software & service providers, then they will naturally get a competitive edge on existing IT industry because of having their own connectivity infrastructure. Their capability of planning, deploying, operating networks, roaming, charging & billing, when coupled with the knowledge of developing, designing, UX, deploying & operating software & services will establish them as extremely strong players in the industry who can really revolutionize the technology landscape from every perspective. It is much easier for Telcos to become IT players than for IT players to become Telcos. With 2015 beginning to unroll, I hope the decision makers in the Telco strategy sphere engage to redefine their businesses for the greater good. The race has started, but there is a long way to go.
Telcos urgently need to transform themselves into IT player - now!
Please share your opinion in the comments to help me verify mine.

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