Digital transformation: Are we there yet?
December 10, 2018 - Aleks
Digital transformation is throwing a spanner in the works for telecoms service providers. There has never been more pressure on operators to change and evolve into agile, flexible, providers that can meet increasing consumer demand for more data, more content and more services. Most service providers have started on their digital transformation projects for this very reason – but there is still a long way to go and a lot to play for.
In its annual industry survey Telecoms.com Intelligence revealed that digital services revenue could reach $462 billion in 2022, up from an anticipated $294 billion in 2019. Yet despite this huge revenue opportunity, operators are still some time off from monetizing new digital services, with the survey revealing that in 2022 the majority of operators will only be halfway along the digital transformation “journey”. With this clear gap in digital transformation progress and future revenues, how can service providers evolve in a way that will allow them to plug into digital services of the future?
Understanding the opportunity
Digital transformation is everywhere, and today, it permeates every aspect of telco operations with many service providers placing efforts on tackling it. The good news is that many service providers have already embarked on their digital transformation projects, and are already starting to benefit from the new revenues generated by digital services. But progress remains slow. According to telecoms.com, the majority of service providers will only consider themselves a third of the way into their digital transformation journey by 2019. That’s not very far ahead at all, and considering the work that still needs to be done to ensure service providers can capitalize on new revenue opportunities, it’s evident that a change is required to speed things up.
It is critical that service providers seize the opportunity to change now. The speed at which the industry is evolving means transformation is no longer a ‘nice to have’ option, but rather one of survival. As shown by the telecoms.com Intelligence survey, the future of service provider revenues lies in digital services, with enterprise IoT, smart home and consumer IoT anticipated to be the biggest revenue earners in the coming few years. Unlocking the potential of these new digital services will only happen if service providers can succeed in their digital transformation efforts.
As with most things, digital transformation is easier said than done. With service providers citing insufficient business cases, general inertia, over-reliance on legacy systems and CapEx constraints as the top 4 obstacles to digital transformation, it’s clear to see that service providers’ challenges are varied and multi-faceted.
Making OSS/BSS the solution, not the problem
The telecoms industry is filled with dos and don’ts when it comes to digital transformation, with different experts voicing different opinions about where operators should start. Unfortunately, no one has yet come up with a definitive answer, but industry associations such as TM Forum are placing a huge emphasis on the importance of upgrading legacy OSS/BSS if organisations are to become ‘digital-ready’. OSS/BSS is critical to enabling fast time to market and gives service providers the ability to try out new business models, at a much faster pace and lower cost than existing systems. This is a crucial element of digitization – service providers simply cannot afford to go at their current pace if they are to manage increasing mobile data and subscriber demand for an enhanced user experience.
Much like the concept of digital transformation, upgrading legacy OSS/BSS is no easy feat. According to telecoms.com, almost 60% of service providers are only 40% along their BSS/OSS transformation journey. When it comes to refreshing OSS/BSS a lot of work is yet to be done. With many of these systems dating back to the 1980s, it is no surprise that they have become ill-fit for purpose. So when it comes to upgrades and transformation, which methods should service providers adopt?
When asked which approach they favoured, the majority of service providers agreed that a ‘big bang’ approach – whereby legacy systems are swapped out for digital systems in one large project – is the worst approach to OSS/BSS transformation. This is unsurprising given that McKinsey, Forbes and telecoms.com all report that the failure rate of large scale transformation projects is at approximately 70%.
Instead, service providers favour a more pragmatic approach. In joint second place was the greenfield and add-on systems approaches, which both received scores of 3.44 out of 5. A greenfield approach allows service providers to add new digital systems to support new lines of business such as IoT or second brands, while an add-on systems approach enables service providers to add on new digital systems as an overlay to existing legacy systems. This then allows service providers to phase out their legacy systems gradually.
The most popular approach to legacy system upgrades was the phased systems method, whereby service providers take a step-by-step approach to replacing legacy solutions with digital solutions. While there will never be a one-size fits all approach to transformation, it’s clear that pragmatism wins here. These approaches minimize disruption and also allow service providers to reduce and maximize the cost spent on transformation. With service provider margins increasingly slim, the prospect of financial cost savings and minimal disruption is a welcome sign.
While many service providers today have a clear understanding of digital transformation’s ultimate goal, the reality is that digital transformation is a continuous journey. Service providers will never be finished with it – it will continuously require new thinking, new advances, change and adaptation. Service providers thinking of digital transformation as a finite journey will struggle to measure their organisation’s success as they focus their aims on an unachievable digital transformation utopia.
Digital transformation represents major upheaval – and even inconvenience – but without it, service providers won’t be able to keep up with the pace of change. They must transform to survive, and that starts within their organisations – with their culture, their processes and their existing network infrastructure. But adopting the right approach is key and service providers need not make digital transformation scarier than it already is by embarking on large-scale, lengthy transformation projects that reap few rewards. It is only through the adoption of a tactical, pragmatic and step-by-step approach to transformation that service providers will be able to evolve and, ultimately, start monetizing the multi-billion digital services revenue opportunity.
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