The telecommunications industry is in the midst of a digital revolution; one shifting from providing traditional communications services to becoming solution providers of diverse digital services and, more importantly, becoming increasingly customer-centric. Globally, telcos are at an inflection point due to heavy investment in 5G development and deployment, innovation in networks, and commoditisation of voice, messaging and data services consumer markets.

According to Omdia’s Global Cloud IT Services Survey conducted in 2021 across 310 decision makers, software vendors and systems integrators (SIs) are preferred over telcos. Likewise, telcos face a similar challenge with enterprises as software and specialist security service providers are preferred.

While it has become table stakes for telcos to evolve their fixed, proprietary infrastructure stacks to more open, flexible, cloud-like models, it is a move fraught with risks as they strive to deliver consistent quality while moving faster and avoiding disruption.

Adopting a customer-centric mindset

One of the biggest hurdles facing telcos in their transformation is an entrenched corporate-centric mindset. To stay relevant, telcos need to prioritise digital solutions that can effectively address consumers’ ever-changing priorities and concerns. According to an EY analysis of the top 10 risks facing the telecommunications industry in 2023, the issues to be addressed range from consumers’ cost-of-living pressures, rising security expectations, secure digital self-service experiences, and new demands for telcos to better manage the sustainability agenda across all aspects of ESG.

Telcos need a paradigm shift to refocus on the customer, or face obsoletion. This means becoming a solution provider with more ‘digital empathy’ towards customers and understanding their needs more deeply than ever before. Setting up user research labs help businesses to better understand the customer experience; from needs and motivations to digital interactions, which contributes to designing products, journeys and processes for customer ease and convenience.

Leveraging platform thinking

Traditional, rigid business models are a thing of the past. The digital revolution requires telcos to have a nimble strategy that can swap resources based on shifting markets and priorities. Instead of focusing on the ownership of individual resources, platform thinking creates value through connections and interactions.

Telcos will need to experiment with running their network as a platform to provide a new way to monetise their network build-outs and possibly spin up a new mobile virtual network operator (MVNO) rapidly and yet profitably. For example, opening up their network to offer new mobile services as well as social tariffs with the aim of providing fast and reliable connectivity support for those who need it most. Telcos with a clear vision to improve the customer experience driven by innovation will be better positioned to unlock new growth.

Challenges and opportunities in telco transformation

With the advent of newer agile methodology and implementation of cloud computing, it is necessary for systems to be decentralised. As most digital technologies are based on agile development, it can be challenging for telcos to decentralise legacy systems to implement digital solutions. For effective transformation, telcos need to look at decentralising both internal and external systems relating to decision-making and purchasing.

To achieve meaningful digitisation, telco transformation requires new operators, flexible business models, change in partnerships, and allocation of revenue towards these partnerships to be introduced. The increasing demand for over-the-top (OTT) platforms, such as Netflix and Disney Plus, has rendered it necessary for telecom companies to incorporate a more flexible business model, work with new operators, and allocate revenue to new partnerships. The seamless integration of these elements in the existing model can be challenging for telcos.

Both a time-consuming and costly process, telcos need to carry out the upgrade of their legacy systems effectively, plan strategically and set aside a budget and other resources for the purpose. Similarly, handling operational complexity will prove to be a major hurdle for telcos. And while 5G networks are aimed at providing for a wider range of customers, the emergence of new services, and customised and bundled communication solutions means the operational processes are bound to become more complex.

The significance behind the transformation from telco to techco is the benefits provided to customers. These include data-driven insights culled from digital technologies that can enable better planning and help with strategic development, an agile network to help techcos react to changing customer demand and stay competitive, and automation to detect and reduce failures and improve operations. Most importantly, an improved customer experience through digital solutions such as digital customer relationship management and omnichannel customer care services, chatbots, and social media interactions.

Much like digital transformation, there is no defined blueprint or guide for transforming from telco to techco. Neither is it a journey that can be finished. It involves culture, talent, operational tools, and processes, and shifting from a fixed physical environment to flexible, multi-tenant software environments. However, this journey will ensure that they’re able to effectively capitalise on 5G, IoT, and edge capabilities – but only if it is mapped out in the right way.