I’ve been repeating the ideas presented in this weblog quite often of late on the shift in telecoms, ever since TADSummit / TADHack Global in 2018. None of this is new, it’s simply packaging old ideas into an easy to digest form to better understand the shift in telecoms thanks to programmable telecoms, why digital transformation has failed, and a strategy for telcos to better manage the shift in telecoms.
The main shift happening is enterprises can now buy their telecoms in 2 ways:
- Telco-way: be grateful you’re our customer, no freemium or trial to buy, inflexible, low automation, relatively expensive, focus on telco standards, 5*9s; and
- Web-way: grateful you’re our customer, lots of freemium and trial to buy options, programmable, high automation, relatively inexpensive, focus on customer needs, good enough.
Ten years ago telecoms sold in a telco-way was the only option for businesses. But that is now changing, albeit in a small way, $15B+ of the $1.4T telecom services market, but the growth is in selling in a web-way, just look at the valuation multiples of such companies compared to telcos. Programmable Telecoms helps both channels, it’s just the companies selling in a web-way have been able to adopt it faster.
This simple idea of 2 ways of selling telecoms, and telcos trying to migrate from a telco-way to a web-way underlies the coining of the dopey term “Digital Transformation” which has been at the peak of inflated expectations for the past 5 years, and in general use for the past decade. And as pointed out by Teresa Cottam should be laid to rest.
I work across both ways of selling, the following are gross generalizations, over-simplifying reality, but laying out why telcos have generally failed to adopt the web-way of selling telecoms.
Quite simply, they are institutionalized, invariant. A telco expects customers, take mobile telcos, usually only 3 are in a country, so they can expect about 25-50% of the market all things being equal. None of us wakes up in the morning and thinks, ‘this year I’m not going to have a mobile phone.’ We have no choice. On the fixed side I have Verizon screwing me on monthly fixed internet charges, and quite happily offered to terminate my service as what choice do I have. As telcos have been around for decades (>century in some cases), this institutionalization runs deep, making them invariant.
For the companies selling in a web-way, like VoIP Innovations, Telesign, hSenid Mobile, Cequens, Wazo etc. they’ve grown up where the customer more often than not says no. This builds a very different type of organization, a more customer centric one, where the people, processes and technology are all aligned to trying to win business they are more than likely not going to win. Once the business model is set and the company’s engine starts performing, the people, processes, and technology get locked in. This is why change can not really happen for either the telco-way to the web-way once both businesses are performing.
Looking a little deeper into the lock-in factors for telcos so we understand why the usual digital transformation band-aids have failed.
Telco standards are treated like the word of god. Telco standards people gather on a mount to derive the word of god and produce overly complex, self-referential, tomes that create massive barriers to entry for most potential suppliers. Look at IMS which was supposed to enable lots of new services and expose telecom APIs. All that’s been achieved in HDVoice (VoLTE) which could have been done on 3G. Yes RCS is in the background, but let’s not go there. For the tens of billions spent on IMS, that’s sort of a failure. But to quote one of the telcos’ vendors on IMS, “what choice do they have?”
Opus is an amazing codec, the telco industry should have jumped on it, but they haven’t. I could list out so many examples of telco standards thinking they can do better, and failing in the market. It’s because selling and product development are now agile. Build an MVP, see how the market reacts, and revise fast. The telco standards model is broken. Even for 5G which should have focused on lowering the cost of networks and improving coverage, instead it focuses on capacity we do not need as 4G is good enough (I currently have 120 Mbit/s / 60 Mbit/s, 20ms ping as I write this weblog). Claims I do not know what amazing things are possible with 5G are weak arguments at best, given 1Gbit/s internet access has been available for over a decade in several countries. The telco industry is making a huge mistake with 5G, analogous to the Titanic trying to plough through an iceberg of cost.
Telcos are filled with 30, 40 and 50 year olds, some of the best and brightest from the country’s technical universities. They have become guardians of the processes, the culture, and the thinking. Bring in a change agent at the top, they find the levers do not work. Buy a business to stimulate new ways of working and thinking and they’ll be marginalized, accused of commoditizing the core, and meetinged to death. Telcos love meetings, when they buy innovative companies they meet the new team into submission, usually within a few months. It’s a particularly cruel form of hazing and deserves a new adjective, ‘to be meetinged to death.’
But let’s not right-off selling in a telco-way. The majority of enterprises buy their telecoms in this way and will continue to do so as people change habits slowly, as well as the majority of integrators, managed service providers, and all the PSTN services of the companies selling telecoms in a web-way. The state granted oligopolies ensure telco are not going away. Knowing what you are, a telco, and selling in a telco-way works; and accounts for the vast majority of telecom revenues. Incremental improvements are possible in telcos, but the core (people, process and technologies) remains unchanged.
So the crux of the issue is what should telcos’ strategies be if transforming themselves does not appear a likely prospect to mitigate revenue erosion? The answer is simple: nothing in the near term. The telcos’ board needs to create a holding company and buy a business that enables enterprises to buy telecoms in a web-way. Keep the two absolutely separate across people, processes, and technology, and once they get close to 50:50 in revenue, examine how best to merge equals. The fit may be by then quite clear, where the telco-way division focuses on ISP and PSTN wholesale, and the web-way division on everything else, perhaps even the underlying technology across the combined entity. Only as equals is such a merging possible. Note the valuation of the business selling in a web-way will counteract the continued devaluation in the telco-way business. Just look at the valuations of Twilio, RingCentral, and Bandwidth to see the vast difference in multiples.
Rather than transformation its acceptance and recognition. Acceptance of what a telco is, focusing on where it’s successful, and recognition that change can only come from outside. In our lives we achieve most satisfaction from life when we accept who we are with all our strengths and weaknesses, and focus where we can make the most significant contribution. Hence telcos can manage the shift in telecoms over the coming decade, and stop spouting all the silly nonsense we see at out-of-touch events like MWC and TMF digital transformation boondoggles .