We recently released the results of new research that explores how 5G investments are being translated into revenue. The findings suggest that communications service providers (CSPs) are failing to develop the business-to-business (B2B) solutions that are critical to the commercial success of 5G. They also show that businesses around the world are more ambitious about the role CSPs will play in 5G than CSPs are themselves.
One of the major takeaways from this research is that CSPs are leaving far too much on the table for others to take. With a $1 trillion predicted investment in 5G built by 2025, CSPs must think strategically to ensure a marked return on their investments. Our research showed that truly, CSPs need to pivot their thinking in order to avoid the mistake they did with 4G, where they focused on the connectivity and missed on the opportunity to innovate with new products and business models to over-the-top (OTT). With 5G, only 5 percent of revenues will come from connectivity – the rest will come from new integrated solutions and services that take advantage of the advanced capabilities of 5G.
The pandemic we are currently experiencing is continuing to hasten the necessary change. With the brakes put on the global economy and tightening budgets all-round, this watershed moment will lead both enterprises and SMBs to accelerate investments in automation, remote business operation, and remote working in the short term. We’re also witnessing more technology-based services becoming available to help their customers to get back to growth – and rapidly – as part of the larger cache of existing business-critical services. While this is an in-progress phenomenon, ultimately, the real beneficiaries throughout will be those providing a consumable solution to a problem.
CSPs face a dilemma and are truly at a proverbial crossroads. There is a limit to what consumers will spend, no matter how fast the network. In fact, the GSMA (mobile network CSPs’ association), predicts 5G will be the first generation of mobile technology to have a bigger impact on businesses than consumers when it comes to monetization. However, 5G opens a world of new possibilities for businesses, whether for replacing current IT, transforming their operating models, or creating new and innovative products and services to sell to customers.
To help CSPs navigate the 5G B2B journey, and to inform the aforementioned crossroads, the goal of our study was to do a deep dive into the real attitudes of both CSPs and business customers around the world towards 5G, along with the potential role of the CSP in the 5G era. Study results were derived from the brainpower of 250 technology decision-makers we interviewed from 100 enterprises and 150 SMBs across Europe, Asia, and North America as well as 90 senior executives within CSPs.
What CSPs need to know
The first takeaway is very encouraging, with 75 percent of both large enterprises and SMBs across all regions believing that 5G will be important to their businesses. However, there is still a major disconnect between what CSPs want to sell when it comes to 5G (i.e., network solutions) versus what business customers want to buy (i.e., new integrated solutions made up of multiple technologies including 5G, IoT and more).
Secondly, it’s clear that businesses want to buy more sophisticated, complete solutions that solve their business problems rather than buy a combination of connectivity and hardware products. With pressures to transform their businesses, for the current landscape we’re in, this is too slow, too expensive, and too risky. In many cases, businesses don’t even have the breadth of capability needed to deal fully with the integration of new standalone technologies. Instead, they look for partners that understand their challenges and can orchestrate the right ecosystem of technologies and players to deliver solutions that perfectly solve their problems.
Substantial change is required if CSPs want to address this opportunity. One major action CSPs need to take: Collaborate much more closely with customers to understand the problems they are looking to solve.
Third, our research also showed that CSPs are not currently seen as obvious partners for enterprises and SMBs to build their 5G use cases. This means that awareness needs to increase regarding the ideal position CSPs are in regarding potential partnerships with enterprises and SMBs through a collaboration ecosystem. To move forward, both need to get on the same page.
How to move ahead? It’s time for a new mindset
A deeper collaboration between CSPs and enterprise/SMB customers could cull a deeper understanding of the problems that customers want to solve, and the benefits and drawbacks of alternative solutions. It’s time for a new mindset. As 5G gathers pace, it’s time for CSPs to sit down with their B2B customers to better understand the challenges they face and better explain the possibilities of 5G. Expectations on both counts – CSPs and businesses – need to be transparent and mutually understood.
Results of our 5G survey demonstrate there is truly no question about CSPs’ commercial success with 5G being dependent on their ability to build ecosystems with multiple partners to create the new products and solutions that embed 5G.
If CSPs want to grasp the significant opportunity presented by both a) enterprises and b) SMBs wanting 5G-powered services, they must take steps now to collaborate with a broad and varied ecosystem of partners. Only in this way can they design, develop, and launch the 5G use cases and solutions that business customers want and need.
Through our research, we also learned that businesses need an average of nine partners to support their 5G use cases. Further, more than 60 percent believe that 5G use cases will involve between four and 12 partners. In contrast, CSPs think they will need an average of just four partners to support the 5G use cases which they have in mind.
The numbers don’t lie: the bottom line is that CSPs are still thinking too small when it comes to 5G. Their focus is still largely individual partnerships and not broad ecosystems in which tens or even hundreds of third-party providers can participate. There is a solution to remedying this micro thinking: an ecosystem-led approach. If built correctly, partner ecosystems will help CSPs become more agile, innovative, and able to properly meet all the technology needs of businesses across a range of different industries and verticals.
This challenge is probably understood best by US CSPs, with 77 percent of them prioritizing developing vertical industry-specific solutions for enterprise customers as their #1 priority relative to Europe and Asia who are still much more network or mass consumer market focused.
Businesses see CSPs playing a bigger role in the ecosystem, with over 90 percent believing they are more than just a connectivity provider.
Moving forward, in Q2 and beyond
An ecosystem-led strategy in 2020 will enable CSPs to solve genuine problems for customers and also open up fresh opportunities with co-created solutions supported by ground-breaking business models and attractive revenue share arrangements. If CSPs want to meet the expectations and demands of businesses, they must become masters of this partner ecosystem orchestration. Alas, we’re certainly not “fully-baked” yet: 5G is not yet a mature technology and won’t fully arrive at scale until 2025. But this doesn’t mean that CSPs can rest on their laurels – 5 years is a long way to go. Large enterprises and SMBs are already choosing their partners to help them carry out their long-term digital transformation plans, in which 5G will play a critical role. However, at the moment, CSPs are not in their thinking as prospective partners.
To quickly shift from being a product-centric organization to a customer-centric one, CSPs must be willing to change their strategic priorities and their internal processes, so as to properly collaborate with both business customers and third-party partners. If they don’t, they’ll miss out on fresh revenues and greater market share in the same way that they did so with 4G and 3G. If they continue to define their role too narrowly, they’ll miss out entirely on the high margin opportunities in B2B 5G. By not taking a lead now, CSPs are gifting the majority of 5G revenues to a new generation of service providers, repeating what OTTs did to CSPs with 4G. The much higher cost of 5G networks means they are seriously jeopardizing the ability to monetize their 5G investments. CSPs must quickly master the art of ecosystem orchestration if they want to monetize 5G at scale. If they don’t, technology providers and vertical solution providers will.
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