As the success of managed services (MS) continues to drive growth in the B2B space, an increasing number of operators are venturing into the managed ICT space. However, the role telecommunication groups should play when selling and providing managed ICT services must shift from the current legacy models to more centrally driven designs. Tech giants such as Microsoft, Google, Salesforce and IBM have already adopted this approach with their local presence in many markets – but the design of the business models and the development of the services are very much centralized. Telecommunication groups, too, can benefit from such centralization. Centralization not only brings about cost efficiencies, but more importantly, helps to build disruptive products due to the enhanced collaboration among operating companies (opcos), which allows them to acquire insight into relevant global trends and access to specialized and skilled resources at a much faster pace.
Essentially, in ICT, scale matters when its benefits are exploited via well-thought-through, centralized models. Those that manage to develop centrally and deliver effectively are bound to rule the markets.
The legacy: most telco groups have not yet centralized beyond shared service centers
Through the late 1990s and early 2000s, operator groups executed their territorial expansion strategies through acquisitions. They grew organically and by blueprint design to a much lesser extent. Time to market was the most important paradigm, as well as the focal point of these expansions. This may well be at the heart of the reason the technical reality of many opcos is very diverse.
Many groups have already engaged in establishing centralized services through trying to leverage scale benefits, and perhaps also for some less-rational reasons. However, these were typically limited to shared service centers (SCCs) catering to procurement, network design and other support services, such as knowledge management and project management. A few groups, including DTAG and Vodafone, have also addressed product and service innovation areas, through DTAG’S Products & Innovations and Vodafone’s Innovation Park, respectively. Many of these set-ups have had limited success in delivering related group and scale efficiencies.
We believe if a group steps beyond the narrow space of being a mere financial investor, the benefits of such an engagement outweigh the related costs. Having worked with many of the groups named above, we have seen only two benefit levers beyond protecting shareholders’ financial interests:
- Shared learning
While shared learning is an obvious benefit, the trick is to organize it so whatever is presented as learning is meaningful for everyone, despite the lack of homogeneity in individual operations.
Operator groups have not even partially leveraged the key drivers (listed below) for efficiency:
- Asset utilization (sharing of production or support platforms)
- Skill utilization (availability of expertise and workforce)
Surprisingly, despite all the virtualization hype and global delivery models of the web-scale players that operators have enabled, there are few success stories that have benefited from asset utilization. Similarly, we do not see any meaningful stories of increased skill utilization, other than SCCs for call-center services, procurement and similar support functions. While these fundamental functions are a good start, we believe there is more untapped potential.