As we entered 2020, many Communications Service Providers (CSPs) were optimistic about finally fulfilling the early promise of IoT by harnessing the potential of 5G and Mobile Edge Computing (MEC) to offer a rich source of future growth. Many CSPs understood that to realize this opportunity, they needed to change. Enterprises wanted fuller solutions that would drive their digital transformation faster and that were simple to buy, fast to implement, and simple to consume.
In a recent Analysys Mason study, 59% of enterprise customers would only buy MEC as part of a solution. Solutions require a much fuller set of capabilities that typically come from partners. So, are CSPs successfully managing to offer compelling solutions that accelerate digital transformation for their customers?
The answer: not entirely. Omdia’s quarterly 5G innovation tracker reveals that so far, 32% of enterprises have chosen DIY (to go it alone and build their own 5G solutions), 40% looked to others like systems integrators for solutions, whilst only 21% purchased directly from CSPs. Although it is early days, CSPs must drive this ratio above 50% to make sense of their 5G investments.
The ‘Positive’ Impact of Covid-19
Regardless of Covid-19, the fact that only one in five early enterprise 5G solution deals are CSP-led, proves that the way CSPs want to sell is deeply at odds with the way in which their enterprise and SMB customers want to buy. What’s more concerning is that some of these early large enterprise deals, such as the ones we see in automotive with VW and BMW, cut out CSPs entirely – even for connectivity. Businesses want to buy complete solutions that meet their needs and help them solve business problems, rather than connectivity and separate technology products they need to integrate. This is a multi-billion-dollar opportunity that requires CSPs to collaborate and better understand their customers’ needs, becoming ecosystem-enabled solution providers to satisfy them.
The global pandemic is causing many enterprises to hit the ‘fast-forward’ button on IoT/5G technology solutions. Indeed, 5G investment in China is already recovering because enterprises there recognize the importance of automating processes to guard against a second wave of the pandemic. We expect this trend to unfold globally as Covid-19 makes digitalizing physical assets, automating through industry 4.0, and securing supply chains more relevant than ever.
As Covid-19 resets how enterprises use technology, major verticals including automotive, manufacturing, and logistics will look to rebuild differently. Within this is an opportunity to test the mettle of solutions that harness IoT, 5G, and MEC with AI. In the U.S. for example, 67% of businesses believe that 5G Applications can deliver 11%+ cost reductions over the next three years. Nearly a quarter (23%), believe that 5G Applications could deliver revenue growth of 11% or more. Now is a very good time for CSPs to change their approach to selling 5G and non-5G driven IoT propositions. But are enterprises willing to buy from CSPs?
Enterprise IoT & 5G Market
CSPs are pushing at an ‘open door’: 98% of European, 92% of Asian, and 87% of North American businesses are willing to buy advanced solutions from CSPs. In particular, North American businesses are most positive about the role CSPs will play in 5G, with 96% believing they will do more than provide connectivity. Large North American enterprises say they want to work with CSPs as they can orchestrate ecosystems of partners, manage complex programs, and are perceived to be more flexible than other potential 5G solution providers.
Enterprises, more than CSPs, recognize that building effective IoT solutions is a team sport. They don’t expect one organization to have all of the answers. But they do expect industry players to collaborate to provide solutions to their business challenges. This is where the problem currently sits. Enterprises are looking to buy solutions, CSPs want to sell products – in effect, to organize themselves in a way that best suits how they want to structure their business internally rather than how best to meet customer needs.
Businesses want to find the ‘perfect’ solution to their problem, rather than invent one by integrating multiple products – which is too slow and costly. Instead, they want to buy complete IoT solutions ready to be consumed in a bite-sized way, with no upfront investment and/or risk. It’s not about buying a network slice or MEC product. For businesses, it’s about finding pre-integrated solutions and the best available technologies to quickly drive efficiencies for customers or help them grow revenue as part of their digital transformation. For CSP, it’s about retaining customer relationships and growing revenue.
Even the larger enterprises don’t have the knowledge or capabilities to deal with the integration of new standalone technologies. So, they look to partners that understand their challenges, orchestrate the right ecosystem of technologies and players to deliver solutions that perfectly solve their problems. Covid-19 will only accelerate this trend as it renews pressure to digitally transform faster.
Historically, CSPs have tended not to work in this way. Now, they really need to. One key step is to adopt a more open and collaborative mindset. This includes taking the lead in setting up and managing ecosystems with third-party partners.
Ecosystems are an effective way for CSPs to plug their knowledge and technology gaps, broaden their portfolio of services and solutions, and importantly encourage fresh ideas and new ways of thinking.
For CSPs to monetize IoT throughout the process of enterprise renewal during Covid-19, it will require having industry-specific solutions underpinned by an enabling technology layer that is massively scalable. Strong partner ecosystems will generate powerful network effects around a digital business platform that provides massive economies, frictionless process execution, and zero-touch operation for customers. These architectures and solutions need to be capable of being converted into technology wrappers and services.
IoT Innovation Requires Collaboration
Solving customer problems requires a broader set of perspectives and the exchange of customer insights and ideas for new products or services, as this rarely happens effectively and sustainably in silo. This is the concept behind an ecosystem-enabled solution provider. They bring together a broader set of capabilities around a digital business platform to prototype and test those new ideas with customers. In these new multi-sided business models, a partner ecosystem is key for generating new ideas, bringing new data sources, driving innovation, expanding offerings, and extending into the white space between old industry verticals and growing revenue.
The pandemic we’re experiencing is hastening change. There isn’t a single entity that hasn’t been affected by it. Our global economy is in a holding pattern and budgets are tightening. This laser focus on how to spend carefully will lead both enterprises and SMBs to accelerate investments in automation, remote business operation, and remote working in the short term. While this is process is in motion without a hard timeline, the CSPs that will prevail will be the ones that harness a powerful ecosystem to provide full solutions to problems and in so doing, build much strong and closer customer relationships.
CSPs are poised as ecosystem-enabled solution providers that can foster growth by combining 5G with technology – if they embrace platform-based business models and orchestrate partner ecosystems to satisfy the needs of their enterprise customers. This requires a change in mindset, experimenting with business models, accelerating innovation, and speed to test and monetize new offerings that are co-created with an ecosystem of partners and underpinned by the right IT platform to support these new ways of working.