Unlocking Vertical Opportunities: A Roadmap for Telecom Transformation in the Digital Era

For some time now, telcos have been under continuous pressure as revenues shrink. Value from voice and SMS, the bedrock of the telco value proposition, has been eroded since the onset of OTT players, and data connectivity, which underpins almost all of the digital services we rely on today, has not delivered significant growth for operators either. McKinsey explains that the reason for this is “business-model disruption, with technologies like AI, big data, and the Internet of Things (IoT) redefining service-delivery and value-capture models” – i.e., those delivering services using advanced data connectivity have benefited more than those who built and delivered the connectivity in the first place.

Additionally, telcos face underperforming investments in 5G and fibre, intense market competition and stringent regulatory constraints. They are in need of rapid transformation, or risk being relegated to just commodified providers of pipes.

But data connectivity is the lifeblood of all the digital services now underpinning society, and the demand for connectivity is only increasing. Forward-looking telcos see their opportunities for expansion and realize they have no choice but to diversify their services. From home automation to connected healthcare and industrial IoT, operators are in a strong position to deliver new revenue-generating services and products into vertical markets.

Verticalisation - The next billion dollars in telco revenue

At Digital Transformation World this year, the chief digital and innovation officer of BT Group, Harmeen Mehta, outlined the company’s goal of unlocking more than a billion pounds in value from AI and its intersection with customer care. Service excellence is one of the pillars the successful telco of the future will be built upon, but telcos must build on this further; more revenue will be found by targeting specific segments with industry-specific solutions. The next billion dollars in telco revenue won’t come from just a single line of business or excellence in one area, but from being able to service multiple across a broad range of different vertical markets too. 

Telcos’ core asset, the network, can be chopped for an almost limitless number of vertical opportunities. Take the Australian telco, Telstra. Telstra Health has grown to become Australia’s largest eHealth company and now works with care providers in the hospital, health service, pharmacy, and aged and disability care sectors to connect health information, clinicians and consumers - these services were built from the network up. Verizon, on the other hand, has made a move into the logistics space with advanced vehicle-tracking systems. Its technology provides fleet operators with a near real-time 360-degree view of their fleet’s operations enabling them to reduce costs, increase productivity and stay on top of vehicle maintenance. These too are services underpinned by the core network ‘product’.

Operators across the globe need to look closely at their individual context to consider the vertical opportunities they can support. Their experience, core competencies and partner strategy may well decide what these opportunities look like, but another key barrier to success will be whether their technology stack enables agility. To seize these vertical opportunities at pace, they’ll need to do away with legacy OSS/BSS.

Evolving the monolithic BSS Stack

Telcos have historically operated as business units primarily focused on serving either the business-to-business (B2B) or business-to-consumer (B2C) segments with network-centric services. Products for each segment were pre-defined and billing was done in a static way. It was a high-volume batch process, generating detailed and weighty bills at the end of the month but providing very little information or value in between. Prepaid platforms were little more than meters that ran down the subscriber’s balance, ultimately cutting off services for those who had neglected to top up.

In our new digital reality this clearly isn’t the case. Subscribers consume a range of services in a number of different ways, often at the same time. Expand this to the enterprise and the complexity is much greater. The evolution of operator services necessitated future-proofed BSS transformation, but this isn’t how the systems evolved. As operators expanded their portfolios to include fixed, mobile, broadband and content offerings, new platforms were typically grafted on to the BSS.

It’s clear that telcos can’t afford to buy a multi-million-dollar BSS and OSS solution each time they want to launch a new service and tap into a vertical opportunity. Many legacy systems need heavy customisation, and would require huge investments if a service provider wanted to create a solution for a customer in a new vertical market. In a fast-moving digital landscape, this approach doesn’t give telcos the agility necessary to capture new opportunities.

A composable, cloud-native architecture, on the other hand, enables telcos to plug together various software modules from different best-of-breed vendors, to seamlessly offer services for new lines of business. No need for deep customisation of existing software and no more lengthy migrations. This approach has proven popular in the enterprise world for some time and is making it increasingly affordable for service providers of all sizes to diversify their offerings and partner with new businesses to sell bespoke and relevant services in a way that suits customers in those markets.

Transitioning to a modular SaaS architecture allows operators to seamlessly integrate AI software into their technology stack, and enable genuine personalisation throughout the customer journey. From order creation and processing to offering guided assistance throughout the purchase, addressing issues, and recommending additional services, AI empowers telecom companies to fulfil their customers' needs with unprecedented speed.

If operators want to turn around their fortunes and start generating new streams of revenue, they need to go through a digital transformation process, but not one that is prohibitively expensive or requires a massive overhaul of their IT. Cloud-native modular SaaS infrastructures can be fast and easy to deploy, empowering telecom companies to monetise various vertical markets, adapt to evolving market dynamics, and deliver precisely what their customers crave. This strategic approach will accelerate telcos’ evolution to 'techcos' and enable them to pursue verticalisation strategies similar to those pursued by their hyperscale counterparts.

Chief Innovation Officer & Co-Founder at Aria Systems. Brendan leads the product direction and drives the launch of new products. He introduced the world to cloud billing, and innovated database-driven, enterprise-grade web applications – before the concept of “cloud” was even on the horizon. Brendan is at the forefront of the recurring revenue revolution that is empowering enterprises — and specifically enabling information systems and new business models to secure predictive revenue streams while improving business processes.