1. How telcos will achieve growth in the Networked Society


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How telcos will achieve growth in the Networked Society

Transformation of the business landscape

From operating models and value chains to innovation and alliances, technologies such as broadband, mobility, and the cloud are transforming the business landscape for telcos.

In the Networked Society, everyone, everything and everywhere will be connected in real time. In the third quarter of 2012 there were an additional 13 million LTE subscriptions and those numbers are predicted to reach 1.6 billion by 2018 (according to Ericsson’s Mobility Report released in November 2012). The building blocks of the Networked Society are now in place including an increasing number of M2M devices and an increased demand for heterogeneous networks. This is having a broader impact than expected on the business landscape and will lead to the transformation of whole sectors and even further innovation.

So what strategy should telcos have in order to achieve growth and create a competitive edge?
I see four fundamental areas that are directly or indirectly impacted by the emergence of the Networked Society, and for which telcos should pay the most attention. These include: operating models, value chain, innovation and alliances. In this post I will explore the first of these four areas.

Operating models
The Networked Society creates the need for new organizational structures, processes and strategies. Telcos are excellent at tightly managing their procurement process and negotiating longer-term contracts with vendors and suppliers. However, the essence of the Networked Society is agile service activation, configuration, management and sourcing. The challenge therefore is to internally and externally decentralize purchasing and decision-making power. This means that telcos must align and adapt their organizations while creating strong cross-functional interfaces and organizational flexibility.

These changes will have a direct effect on the telecom operating model, for example in the OSS/BSS areas of customer service operations and network operations. Operational support services such as order fulfillment, service configuration, resource provisioning and invoice billing are becoming increasingly complex with millions of connected devices (e.g. subscriptions) involved and a variety of products. The operational cost to handle this environment is high and the infrastructure needed to cater to the increasing customer base can lead to greater financial overhead.

Cloud computing, which is an integral part of the Networked Society, incurs minimal capex since infrastructure is owned by the cloud providers themselves. The implementation of cloud solutions decreases capex and converts them into opex, thereby saving costs on the balance sheet and lowering taxes on operating profit.

The telco operating model should be restructured in order to incorporate cloud computing. The adoption of cloud solutions can have a significant effect on strategy, infrastructure and operation (also known as the eTOM process) by improving the cost structure through operational excellence and economies of scale. The shift from a capex to opex leads to new innovations as well as the development of new business models.

Written by Sami Dob

Sami is Program Director, Sustainability and Corporate Responsibility, for the Ericsson Group worldwide. An engineer and economist, he is interested in innovative business solutions that make great social impact. Also an advocate of redefining the practice of capitalism, Sami believes that Information and Communication Technology (ICT) can play an important role in addressing global challenges in areas such as poverty, development, climate change and human rights.

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