The digital transformation race is leaving telcos behind

It's become conventional wisdom that the pandemic has massively accelerated digital transformation.

As far back as April 2020, Microsoft boss Satya Nadella said the company had seen "two years' worth of digital transformation in two months."

Mother of invention: The coronavirus global pandemic has forced individuals and industries to find new ways of working - usually online.  (Source: Unsplash)
Mother of invention: The coronavirus global pandemic has forced individuals and industries to find new ways of working - usually online.
(Source: Unsplash)

But not everyone has been convinced. Back in 2020 some observers argued the COVID impact had been overstated. It wasn't an unreasonable point at the time, with a lot of bellwether cloud and consulting firms cutting staff and losing revenue. Yet the conventional wisdom is correct. A COVID-led transformation boom is underway and appears to be gaining pace.

Going digital

A McKinsey survey taken late in 2020 found adoption of digital technologies had sped up "by three to seven years in a span of months." Nearly two thirds of companies had increased their digital technology spend over the previous 12 months.

A more recent study said this has extended beyond technologies and internal processes to core business.

"The newest results show that this acceleration is also happening at the level of core business practices: what was considered best-in-class speed for most business practices in 2018 is now slower than average." Only 11% of businesses believe their current model will be sustainable in 2023, McKinsey said. Besides the survey data we can simply observe the change in behavior.

As George Westerman, principal research scientist for workforce learning in MIT, points out, coronavirus has blown away man of the myths holding back digital business: that customers prefer the human touch, or that it's better to be a fast follower, or that people won't pay so much for digital-only and so on.

The dazzling numbers from digital services and software companies also tell the story. Just to name a few recent results: Microsoft has reported earnings up 42%, Accenture adjusted net up 29%, Salesforce has blown past expectations with 21% higher sales.

Always one step behind

But this rush to transformation is a problem for telcos, and especially those with 5G ambitions. Most operators are banking on 5G to open up new partnerships and revenue streams in B2B services. It is potentially the biggest part of 5G. But the networks are not quite ready. In particular, operators really need the 5G core to run the slicing use cases that are the most appealing to business.

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The telcos themselves are not quite ready either. Forcing their way into the hotly-contested enterprise space was always going to be an uphill battle.

Operators aren't used to and aren't structured for selling complex IT solutions. That's why most have legacy partnerships with cloud giants and SaaS players, security specialists and others.

There's no doubting the potential of 5G to transform business processes. But enterprises are opening their checkbooks now while operators are still on the sidelines.

— Robert Clark, contributing editor, special to Light Reading

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