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The 7 Deadly Sins of Digital Transformation

James Crawshaw
12/8/2017
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From mining to insurance, companies across multiple industries are talking about digital transformation. For some, digital transformation is about selling existing products and services over the Internet. For others, it is about building an omnichannel offering with online and offline channels fully synched. And for some, digital transformation is about cost saving through automation.

In the telco sector there are multiple drivers for digital transformation which we classify here as "seven deadly sins." The first "sin" is gluttony -- no matter how much bandwidth we throw at consumers they seem to find ways to use it up. We used to be impressed with speeds of 86 kilobit per second over GPRS. Now we are talking about 100 megabits per second with 5G. That 1,000-fold increase in data rate drives the need for transformation at the network layer.

Pride is the excessive belief in one's own abilities. Arguably telecom operators have been guilty of excessive belief in the importance of their telephony and messaging services. Sadly, the consumer has been happy to substitute PSTN with VoIP and SMS with WhatsApp. These services are now a commodity. Sloth is the habitual disinclination to exertion -- which sounds pretty much like the revenue performance of the telecom sector in recent years. All of which leads to the last four deadly sins, starting with anger. The telcos are upset with regulators for forcing them to provide equal access to all services over the Internet even when these directly compete with their own voice and video services. And even if net neutrality regulations are relaxed in some countries, there are still plenty of other regulatory matters to be angry about, from spectrum allocation to unbundling requirements.

Next up greed -- Gus Levy encouraged Goldman Sachs workers to be long-term greedy but telcos are guilty of being short-term greedy when they slash costs to boost near-term profits without investing in the IT systems necessary for the long term profitability. Envy -- Apple, Alibaba, Alphabet, Microsoft, Facebook, and Tencent are the seven largest public companies in the world by market cap. Ten years ago that list would have had a few telcos in it. Today the combined market caps of AT&T and Verizon are less than Facebook alone.

Finally, lust -- with investment bankers keen to play the role of Cupid, telecom operators cannot seem to help making acquisitions of advertising and content businesses that offer few synergies with their core business. M&A is the lazy approach to digital transformation.

In Heavy Reading's upcoming white paper, "BSS and OSS Modernization: Lynchpin of Telco Digital Transformation," we outline four aspects of digital transformation that modernization of BSS and OSS systems can enable. The first aspect is improved customer experience. By investing in self-care apps and portals telcos can enable an omnichannel experience for their customers, making it easier for them to place orders and get problems resolved. With chat bots we can help customers get the answer to their questions quickly while capping call center costs. With analytics we can make offers more personalized to boost retention.

The second aspect of digital transformation is operational agility. Operators are often hamstrung by legacy B/OSS which they are too afraid to touch as the person who wrote the code has retired or the supplier went bust. We need to decouple legacy systems of record from the customer-facing systems of engagement enabling a two-speed approach to IT development. The other enabler of agility is the migration of applications to the cloud. Vodafone is aiming to migrate 65% of its IT applications to the cloud to give it greater scalability.

The third aspect of digital transformation is enabling internal innovation. The adoption of DevOps and a fast-fail mentality might unleash the creative potential within a telco's own workforce and provide an attractive environment for recruitment. Telecom operators have depended on third parties for technological innovation for too long.

The final aspect of digital transformation which we address in the white paper is the platform play. By this we mean turning operators into service aggregators for third parties (e.g., Netflix, Spotify, Deezer, financial services), similar to the app store concept for smartphones. This platform concept is a key element of the IoT opportunity. CSPs' platform strength lies in managing communications between different parties, leveraging existing relationships with enterprise customers, and exploiting their existing monetization (billing and revenue management) capabilities.

To learn more about the scope for digital transformation through modernization of BSS and OSS join us for a webinar on December 13 (aclick here to register) when we'll present the findings of the whitepaper in more detail.

This blog is sponsored by Apptium, Cerillion and ZTEsoft.

— James Crawshaw, Senior Analyst, Heavy Reading

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