Business Transformation

Defining the Digital Service Provider

During the past five years there has been a significant change in the way that people communicate and use mobile telecom services. The advent of 3G and 4G/LTE connectivity has had no small part to play in this; it has been a major catalyst in the shift away from traditional telecom services -- voice and SMS -- to a more data-centric mobile phone experience.

In particular, the rise of OTT applications and social media has had a big impact on the way that we, as consumers, use our mobile phones. Connected to the Internet, we can now replicate traditional telecoms services using "free" Internet-based OTT applications, whether it be WhatsApp or Facebook for messaging, and Skype or Viber for calling. Even native operator voice-calling services will eventually be transferred over the Internet with the rollout and adoption of voice-over-LTE (VoLTE).

The telecom industry, in particular, is coming to the realization that a whole new business model is critical to survival and growth in the digital marketplace. In order to stay ahead of the curve, communications service providers CSPs now have to plot a course towards becoming digital service providers (DSPs).

Defining the DSP
First and foremost, it's important to understand exactly what we mean when we refer to a DSP, and what gives them the advantage over regular CSPs.

The term "digital service provider" applies to any company that distributes media online. In the case of telcos, it's an organization that has moved on from offering core, traditional telecom services, to providing mobile broadband access, services, content and apps, all sold directly from the device.

The transition from CSP to DSP has been driven by the mass consumption of cellular data, accelerated as LTE services are rapidly being deployed, alongside existing 3G services. Currently more than 330 operators worldwide have so far launched commercial LTE (4G) networks, spanning more than 110 countries (according to data from the Global Mobile Suppliers Association). This figure is increasing and will continue to do so for the foreseeable future, driving further data service consumption. This dynamic has caused many CSPs to re-evaluate their role in the value chain and position themselves to take advantage of this growth.

The DSP isn't merely a dumb pipe offering shared access to a common utility; it's an online, real-time business that deals with countless transactions every day, managing high volumes of data traffic and multiple devices per user, and often multiple users per account. The mobile landscape has changed dramatically and CSPs are fine-tuning their businesses, and their network infrastructure, to cater for the digital needs of the data-hungry customer.

Currently, traditional CSPs do most of their business through traditional retail and call center channels, whereas DSPs conduct more than 80% of their transactions through online digital channels, much like the web services giants such as Amazon.

There is also the speed at which new propositions and products can be rolled out that sets DSPs apart; they are more agile and development cycles are much shorter and cheaper, therefore all-round they are far more profitable.

As they undertake the DSP journey, CSPs will be able to shed the costs of running traditional customer support operations because new IT systems will facilitate the transition to mobile self-care apps. These apps will allow consumers and enterprises to very quickly manage their accounts, make new service purchases, receive alerts about spending, promotions, or account changes, personalize their services and share their services with family or work groups.

In a fully connected, mobile and digital world, consumers demand a multichannel experience that is consistent across any device and network they are using, and this in turn has advanced and redefined the "traditional" relationship between customer, brand and service. This paradigm shift has forced CSPs to re-evaluate their position and transform their businesses into ones that can sell an array of interactive services and experiences direct from the consumer's device, in an instant.

Taking the leap
CSPs can no longer rely on traditional business models or legacy IT systems in their evolution towards becoming DSPs. It requires fundamentally new solutions and approaches, not optimization and architectural tinkering. The definition of insanity is doing the same thing time and time again expecting a different outcome. So relying on the same old legacy IT to solve a new challenge is even a step beyond this -- it's an impossible undertaking.

CSPs that are analyzing the new environment they inhabit will recognize the new challenges they face, acknowledge what is expected of them from customers, embrace the fact that customers now drive the brand-consumer relationship, and plan a new strategy accordingly.

This is an exciting time for the industry, as we will see more and more CSPs making the leap from being network-centric organizations to becoming customer-centric businesses in the DSP mold. If CSPs can make the ideological shift necessary to compete effectively in today's competitive LTE-driven digital marketplace, they can pursue exciting new business opportunities and drive new services to meet their subscribers' increasingly data-centric demands.

— Jennifer Kyriakakis, Founder and VP of Marketing, Matrixx Software Inc.

[email protected] 10/3/2014 | 3:20:27 AM
Re: Companies And to add to that...

Jennifer, are there any telcos that you think are en route to becoming DSPs any time soon?
jenniferk 10/2/2014 | 6:36:42 PM
Re: Companies Yes, I would consider them DSPs.  However, since they don't own networks there are only parts of the customer experience within their control.  For those that own the networks, they have a bigger job in front of them to achieve the same capabilities - however, that also makes their opportunity bigger as they have the ability to better control the end to end experience of the customer.
bobmachin 10/1/2014 | 5:29:39 AM
From one to many models - or no fixed business model? "The telecom industry, in particular, is coming to the realization that a whole new business model is critical to survival and growth" ... for me the big change is from a single, well established business model to multiple business models - is the model that supports entertainment distribution anything like the model needed to partner with a consumer electronics firm to offer a M2M proposition, and how similar is that to the model needed to support the deliver of remote health services for a government agency - many different models of business, requiring either multiple IT stacks or extremely flexible and agile business support systems...
jabailo 9/29/2014 | 5:10:05 PM
Re: The biggest hurdle I expect the real evolution to start happening once the CSPs become DSPs.

Think about how hardware bound CSPs could make so few changes.  They basically made plans years in advance, ordered lots of equipment, and then installed and when it was all ready hoped that someone would use it and that it wasn't 3 years out of data.

As DSPs they have the flexibility of software design.  They can try things out.  They can build sandboxes.  They can build one network for one customer and one for a completely different.

By more to the point, instead of just consuming and configuring...they can create!

brooks7 9/29/2014 | 2:20:46 PM
Companies According to your definition are Google, Apple, and Netflix DSPs? Seven
smkinoshita 9/29/2014 | 2:03:15 PM
The biggest hurdle "CSPs can no longer rely on traditional business models or legacy IT systems in their evolution towards becoming DSPs."

The biggest hurdle faced by the industry will be the fact that the required changes defies traditional models.  This is a change at what I feel is a cultural level, and those are the most difficult to implement.

The way communications has changed as effected every industry as far as I can tell.  It's like we've cranked up a treadmill on ourselves and are now desparately trying to keep up.
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