Heavy legacy: how telcos need to streamline to react to industry 4.0

As MWC has been cancelled this year, we’re taking the telco discussion online. Here, we look at how telcos can avoid becoming a victim of Industry 4.0 – and address their legacy to become more agile. Join the conversation on LinkedIn.

 

The traditional telco is dead.

“Historically, the winners of one industrial revolution have been the losers of the next,” said Naveed Suitan, Global Head, Treasury and Trade Solutions, Citi, at last year’s MWC, commenting on how the disruption of industry 4.0 poses a significant risk to telcos.

A year later, that risk shows no sign of abating – and telcos need to act fast to avert it.

While telecommunications businesses have played a vital role in the evolution of digital communications, they now face a serious threat of being left behind. New, agile businesses are ready to step into the spaces opened by developing technologies – while telcos, with their long history and extensive legacies, are finding it harder to respond quickly to change.

But then, the industry already knows this. Telcos over the world are responding to this threat, chasing innovation and looking at new ways to add value to their offering.

Yet the biggest question isn’t necessarily ‘how can telcos stay ahead of the technological curve?

It’s ‘how can telcos create value for customers through technology, while still generating revenue for their brand?’

Innovation costs money. Yet no one is paying more for their phone bill each month – they’re actually getting cheaper with every renewal, as customers expect more functionality for less money. With the likes of WhatsApp, consumers can make calls and send messages for free. Why would they want to pay for something they can get elsewhere for nothing?

To respond to this predicament, telcos are needing to think on their feet, and analyse how they can reduce costs, improve efficiency and offer more to their customers in a competitive, disruptive market.

One of the biggest obstacles they face on this journey is legacy.

The majority of large telecoms companies are not streamlined. They have history. They have old technology running alongside their new initiatives. They have staff who have worked at the organisation for years – even decades – and a number of revenue-generating customers who are still willing to pay for the services of the past, and aren’t necessarily hungry for the technology of the future. It’s a balancing act that consumes resource.

Disruptors, meanwhile, have none of this baggage. They can see an opening in the market, and create a model to fill it – free to be flexible in what they offer, how they deliver it and who to cater it to.

We’ve been working with telcos who are transforming the way they operate to address this problem, by taking several different approaches: addressing their legacy technology, merging with other providers, or simply cutting their own costs – including staff.

In industry 4.0, the world is becoming more service delivery focussed, rather than having a ‘send in the troops’ mentality. People with specific skills are being called on to work on a task, deliver a project, and move on. It’s agile. It’s reactive. And it’s the opposite of how telcos have traditionally operated.

One particular project we’re working on at the moment highlights the difficulty faced in reacting to this new world. A merger between seven companies in Europe, it brings together seven disparate IT systems. That’s seven IT departments, employing hundreds of people between them.

The problem is, many of these people are legacy employees. They are there to run the IT systems as they currently stand – not to spearhead digital innovation. What the merger needs is that ‘service’ talent: the right people, at the right time, to drive the merger into the future. And that’s going to ruffle a few feathers. A lot of companies may say they are agile and nimble, but when it comes to the logistics of managing people through change, it becomes clear that they’re not.

Our task is finding the people that have the skills they need, the ability to influence change, and a mindset that can culturally adapt the business to new ways of thinking.

It’s just one aspect of the transformation telcos need to thrive, but it underpins everything. Technology development, customer experience, adaptation: if telcos can truly streamline their operations, improve efficiency and reduce their OPEX spend by hiring the right people, they have a much better chance of retaining profitability and reacting to customer expectations as they evolve.

The biggest risk a telco can take in industry 4.0 is to simply do nothing.

MWC may be cancelled this year, but at RPI, we’re still keen to discuss the challenges facing telcos in 2020 and beyond. Join the conversation – share your comments below, or call us on +442035977150 to talk about your digital plans and finding the people you need to fulfil them.