Digital Transformation Is Reshaping Communication Services

Communications service providers and content providers must transform their business models to keep pace with always-connected consumers.

Digital technologies and innovation are affecting every corner of business and commerce and driving transformation in ways both expected and unexpected. Rather than simply supporting and enhancing existing business operations and processes, digital technologies are driving entirely new platforms and ecosystems and completely transforming industries. The digitization of everything has flipped the power dynamic in the relationship between retailers and their customers, for example. It’s radically transformed industries like travel, sometimes to the point of near obsolescence – why use a travel agent when you can book your own trip online, faster and for less? Among communications service providers (CSPs) and content providers, what’s happening is not just a technical or operational digital transformation; it’s a transformation of their entire business model. CSPs must evolve into DSPs—digital service providers— in order to maintain their relevance and ensure their success in a marketplace now driven by always-connected consumers. To achieve that transformation with maximum efficiency and minimum disruption, they must partner with the right providers in multiple areas, especially monetization and customer experience. The biggest challenge they face is keeping one step ahead of consumer preferences, which are rapidly evolving into omni-channel and cross-device consumption, says P. K. Kannan, dean’s chair in marketing science at the University of Maryland’s Robert H. Smith School of Business. “Consumers increasingly want to consume content wherever they are and from whichever device they are using,” Kannan says. The companies able to provide that kind of omni-channel flexibility are the ones that will succeed, and “this may require tie-ups among CSPs and content providers in interesting ways.” Consumer connectivity is not the only driver behind the need for business model transformation. “The basic revenue streams for CSPs have been commoditized to the point where they can no longer be the primary source of revenue,” says Greg Collins, founder and lead analyst of Exact Ventures, a market intelligence firm. In response, CSPs are merging to achieve economies of scale; purchasing and producing their own video content; and transforming operations models to more closely resemble those of their over-the-top competitors like Netflix, Amazon, Facebook, and Hulu. “The word ‘industry’ is becoming obsolete as lines are blurring between cable and telecom, between communications and entertainment providers,” says Ken Kennedy, executive vice president and president, technology and product at CSG, a leading provider of business support solutions and technology platforms that help CSPs monetize their digital services and improve the customer experience. Legacy systems alone will not be able to provide the flexibility, speed to market, innovation and cost efficiency needed to transform CSPs into DSPs. Cloud-based solutions will be required to create more agile operating models that support launching, monetizing, and scaling new service offerings. The year ahead will see CSPs prioritizing a business transformation that will require them to rethink the services they offer to the end customer and the systems required to support a new way of doing business, Kennedy predicts. “Transformation will be required as service providers are pressed to create compelling and engaging content and experiences for tomorrow’s consumers. Organizations around the globe and across market verticals will be presented with a whole new set of business opportunities—and corresponding challenges.”