CSPs and the Need for High-Impact Actions

New research published by McKinsey warns that, as we find ourselves possibly on the brink of a new economic downturn, the challenges faced by communications service providers (CSPs) have intensified since they last endured a recession a decade ago.

These include capital expenditure demand (this time driven by fiber and 5G deployments), ever-increasing competition, pressure on margins, and the growing heft of the digital native giants which have redefined the landscape in which CSPs now operate.

From 2007 to 2018 North American telecom revenue grew 20 per cent, McKinsey tells us, under-performing the market in general by eight percentage points. In Europe revenue declined by 24 per cent over the same period even as the overall market grew by 18 per cent.

McKinsey’s purpose is not to doom-monger, however. Far from it. The firm offers reassurance with its observation that the CSPs which rode out the last downturn most effectively were, at all times, focused on taking decisive and “high-impact actions” which secured their success. Crucially they were doing so before the downturn began, as well as while it lasted, and in the immediate aftermath.

Among the actions identified are reductions in operating expenditure, innovations in network management and service delivery and CSPs positioning themselves to react “quickly to market opportunities and threats to their business.”

It appears widely understood in this industry that the platform model which has provided such great success for those digital natives is the prevailing model of our time. It has changed the game dramatically and it suggests that CSPs need to find ways to expose network assets and capabilities to brands and vertical specialists which are best positioned to attack a mobility market which is set for enormous subscription growth thanks in large part to the explosive IoT opportunity.

How easy it is for them to focus on executing such a strategy while juggling the demands of new network roll-outs and large existing consumer and enterprise customer bases is another question, however.

This provides a unique opportunity for Pareteum. Our Experience Cloud platform has been chosen by leading operators precisely because it provides a rapidly deployable software layer which allows for the easy integration of a multitude of service providers with the CSP’s network.

In many instances CSP’s own software systems lack the flexibility to make this happen, even if their attention were not consumed by other core requirements. And in a market powered by platforms and partnerships, they are now more open than ever to collaboration.

Harnessing our platform gives them enormous freedom, a time to market advantage which allows them to react to those opportunities McKinsey references, and the ability to shift the cost of sales to market-facing partners that can enable new revenue-generating services and applications at a rate the CSPs could never match.

McKinsey’s report is well timed and CSPs would do well to pay attention to it – not just because of the prospect of a financial downturn, but because of the opportunity that presents to emerge on the other side having secured a valuable lead over competitors.