Six ways telcos can outpace their competitors

Telecom service providers are under tremendous pressure to provide competitive services. This pressure comes from incumbents and new tech titans, customer demands for the latest equipment and services, and government regulations. Further complicating the issue is the lack of profitability as telcos invest an estimated $1 trillion in 5G, with return on assets at only 1.5 to 4.5%.^1,2 More than ever, it’s imperative for the industry to optimize their processes and technology to successfully navigate these challenges. 

Based on insights from our CGI Voice of Our Clients research, we see six ways for industry executives to accelerate profitable growth and stay competitive. 

1. Drive a lean company, cost optimized with AI-driven automation 

To stay competitive, telcos around the globe must:

• Automate manual processes to streamline core business operations
• Boost the percentage of transactions conducted through self-service channels with applications users enjoy 
• Establish a customer data-driven environment, starting with the product catalog, to support agile business decisions through real-time data updates 
• Simplify IT and network architectures by aggregating functionality across product types within their tiered structures 
• Eliminate static legacy system limitations by implementing next-generation customer relationship management (CRM), business support system (BSS), operations support system (OSS), and network solutions
• Encapsulate unique legacy capabilities with industry standard open APIs to enable integration with modern telecom systems, facilitating the gradual replacement of outdated software

These capabilities are not “nice to haves” but mandatory to compete in an increasingly competitive marketplace with a growing number of disruptors.

2. Go farther together with strategic partnerships 

Strategic partnerships drive relevance and revenue because they address the complex changes happening in the telecom industry. Telcos can no longer do it alone. The reasons for creating strategic partnerships stem from a growing number of multi-dimensional changes and complexities, such as:

• Changes from new technologies coupled with customer demands for cheaper and more reliable services. This includes software as a service (SaaS) models in the cloud, where customers pay as they go.
• The evolution of telecom networks introduces new demands for the industry. While 4G LTE allowed mobile devices to support applications like video streaming and tasks once reserved for computers or TVs, 5G brings enhanced speed, reduced congestion, greater reliability, and lower latency—benefits primarily aimed at businesses. Emerging 5G use cases, such as the Internet of Things (IoT) with autonomous vehicles, smart cities, smart factories, and smart healthcare, require a collaborative ecosystem of partners. These partners specialize in areas such as sensors, edge computing, communications, cloud services, data integration, and consumption models.  

Therefore, telcos must drive three types of strategic partnerships:

• Cloud providers: Strategic partnerships with AWS, Microsoft Azure and Google Cloud can enable more cost-effective solutions on telecom networks.
• Key SaaS providers: To create enhanced customer offerings, telcos should first implement a SaaS solution (such as for CRM or workflow management) within their own environments to build skills and collaboratively generate a success story. 
• Next-generation solution providers: Developing partnerships with providers at the forefront of IoT, autonomous vehicles and smart systems solutions enhances telcos’ ability to innovate. 

3. Cybersecurity is now table stakes and is critical to build into everything

Analysts report a doubling in cybercrime every year for the past four years, with threats becoming more sophisticated and dangerous. According to the U.S. Agency for International Development, the estimated $8 trillion global cost of cybercrime in 2023 outpaces all world economies, with the exception of the U.S. and China. 

Negative impacts of security breaches include legal and compliance costs, where breaches involving the data of millions of customers have cost telcos millions of dollars in lawsuits. Brand reputation and customer confidence impacts can also be significant to future revenue streams. In fact, customer churn can double for months after a security breach. For example, the doubling of an average 1% increase in monthly churn can result in a $12 billion loss in just one year for a $100 billion telco.

Given that a strong cybersecurity posture is imperative for telcos, we recommend a three-dimensional program that includes: 

• Implementing a next-generation suite of proactive security systems to resolve vulnerabilities before they become a threat or breach. These programs use AI and machine learning (ML) to identify suspicious patterns and security threats and address them in near real-time.   
• Developing a reactive security remediation program to quickly find and fix issues. 
• Creating ongoing security training awareness programs for all employees to avoid security threats coming through major channels. 

4. Align C-Suite with lines of business, operations and IT to accelerate transformation

Our Voice of Our Clients research indicates that digital leaders (those producing results from their digital strategies) are widening the gap when it comes to achieving desired outcomes compared to those in earlier stages of digitization. A key element for digital leader success is close alignment between the C-Suite, operations and IT organizations. This alignment is the basis for four key business differentiators that help drive greater company value. These differentiators include:

• Better decision-making: Aligned strategic goals and operational realities lead to better business outcomes.
• Increased operational efficiency: Reducing redundancy, streamlining processes, and significantly boosting operational efficiency drives optimized operations.
• Competitive advantage: Aligned organizations are more agile and able to respond quickly and effectively to changing market conditions, customer needs and emerging opportunities.
• Greater productivity: Reducing internal conflicts leads to fewer misunderstandings and conflicts where all employees are on the same page. This creates a more harmonious and productive work environment.

Case in point: Helping large telco transform into an agile organization by aligning business & IT around value 

5. Free up experts to create B2B solutions with partners and monetize 5G

As 5G provides increased benefits for businesses, telcos should consider freeing up experts to create and monetize B2B solutions with partners. The opportunities include:

• Unlocking new revenue streams: By developing B2B solutions, telcos can tap into new revenue opportunities beyond traditional consumer markets. This includes offering premium connectivity solutions tailored to specific industries, such as manufacturing, healthcare and logistics.
• Enhancing network use: 5G technology enables the creation of private networks and hyper-localized zones that can significantly improve network performance and efficiency. This allows telcos to offer specialized services that meet the unique needs of B2B customers.
• Driving digital transformation: 5G’s capabilities, such as low latency and high data throughput, are essential for enabling advanced technologies like AI and IoT. By offering B2B solutions, telcos can support businesses in their digital transformation journeys—making them more competitive and efficient.
• Capturing market share: As competition in the telecom industry intensifies, focusing on B2B solutions allows telcos to differentiate themselves and capture a larger share of the market. This strategic move can position them as trusted partners for enterprises looking to leverage 5G technology.

6. Understand how to collaborate and compete with hyperscalers in strategic areas

Telcos must recognize their competitive landscape to effectively collaborate with hyperscalers like AWS, Google Cloud, and Microsoft Azure for two key reasons:

• Partnership opportunities: By understanding hyperscalers’ market offerings, telcos can identify strategic partnership opportunities. These collaborations can lead to mutually beneficial outcomes, such as enhanced service offerings and shared technological advancements. However, telcos may face challenges that include cloud services, being a superset of traditional hosting, and having disrupted telco’s services in the past.
• Innovation and growth: Hyperscalers are rapidly expanding into areas such as edge computing and 5G. Telcos can leverage these innovations to compete in emerging markets, stay relevant, and unlock new revenue streams.

At the same time, telcos must also compete with hyperscalers in key areas, focusing on:

• Meeting customer expectations: As customer demands for advanced and integrated services grow, telcos need to compete with hyperscalers to deliver on these expectations. Owning the customer relationship is essential for providing ongoing services, including cloud solutions, seamless connectivity, and edge computing.

In closing, to achieve growth, relevance and competitiveness in the evolving telecom landscape, telcos must look internally to reduce costs, create better business agility, and drive greater efficiencies by modernizing their architectures with enabling technologies, including AI. They must also align leadership across departments for enhanced decision making and strengthening cybersecurity. At the same time, telcos need to look externally for growth through strategic advantages to drive new revenues by freeing up experts to create B2B solutions and drive innovation with partners through collaboration. 

Please connect with me to learn more how CGI is helping telcos pursue effective strategies to outpace the competition.

References
1. GSM Association. (n.d.). Connecting the world, investing in the future. Accessed September 17, 2024, from https://www.gsma.com/solutions-and-impact/connectivity-for-good/public-policy/mobile-policy-handbook/mobile-policy-handbook/connecting-the-world-investing-in-the-future/.
2. PwC. (n.d.). The challenge of monetizing 5G. Accessed September 17, 2024, from https://www.pwc.com/us/en/tech-effect/emerging-tech/5g-monetization.html.