Promoting partnership

CSPs have long been told that they have no choice but to partner. A wholesale paradigm shift has been slow to materialize, but in 2014 we'll likely see one as providers exhibit a willingness to adopt partnerships. And as Big Data continues to take center stage, CSPs are becoming more aware of the untapped wealth of customer information they’re sitting on and how it can impact their business.

Whether they choose to offer value-added cloud applications to strengthen customer stickiness by bundling in OTT usage, or accelerate the adoption of new use cases like M2M, CSPs will need to make, manage and maintain partnerships outside of their traditional intercarrier billing arrangements. Recent alliance/partnership discussions such as those between Comcast and Netflix signal that CSPs’ business models are truly evolving; providers are now beginning to tackle the challenges inherent in attracting partners, negotiating and managing complex agreements, handling payments and settlement, assuring revenue, and delivering the rich network information on customer usage and behavior patterns that prospective partners desire.

With tremendous market forces pressing on CSPs—the decline of voice and the rise of data, the ever-present OTT threat, the potential of Big Data, and the never-ending drive to reduce costs and increase efficiencies—their business models will continue to take on new and different shapes in 2014.

Core no more: operational model evolution

Finally, 2014 will see an increase in CSPs that take a long, hard look at their organizations and decide what the core elements are—and what’s core no more. As they opt to “stick to their knitting,” their business climate will require a sharp focus on driving down costs and zeroing in on core processes and capabilities that are essential to increasing innovation, agility and profits.

CSPs have deemed a range of areas to be noncore and are choosing to implement outsourcing in very different areas of their business. For some, that’s meant outsourcing facilities, such as AT&T’s sale/lease of its wireless towers. As senior vice president Bill Hogg explained in an official statement, “This deal will let us monetize our towers while giving us the ability to add capacity as we need it. We’ll get additional financial flexibility to continue to invest in our business and maintain a strong balance sheet and return value to our shareholders.”

Other CSPs have gone so far as to outsource all non-customer-facing operations. 3 Italia has outsourced its BSS, IT and network operations over the past few years to providers that agree to efficiently upgrade operational support in order to deliver 4G capability, faster speeds and greater service to 3 Italia’s customer base.

Managed-services IT and BSS are growing in popularity. In a survey published in January by the research firm Informa Telecoms & Media, 87 percent of CSPs confirmed that they already do business with a managed-services provider (MSP) or will do so by 2016. Informa found that customer relationship management (CRM), billing, mediation, and self-service were the most commonly cited candidates for business transformation, which is becoming a primary driver for CSP outsourcing because of the relentless changes in the telecom industry that have created increasingly complex BSS structures, constraining service introductions as well as driving up costs.

What’s become clear is that there’s more to managed services than cost-cutting. Informa’s research shows that deep domain expertise and service quality, not to mention trust and transparency, will be critical as CSPs reach out to third parties to simplify the complexities in their operations.

The constancy of change in the industry has made it imperative that CSPs remain aware of trends while staying focused on their own core competencies and value propositions. The ripples of technology innovation will continue to resonate throughout the business, as agility in managing this evolution in networks, business models and operations will be at the top of many executives’ and analysts’ minds in the coming year. CSG International expects, however, that despite the shifting sands, CSPs will place stakes in the ground and select partners that support their own evolution.