Telcos and upgrading software

Most service businesses are valued at two to three times revenue, not 10 times revenue, like you see at typical SaaS software companies. So why do software companies continue to accept customizations to their products? Telcos believe that in order to provide a differentiated service to their subscribers, they must be able to customize their software.

Most customizations have been done in the name of providing an omni-channel, consistent, and excellent customer experience. Most software upgrade cycles are years apart, not every month or every quarter like in other industries. Working from a widely used product base means that the time to market becomes more cost effective and faster. By minimizing the potential failure points you mitigate operational risk. Other telcos that want to enter vertical markets have a track record as systems integrators, or they have extensive B2B information and communications offerings in the local markets that they serve.

Although early adopters have gained traction with initial proof-of-concept uses in areas such as remote-site connectivity, site security, and worker safety, it is not clear which industry-specific applications will become most relevant in the near term. As a result, some carriers are reluctant to pursue these solutions. Even telcos with existing local relationships that could serve as the foundation for vertical services often lack sufficient understanding of business and consumer needs.

Telcos interested in offering end-to-end vertical-market services may lack other capabilities needed to enter this market, which would require them either to develop or acquire them or to find a partner to fill in the gaps. Whether they pursue horizontal platforms or end-to-end vertical services, telcos have to scale edge-based offerings quickly, as size is a key to success. Telcos should avoid spending too much time on technical proofs of concept, aiming instead to create rapidly scalable business models.

Bringing on a partner can help. Even though edge has attracted players from outside the industry that some long-time vendors fear could usurp their position, the majority of telco executives we surveyed believe that finding a partner is a must.

Telcos can assume one of three roles in an edge partnership. See Exhibit 4. They can act as a builder, constructing and running an edge-based service on their own or with limited participation from a partner. They can become an operator, running a service that a partner has created.

They can become an enabler, acting as an integrator or creating a site, platform, or service that one or more partners use to provide their own services. Each role has advantages and disadvantages depending on the edge strategy. In the short term, we expect telcos to create the most value by building, operating, and enabling edge-based connectivity and by operating horizontal platforms. In the longer term, we see some providers deriving the most value from operating end-to-end vertical solutions.

However, those services will be much harder to launch because they are so different from what telcos offer today. Most telcos see hyperscalers in the mix of potential partners because they can provide the cloud scalability and other technology needed to build horizontal platforms.

Hyperscalers also bring an immense developer and partner ecosystem that can help in developing edge applications. Before telcos move forward with one or more partners, they need to address the potential pitfalls. Many telcos have little or no experience monetizing partnerships or working with hyperscalers.

They need to negotiate partnership agreements whose terms do not dilute their margins. And they need to introduce effective cross-domain orchestration and automated controls for services that integrate with the public cloud in order to maintain service levels appropriate to their edge applications. Corporate culture can be a sticking point in partnerships.

Historically, telcos and hyperscalers have had different cultures and ways of working—those of the former more traditional than those of the latter—which could make a partnership difficult to manage. Companies that end up operating in multiple edge ecosystems may have to negotiate their roles with each partner, including decisions about which company assumes the role of orchestrator.

Our interviews indicate that telcos should do the following when evaluating edge-computing strategies and potential partners. Best Deals of the Day ». Tech News in Hindi. More Technology News in Hindi.

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