CommsDay Summit 2016: Accenture's David Ellis
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Transcript of CommsDay Summit 2016: Accenture's David Ellis
CommsDay Summit – 4th March 2016
Operating in the Middle of the Digital EconomyDavid EllisCommunications Industry LeadAccenture APAC
Copyright © 2016 Accenture. Confidential and proprietary material. All rights reserved. 2
Operators face a very real risk of becoming <10% EBITDA businesses unless they prepare for new market realities
8 Mega-trends will decide on two extreme industry characteristics:1) Infrastructure Dominance2) Digital Dominance
Overview
Telcos actively seek new positions within three potential scenarios:• Commodity Play: Protect the core, but accept the “new normal”• Synergetic Collaboration: Exploit assets in a world of “co-opetition”• Digital Battlefront: Position in the “middle of the Digital Economy”
TraditionalTelco is dead…
In a world of uncertainty…
Better be prepared…
Regardless of desired strategic direction Telcos must implement 5 “No Regret Moves“ to position for adjusted cost/revenue performance
Long live the Smart Telco!
Copyright © 2016 Accenture. Confidential and proprietary material. All rights reserved. 3
8 Mega-trends are shaping the Comms Industry up to 2020
1. Customer 3.0(Changing consumer behaviour, new
services, digital customers are shared & not owned, “lock-ins” no longer work)
2. Telco Core Erosion(Declining revenue in voice and data services, difficult monetisation of 4G,
strong market regulation)
3. Webscale Rising(Entrance of internet players, rise of
customer centric OTT providers, centralisation of ecosystem )
7. Smart Consumer Services(Real-time services, at technology level
and demand level)
5. Fixed Line Reloaded(Wireless cap. limited, fixed line continues
to play a significant role)
8. New Monetisation Paradigm(Big Data, analytics, ad-based / freemium
monetization, data monetization)
6. Intelligent Enterprise(Internet of Things, Smart
Manufacturing, M2M Communications)
4. Technology Revolution(Shifting infrastructure needs,
intelligent systems, e.g. SDNs/NFV, CDN, 5G, SD-WAN)
Copyright © 2016 Accenture. Confidential and proprietary material. All rights reserved. 4
Needs and purchasing behaviour of digital customers have evolved
Customer 2.0Customer 1.0 Customer 3.0
• Slow and failing connectivity• Internet an advertising
medium• Limited customer
engagement
• Customers seeking new choices
• E-Commerce / ‘Internet-only’ businesses
• Hyper-connected• Spoilt for choice• “Want it now” attitude
1990-2000 2000-2010 2010-2020
Purchase path used to be linear…
...But is now…
Open content & channels
Branded content & channels
1. Customer 3.0
Dynamic
Accessible
Continuous
Higher Digital Customer Intensity
Source: Accenture Analysis
Copyright © 2016 Accenture. Confidential and proprietary material. All rights reserved. 5
Value in the Telco market has shifting away from the Operators…
Market Capitalization (Comms Industry)Market Capitalization (Telco Operator)
2. Telco Core Erosion
Selected European Telco Market Cap11/2005 to 11/2015 – Market Cap (Euro m)
Global and European comms industry profit pool(1)
[Nov ’05 – Nov ’15, EUR]
80,000
140,000
60,000
40,000
20,000
100,000
120,000
2005 2010 20150
Vodafone (-3%)DTAG (3%)
Telefonica (-1%)BT (8%)
Orange (-2%)Telecom Italia (-6%)KPN (-2%)
CAGR 2005-2015
2,000
1,000
1,500
3,000
2,500
500
02010 20152005
896bn (+320%)
Market CapEURbn(10yr growth)
917bn (+167%)
317bn (+56%)251bn (-12%)234bn (+42%)
Devices
Aggregators
ContentWirelessWireline
Source: Bloomberg; Corporate information; Accenture analysis.
High growth of devices and aggregators firmsNo growth in market cap. of Telco Operators
Copyright © 2016 Accenture. Confidential and proprietary material. All rights reserved. 6
…with further threat from Webscale players…
3. Webscale Rising
2008
2010
2012
2014
Today
2008
2010
2012
2014
Today
2008
2010
2012
2014
Today
2008
2010
2012
2014
Today
2008
2010
2012
2014
Today
Device
Types
PC
Tablet
Phone
TV/STB
Wearables
VR / AR
Home IoT
Cloud Servic
es
Media
Comms
Maps
Search
Storage
Store
Operator
Services
Voice
Data Care
Data Access
Services
Google AmazonMicrosoft Apple Facebook
Limited / Indirect
Present
Not Present
Telcos need to differentiate from Webscale players to establish a clear position of value in the marketSource: Google, Microsoft, Apple, Amazon, Facebook, Accenture analysis, 2015.
Copyright © 2016 Accenture. Confidential and proprietary material. All rights reserved. 7
… underpinned by bold strategic moves and investments
Voice & Data Products
Traditional Network Development
Last Mile Operators
Selective fibre roll-out (1GBit/s), delivering
superiorfixed-line speeds to a number of cities in the
US
Provision of internet access to remote populations using
mobile assets (e.g. drones, high altitude balloons, satellites)
‘Wi-Fi First’ providers of connectivity,
utilising ‘freemium’ business models
Hybrid WiFi/Wireless Models
High consumer engagement
of social apps such as Facebook, WhatsApp,
and YouTube
SKYBENDER
3. Webscale Rising
Webscale players are seeking to extend ownership and control of the ‘end to end’ customer experienceSource: Comscore, Traction metrics, The Economist; oneweb.world; Accenture.
Copyright © 2016 Accenture. Confidential and proprietary material. All rights reserved. 8
Network and Infrastructure developments continue to transform and change the industry significantly
Best Effort, “Bandwidth Mantra”
Traditional connectivity model
Voice, email, Internet(«break – fix»)
2G, 3G, 4G(10.000s cells)Access
Services
Network
Quality
1
2
3
4
< 1 year
1-2 years
1-2 years
2 yearsRaise of CDN, Edge Computing, “Quality of Service Mantra”
Business Clouds powered by virtualization (SDN/NFV, SD-WAN)
Wearables, AR, virtual reality, tactile internet, IoT(«perform»)
Heterogeneous Networks / 5G (~100.000s cells)
Technology development New technology mantras
Engineer and Operate Virtual HetNets*,
optimized for service experience, with end to end business functions
(*) HetNets are heterogeneous networks, with seamless multiple technologies
4. Technology Revolution
FROM… …TO:
Plan & Deploy 100.000s Cells HetNets
Design & Operate Quality of Service Experience
Provide Business Clouds for the vertical industries
Design for billions of transactions, pByte of data
Industry is being transformed by major drivers that will require new capabilities in the NW Engineering and Operations servicesSource: Accenture Analysis
Copyright © 2016 Accenture. Confidential and proprietary material. All rights reserved. 9
New services need increased bandwidth and low latency requiring Telcos to invest in new infrastructure to keep up with emerging technology demands
Telco operators need to upgrade their network and 5G requires more base stations hence more backhaul infrastructure is needed
5G technology can be a chance to positively influence “balance of power” versus over-the-top players with regards to Quality of Service (e.g. mobile edge computing)
Impactions of 5G for Telco OperatorsBandwidth and delay for new services
5G allows innovative services such as tactile internet thanks to low latency (delay) and high bandwidth
Delay
1ms
10ms
100ms
1,000ms
<1 Mbps 1 Mbps 10 Mbps 100 Mbps >1 GbpsBandwidth throughput
Tactile internet
Virtual reality
Multi-person video call
Augmented reality
Autonomous driving
Real time gaming
Bi-directional remote controlling
First responder connectivity
Wireless cloud based office
Video streamingPersonal cloud
Device remote controlling
Monitoring sensor networks
Automotive ecall
Disaster alert
5G
Legacy network
Fixed Nomadic On the go IoT connectivity
4. Technology Revolution
5G requires Telcos to upgrade network infrastructureNew services require high bandwidth and low delaySource: GSMA, Accenture Analysis
Copyright © 2016 Accenture. Confidential and proprietary material. All rights reserved. 10
Operators are pursuing fixed-mobile network M&A
5. Fixed Line Reloaded
Vodafone takes over Kabel Deutschland for approx EUR 11 bn.
French Telco firms SFR and Numericable merge
Vodafone and Liberty Global agreed on joint venture for Netherlands
Telenet (Liberty Global) takes over Base in Belgium
Source: © Ovum, “Network & Tower Sharing Analyzer: 1Q15”, May 2015, © Enders Analysis. © S&P Capital IQ Database. Accenture Analysis
Copyright © 2016 Accenture. Confidential and proprietary material. All rights reserved. 11
New enterprise services offer significant growth potential
Cloud Services
Security Management
Machine-to-Machine Connected Car Smart City Smart Home Remote control
of devices
Cloud Storage Cloud Management Big data storage Analytics
Enterprise Security Vulnerability Management
Enterprise services
Industrial Internet Smart Manufacturing “Industry 4.0” Intelligent Machines New Workforce
(Maintenance, Installation services)
6. Intelligent Enterprise
Telco players need to adapt to the new opportunities surrounding the wave of consumer driven enterprise products and services
Copyright © 2016 Accenture. Confidential and proprietary material. All rights reserved. 12
In each of the B2B marketplaces, Telcos need to vie for relevanceHardware
(Automotive) Platform Application Services/ Content CRM Infrastructure
Automotive OEM
Supplier
Car Insurer
Telco Player
Digital Player
Core businessPotential new business
Core New / Potential
? ?
Connected Car
6. Intelligent Enterprise
Telco players need define their industry position and leverage capabilities to become relevant in the living services waveSource: Accenture Research
Copyright © 2016 Accenture. Confidential and proprietary material. All rights reserved. 13
New consumer services provide growth opportunities in B2C segment
ConsumerServices
7. Smart Consumer Services
Smart Home Home security 24/7 service Video surveillance Smart Thermostat Smart Plugs
Wearables Smartwatches Fitness devices Glasses Smart clothes
eHealth Tele-Diagnostic Elder falls alarm Blood pressure Glucose levels
Video & Media Content TV + Cable channels Streaming services Applications Advertising
Telco players need to adapt to the new opportunities surrounding the living services wave
Copyright © 2016 Accenture. Confidential and proprietary material. All rights reserved. 14
New revenue models have developed due to market entrance of web players including subscription, commission and advertising
Media e.g. video, music etc.
Advertising, Subscription, Commission
Voice Calling
Advertising, Subscription, Commission
Data Connectivity
Advertising
Location Based Services
Commission
Text Messaging
Advertising/Transactional
Hosting / Cloud Services
Subscription
Maps & dedicated GPS devices
Advertising
Traditional Operator Offerings & Disruptors and primary revenue models
8. New Monetisation Paradigm
Traditional subscription-based revenue models of Telco players are threatened as new models become the industry normSource: Accenture Research
Copyright © 2016 Accenture. Confidential and proprietary material. All rights reserved. 15
Today, Telcos are mainly using licensing or co-branding partnerships – in the future more JV or M&A are expected
Telco can offer the combination of its resources with the partners resources and takes over full risk of operations
Licensing
Telco can offer (preferred) access to network, customers, cost sharing, knowledge exchange
Telco can offer sale to the full customer base
Telco can offer partner access to customer base and distribution via shops/webpage
Telco takes over potential collaboration partner an owns equity and resources and has a high ability to influence operations
Partners join forces in a joint legal entity, both partners share equity as well as resources of the joint venture
Partners remain separate with joint market approach and joint brandingTelco licenses particular product
for distribution/sale
Co-Branding M & A Joint Venture
Short-term Long-term
Wha
t?W
hy?
Position of Telcos
8. New Monetisation Paradigm
TODAY FUTURE
Telcos need to define preferred mode of collaboration and carefully assess the time horizon and pros and cons of each optionSource: Accenture Research
Copyright © 2016 Accenture. Confidential and proprietary material. All rights reserved. 16
Comms providers must also look to capitalise on the rich consumer data under their ownership
8. New Monetisation Paradigm
Mobile Marketing Location Data Identity Management Connected People Mgt
Overview
Buyers
Execution Strategy
• Combine mobile network data with customer profiles
• Targeted with advertising and discounts
• Advertisers • Media agencies • Data management platforms• Mobile/video ad networks• Publishers
• Sharing mobile network data with ad brokers, data management platforms and research firms
• Dev. ad placement platform
• Use location data to determine site selection, location demographics, customer behavior to ads, competitive traffic and purchase throughput
• Real Estate Developers • Shopping Centre Operators• Retailers• Retail Analysts
• Provide aggregated panel data for retail analytics
• Develop an advanced analytics platform for retail site selection and analytics.
• Use mobile data to identify suspicious activity i.e. fraud
• Mobile location more reliable than IP address which can be masked
• Banks• Payment Processors • Insurance Companies• Government Agencies
• Correlate credit card with phone location
• Auto notify financial institutions of movement across border
• Use mobile network data to understand traffic patterns and plan transportation etc
• Use to understand large gatherings, potential riots
• Government Agencies• Police Force• Event Planners• Insurance companies
• Develop connected person placement platform
• Sell data as a service data government agencies
Telco players can build platforms or sell aggregated data to offer valuable insights to both public and private organisationsSource: Accenture Research
Copyright © 2016 Accenture. Confidential and proprietary material. All rights reserved. 17
The 8 Mega-trends lead to distinct characteristics which define the future market scenarios of the Telco industry
1. Customer 3.0
2. Telco Core Erosion
3. Webscale Rising
4. Technology Evolution
5. Fixed Line Reloaded
6. Intelligent Enterprise
7. Smart Consumer Services
8. New Monetisation Paradigm
INFRASTRUCTURE DOMINANCE
DIGITAL DOMINANCE
• Infrastructure is still dominated by Telco Operators
• Regulation ensures Telco players retain control of infrastructure and allow limited QoS differentiation
• Telco operators still own customer relationship for core services
• Majority of digital services are being provided by Web players
• Webscale players dominate the digital product and service landscape
• Webscale players are competing in core voice/data markets with own infrastructure and/or by providing own data/voice service bundles (e.g.via eSim)
• Telco players are trying to win in digital with their own offers or through collaboration to avoid becoming dumb pipe operators
Copyright © 2016 Accenture. Confidential and proprietary material. All rights reserved. 18
Commodity Play Digital Battlefront
We see three core scenarios for the telecommunications industry
Synergetic Collaboration
Revenue split IDSP: Revenue split
Digital player enter Telco space and offer sim cards (eSim) and own core network products.
Endgame for digital services and communications services.
Focus on digital services and/or network connectivity.
Succeed as IDSP1 or fail as Dumb Pipe
Revenue split
Telco and web player cooperate for products and services offerings.
Operators partially give up customer ownership in favour of B2B2C focus
Focus on high quality network products + partnerships/rev shares& especially QoS monetisation
Smart Pipe
Telco becomes pure commodity provider to consumers and enterprises.
Digital services dominated by Webscales.Operators have customer ownership but lack of growth opportunity.
Focus on core voice/data network products and wholesale.
Commodity Play for B2B & B2C
Dumb PipeRevenue split
Infrastructure Dominance Digital Dominance
Enterprise, Wholesale Enterprise & Wholesale
Margin development Margin development Margin dev.
~35%today
~10% >35%~35%
Margin dev.
~35%~35% >35% <10%
B2C B2B B2C B2B / B2B2CB2C B2B B2B2C Po
tent
ial T
elco
Pos
ition
Note: 1Integrated Digital Services Provider
today todaytodaytomorrow tomorrow tomorrow tomorrow
Copyright © 2016 Accenture. Confidential and proprietary material. All rights reserved. 19
Telcos need to actively seek new positions to stay relevant
Traditional Operator
Traditional Operator are at the intersection of Commodity Play and Synergetic Collaboration
Commodity Player
Strong focus on core competencies (network / marketing & sales). Customer ownership allows establishment as partner in B2B and B2C in pseudo-protected market environment
Smart Pipe
Strong partnerships with web players as basis for successful collaboration, strong focus on B2B(2C) and QoS with protection of core from regulation
Potential to move between Commodity Play and Smart Pipe Integrated
Digital Service Provider
Establishment as Digital Service Provider offering access/connectivity + digital products and services to end customer
Dumb Pipe
Failure to establish as IDSP, Telco is disintermediated by webscale ending up as dump pipe (pure wholesale provider) or dies
Commodity Play Digital BattlefrontSynergetic Collaboration
Infrastructure Dominance Digital Dominance
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Evolution path depends on enhancement of functional capabilities
Commodity Play Digital BattlefrontSynergetic Collaboration
Traditional Operator
Commodity Player
Smart Pipe IDSP Dumb Pipe
ITCUSTOMER
SERVICER&D/
ENGINEERINGNETWORK
SALES & MARKETING
GENERAL & ADMINI
Func
tiona
l C
apab
ilitie
s
For future evolution, Telcos need to modify their DNA which is based on six key functional capabilities
Infrastructure Dominance Digital Dominance
Copyright © 2016 Accenture. Confidential and proprietary material. All rights reserved. 21
Digital Battlefront is most challenging market scenario as Telco needs to succeed in core and digital business
IT
NETWORK
CUSTOMER SERVICE
SALES & MARKETING
R&D/ENGINEERING
GENERAL &ADMINISTRATIVE
• High quality• Low costs
• Divest infrastructure, only selectively invest based on analytics• Focus on wholesale and share network capabilities• Outsource build/ service/ maintenance of network/ OSS
• High Quality• Leader in product
development
• High Quality• Efficient & best-in-
class IT
• High quality• Low cost
• Low Cost
• Low Cost
• Modular and flexible IT Architecture• Agile and open platform• Use of best in class Enterprise SaaS to drive efficiency• Customer-value driven service levels• Heavily outsource back and front office• Invest in automation/AI • Segment-specific monetization models (e.g. freemium)• High focus on online channel to generate sales• Strong brand for convergent products and services• Development of innovative services, e.g. Living Services• Focus on content creation and partnering with content provider• Strong focus on big data and analytics• Establish innovative culture and network of R&D labs
• Significant outsourcing of business services• Lean back office operations
Non CoreCapability Importance Core
Characteristics Key ConsiderationsIDSP
Copyright © 2016 Accenture. Confidential and proprietary material. All rights reserved. 22
Strategic implications for this scenario are excellence in innovation and strong digital brand
Non CoreCapability Importance Core
Focus on digital product innovations beyond the core:• Invest heavily in new business areas (e.g. IoT, digital services, web services and smart city)• Develop fully fledged product portfolio by partnerships, acquisitions and organic innovations• Integrated enterprise services, e.g. unified communication, cloud, M2M and device management • Deliver seamless customer experiences by creating delighting and consistent customer journeys • Ensure personalised customer experience across all channels with the support of AI capabilities
Make analytics a growth driver and develop monetisation model:• Enhance real-time predictive analytics and closed loop execution against customer needs• Implement digitally enabled processes, intelligent robotics and end-to-end process automation• Monetise specific sets of data in action and set up new operating models• Monetise of data and monetise reach via ad-based model• Complement subscription model with freemium model
Become a (global) brand in digital industry:• Develop disruptive products and services in the digital area beyond the core network• Become recognized globally as a leading player in digital innovations• Become the preferred ecosystem provider for partners and suppliers to offer products and services
Foster Innovation culture to achieve “Silicon Valley R&D Performance”: • Promote leaders who disrupt the status quo and redefine success in terms of innovation • Encourage cross functional cooperation and break down silos• Establish network of R&D labs and establish start-up accelerator
IT
NETWORK
CUSTOMER SERVICE
SALES & MARKETING
R&D/ENGINEERING
GENERAL &ADMINISTRATIVE
IDSP
Copyright © 2016 Accenture. Confidential and proprietary material. All rights reserved. 23
Independent of the scenarios Telcos must take 5 moves to succeed
Commodity Play Digital BattlefrontSynergetic Collaboration
Traditional Operator
Commodity Player
Smart Pipe IDSP Dumb
Pipe
Infrastructure Dominance Digital Dominance
Lean Operating
Model
5 No Regret Moves
Networkof the Future
• SDN / Network 3.0• NW Virtualisation
Seamless Customer
Engagement• Digital Experience• Seamless Omnichannel
Actionable Analytics
• Customer 360• Big Data
• Multi Shared Service• Large Scale G&A BPO
Virtual Workforce of the Future
• Agile, Collaborative and Insight Driven Culture
• Automation / Robotics
1 2 3 4 5
Copyright © 2016 Accenture. Confidential and proprietary material. All rights reserved. 24
Summary
TraditionalTelco is dead…
In a world of uncertainty…
Better be prepared…
Long live the Smart Telco!
We have to face a new set of realities or will become <10% EBITDA businesses
Two distinct characteristics will emerge: Infrastructure Dominance and Digital Dominance
Although there are survival strategies as “Commodity Players” and through “Synergistic Collaboration” – there is an opportunity to for Telcos to operate in the “Middle of the Digital Economy”
Regardless of the path, Telcos need structural changes across Network, Customer engagement, Analytics, Op Model and Workforce
Copyright © 2016 Accenture. Confidential and proprietary material. All rights reserved. 25
https://www.accenture.com/us-en/insight-integrated-digital-service-providers.aspx
To find out more:
David EllisAccentureCommunications Industry Lead – Asia [email protected] +61 409 892 430