Everything-as-a-Service: The next step in the evolution of the telco

A quick flick through the agenda for next week's Carriers World event in London, will show you that telcos are desperately searching for ways to boost their bottom line, increase ARPUs and stop being just… well… telcos. The days of merely flogging voice, text and data bundles to the world and his wife are long gone, as service providers look to leverage their existing infrastructure to deliver a huge range of "Everything-as-a-Service" type products.

New consumer research released this week, suggests that telcos are well placed to build on high levels of brand trust, as well as a genuine desire for digital services among their client base, to transform their business models.

A new survey released by Openet this week, shows that 70 per cent of consumers believe that their mobile network provider is a "digital first" company, while 73 per cent said that they would be receptive to greater digital service offerings from their provider.

Surprisingly, respondents to the survey held their mobile operator in higher regard than a host of digital native companies, including Spotify, eBay and Uber.

In light of these findings, I met with Openet's CEO, Niall Norton, in Dublin, to find out about the next steps telcos can take in their digital evolution.

Becoming more than just a telco

Orange has been one of the most ambitious telcos in the world, in terms of expanding the traditional remit of the telco. From providing domestic electricity supply in Poland to launching micro finance solutions across Africa, to launching its own bank in Europe, Orange has aggressively pushed the diversification envelope. Norton believes that it will only be a matter of time before other telcos follow suit.  

"Orange have already shown that if you go into this thing with the right mindset, then you can completely transform your business.

"For my money, they are a fantastic example of the opportunity that exists for telcos to do more. Customers trust telcos and telcos now have an increasing amount of digital engagement with their customers.

"So, it's a no brainer for me that they definitely can become more that they currently are. The big question is how they go about it," he said  

Whether they intend to expand into utility supply, finance or cyber security, telcos should treat their new business ventures with a start-up mentality, according to Norton.

"If you take Orange, again, as an example – they took a bunch of people and said "you are now Orange Banking" and they hived them off from the rest of the business and said go on and get on with it. But they didn’t give them 4,000 bankers to work with from the off. It was very much a start-up mentality within the existing business.

"Similarly, in The Philippines, when Globe launched their own television services, they started with only 112 people – that's it. They worked really closely with existing production companies who knew what they were doing in that space and they flourished".  

In addition to offering "as-a-service" products to their clients, Norton also believes that telcos are well positioned to leverage their existing infrastructure to act as a platform for other companies' products and services.

"Another opportunity for telcos is to act as a kind of shop front and have other companies use them as an enabling platform. If they have the right infrastructure, they can do that really, really cost effectively. Telcos can do this type of thing because they can offer opportunities to businesses who perhaps don’t have all the infrastructure themselves.

"It's very similar to the situation with Intel – IBM would be advertising their products with the "Intel Inside" slogan, because people associate it with quality. Telcos have that same kind of credibility. If something's delivered by Vodafone, for example, customers are going to trust that it comes with a certain level of reliability, that they are not going to have their data stolen and sold on, and so on.

"This is a new thing and its what's changing the dynamic of the industry. Historically, telcos have been more concerned about cannibalising their own revenue streams. Now, its more of a case that they are going to get eaten by somebody else, unless they act. Self-preservation is an extremely good motivational factor at the moment.

Specific opportunities for UK telcos

"The specific opportunities for telcos in the UK and Ireland really differ from company to company. A lot of them already have some kind of media or content offering in the field, so there is obviously an opportunity to go deeper into that for those guys.

"Similarly, cyber security is a pretty big play across Europe at the moment. Financial services and healthcare are another two huge opportunities," Norton explained.

In China, the WeChat super-app has essentially cornered the market for online services, offering everything from restaurant reservations and bill payment through facial recognition technology, through to online dating. In order to be successful and sustainable, telcos need to try and take at least a slice of that revenue pie in Europe.   

"If you look at what the super-apps are doing, the WeChat's and so on, the way they've combined the referrals and online booking with the banking and payment facilities. It’s a very intranet like mindset, but the technology is all there to make it a reality.

"You are always going to get hawks and doves, in terms of how willing a company is to embrace change. Orange obviously has a very evolved way of thinking, so does Vodafone.

"Look at AT&T for example, in the US. Their chief digital officer has been bought in from Walmart [rather than from another telco]. We've worked with AT&T for many years and for someone to come into that role, relatively new, and with no telecoms background, that shows you a changing mindset among telcos. They are looking to join up the dots in a slightly different way.   

"For me, electricity, power and water are all options [into which telcos could diversify], but it could also be much smaller scale, for example, working with a string of local coffee shops. If you have the right infrastructure, you can enable the micro case and the macro case. In days gone by, when you were building one-off infrastructure, it had to be the macro case only," he explained.  

Creating the European WeChat

I asked Norton what was to stop a European telco developing a super-app and cornering the market for online services: "Absolutely nothing," was his emphatic reply.

In truth, there would be some barriers to overcome, particularly with regard to data security and GDPR compliance, as Norton explains.

"I think there is a more considered view in Europe about data privacy, so that might be a small barrier. 

"WeChat in China has been massively integrated into the healthcare, banking and hospitality sectors in China because candidly speaking, they didn't have very much infrastructure in place before that.

"The convenience and the change in people's lives that these things are having in China is huge, so maybe they care slightly less about the data privacy issues. In this part of the world, the younger people are, the less suspicious they are of companies using their data, so that slight reservation we have in Europe will change in time and change quickly. I think someone should definitely do it [launch a WeChat equivalent].

"Our digital platforms are enabling MVNOs in three different countries – not one of those MVNOs is a traditional MVNO – They all want to be the WeChat equivalent in their countries. They want to build that brand and that experience and the telco component is just one of the things you have to have to be a relevant app guy.

"There are certainly some GDPR related inhibitors here in Europe that would impact on launching that kind of super-app. There would certainly be some barriers on that front, particularly around the banking element. Whereas, if you look at somewhere like Singapore, the regulators at the front end of financial services actually change and make things much, much easier. Those things will change here too. Mainly because the European Union will want them to change.

"These things always start with a health benefit. There is huge opportunity in all of this. If you decided to set up as the WeChat of Europe the operator could host you and become a hugely integrated part of your business. If you are a start up, they might even end up taking an investment in you too.

"It's very reminiscent of the old days, where Marlborough tobacco found itself also selling cologne and jeans and all kinds of lifestyle products. It's a diversification of interests – its an inevitability if telcos can build on their brand. Telcos have a really huge opportunity in this space," he said.  

Openet's new study surveyed 1,620 consumers across the UK, Colombia, Canada, Indonesia and Singapore. The full Openet report, entitled ‘Mobile operators – digital leaders, or ‘also-rans’?’ can be found by clicking here.