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Telcos lose out in early enterprise 5G business

Research reveals that industries and enterprises are ready to reap the benefits of 5G, but warns that service providers need to learn how to satisfy this demand

A study from BearingPoint//Beyond, in collaboration with Omdia, is warning communications service providers (CSPs) that they must change their strategies to drive revenues from their 5G investments, and recommends urgent action to reverse this trend, as most projected telco 5G revenues rely on B2B services.

The 5G for enterprise and industry: What does it mean for CSPs? report reveals that even though there is alignment between CSPs and enterprises on the importance of 5G, there exists what it calls a worrying trend for CSP 5G revenues being based on their roles in early 5G enterprise projects.

In addition, it proposes that a key problem in the industry is that businesses want to buy complete solutions that fit their needs and help solve business problems.

The report found that 5G strategies focused on selling just communications solutions are failing, and that only CSPs engaging partner ecosystems to solve enterprises’ business problems will be able to make up lost ground. It says that telcos are set up to sell data, network slicing and edge capabilities: technology assets that don’t do everything businesses need.

The study calculates that only a fifth of early enterprise 5G deals are telco-led, and that in 40% of cases, telcos are the secondary supplier. Furthermore, in some deals, telcos are cut out entirely, with even the basic connectivity being provided by alternative providers.

Omdia found that 72.8% of CSPs believe most of their 5G revenues will come from B2B, B2B2X or government or smart city opportunities. Earlier in 2020, BearingPoint//Beyond research showed that CSPs expect a 15% increase in current revenues from B2B 5G services.

Yet Omdia’s research reveals the firms are already being cut out of strategic engagement and solution building with enterprise partners. In addition to finding that 40% of enterprise 5G deals saw CSPs as the secondary supplier, 32% were led by enterprises. Only 21% were led by CSPs.

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The report emphasises the need for CSPs to change their posture from “5G-first” to “business-first” thinking, focusing on applications and vertical-specific solutions. It finds that enterprises are already making the connection between 5G and applications.

Manufacturing, transport, utilities and energy and mining sectors were found to account for nearly 80% of early enterprise 5G deals, and the study observes that as an enabler of business solutions, 5G’s value will be realised through industry-specific processes, supply chains, partnerships and applications. It points to examples of how Deutsche Telekom, Verizon and Telefónica are starting to form industry partnerships to access these verticals.

Yet the fact that only one in five early enterprise 5G deals are CSP-led proves the way CSPs want to sell is at odds with the way in which businesses want to buy, suggested BearingPoint//Beyond CEO Angus Ward. “What’s deeply concerning is that some of these early deals, such as the ones we see in automotive, cut out CSPs entirely – even connectivity is being provided by other suppliers,” he said.

“Businesses want to buy complete solutions that fit their needs and help them solve business problems, rather than individual technology assets. This is a multi-billion-dollar opportunity that CSPs need to address fast, and requires CSPs to collaborate with enterprises and SMBs to better understand their reality.”

5G to act as catalyst

Omdia believes 5G will act as a catalyst for those enterprises that are still hesitant about the deployment of specific applications and will enhance certain applications that are going to be deployed anyway.

“CSPs will only realise value from 5G if they can identify, partner, codevelop, implement and run a proposition with application-specific and industry-specific specialists,” said Evan Kirchheimer, research vice-president for service provider and communications at Omdia. “CSPs that can orchestrate such a complex web of relationships will be capable of capturing a greater share of the market and will not be relegated to being one of many connectivity providers competing solely on price.”

In a call to action, the report concludes that the 5G world demands that CSPs “be brave”, and that they have to embrace platform-based business models and orchestrate partner ecosystems to meet specific enterprise demands. This, the authors accept, requires a change in mindset, experimenting with business models, accelerating testing and monetising speed to test and monetise new offerings that are co-created in the ecosystem of partners and underpinned by the right IT platform to support these new ways of working.

“Fundamentally, CSPs must become 5G ecosystem orchestrators,” said Ward. “That’s the only way they can hope to meet enterprise business needs and reintegrate themselves into the enterprise 5G value chain as the world emerges from the Covid-19 pandemic.”

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