Communications service providers (CSPs) in Singapore have high expectations of the value partner ecosystems will deliver to their businesses – 50% anticipate a 16%+ revenue bump in just two years. However, they have yet to execute their ecosystem strategies, frustrated primarily by technological challenges and internal barriers.
Those are the findings of a new study into partner ecosystems in the telco industry from independent global management and technology consultancy BearingPoint.
CSPs are under pressure to innovate to counter commoditization, win customers and grow topline revenue. Few innovations (improvements or new services) are created solely in-house and so the right partner ecosystem is paramount. All the more with digital, where services can be seamlessly added and combined at speed. Co-innovation of more sophisticated and harder-to-replicate offers to which CSPs add their own service wrapper and experience, is the only practicable model. CSP expectations on ecosystem partners’ contribution to revenue growth are running extremely high.
According to the BearingPoint study, 50% of CSPs in Singapore expect partner ecosystems to drive cost-effective innovation, with 80% of CSPs believing that partner ecosystems can help them remain competitive and just over two-thirds (70%) expecting ecosystems to improve customer experience. CSPs also expect them to create direct customer relationships, enhance their own internal ecosystems and improve efficiency.
However, the most telling finding is that half of CSPs expect their revenues to grow by more than 16% over the next two years on the back of successfully building partner ecosystems. Even more extreme, 20% of CSPs anticipate revenue growth of more than 21%.
“Based on our research, companies leveraging digital platform-based business models have already doubled their growth rate compared to businesses that have stayed stagnant in their CSP transformation efforts,” says Dr Chris Stephenson, senior representative at BearingPoint Asia Pacific. “Digital platforms allow companies to grow revenue from their existing customers by using partner ecosystems to create compelling new products and services and cross-sell them to also strengthen loyalty, brand and differentiation – adding partner ecosystems with a platform is the closest thing to a ‘silver bullet’ in telecom – partner ecosystem development should be paramount in Singapore CSPs’ transformation strategy.”
Telco lags on ecosystem execution
Despite their understanding of the importance of partner ecosystems, CSPs are significantly behind in implementing the new business models and digital offerings based on those ecosystems seen as vital to future success. Only 30% of CSPs in Singapore have embarked on execution compared to an average of 34% across industries surveyed. Meanwhile, 40% of CSPs say they are about to embark on execution, 10% are analyzing their options and 20% are at the very start of their journey.
“That only a fifth of CSPs appear to be in the initial stage is a matter of concern. A lot of CSPs today continue to rely on rapid product commoditisation rather than proactively taking steps to create new more compelling products that will drive profits now and in the future,” observes Dr Stephenson. “There shouldn’t be any reason for delays in ecosystem execution. To realize the benefits of the ecosystem, CSPs need to quickly commence developing their ecosystem by establishing a solid strategy that complements business objectives, identifies appropriate partners and go-to-market offerings, and move to execution quickly.”
Tech challenges loom large
Three of the top four challenges CSPs face in curating ecosystems are technological in nature, asking deeper questions on CSPs’ capacity to deliver the right technology, skills and business agility:
- Having the right technology in place to manage monetisation across the partner ecosystem (50%)
- Overcoming a complex IT environment that cannot support a minimum viable product or fail fast concept (30%)
- Having the right technology and digital business platform to manage the partner ecosystem (30%)
- Creating flexibility within the partner ecosystem to respond to ongoing market changes
“While digital platform-based business models present potential business benefits, technology challenges, including ensuring partners’ payments and creating agile environments for experimentation, remain roadblocks to for Singapore CSPs’ rapid and successful implementation,” continues Dr Stephenson.
All up, he says, there’s a clear mismatch between ecosystem expectations and the execution of ecosystem strategies, the latter being still in its infancy.
“Without shifting to new underlying digital business platform technologies that facilitate partner ecosystem-based innovation and more sophisticated offers, CSP efforts to introduce new business models will surely be futile,” he says. “Hence, instead of simply discussing the potential of the partner ecosystem, CSPs should work towards accelerating its implementation to start realising its benefits.”