Telecoms operators globally are attempting to transition their business model towards a techco or “technology company” centric approach, as they seek to grow revenues and change the foundation their network is built on.
5G is a trigger for change from telco to techco
Over the past 10 to 15 years, the telco business model has come under pressure as infrastructure and services have become increasingly disaggregated. It has been proposed that telcos consider adopting a techco business model.
Globally, telcos are at an inflection point due to:
- Heavy investment in (further) 5G development and deployment, now demanding a return on investment;
- Innovation in the networks – particularly in moving towards software-defined, cloud-native network and IT;
- Threat of hyperscalers whose presence and interest in telecoms is growing;
- Commoditisation of voice, messaging and data services consumer market and diminishing returns on network innovation;
- Potential growth of B2B enterprise services due to 5G, edge computing and private networking.
The investment in 5G is providing the telecoms industry with a catalyst for change, as it forces change across businesses while presenting opportunities for revenue growth. However, the pressure for telecom operators to deliver on this is also significant.
Telcos are looking to transition to techcos
The traditional telco model has historically resulted in a close relationship with the NEPs and the outsourcing of services innovation to third-party ISVs who manage the creation of new applications that make use of the underlying connectivity infrastructure.
STL Partners defines a “techco” as an agile and open organisation that leverages software technologies to create a modular foundation to innovate on top of. Its operating model is underpinned by a flexible, horizontal workforce and an ecosystem of partners to dynamically develop new products and services for their customers. The “techco” formula is based on lessons from the most disruptive telecommunications organisations on how they have achieved success in transforming their model, with an eye to the internet players and hyperscalers and their internal measures of success. Moving away from traditional KPIs towards the measurement of speed and agility ensures the organisation is adaptable – the hallmark of a strong technology company.
STL Partners has identified a framework articulating the key areas telcos must focus on as they look to transition to a techco:
An STL Partners report leverages findings from an extensive research programme conducted in APAC, including interviews with 8 different CSPs and a survey with 66 responses from CSPs across the region. The research explored the digital transformation achievements and ambitions of CSPs in the APAC region.
Related article: Vodafone Idea transforming into a ‘techco’ to grow enterprise business
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