Telcos becoming LEAN and SMART

OvumIn 2009, Ovum published the Telecoms in 2020 series of reports, which outlined our 10-year vision for the telecommunications industry.
Three years later, much of this vision is beginning to take shape. In our recent report, Telecoms in 2020: Telcos’ Progress on the Road to SMART and LEAN, we revisited our predictions to examine how telcos are responding to the challenges that we envisaged back in 2009. One of our main findings was that telcos are being forced to redefine themselves into one of three roles.
Global telcos are increasingly faced with questions related to their positioning and relevance as new players enter the traditional telecoms ecosystem and influence technology, services, channels, and customer behavior and expectations.
Telcos are no longer at the center of the telecommunications universe, where their only threat was from other telcos. In the current environment, telcos no longer receive the majority of revenues from transactions generated and conducted over their networks.
Every telco will have to grapple with these fundamental questions, and will have to define itself according to the new reality of communications, IT, and media convergence.
Becoming LEAN requires a leap of faith
In 2009, Ovum predicted that most telcos would become LEAN (low-cost enablers of agnostic networks) operators by 2020. LEAN telcos will run low-cost, open, technology-agnostic networks that provide network capabilities to a wholesale-oriented customer base.
This business transformation won’t be easy, but it is already underway. To capture new revenues, telcos are investing heavily in innovation and are acquiring companies with assets in vertical industries in which they have complementary expertise and/or strategic ambitions. They are also developing new value-added services, and are working with over-the-top (OTT) partners or launching their own OTT services.
For most telcos, however, these external pursuits will be costly distractions from achieving their true identity and purpose. An early and deliberate move to becoming a LEAN operator will require a leap of faith by telcos that have, until now, been keenly focused on defending retail revenues and profits.
SMART telcos will have to defy the odds
Becoming a SMART (services, management, applications, relationships, and technology) telco will require monumental vision and effort. Our recent assessment reinforces our prediction that there will only be a small number of SMART players by 2020, and that even fewer will be telcos.
SMART telcos will have to defy the odds to develop or acquire capabilities in new and unfamiliar domains including devices, software, content, and customer channels.
More importantly, to compete with the likes of Apple, Google, and Amazon, SMART telcos will need far-reaching brand loyalty and meaningful relationships with end users.
While SMART telcos will be expected to provide a full suite of end-user services, they will also need to manage and integrate services from other providers. Ultimately, SMART players must be capable of providing and managing the entire consumer experience including access, devices, services, and content.
Verizon is one telco that has SMART aspirations. It has a reputation for maintaining tight developmental control on its network, and has expanded into a broad range of horizontal domains (including cloud, telematics, applications, content services, and distribution) and verticals, such as healthcare and automotive.
Indecision will cost telcos
While companies such as Free in France and Sprint and TW Telecoms in the US have taken steps towards becoming LEAN operators, others are still not ready to commit. Many telcos have adopted both SMART and LEAN strategies in different products and segments, but this hesitation risks precious time, resources, and money.
Telcos that are not yet ready to redefine themselves may look to become “smart enablers”. Smart enablers provide assets such as location, billing, and existing customer relationships to SMART players, which then use them to establish direct customer channels.
Sprint in the US and Telefonica O2 in the UK are two examples of telcos that have exploited their assets by investing in open development platforms and application programming interfaces for the benefit of developers.
However, while smart enables currently serve a distinct purpose, we believe that this role will be nothing more than a transitional stage that provides telcos with an opportunity to ease into the role of a LEAN player gradually, rather than in one leap.

Sara Kaufman is a telecom research analyst at Ovum. For more information, visit