Telcos are extending new propositions to business users. But there are challenges.
Despite making inroads in the enterprise market beyond legacy connectivity services, telecom operators face a tough time convincing business customers that they can be trusted providers of information and communication technology (ICT) services. Fifty-six percent of respondents believe that telcos should stick to their core business, rather than being all things to all people.
The reason for this study
To help telcos gain insights on how they can successfully address the requirements of their business customers, we commissioned the Economist Intelligence Unit (EIU) to conduct a survey.* Participants included 365 procurement and IT executives from a host of industries, 50% of whom were C-suite or above. Roughly 33% were based in Europe, 36% in North and Latin America, 27% in the Asia-Pacific region and the remaining 4% coming from the Middle East and Africa.
Participants also represented a wide cross-section of company sizes, with 58% having annual revenue of over US$5m, and 20% with revenue of over US$5b per year.
A complex industry landscape
Not all telcos are starting from the same point. Some have global network footprints, while others have only regional or national reach. Some telcos have both fixed-line and mobile operations, and others run either a fixed-line or a mobile network.
Despite this diversity, this survey revealed large areas of agreement among respondents (representing large and smaller companies, various industry sectors and based in different geographical regions) on what they see as telcos' main strengths and weaknesses.
The overall message is rather mixed: one third of business users are already taking hosting, security and conferencing services from their telecoms suppliers. Half would not consider telcos for IT help desk, business consulting or cloud services.
Enterprises haven't ruled out telcos playing a more expansive role, but as this survey indicates, in order to move successfully into non-core service areas telcos will have to emphasize more of their network strengths, explore further strategic partnerships with IT vendors and heed warnings from enterprises about their shortcomings.
Key study findings:
- Telcos face a tough challenge convincing enterprise customers they can be trusted providers of additional services beyond voice and data. If telcos want to win customers over they would be better served by showing a greater understanding of individual business requirements and tailoring their service propositions accordingly, rather than promoting a wide range of services that enterprises don't need or want.
- Network expertise is the telco trump card. Enterprises hold their telcos in high regard for the delivery of real-time services over IP networks, such as video and audio conferencing. Telcos are therefore well placed to play a much more prominent role within the enterprise as demand increases for unified communications, the mobile internet and Voice over internet protocol (VoIP).
- Telcos cannot assume that providing a good basic connectivity service will automatically lead to greater enterprise enthusiasm for their additional services. There is no strong correlation between offering a reliable core service and the propensity of enterprises to take on additional services from their telecoms service provider.
- Telcos can extend their capabilities through partnerships and acquisitions. By being more open to partnerships with IT providers and systems integrators, telcos can strengthen their position in the ICT market. Acquisitions, too, can lead to greater credibility in key areas where they lack capability.
- Customers have a broadly positive view of the telco in areas of legacy expertise. Many enterprise customers are wholly satisfied with the telecoms service they currently receive. Although connectivity services are subject to ongoing pricing pressure, mobile voice and data are increasing spending priorities for many organizations.
- Smaller companies are more skeptical. The survey shows smaller companies have more doubts than larger companies about telcos' ability to deliver offerings in non-core areas, such as cloud computing, Software as a service (SaaS) and unified communications.
*The quantitative findings presented here are based on an online survey conducted by the Economist Intelligence Unit (EIU). This study was conducted in November 2009.