Communications service providers (CSP) in Singapore understand the importance of partner ecosystems but are failing to overcome internal barriers preventing successful execution.
That's according BearingPoint research, which reports that CSPs often view digital transformation as a means to shore-up short-term financial performance, but fail to provide adequate attention to new digital business models that are needed for long-term sustainable growth.
The report - Partner ecosystems: the silver bullet for telco woes? - shows the high expectations placed on partner ecosystems but with half of CSPs anticipating at least a 16 per cent revenue bump over a two year period, do expectations need tapered?
Or perhaps the question is, are CSPs doing enough to help partners?
Furthermore, 20 per cent of CSPs are anticipating revenue growth of more than 21 per cent as a result of partner networks over the next two years.
These results indicate that although CSPs understand the importance of partners ecosystems, they are failing to overcome internal barriers preventing their successful execution.
Commoditisation of the market is a real threat where the customer treats the CSPs offering as a commodity with the price the only differentiating factor between providers - it is for this reason CSPs are always under pressure to innovate to counter this trend.
This reason is why the development of partner ecosystems are so significant, as innovations such as improvements or new services rarely happen in-house. Instead, CSPs rely almost exclusively on partners to innovate and add-value to offerings.
In Singapore, the study found that 50 per cent of CSPs expect partner ecosystems to drive cost-effective innovation, with 80 per cent of CSPs believing that partner ecosystems can help them remain competitive and 70 per cent hoping ecosystems improve the customer experience.
Furthermore, partners are expected to create direct customer relationships, enhance their internal ecosystems and improve efficiency.
"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,” said Dr Chris Stephenson, senior representative, 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."
Dr Stephenson further explained that the closest thing to a ‘silver bullet’ in telecoms was adding partner ecosystems with a platform, and that partner ecosystem development should be paramount in Singapore CSPs’ transformation strategy.
Why the lag?
Given the importance of partner ecosystem development, why then do CSPs lag in their execution?
Specifically, only 30 per cent of CSPs in Singapore have begun the execution process as opposed to the average of 34 per cent across other industries.
Furthermore, 40 per cent of CSPs surveyed are about to begin the execution process, while 10 per cent say they are analysing their options and 20 per cent report being 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,” said Dr Stephenson. "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."
Dr Stephenson did not see any reason why CSPs are delaying ecosystem execution.
Furthermore, CSPs lack of action could spell trouble for the sector. Going forward, they need to layout a solid strategy that complements business objectives, identifies appropriate partners and go-to-market offerings and move to execution quickly, according to Dr Stephenson.
The reasons for the delay appear to be a lack of technologically readiness on the part of the CSPs, with three of the top four challenges CSPs are facing come under this category.
Half of CSPs expressed the view that having the right technology in place to manage monetisation across the partner ecosystem was a significant challenge. While 30 per cent saw overcoming a complex IT environment that cannot support a minimum viable product or fail fast concept was a significant inhibitor.
“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,” said Dr Stephenson.
Delving deeper, the study found that 30 per cent of CSPs expressed that a significant impediment to partner ecosystem development was having the right technology and digital business platform to manage the ecosystem.
"There’s a clear mismatch between ecosystem expectations and the execution of ecosystem strategies, the latter being still in its infancy,” said Dr Stephenson.
The last challenge the study found CSPs faced in partner ecosystem development was creating flexibility within the partner ecosystem to respond to ongoing market changes.
“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,” said Dr Stephenson.
“Hence, instead of simply discussing the potential of the partner ecosystem, CSPs should work towards accelerating its implementation to start realising its benefits,” he added.
The telco sample for this research comprised 85 executives representing tier one and tier two CSPs across Europe, Asia and the US.
Furthermore, 440 executives across IT, technology, automotive, transport, banking and insurance sectors were also surveyed, to help rank the progress of CSPs against other industries driving significant digital change.
