Four Vertical Enterprise Opportunities Telcos Failed To Grab

Cap Gemini recently released a study on identifying new revenue streams for fixed and mobile telcos. The report analyzed three verticals: healthcare, energy, and automotive. It can be downloaded here (free, but registration required).

The report argues that telcos are forced to identify new revenue streams, given the increasing competition from over-the-top Internet players (have a look at bilderbeek consulting’s six-sided telco research stream for more analysis on this issue). Further, it says that if telcos are capable of creating a new ecosystem in healthcare, energy, and automotive, and place themselves at the center of these ecosystems they can generate significant value in the future. That is a big IF.

We believe it will be very difficult for telcos to capitalize on Enterprise opportunities, other than those that are horizontal and fairly generic in nature. Why? Because events in the past have taught us that telcos have failed to grab vertical enterprise opportunities before. Let’s have a look at four examples: education, air transport, public safety, and banking (see figure below).

In the education vertical, NRENs (National Research and Education Networks) like SURFnet in the Netherlands and Janet in the UK have been supplying the high bandwidth needs of researchers and scientist for some time now. In fact, NRENs have been established because researchers and scientists could not get the type of communications services they needed from telcos. Here is a list of NRENs worldwide.

In the public safety sector, mobile networks like C2000 in the Netherlands, Airwave in the UK, and Astrid in Belgium have been supplying the mobile mission critical infrastructure for police, fire brigades, and ambulances. Similar to the education sector, these networks have been established because regular telco services could not satisfy mission critical communications needs. Telcos do operate and maintain some of these networks, but there are very few telcos in the list of members of the TETRA association (mission critical networks worldwide built on TETRA technology). In fact, those telcos that were in this market are bailing out. In 2007 mobile operator O2 sold Airwave to a private consortium. A clear sign that such a vertically oriented network was not O2’s cup of tea.

In the transport sector, SITA (Societe Internationale de Telecommunications Aeronautiques) is the global provider of telecommunications and infrastructure operations to airports, airlines and others.

In the finance sector, SWIFT (Society for Worldwide Interbank Financial Telecommunication) is the global provider of secure messaging services and interface software to wholesale banking.

Both SITA and SWIFT have strong industry backing and are run by their members (airlines and banks). Business process and industry knowledge is key to operating communications in these vertical markets.

We believe that organisations like SITA and SWIFT will emerge for the automotive industry, governed by players in the automotive industry, not by telcos. Similar, we believe that on a more national scale, organisations like SURFnet, Janet, C2000, and Airwave will emerge for healthcare and energy. Governed by industry players, not by telcos. Telcos lack the business process and industry knowledge.

Do you believe telcos can grab the vertical opportunity? Let us know!

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About Pim Bilderbeek

3 Responses to “Four Vertical Enterprise Opportunities Telcos Failed To Grab”

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  1. David Patton says:

    I tend to agree with you, Pim. Having worked for SITA, I understand the need for industry-specific knowledge. Having also worked for Sprint, BT and Equant, and having consulted to many telcos, I don’t believe the telcos can develop the needed industry expertise in the near future. If they make the strategic commitment to do so, they will require time to change their business models from being access, transport and managed services providers to also include consulting. They will have to build a base of consulting and implementation resources that understand the unique needs of specific verticals, something they lack today. But as disruptive technologies continue to eat away at their network-based business models, they must find ways to transform themselves into total solutions providers – in the user’s office, factory, home and anywhere else he may be.

  2. Hi David,

    Thanks for your POV. Good to have support on this post from a professional who has worked for both SITA and telcos! Agree on the need for transformation to total solutions.


  3. Stephan de Haas says:

    Hi David, I agree for the telcos in general but disagree in case of Deutsche Telekom. DT has T-Systems as its captive ICT service provider with more than 40.000 people competing successfully with the likes of IBM and HP in the outsourcing market. They are for instance particularly strong in automotive with their past acquisitions of debis and Gedas which were the former captive IT departments of Daimler and Volkswagen. I think that this is exactly the know how which is necessary for the connected car. Furthermore, T-Systems has recently won a big outsourcing deal in the energy sector and has been transitioning former employees in its work force. Sounds like a plan for the Energy sector, doesn’t it?

    Enjoy reading your posts – kind regards SDH