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Even as broadband services continue to expand, creating opportunities to grow bundledservice revenues and increase ARPUs from consumers and SMBs, fixed-line providers face another challenge: Enterprise customers of traditional voice and data networking services — carried via DS0/T1/T3, TDM, frame relay, ATM and dedicated DSL and custom fiber optic links — are now looking to upgrade their networks and services to Ethernet-compatible broadband services. Why? As more players enter the market and broadband service coverage continues to expand, competitive pressures are impacting prices. Plus with Ethernet-based services, companies can save by consolidating all their traffic onto a single, well managed network. And while many companies will be willing to use some of the savings to pay for managed services to reduce their reliance on scarce and expensive internal IT resources, basic fixed-line revenues from large enterprise customers are likely to remain under pressure despite the growing demand for bandwidth.
Delivering New Types of Managed Services
At the same time, SMBs represent a new growth opportunity for all communications service providers (CSPs). With broadband service access charges similar to those for consumer services, the SMB market has now become a viable opportunity. Although competition for SMB customers between traditional telcos, cable service operators, ILECs and others means pricing for basic broadband services is likely to remain very competitive.
Customers of all sizes are under growing pressure to lower costs, reduce risks and better align IT with business imperatives. CSPs should now position themselves to protect one of their largest sources of revenues and profits by delivering managed and value-added service capabilities that help reduce the burden on their customers’ IT organizations and free up their IT staff to work on new capabilities and more strategic issues.
Creating These New Services Can be Costly and Require New Investments
However, developing new business services can be expensive and risky. While significant new investments are needed to deliver basic broadband services, managed and value-added services require major additional investments in hardware, software and human resources. Even CSPs that leverage other service providers’ wholesale transmission services must invest in expanded operations centers and in the recruitment, training and compensation of professional services staff.
And as they do this, CSPs are entering a market that has already reached a high level of maturity and competitiveness. IT service providers, systems integrators, outsourcers and software-as-a-service companies have been selling outsourcing, integration, security, and managed and professional services to enterprise customers for several years.
To be successful, CSPs must differentiate themselves from non-network service providers by developing network-centric offerings that build on and are easily bundled with existing network services and that are grounded in a single standard: IP. For example, managed voice-over-IP (VoIP) services are likely to be attractive to many businesses, particularly smaller ones, because they do not have the technical expertise to manage their own voice or unified communications capabilities.
To Succeed, CSPs Must Know Their Customers Inside and Out
Another significant challenge faced by traditional telcos is that while they have deep relationships with the telecommunications professionals within their customer base, their relationships with the rest of IT are not as strong — and other CSPs may not have sold into the IT department at all. Providing real value to enterprise IT departments requires that: SERVICE PROVIDERS MUST UNDERSTAND THEIR CUSTOMERS Most likely, enterprise IT organizations will look to CSPs for network-related services that address issues such as network management and planning, security, mobile device management, storage, business continuity and unified communications. However, it is less likely that they will view their network service provider as an applications- or business process-based service supplier unless or until the CSP demonstrates a strong core competence in these areas.
SERVICE PROVIDERS MUST TALK THE LANGUAGE OF IT Increasingly the model to which enterprise customers are turning to manage their IT organizational development is the IT Infrastructure Library, or ITIL®. CSPs offering managed and value-added services must be able to describe how their services fit into the ITIL model and how they can contribute to increasing the IT maturity levels of their customers.
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