Are CSPs ready for the platform economy?

Seven of the ten most valuable companies in the world are now platform businesses. With the advent of the Platform Economy, Rob Vos, a Senior Calvi Consultant examines how CSPs can leverage their strengths to compete and thrive in a world dominated by platforms.

The Platform Economy shifts the dial for enterprise customers, changing them from mere consumers of telecoms services to participants in a new business paradigm. This change will have considerable impact on enterprise billing.

Most historic telecom innovation was technological

Change and innovation are an integral part of the telecoms market. Since the early 1990s, the industry has launched 2G, 3G, 4G and 5G mobile networks, and is now working towards 6G, which is expected to be market-ready by 2030. At the same time, it has also rolled out broadband and fiber networks and is currently building gigabit-capable full fiber connectivity.

While the telecoms industry concentrated on technological innovation, smart disruptors focused on commercial innovation – seizing much of the business value of Customer Service Providers’ (CSPs’) investments by building platforms that facilitated new ways of doing business and interacting online. These platform businesses support service provision (Uber and Airbnb), product sales (Amazon and eBay), enable payments (Square and PayPal), provide new ways for people to make money (Upwork and Fiverr), as well as new ways to interact, communicate and engage (YouTube, Twitter, Instagram, TikTok and Facebook). Such platforms delivered substantial value to their creators, but killed off money-making telecoms products such as SMS and voice, which were replaced with OTT products that generated little additional value for CSPs.

Avoid the bit pipe, embrace the platform model

The telecoms industry is at an inflection point.  5G and gigabit fiber will fuel fast-paced commercial innovation with much of the new value coming from growth and disruption in the enterprise market. CSPs need to be ready to support rapid business change that will see:

• new charging models
• new complex products comprised of telco and non-telco services
• CSP participation in emerging B2B ecosystems (such as B2B2X business models)
• the creation of new value-added platforms.

Critically, B2B customers and partners want CSPs to offer innovation platforms that enable them to co-create new products and consume ICT services in different ways. And they will want the digital autonomy to manage things themselves wherever possible. This represents a huge opportunity for CSPs to create new, sustainable value.

The appeal of the platform business

Platform businesses are highly valued by investors. This is because a product owner charges the end customer for the service provided. But a platform owner creates more than one revenue stream - charging not only the end customer, but also the vendors that use the platform to sell, distribute, bill and support their customers, as well as companies that want access to usage data or the CSP’s customer base to advertise or sell.

To become a platform, CSPs need to shift from providing the best products to becoming the best partner and enabler. Success will require CSPs to transform their existing closed and siloed systems into an open infrastructure that allows them to monetize their many strengths. For instance, why only use an expensive revenue management process to bill products when you could bill and split revenues for others and then charge for this service? The same applies to other key operational functions such as distribution, customer support, collections, dunning and so on.

How to realize the platform opportunity

As McKinsey has noted: “...telcos find themselves at a crossroads: they can either tinker around the edges to achieve incremental gains or make a bold choice to reinvent their value-creation formula and bravely, firmly, commit to that choice.”

Realizing the platform business opportunity requires CSPs to implement a cultural mind shift, as well as a technological transformation. They need to see innovation as not something they exclusively own, but something that is shared with customers and partners. This is the key to unlocking all the new opportunities promised by co-creation. CSPs must also learn to think differently, become less defensive and more open to disruptive ideas.

Key telco strengths that CSPs can leverage to make a success of the platform business model

Trusted billing is at the heart of a successful platform business model

Whoever you’re billing, whether it’s a consumer, an enterprise or a partner, the bill must be transparent and trustworthy, and provide the ability to manage and analyze service usage, costs, or revenues that have been generated.

• Accuracy – customers need to be able to trust their bills, which means they must be accurate and easy to check. While CSPs have traditionally had to adhere to a mandated level of accuracy, complying with such mandates is set to become more challenging as business models and charging paradigms evolve. Being able to charge accurately and reliably will become key criteria in CSPs’ ability to assume a trusted role within evolving ecosystems as a charging and payment processor.
• Awareness - the bill can also be used to communicate new information such as new products, prices, offers and capabilities that customer need to be aware of
• Transparency - customers need to understand how changes they’ve made to their service mix affect the amount they owe. This will drive the adoption of digital portals that incorporate both billing information and self-service tools so that customers can understand balances in real-time, make payments when it’s convenient for them, and change their package or usage controls.
• Insight - businesses will need to understand the cost of the services they’re consuming. This shifts enterprise billing from a unidirectional consumptive model, to a bidirectional model that combines information about both consumption and revenue generation.

CSPs looking to succeed in the platform business will need to harness service offerings from a diverse supplier base, using shared orchestration, monetization, and administration tools to create new service bundles. Critical to the success of this model is ensuring that everyone participating gets paid the right amount and on time. The model shifts the dial for enterprise customers, changing them from mere consumers of telecoms services to participants in a new business paradigm. This change will have a considerable impact on enterprise billing - elevating billing and payment services from an operational necessity to a strategic asset that becomes a valuable component of complex service provisioning. 

Curious about new revenue-generating opportunities arising from platform-based businesses? Reach out and our Business Consultant Rob is happy to tell you all about it! 

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