BearingPoint//Beyond CEO Angus Ward discusses 5G opportunities and potential, trends for CSP 5G revenues, as well as the possible effects Covid-19 might have on the industry.
Tell us a bit more about your research and why you decided to commission it?
5G has captured the attention of enterprises at a very early stage of its roll out – many expect the technology to have a transformational impact on the way they do business. But how are enterprises approaching 5G? What role will Communication Service Providers (CSPs) play? And what are the applications they plan to deploy?
After commissioning research earlier this year to understand the real attitudes of both CSPs and business customers around the world towards 5G, we wanted to delve further into the 5G B2B opportunity for CSPs.
To do this, we worked in close collaboration with Omdia (previously Ovum) to develop a series of reports examining industry and enterprise appetite for 5G, where opportunities lie, how CSPs can add more value for 5G enterprise solutions, and what role CSPs will need to play in the ecosystem to succeed.
This first report is focused on an overview of the 5G opportunities, their potential and what is being done so far.
Your research highlights a worrying trend for CSP 5G revenues based on their roles in early 5G enterprise projects. Can you tell us more?
The report shows that almost three-quarters of CSPs believe their 5G revenues will come from B2B, B2B2X or Government/smart cities opportunities. Earlier this year, our own research also showed that CSPs expect a 15 per cent increase in current revenues from B2B 5G services. So far, it’s good news.
However, there is an issue. Omdia’s Enterprise 5G Innovation Tracker reveals that CSPs are already being cut out of strategic engagement and solution building with enterprise partners. In 40 per cent of enterprise 5G deals already signed, CSPs were the secondary supplier. One in three were led by enterprises and only 21 per cent were led by CSPs. In most recent deals, such as within automotive, enterprises have been cutting out CSPs entirely—even connectivity is being provided by other suppliers—and choosing to build their own private 5G networks as part of industry 4.0 smart manufacturing solutions.
Without embedding 5G within broader solution offerings and taking the role as lead partner in providing enterprises with the solutions they want to buy, CSPs run a real risk of being left out. Indeed, according to the GSMA, only 5 per cent of revenues will come from connectivity – the rest will come from new integrated solutions and services that take advantage of the advanced capabilities of 5G. By relegating themselves to being just specialist connectivity providers, CSPs are negatively impacting their own bottom line and endangering their ability to monetise their 5G investments.
So, what should CSPs do to reverse the current trend?
To reverse their fortunes in early enterprise 5G projects and start reaping the benefits of 5G, CSPs must think business-first, not 5G-first. This means focusing on the ultimate business problems their customers are looking to solve and creating the best possible solutions that enterprises can quickly consume with none of the costs and risks of integrating standalone products themselves.
In order to solve these problems, CSPs must identify, partner, codevelop, implement, and run propositions with technology players, application-specific and industry- specialists. CSPs that can orchestrate such a complex web of relationships will be capable of capturing a greater share of the market and not competing solely on price. In short, this is about CSPs embracing platform-based business models and orchestrating partner ecosystems to better meet enterprise needs. The research reveals that manufacturing, transport, utilities and energy sectors account for nearly 80 per cent of early enterprise 5G deals. Others coming to the fore are healthcare, education, retail and mining. This shows there’s a huge opportunity for CSPs to make their mark in these verticals, but each has a different set of problems that customers are looking to address. Therefore, the solutions and applications that will drive value need to be specific to each industry vertical.
CSPs should start small and pick an application or industry where an opportunity exists to work collaboratively with an enterprise customer to understand and investigate the problem whilst co-creating solutions. Learnings can then be industrialised and productised and diffused into the wider market. There also needs to be an acceptance that CSPs are unlikely to have all the answers themselves, so they will need to partner in complementary fields and to orchestrate an ecosystem that helps realise the perfect solution for their customers.
CSPs need to get out of the mindset that they are simply connectivity providers. Fundamentally, they must become 5G ecosystem orchestrators.
Finally, do you believe the Covid-19 pandemic will have an impact on the demand for 5G?
Absolutely. Although it’s unlikely that it will change the nature and shape of the 5G market or opportunity, it is certainly acting as a catalyst for enterprise demand for 5G technology solutions.
By 2022, 5G is expected to have reached viable functional maturity, but enterprises are not waiting. They are already forming ecosystems to help them address their needs. Indeed, 5G investment in China is already recovering because the country recognises the importance of accelerating the digitalisation of industries to guard against future risk. This trend is expected to unfold globally as Covid-19 makes digitising the physical, enabling a work-anywhere economy and mitigating risk in supply chains through an ecosystem play, more relevant than ever. Digitisation is now a matter of survival and a lot of that will be 5G enabled.
To meet this enterprise demand, CSPs have to embrace platform-based business models and become 5G ecosystem orchestrators. That’s the only way they can hope to provide enterprises with the sophisticated, complete solutions that fit their needs and re-integrate themselves into enterprise 5G value-chain as the world emerges from the Covid-19 pandemic.
Angus Ward, CEO, BearingPoint//Beyond