Telecommunications providers’ reluctance to take advantage of opportunities beyond their core businesses could cost them dearly, according to a report from McKinsey & Company.
The report — “B2B Customers have Spoken. Will Telcos Listen?” — suggests that telecommunications providers’ core business is slowing, and they must shift their priorities.
The report, which is part of the firm’s Global Technology and Telecommunications B2B Pulse Survey, is credited to Giacomo Dolci, Naveed Niwaz, Bulat Gaifeev, and Luca Furlani.
“[N]early 80 percent of B2B customers affirm that telcos have a ‘right-to-play’ beyond traditional connectivity.” the report’s authors wrote. “Yet, many operators are falling short of capitalizing on this expanded mandate. While substantial growth opportunities lie in adjacent domains, such as next-generation connectivity, cybersecurity, and cloud-enabled services, they remain largely untapped by operators.”
Security has the greatest level of “stated spend change over the next 12 months,” with 8.6% expected growth. It is followed by cloud (6.4%), business applications (6.3%), the Internet of Things (IoT) (6.3%), next-generation connectivity (6.2%), communications and collaboration (5.8%), and end-user devices and services (5.8%). Only then — at the bottom of the list — is core connectivity.
The study also looked at the shift in priorities.
Improvement in cybersecurity was seen as a tech need by 3% more of executives now than in 2023. Perceived future needs receded in six categories from 2023 levels: “boost ecommerce and customer engagement,” “improve operations through specific applications,” “invest in next-generation connectivity,” “flexible/digital working enablement,” “improve advanced analytics,” and “end user devices and services”).
“Switch to the cloud” remained the same and “fix/maintain the basics” grew during the two years since 2023.
The report found that one in four B2B customers plan to switch their telecommunications vendor during the next year. The big winners will be cloud providers and tech manufacturers. Preference for non-telcos in security, business, applications and next-generation connectivity shows the depth of the challenge.
The report McKinsey concludes that connectivity is becoming a commodity and enterprises increasingly look to integrated solutions that alternative vendors can provide.
A March report from McKinsey pointed to four ways telecommunications providers may benefit from artificial intelligence: Connecting new data centers with fiber, enabling high-performance cloud access with intelligent network services, turning unused space and power into revenue, and building a new GPUaaS business.
