The transformation of traditional telecommunications companies (telcos) into more technology-focused and innovative businesses
As traditional telcos face increasing pressure from many factors, many of the world’s leading telcos are striving to reposition themselves as Techco – evolved telco companies that prioritize innovation, focus on customer experience, and engage in continuous digital transformation.
In the latest report, “From telco to techco,” professionals from KPMG explain what a techco is and how organizations get there. It presents the key drivers of change, and challenges facing traditional telcos today, and provides key insights and ideas to help telecom leaders move their organizations from telco to techco.
The urgency of transformation
The term “techco” is a relatively new buzzword to describe the transformation of traditional telecommunications companies (telcos) into more technology-focused and innovative businesses. This shift is being driven by the rapid pace of technological change and increasing demand for digital services.
Telcos’ business-to-consumer (B2C) revenue growth rates have flattened due to offer commoditization and fierce competition. Traditional core telecom services are being replaced by over-the-top (OTT) platform solutions (voice to VoIP, messaging to chat, IPTV to video streaming) and tariffs have been simplified. On the consumer side, many telcos are seeking to offer a suite of services for the connected home with the goal of generating additional revenues and broader service relationships.
The business-to-business (B2B) segment, on the other hand, is seeing stronger growth as clients digitalize and new opportunities emerge. Enterprises are rapidly digitalizing their own businesses and want increasingly sophisticated connectivity and data solutions, prioritizing scalability, reliability and security.
To generate value in this environment, we believe telcos need to overcome legacy technologies, business models, systems and processes in order to extend their offer with value-added services that meet their customers’ evolving expectations. They will likely need to continue to invest in updating their networks and capabilities to address the ever-growing demand for connectivity and to deliver value from their investments.
“Telco must evolve into Techco, prioritizing innovation, customer experience, and digital transformation to thrive in tomorrow’s telecom landscape.”
Supachate Kunaluckkul
Head of Enterprise Risk and Head of Technology, Media and Telecommunications
KPMG in Thailand
Traditional telcos face an uphill climb
The legacy systems and processes that drive traditional telcos can limit their agility and reduce their ability to develop customer-centric services and user experiences. KPMG’s Global Customer Experience Excellence report found that the telco industry’s customer experience excellence scores dropped 3% in 2023 compared to the previous year.
The problem comes down to integration challenges, as operators often deploy their networks and business support systems by aggregating proprietary vendor solutions, leading to challenges in the provisioning process, and that has led many traditional telcos to focus on delivering simpler commercial bundles that don’t always meet customer needs and value expectations.
To address this issue, many telco operators have launched programs to simplify and automate their processes, develop customer intelligence analysis capabilities, and improve user experience metrics. Additionally, operators are reducing the complexity of IT architecture by moving operational support systems (OSS) and business support systems (BSS) platforms to the cloud.
Therefore, to achieve the level of operational flexibility and capital expenditure efficiency required to remain competitive, and telcos are increasingly realizing that they will need to transform from a telco to a techco.
Seven tips to help transform your telcos business
- Assess your current capabilities: Identify strengths that can be leveraged and gaps that must be addressed to set the stage for a transformation agenda.
- Decide where you want to play in the techco world: Craft a distinct identity that resonates with evolving market demands and your unique value proposition.
- Consider the key value streams: Understand what will drive value for your business and your customers and stakeholders.
- Identify the key capabilities you need to get there: Chart a strategic roadmap to drive the capabilities necessary to deliver on new value streams.
- Define the strategy for the transformation journey: Prioritize the design and build of the transformation value streams and determine the right balance between business-as-usual operation and ongoing initiatives.
- Go beyond the tech: Foster a culture that integrates talent, compliance, and governance to ingrain agility and innovation into the corporate DNA.
- Leverage partnerships, co-development, and external support: Create an ecosystem of partners that can help amplify innovation, drive growth, and facilitate market penetration.