Can telcos survive on data analytics alone?

We don’t pay for Facebook or Google services — at least not with money. We pay with the information about ourselves that OTTs are then able to monetise and get [some] revenue out of. Yet companies that have the most data about our behaviour and daily habits have not yet learnt how to get money out of this data. Along with increased popularity of OTT services CSPs are more and more afraid of being pushed towards the bottom of the value pyramid — serving only as providers of access and connectivity. There has always been a search for ‘the killer app’ beyond voice and SMS; MMS turned out not to be the killer app, then CSPs have tried to open app stores — also without much success.

The latest trend has been to look for insights from Big Data as the source of new revenue streams. Some telco executives believe that the industry can survive on data analytics alone, without other sources of revenue. We see that most CSPs in the mature markets have started to act, to build new business models that leverage the insights they can get from Big Data. Telefónica has launched a global big data business unit (Telefónica Dynamic Insights), which already offers their first product, called ‘Smart Steps’, that allows brick and mortar retailers to get information about how their consumers move around their premises.

Most of CSPs do not have the capabilities required to build revenue on data analytics. The capabilities are: proper IT solutions to gather and analyse data, business processes supporting the business of selling insights, resources with data analytics skills (data scientists).

We also have to keep in mind that CSPs are not like Internet startups — they are large, process-driven organizations, where change is expensive and takes plenty of time. Therefore introduction of these new kind of capabilities may come too late. CSPs need help from outside, from companies that will not only deliver Big Data IT platforms, but also tell them what is the best use of data, how to reorganise the processes and — maybe — will perform some of the analytics services in an outsourcing model.

On the other hand, in the difficult economic environment, CSPs are not willing to bet on new businesses. Each new investment is typically required to have a strong business case before budget is approved. In this situation, the preferred way to start will be via proofs of business concept that do not generate significant cost, but can help verify the market potential. Big Data is at the ‘peak of inflated expectations’ of 2013 Gartner’s Hype Cycle, so this area of investments may get special attention from executives and financial controllers.