In the past few years, service providers have felt vulnerable, standing alone against new competitors coming to eat their lunch. As a result, many operators are searching for ways to realize the value of mergers and acquisitions to rationalize their business, consolidate their networks, integrate their offerings and better prepare for the competition.
Even many industry giants are finding that in coping with the expected trends in 2014 – such as omni-channel, big data, virtualization, small-to-medium businesses, video and TV, and connected devices – two is better than one.
Service providers will continue to merge to rationalize their businesses and to ensure growth and efficiency. They’ll need to address market saturation and hyper competition, lack of resource such as spectrum, and regulators pressure, which will lead to M&A and expansion beyond their current geographies. Vodafone, America Movil and Liberty Global are just a few good examples.
Also in 2013, service providers joined the retail industry in making omni-channel a top priority. With millions of smart devices, billions of applications and unprecedented growth in data consumption, the world of omni-convergence has become all-encompassing.
Even greater numbers of service providers will integrate their channels and online tools in 2014 to deliver a consistent, continuous experience, enhanced by data-driven analytics.
It’s important to note that successful omni-channel integration can’t exist without a proactive relationship with customers. Service providers will incorporate a greater number of tools that will allow them to proactively notify and interact with their customers in 2014.
My second prediction is that big data is going to be even bigger next year because it will present a massive opportunity for service providers.
What may surprise service providers is how quickly they will have to transition from merely managing big data to realizing its value in the coming year. Another surprise may be that the secret to realizing that value will be internal initiatives.
Internal data monetization will lead to improved personalization, including proactive customer care and marketing, as well as network optimization and planning.
For the moment, though, external data monetization is probably still the hotter topic, and we can expect to see many service providers leveraging existing data assets to create new revenue sources, such as mobile ads. For instance, Sprint offers a service where hotels, restaurants and casinos are able to identify the different profiles of people around their businesses and target advertising/promotions accordingly.
A third trend is the further growth of virtualization to include network function virtualization (NFV) and software-defined networks (SDN), which refers to implementing a network function on a virtual machine that can run on industry-standard server hardware.
By re-architecting data centers and networks, service providers would be able to save huge amounts of capex by replacing costly proprietary hardware with standardized, less expensive servers. In addition, opex will be reduced, perhaps even more dramatically, because SDNs and NFV will make services and infrastructure more agile and scalable, and thereby less costly to maintain, reconfigure and upgrade.
In 2014, we will see a greater focus and more implementations of NFV and SDNs. Both concepts create a virtual control layer for the network, allowing service providers to save costs and to manage their networks more efficiently.
But that’s not all they can do. A consensus is growing that the more significant impact of virtualization going forward is helping service providers to drive new revenue streams and improve the profitability of old streams. SDN and NFV will enable services that require guaranteed, optimized, end-to-end quality of service, along with high and elastic bandwidth.
A fourth trend is that the enterprise and small-to-medium business (SMB) sector is becoming indispensable. In 2014, service providers will increasingly merge network and IT to provide their SMB and enterprise customers with complex, cloud-enabled services, moving from being a network solution provider to a true ICT player that provides more cloud-based, M2M and software service on top of network and mobile access.
With cloud-managed applications and device and computing services, up to 80% of the enterprise ICT budget would be in play, and it will happen sooner rather than later.
Many service providers – such as Telefonica, Vodafone, SingTel, Telstra and AT&T – are restructuring and engaging in acquisitions to capture an increased share of this emerging opportunity.
Finally, the roll out of 4G/LTE will continue apace in 2014. Service providers are focusing on optimization and monetization of their new networks, meanwhile the development of a standard for 5G is heating up and trials have already started.
Taking advantage of all these opportunities isn’t going to be a walk in the park. Expect to see plenty of M&As in 2014 as the industry continues to evolve and service providers consolidate to embrace new challenges.
Michal Harris is director of market insight and strategy at Amdocs
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