For communications service providers, questions still loom over how 5G will be monetized. Many have voiced the view that the enterprise segment is where 5G will make its money, with potential use cases across a breadth of verticals including the automotive, manufacturing and utilities industries to name a few. However, if service providers focus more on delivering 5G business use cases to small and midsized enterprises (SMEs), this market segment could prove to be a fruitful source of revenue.
As 5G deployments continue to roll-out globally, CSPs are focused on deriving value from projects and partnerships with large multinational enterprises. And they are eager to do so quickly to assure payback from their $1trillion investments in the next generation network. However, are CSPs blinkered in their approach to generating ROI from 5G? Are they limiting themselves by focusing too much on a small segment of the enterprise market, that to date has limited CSPs' involvement in early 5G projects, reducing them to mere providers of connectivity?
In a recent joint report launched by Beyond by BearingPoint in collaboration with analyst firm Omdia, it was revealed that the majority of CSPs focus 70% of their B2B resources on less than 1% of the enterprise universe made up by large businesses. In essence, CSPs are overlooking a vast opportunity to grow 5G B2B revenues, by focusing so little of their time on small and midsized enterprises (SMEs) which account for 99% of the world's businesses. For a long time, the SME market has been coveted by the telecoms industry, but CSPs have perhaps viewed them as the unfashionable end of the B2B market. However, SMEs can be a critical asset in the 5G landscape, a market that Omdia recognises as a $433 billion revenue opportunity.
Unlocking a vast and untapped opportunity
5G promises much in terms of reinventing the traditional telco business model, but it will require CSPs to prioritize partnerships with vertical specialists and technology experts, facilitating service experimentation across a range of applications and use cases.
The harsh reality for CSPs is that many large and multinational enterprises do not view CSPs as their preferred partner for 5G strategy execution. According to our research, just 21% of enterprise 5G projects are led by CSPs. In many cases, enterprises are investing in their own private 5G networks, favoring a DIY approach to 5G strategy execution, and in some cases are partnering with cloud service providers like AWS or Azure.
We saw this in action at the end of last year, when manufacturing giant Bosch announced plans to deploy its own private 5G network in 250 of its plants worldwide to drive Industry 4.0. SMEs, however, are not likeminded and place CSPs at the top of their list with 42% stating that they trust CSPs most to execute their 5G strategies.
A crucial inflection point
Accounting for 99% of the enterprise market and according to Omdia, boasting a potential $433 billion opportunity to grow 5G revenues, SMEs are a market segment that CSPs can't afford to ignore. SMEs' business needs can be just as complex as large enterprises and 5G will play as pivotal a role for both, in increasing productivity and efficiency, and creating new opportunities across the value chain. What's promising for CSPs is that ultimately SMEs believe in 5G's value generation, making them ideal partners to rapidly test and roll-out new 5G services across multiple verticals, expanding both the CSPs' addressable market and service portfolio.
CSPs must consider SMEs' business needs within their most common working environment and industries, from construction sites to cafes, to retail stores, small offices or businesses on the move. Operators must consider how 5G could improve SMEs' productivity, sales and marketing outreach, while also helping them secure and analyze their rising volumes of digitized intelligence. Ultimately, telcos need to embrace these factors to create an outcome-based value proposition that a typically non-technical client will understand and be enticed to buy.
Bringing them closer to the ecosystem
To unlock this coveted market, operators need to address the different types of SMEs out there, their unique business needs and their vertical context. There will not be one "killer" use case for 5G that addresses all needs. Rather 5G services and solutions will need to by dynamic, differing from use case to use case, with vast potential for repeatability and scalability.
Today, most 5G offers for SMEs are "Consumer Up" – a re-sleeved consumer offer. However, 5G's real value lies at the higher tiers of the value proposition, which often involve more ecosystem partners and can be deeply transformative to help SMEs achieve a significant strategic shift.
The opportunity for CSPs lies in the co-creation of attractive, pre-integrated joint solutions that address unique SME needs through a combination of several technologies and applications, including anything from connectivity, to IoT, sensors, drones, cloud and AI.
Take for example a farmer purchasing a smart agriculture solution that allows them to monitor crops in real time to improve quality and yield while also optimizing labor involved. Or similarly, a restaurant purchasing a smart kitchen solution to manage supply levels, energy efficiency and remote appliance control These types of solutions can be deeply transformational; however, most SMEs won't understand or have the time to learn about the technology. What they need is a solution from CSPS that is simple to buy, easy to implement and that uses technologies that deliver the outcomes that SMEs require.
As the SME market continues to grow, the list of 5G use cases grows with it. To put 5G to the test, CSPs need to understand the value of this untapped market and offer a new set of solutions tailored to their specific, and dynamic requirements. We're already seeing some CSPs take on the challenge to address this 5G SME gap by orchestrating a partner ecosystem. According to Omdia, Vodafone Spain offers an all-inclusive value proposition providing SMEs with compelling mobile-first productivity tools. In addition, SK Telecom is partnering with the Korea Smart Factory Data Association and software developer, BISTel, to offer a 5G-based big data analysis service to manufacturing SMEs.
These types of collaborative approaches demonstrate how CSPs can marry 5G capabilities and other assets with ecosystem players to deliver profound value to SMEs in 2021 and beyond. This opportunity to help SMEs reinvent their business models and grow at scale will be deeply transformational. However, to realize this opportunity, CSPs will have to address the different types of SMEs out there. This will mean gradually developing a growing number of solutions with an increasing number of technology partners and vertical specialists. Using a digital marketplace will enable the orchestration of these multi-partner solutions, while also simplifying the complexity for the SME user. This marketplace needs to allow CSPs the speed and the scale to grow from selling a few SME solutions, to selling multiple solutions as more partners and customers come on board.
— Angus Ward, CEO, Beyond byBearingPoint
Photo by Blake Wisz on Unsplash