How can telcos tap into the $400 billion XaaS opportunity?

Focus on outcomes, innovate and iterate

Anything as a Service (XaaS) represents a more than $400 billion market opportunity by 2025 for Communication Service Providers (CSPs), according to Bain & Company. What’s more, the company’s research suggests that by then, half of telecom enterprise revenue growth will come from XaaS models, assuming they’re able to differentiate themselves from hyperscalers. 

Bain sees XaaS opportunity for telcos by catering to enterprise and large business-to-business (B2B) segments ready looking for outcome-driven solutions enhanced by the dynamic, scalable framework cloud-native services provide. Bain said telcos that are experiencing early success have identified both broad market categories and promising niches which draw on carriers’ core competencies and foundational technology. Operators that narrow focus may increase the chances of success with sufficient investment, they assert.

Bain’s research is validated by the experiences of RCR Wireless’s 5G Monetization Panel. Examples of where this has proven to be true for Vodafone Americas include growth areas like private 5G, healthcare, manufacturing, and logistics businesses, according to David Joosten, Vodafone Americas regional manager.

“I think that’s where we see most monetization happening at this point,” he said.

Joosten emphasized that the technology is secondary to how it helps the customers. “Our customers are not necessarily looking for products,” said Joosten, nor do they want to become subject-matter experts with the tech or telecom they’re using. They’re trying to solve a problem. “In every offering that is put out to market or how we position ourselves, it has to be oriented around the business outcome,” he added. 

Deliver outcomes, not tech

The proof of the pudding is in the eating, asserted Arpan Tiwari, Deloitte TMT managing director. At a time when the economy has pivoted to a consumption model and XaaS is practically everywhere, carriers must deliver solutions which provide tangible benefit to enterprise customers.

“If there is no success that the enterprise is getting, there will be no consumption,” he said. “I’ve seen this shift in thinking vis a vis the operators.”

An emerging challenge in finding these new market opportunities is having the institutional knowledge to be able to fluently communicate with customers in increasingly specialized, highly technical market niches, said Tiwari.

Build an ecosystem

“How do you gain the specific industry vertical knowledge?” Tiwari asked. Telcos can’t do it alone. Acquiring domain-specific knowledge to address specific XaaS segments requires carriers to think about strategic hires and acquisitions, he said. 

Operator success will depend on building partnerships with system integrators and emerging players to help create a viable and sustainable ecosystem for future business growth. That sentiment is shared by both Bain and the panelists.

“There is a really big need for ecosystem,” said Vodafone’s Joosten. Telcos can’t possibly create solutions to suit every business need, so it’s imperative they draw from outside expertise. 

“We need to create open platforms,” he said.

Test, iterate and see what works

Competing with hyperscalers requires adopting a cloud mindset, Bain said. Testing, deploying and being agile enough to respond to market changes are all essential components of this success. 5G requires a platform that’s agile and flexible, said Azita Arvani, GM of Rakuten Symphony America.

“Offering these things as a service to operators allows them to play around and see what works for them, going with much lower investment,” said Arvani. 

The continuous integration/continuous deployment (CI/CD) lifecycle is at the core of successful cloud-native businesses. Operators must view their platforms through the lens of continuous improvement, said Arvani. 

“Lowering the friction with enhancements, throwing innovation in, and being able to try new innovations from different vendors using an open model is really critical,” she added.

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