Startup partnerships as a catalyst for driving Telco Innovation

Telcos and innovation are not known to go hand-in-hand. Traditionally, the Communications Service Providers (CSPs) struggle with change, mainly because of their size and mindset. Typically, they provide commoditized services like voice and data, which is tough to differentiate. It is for this reason that the telcos are referred to as dumb pipes of providing connectivity.

Why Do Telcos Need To Innovate?

Over the last few years, telecom operators have faced disruption across their businesses, including voice, data, messaging, or ICT services. Internet giants, like Google, Facebook, and others, have taken a lead where coming up with new and exciting products and services is concerned. The telcos find themselves playing a catch-up game. While the introduction of new services helped in the uptake of telcos data services, there is a growing realization that the CSPs need to innovate and create new solutions and products to remain relevant in the mind of the end consumer.

Further, the telco networks were initially designed to provide basic connectivity and that purpose is more or less accomplished. The telcos now need to come up with newer services to monetize their infrastructure and that is not possible unless and until they innovate and come up with new services. Besides, the digital revolution runs on the foundation of the communications network, and telcos should monetize their investments to set up an infrastructure.

Innovation is all the more required for the telcos in the upcoming 5G era because it promises to herald several new business models and use cases. Unlike previous standards, 5G is not just about better speed. It enables ultra-high-speed along with extremely low latency, which opens up several new pathbreaking use cases like Augmented Reality (AR), Artificial Intelligence (AI), Virtual Reality (VR), and Industrial Internet of Things (IIoT), among others. In effect, 5G opens up a plethora of opportunities for startups and other companies that innovate and come up with exciting products and solutions.

The creation of new use cases, especially in education, health, and public safety, means that the telcos can add new revenue streams. Besides, the networks will be able to collect a massive amount of data that they can analyze to further create targeted services and new value-added services.

Transforming The Networks To Form Winning Partnerships

The changing digital ecosystem means that the telcos have to move away from the traditional mindset. This new area calls for deep collaboration with other industry verticals for the development of new use cases. For instance, the use case of a connected car does demand that the telco work with the automotive industry, and smart living use cases might require the CSPs to collaborate with white goods firm, and so on. The traditional mindset of the telcos of operating in silos is unlikely to reap results in this scenario.

This evolving digital landscape also means that the service providers need to form winning partnerships with startups, who are known to innovate and think out-of-the-box. This has already started to happen with several service providers trying to collaborate with startups.

There are several models that service providers adopt to work with startups. They might acquire the startup to get access to the company’s innovation. For instance, Bharti Airtel acquired YTS Solutions, a financial products firm, in 2015 to enhance its wallet offering.

The service provider can also invest in acquiring a stake in the company. Reliance Jio, India’s newest service provider, has invested in several startups, including Fynd and Haptik, among several others, to leverage their innovation to enhance its offerings. It formed JioGenNext, a startup accelerator, to identify and invest in startups.

“We are well-positioned to help Indian startups in a number of ways, whether it be in technology development, product development, distribution, market access, or even scale-up capital,” says Mukesh Ambani, Chairman of Reliance Industries, the parent company of Jio, said at the company’s recent Annual General Meeting. “We are inviting even more startups to join forces with us. We are ready to integrate them into our roadmap and to help them reach their full potential,” he added.

Partnership with telcos help the startups scale quickly, they stand to benefit from startups’ new products and way of thinking.

Putting Cogs In The Wheels

However, getting the cogs in the wheels of working with startups comes with some challenges. Working with the startup demands that the telcos upgrade the networks to have open, programmable, and agile networks. The traditional monolithic hardware-centric networks hinder innovation.

On the other hand, software powered network which leverages virtualization, cloud computing enables new services and function, improved customer experience, better operational efficiency, and innovation. It also allows service providers to cost-effectively bring more new services to the end-users. Enabled by Software Defined Networking (SDN) and Network Functions Virtualization (NFV), the Softwarisation of the networks is crucial to adopting newer ways of working and enabling innovative business models. Virtualization leads to a more flexible network while at the same time, allowing them to bring down the cost of network management.

Typically, service providers tend to go for products and solutions from the same vendor to reduce risk. This leads to vendor lock-in. More importantly, it affects the telcos’ internal innovation capabilities and even prevents them from launching differentiating products and services. By default, softwarization leads to more open networks.

Softwarization makes it easy to upgrade the existing network infrastructure, ensuring that the service provider is able to acquire a key technological edge over competitors.

The telcos are fast realizing that an open and programmable network is a pre-requisite to adopt and promote innovation. It is also crucial for the CSPs to form winning partnerships with the startups. The service providers need to re-invent themselves and their network architecture to enhance their engagement with the startup ecosystem to create truly different digital services and products.

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