Telcos Transforming into Techcos…See How

Transforming telcos into techcos: the role of channel partners

The telecommunications (telco) services market is undergoing a significant transformation, driven by the need to adopt business models similar to big tech companies.

Commenting on a recent report by Canalys, Devan Adams, a principal analyst at the firm delved into how channel partners can act as catalysts in this transformation, helping telcos enhance their go-to-market strategies, expand sales and deliver comprehensive solutions:

Key insights

Market growth and opportunities

The total addressable market (TAM) for telco services is projected to reach US$1.49 trillion in 2025, growing at 3.7% year on year. In contrast, IT services revenue is expected to reach $1.75 trillion, with a 10.7% year-on-year growth rate.
These stark growth differences highlight the urgency for telcos to evolve their business models to include modern IT services, thereby increasing their revenue through cross-sell and upsell opportunities.

Telco to techco transformation

Leading telcos like China Mobile, NTT, SK Telekom, Telefonica, Vodafone, e& and AT&T are successfully transitioning to techcos by adopting software and platform-based models, focusing on AI, big data, and cloud services.
This transformation involves offering high-growth services that can be combined with telco connectivity to meet general market demands and address specific vertical needs.

Channel partner contributions

Technology services distributors (TSDs)/marketplaces: curate and customize telco solutions, provide tools, training and support to tier-2 partners, and offer digital marketplaces to expand reach and access new customer segments.
Value-added resellers (VARs): bundle telco services with advanced IT hardware and software, creating comprehensive solutions that enhance customer value and drive higher sales.
Systems Integrators (SIs)/aggregators: enable large-scale digital transformation projects by integrating telco services with enterprise-grade IT solutions, combining wired/wireless networks with applications, IoT or AI capabilities.
Managed service providers (MSPs): offer fully managed IT and telco service packages, ensuring consistent quality and performance, and enhancing customer satisfaction.
Independent software vendors (ISVs): develop compatible IT software that adds value to telco platforms, improving user experience and addressing new use cases.
Hyperscalers/cloud service providers: provide scalable cloud-based solutions and extensive customer bases, co-creating solutions with telcos and enhancing go-to-market strategies through joint marketing efforts.

Transforming telcos into techcos - — Source: Canalys

Blurring lines between IT and telco

The convergence of IT and telco is evident as partners increasingly offer integrated solution bundles that combine connectivity with high-growth IT solutions like cloud, AI and cybersecurity.
Partners frequently bundle telco connectivity with IT solutions, with 80% stating they do so regularly. This trend underscores the importance of offering comprehensive, integrated solutions to meet evolving customer needs.

Go-to-market developments

Telcos must optimize their partnerships with channel partners to drive digital transformation, enhance customer experiences and achieve substantial sales growth.
By leveraging the strengths of their channel partners, telcos can provide end-to-end solutions, diversify revenue streams and capitalize on the latest market trends.
Telcos should fully exploit their existing partnerships with hyperscalers and other big tech companies to revitalize their go-to-market strategies and emulate the agility and innovation of big tech companies.

Conclusion

“Channel partners are essential in helping telcos transform into techcos, enabling them to operate more like big tech companies. This report provides valuable insights and strategic recommendations for telcos and their partners to navigate this transformation successfully.

By formulating strategic plans based on their channel partners’ competencies, telcos can empower their partners to act as stimuli in their journey to operate and perform like big tech companies”, Devan Adams, said.