Ali Durmus Ali Durmus Founding Partner, Executive Committee Member - Etiya

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Monetization or optimization?

  • In recent times there has been an inordinate amount of discussion in the telecoms’ sector about monetization. This is not just about making money, it’s more about finding ways to generate revenue from new sources and seeing how best to maximize revenue from traditional ones as well.

    Whilst one side of the business is tasked with reducing costs to generate better profits, the other is actively trying to find what the next big thing or what the next killer app will be. And often these activities are undertaken independently of the other - a situation that does not always work to the betterment of the business as a whole.

    Monetization or OptimizationAlthough some operators have established and funded new departments specifically to look for new revenue earners, others have chosen to establish innovative startups themselves. Others, like Telefonica went as far as setting up an arms length operation to research and nurture new products in the digital space - a move that may have proved a little too radical for a traditional telco.

    And here lies the dilemma for CSPs looking at investing in digital service start-ups, many of their ideas have never been seen before. In CSPs there exists a culture of being risk-averse and only wanting to make absolutely safe choices. Risk aversion and disruptive activity don’t go well together in a sentence and for a CSP they are polar opposites. It is not easy to change the mindset of being in total control of everything.

    Likewise, in existing vendor relationships that have been in place for years, size matters. CSPs like the comfort of dealing with big, established players. This may work well for traditional IT and network supply chains, but in the digital world, things are very different. In this relatively new space there are lots of smaller players vying for space and attention. Again this is a foreign environment for many CSPs.

    Working with start-ups is complicated. They often lack the processes and customer support frameworks of their more-established counterparts. Their rollouts and updates require extra oversight. The telco CIOs that partner or acquire them have to do a lot of hand-holding throughout the relationship.

    For the new players, the tough decision is whether to accept working with the conservative guys that have the established networks and customer base or hold out for the more disruptive OTT players that have a similar DNA to them.

    Monetization, particularly in the digital services space, is easier to talk about than to achieve. That may explain why many CSPs just sit back and wait to see what works then make the move. They may avoid the risk of early adoption but they take the greater risk of missing out altogether.

    This might explain why so many prefer to invest in other network operators like themselves to generate greater revenue and even expand their global reach. The gamble here becomes one of sticking with what you know best and hoping networks grow in demand, as opposed to banking on new digital services to generate more money.

    Surely the network operator’s strength and greatest asset is optimizing the connectivity between users and services, whether or not they own the users or the services.

    It could also be argued that owning as many parts of that chain is the secret to maximizing monetization. On the other hand, failing to provide the best experience to customers in any part of this chain could prove devastating to revenues and, more importantly, profitability.

    For CSPs, maybe its time to stop talking about monetization and go back to optimization of what they already have. Both require investment and both require strong will and foresight and only time will tell which reaps the most benefit.

    Ali Durmus
    About Ali Durmus Ali Durmus works as Founding Partner, Executive Committee Member at Etiya
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