Telecommunications service providers must change their investment strategies in order to maintain and grow their market position, according to a new report by Gartner.
Released Wednesday, the study noted that shifts in customer demand, changing competitive environment, the declining economy and new government policies have affected the carriers' market position domestically and globally.
Carriers will "struggle" to retain and expand their market foothold, the research firm said, noting that market success will depend on how well players tweak their investment strategies in 2009, through to 2010.
"While the recession will hurt all carriers, those with a strong cash position will have an opportunity to outpace their competitors through targeted acquisitions and service innovation," Alex Winogradoff, Gartner's research vice president said in the report. "Weak carriers will need to aggressively realign their cost structures, reposition their service portfolios and concentrate on shoring up their customer and revenue bases just to survive."
Gartner outlined three major trends that it said would influence how well carriers perform in domestic and global markets, as the recession continues to restrict access to capital, and governments roll out policies--designed to soften the impact of the financial crisis--that mitigate market forces.
First, customer will demand more for less. With consumer confidence dipping across most regions amid the recession, Gartner said a "cocooning" phenomenon will emerge as consumers avoid adopting new services that are not free. This will push carriers to focus on brand positioning and building customer trust, the analyst said.
However, this will be insufficient, as carriers will also need to adopt a more aggressive services lifecycle and refocus innovation on customer experience, for instance, by offering context-based services, targeted advertising and user-generated content.
Gartner said carriers should provide third-parties access to their network enablers, such as billing, in exchange for development resources and service innovation. This benefits telcos as it promotes creative service offerings, which is not a forte of most carriers, as well as reduce the cost of innovation, the research firm said.
Gartner also predicts that the current market climate will drive "forward-thinking" carriers to change their corporate culture. While telcos look to reduce their workforce to cope with diminishing revenue, such cuts will not be sufficient. They will need to explore new ways to transform the business and operating cultures, Gartner said.
"Some innovative partnering arrangements have already been pursued to distribute risk, reduce cost structure and share intelligence," it said, citing examples such as network-sharing arrangements between Telus and BCE, Telia and tele2, and Vodafone and O2. Some service providers have also looked outsource traditional telco functions, such as Vodafone's outsourcing of network operations to Ericsson, while others explore professional labor augmentation to fill temporary skill gaps, such as in media consulting.
Finally, Gartner anticipates that leading mobile operators will avoid commoditizing their services.
It noted that carriers will invest in efforts to better understand and improve user experience, in a bid to appease and retain their clientele as well as industry regulators. Gartner advises innovation to be employed from outside and allow others to build services on top of carrier platforms in order to differentiate themselves from competitors.
In terms of infrastructure investment, the research firm urges carriers to address all aspects of the network instead of focusing only on wireless broadband technologies. This encompasses network control and service layers, contributing to industry initiatives, forming partnership with other carriers, device vendors and social networks, and focusing on attracting third-party developers.
Based in Singapore, Konrad Foo is an intern with ZDNet Asia.
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