New capabilities ‘key to Mena digital market’
Dubai, December 19, 2012
In order to penetrate the Mena region’s rapidly growing digital services market and overcome related challenges, telecom operators must build an entirely new capabilities system, a report said.
With the market for digital services in the Mena region set to grow 12 per cent annually by 2015 telecom operators can effectively tap into this growth potential by better leveraging their competitive advantages, added the report from Booz & Company, a top management consulting firm.
Booz & Company estimates that the market for digital services in the region will reach $35 billion by 2015; and so, properly prepared Mena telecom operators will be well placed to meet this growing demand.
“The advance of digitization is already evident throughout the region,” explained Bahjat El-Darwiche, a partner with Booz & Company.
“In recent years, the fiber infrastructure that provides the backbone of digitization has been extensively deployed, particularly in the resource-rich countries of the GCC.”
Concurrently, the Mena region’s predominantly young population and the growing availability of smart devices and applications are driving customer demand for all things digital across four principal market segments:
• Consumers: Every day, there are 36,000 new Facebook subscribers in the Mena region and an ever-growing population of digital consumers that are quickly coming to expect access to a broad array of digital content and services.
• SMEs: The Mena region’s SMEs are adopting digital technologies and services to manage their primary operational challenges: anemic cash flow and the lack of in-house IT skills.
• Large enterprises: Digitization is transforming the business models of large enterprises in the Mena region. In effect, these organizations are increasingly adopting M2M-based solutions and various related industries are also turning to digital services to create competitive advantage in their markets.
• Governments: Mena governments are equally recognizing the longstanding benefits of digitization. Some governments, including those of Qatar, Saudi Arabia, and the UAE, have recently launched large-scale digitization initiatives that are focused on digitizing government operations, extending government services over the Internet, and digitizing public services, such as health, utilities, and transportation.
The right to play
With conventional voice and data revenues stagnating, telecom operators are seeking new growth opportunities and digital services are an obvious solution – especially given the new market’s close positioning to voice and data services and the already high penetration levels of mobile and fixed broadband service in the region.
“There are six adjacent service segments that Mena telecom operators can build digital portfolios around: M2M, applications and content, solutions development, cloud computing, systems integration, and managed services,” said Louay Abou Chanab, a Principal with Booz & Company.
“These services can be marketed as horizontal platforms that cut across customer segments and/or various industries, or they can be marketed as bundles of services that address specific customer segments and/or industry verticals.”
Although the market for digital services in the Mena region is highly attractive, telecom operators will still have to face myriad challenges.
“They need to develop skills and business models to take advantage of these adjacent digital services opportunities. That also demands that they gain familiarity with the digitization delivery chain,” said Jad Hajj, principal with Booz & Company.
“As they enter digital services, these telecom operators will face competition from hardware and software vendors, IT service providers, and Internet players. Finally, they need to engage their business partners collaboratively in new ways that are different to existing contractual relationships.”
A new capabilities system
Mena telecom operators looking to penetrate the digital marketplace need to determine a value proposition that differentiates them from other players. In developed markets, telecom operators that expanded into digital services have typically followed one of two distinctive value propositions: they either become technology enablers or ecosystem enablers.
“Whether a telecom operator chooses one or the other, it will need specific capabilities in order to win in the marketplace. These capabilities – composed of skills, knowledge, behaviors, processes, structures, and technology – will have to be aligned to create a competitive advantage,” said Chanab.
“In the digital services market, there are four areas in which differentiating capabilities are commonly located: innovation, solutions delivery, platforms management, and commercialization expertise. When built in a robust and complementary fashion, they provide the foundations for a telecom operator’s success in the digital space.”
“With the markets for core voice and data services reaching saturation, Mena telecom operators need a new growth platform, and the digital services market offers an attractive opportunity. Tomorrow’s leading telecom operators will be those that begin pursuing growth potential in the digital services market today,” said El-Darwiche.
“These operators will ensure a prosperous future by identifying and developing the capability systems within the four areas described – as this will allow them to successfully differentiate themselves in the market segments and geographies in which they choose to play. These are the telecom operators that will earn the right to win in the Mena region’s fast-emerging digital services marketplace,” he concluded. – TradeArabia News Service