Five Trends, 15 Promises

The future of communication management Last issue we presented Ian and Lis Angus’ retrospective on the telecom landscape. Based on various prognostications over the years, they warned us: "Whatever your predictions about the future of business telecom, don’t be surprised if they turn out to be off the mark. Follow closely the changing pattern of new applications and suppliers. Business planning has to make allowances for the unexpected." Never ones to shy away from a crystal ball, however, our consulting editors boldly turn their attention to the future. This is Part II of the speech they made at Telemanagement Live late last year. We are currently focusing our attention on five trends that are reshaping telecommunications, and the management of enterprise telecom and networks. They are important now, and they will remain important for some time to come. 1 Everything over IP, Everything WirelessEverything about telecommunications is ultimately shaped by technology. Today, two revolutionary technologies are rapidly transforming the industry as we know it. IP has decisively beaten all competing technologies as the basis for integrated multimedia networks — and that means all networks, since IP makes it easier to build and maintain a single infrastructure than to build and maintain multiple parallel nets. That’s not just true for carriers but for enterprise networks too. Today, there is no justification for building a new network that isn’t based on IP, and very little reason to expand existing networks that are not IP-based. If your near-term network plans do not include a roadmap for conversion to IP, your network will soon be obsolete. It will perform well below optimal levels. Most seriously, it will put you at a competitive disadvantage, because your competitors are already making the change. But IP isn’t the whole story. We are also midway through a digital wireless revolution. This transformation has already begun to eliminate the wires that tether most network access devices — phones, computers, you name it. It won’t stop until almost everything that communicates does so without wires. Today’s BlackBerry warriors are just the beginning. Wireless LANs and Wi-Fi hotspots are just the beginning. It’s now practical to deploy qualitatively faster wireless services, and to make them nearly ubiquitous in cities and along major transportation corridors. There are only two remaining issues: who will deploy these technologies first, and how quickly can they do it? This twin revolution — everything over IP, everything wireless — is changing the entire multi-trillion dollar telephone industry, which was built on circuit switching and hard-wired connections. The IP-wireless wave also enables a huge range of new business-to-business and business-to-consumer applications. Many businesses will be transformed by it — whether the transformation is positive or negative will depend on how thoroughly companies embrace the change and how effectively they execute it. In telecom, strategy is important, but execution is critical. The flip side of the "Everything over IP, Everything Wireless" revolution is the continued gaps in coverage. Yes, 49% of Canadian households have high-speed Internet access, and 47% of Canadians have cellphones, but there are still large parts of the country where broadband and wireless are not available at all, and many others where coverage is limited or unreliable. What’s more, by the time these areas get DSL and digital cellular, the requirement will be for much higher speeds. The definition of broadband won’t stand still. Extending modern telecommunications to the entire country isn’t just a matter of social equity. It is vitally important for the success of any business or agency that depends on telecommunications, and for Canada’s entire economic development. As former Industry Minister David Emerson said recently, without it, "people and communities simply cannot get into the game. They’re not able to get into the economic mainstream." Without a co-ordinated national commitment it could be a long time before a full set of advanced telecom services is available to businesses and consumers everywhere in Canada. Unfortunately, expanded network coverage was dropped from the national policy agenda in recent years. We’re hearing hints that it may be back on the agenda now. The business community should welcome and promote that development. Promises: Universal access to network services and information resources, anytime, anywhere. Payoffs: Faster, smoother deployment of staff and other resources where they are needed. Seamless multimedia communication within your organization and with everyone outside it as well. Pitfalls: Despite technological change, the carriers still want to lock customers into their own bitstreams, and so are dragging their feet on portability of numbers and other resources between networks. And without strong business pressure, its very possible that there will not be a national commitment to deliver truly universal access, which will mean that many communities remain off the net. Your organization’s ability to connect to your branch offices, your suppliers, and your customers, will suffer if that happens. 2 Industry ConsolidationThe past two years have seen even further consolidation of the few remaining national carriers offering a full range of telecommunications services to the business market. Bell Canada bought Group Telecom, MTS bought Allstream and Rogers bought Call-Net, effectively eliminating the independent carrier sector, so far as business customers are concerned. Paradoxically, this process actually intensified competition for the business telecom dollar, because it has produced four well-financed and credible facilities-based carriers: Bell Canada, Telus, MTS-Allstream, and Rogers, all of whom offer service directly or indirectly in most of Canada. At least in urban areas, there is no reason for any business to complain about lack of choice today. In the near term, the only remaining wild card is Shaw, which we expect will eventually align itself with one of the big four.Promises: The ability to choose among several large, reliable service providers, anywhere in Canada. Payoffs: Integrated national communication networks for even small organizations. Lower prices generated by competition. Pitfalls: Continuing gaps in coverage. Big supplier contracts and monopoly mindsets that limit users’ creativity and flexibility. The possibility of even more consolidation, reducing our choices. 3 VoIP Boom — And BustWhile the facilities-based carrier business has consolidated, the Internet-based telephone business has exploded in 101 directions. The Voice over IP market today is remarkably similar to the early days of long distance competition. Just as in the early-1990s, every week brings another announcement of a new company with new promises, new services, and above all, lower prices. Someone once said that long distance competition produced a market in which price was determined by the stupidest competitor. Everyone undercut everyone else, until no one made a profit. Some of the pricing announcements we are seeing today indicate that history is repeating itself. Many of the new VoIP providers seem determined to win the race to the bottom — and few seem to understand that a business with no profit is never going to succeed. The situation is in many ways worse than in the ‘90s, because the barriers to entry in VoIP are so very low. Anyone who has a few thousand dollars, a little computer literacy, and a high-speed Internet connection can be a telephone company these days, offering services and features that used to require million-dollar switches. This is particularly true in the residential phone market. We’ve seen some impressive startups offering IP-based telephone services to the business market, and it’s very possible that some of them will be big winners in the coming decade. But we’ve also seen companies with less than half a dozen employees promising comprehensive outsourced business communications on a continent-wide basis. When long distance competition began in the early-‘90s, we advised businesses to take advantage of it — but to check out potential suppliers carefully, and to implement back-up services and contingency plans in case something goes wrong despite all your checking. We’re saying that again today. There are impressive and innovative new services available now, but keep your eyes open. We don’t want to be doom-sayers, but sooner or later there is going to be a big shake-out. We expect the number of IP telephony providers to continue expanding for a while, perhaps for a couple of years. But there are already too many providers with too little capital and nothing resembling realistic business plans. There will be survivors, but there will also be some very messy failures.Promises: Lower prices, innovative services. More supplier creativity driven by competition. Payoffs: Even small businesses can have the most advanced services at affordable prices. Communication without barriers. Pitfalls: The eventual shake-out will harm many businesses, especially the smaller customers who commit everything to one supplier. And the disappearance of an entire layer of innovative small providers may reduce the big carriers’ incentive to roll out new services broadly and quickly. 4 Outsourcing BoomOne of the most disturbing trends in the past 10 years has been the steady decline in the role of telecommunications management in large and medium sized organizations right across Canada. In many an organization there is now no one responsible for telecom and networking at all. In others it has become a purely technical function, staffed by people who know the technology but don’t have any role in determining how the technology can or should be used to advance their organization’s business goals. Obviously there are exceptions, but the trend is very noticeable. In our consulting practice, we constantly deal with organizations where no one is in charge of the network, and with others where the person in charge has so many other responsibilities that the network rarely gets a second thought. Closely related to that trend, as both cause and effect, is the growth of telecom and network outsourcing. Of course the term "outsourcing" isn’t fashionable right now — perhaps because most studies show that more than half of outsourcing deals fail in the first two years. So instead we hear about "hosted services" and "network management services." But the meaning is the same: every supplier promises to do it all for you. Some outsourcing projects work well. But our consulting practice deals with more failures than successes. Often the technology is managed competently, but the implementation shows little understanding of the customer’s specific business needs. The suppliers will install what you ask, but they have their own technology to sell and their own preferred models of implementation. It’s very rare to find a "hosted services" provider who develops truly customized solutions that meet the customer’s specific requirements. This is not entirely the supplier’s fault. Too many customers sign an outsource agreement, and then assume nothing more needs to be done. They don’t manage the outsourcer, and that is a huge mistake. Without constant checking and review, an outsource arrangement almost always becomes routine: the telecom system works, but it isn’t optimized. More seriously, it doesn’t evolve quickly to take advantage of new opportunities to radically improve the way you communicate, the way you do business. If you don’t manage your own network, you don’t think about your own network. By the time you realize that a network change could win you a major competitive advantage, it may already be too late. In our years in business, we’ve seen the pendulum swing back and forth repeatedly between Do It Yourself and outsourcing. We won’t be surprised to see it swing back in the next few years, but we expect the next transition to be very difficult for many organizations, because the cutbacks of the past decade have left them with little or no base of internal skills to rebuild from.Promises: Reduced costs and management complexity. Payoffs: Enterprise networks that work reliably, run by experts. Pitfalls: Cookie-cutter solutions and unexpected cost overruns. Lack of internal management resources needed to use advanced telecommunications effectively in your organization’s best interests. 5 Regulation RevisitedIf you only listened to the incumbent telephone companies, you’d think telecom remains intensively and minutely regulated. In fact, most telecommunications services in Canada are now deregulated. The only significant exceptions are the incumbent phone companies’ local dial tone and some services to competitors. From a business-customer perspective, this means we can negotiate prices and service conditions for just about any telecom service we want to buy. That can add complexity to the purchasing process, but it also adds flexibility and definitely reduces our costs. Despite its vital importance in economic and social development, telecommunications has not been an important subject in Canadian political circles for several years. None of the political parties seems to consider it a priority. In 1999, the Canadian Business Tele-communications Alliance collapsed, leaving business with no effective voice in telecommunications policy and regulation. So we’ve been greatly encouraged by the recent formation of the Coalition for Competitive Telecommunications, a business association that has been playing an active role in regulatory and policy debates. We don’t always agree with specific positions the Coalition takes, but we think it is critically important for the entire business community to be actively involved in telecom policy and regulatory debates. We have a lot at stake in getting it right.Promises: Faster product and service delivery. More innovation and more competition. Payoffs: A world-class telecom industry that consistently delivers superior service at affordable prices. Pitfalls: Deregulation that’s too fast or too slow could undermine competition on one hand, or unnecessarily hobble the incumbents on the other. A Cabinet that isn’t really interested in or knowledgeable about telecom may make decisions based on which lobbyist spends the most or is most persuasive, not on what constitutes good public policy. ConclusionThe past 10 years saw remarkable changes in telecommunications, and they also saw remarkable opportunities to create new businesses and to remake old ones. In 1995 there was no Amazon, no Google, no eBay. You couldn’t buy much of anything online. Catalogue companies still depended on regular mail. Call centres just used 800 numbers and phones. There were no contact centres using email, and no click-to-talk buttons on the Web. Telecommuting was rare because home network connections were expensive, unreliable, and slow. There was no way to track parcels in delivery vans or 18-wheelers on the road. If a car-rental customer kept the car too long, there was no way to find the vehicle. Innovations have transformed entire industries. Some sectors are being forced to change or die — travel agents, bookstores and music companies are obvious examples. Others, including banking and delivery services, have taken the lead in making universal connectivity part of their basic services. We’re going to see much more of that in the coming decade. Connectivity will be universal, very high speed, and totally mobile. Billions will be made by businesses using network technologies no one is even thinking about yet. That’s the promise. And of course there will be pitfalls, more than we can imagine today. But for many who seize the opportunities and execute effectively, there will also be big payoffs.

Five Trends, 15 Promises

News | 02/01/2006 5:00 am EST

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