Industry Spotlight: Accenture’s Andrew Walker on the State of Telecoms

For today’s interview, we have a return visit from Accenture’s Andrew Walker whom we last talked to just about two years ago.  Andrew’s role has expanded from a focus on North America to where he now leads Accenture’s Global Communications & Media consulting division.  Andrew has conversations with players from across the sector regularly, developing strategies for business transformation in the age of cloud infrastructure.  That puts him in a good position to see things from an outside perspective.

TR: What does the telecommunications marketplace look like today from your perspective?  What is the overall state of telecoms today?

AW: Challenged. The days of opening stores and adding subscribers who just wander in and want a cell phone subscription are obviously over. 5G has been really expensive to roll out without a lot of pricing upside on behalf of the carrier, and their input costs are also rising. That puts telcos in a bit of a margin squeeze. So the natural question becomes: what are the new sources of revenue? How can they expand? Where can they bring different products to offer sources of value to customers and move out of the utility game? We see there being kind of three trends.  The first is around the SMB, which tends to be an underserved segment. We have done surveys of SMBs, and many of them say that they don’t get the level of technology support they need. For example, only 25% get technical support on service/product installation and only 36% get help resolving technical issues. So, I think quite a few telcos are looking at that space. 

The second is the enterprise segment, which is a little bit of a tale of two cities. If you are exposed to the enterprise segment as a legacy provider, the tide is going out. But at the same time, enterprises are reconsidering their networks, and we are seeing 5G in the network space happening.  There are a lot of different attempts and partnerships with the hyperscalers in that space. And third is around the consumer. Beyond connectivity, there are things like owning the home: the router and the platform into the home, video, security, and even, health platforms and areas like that.  We have been advising and supporting telcos as they go in that direction.

TR: Let’s start with the SMBs.  What do they need in today’s marketplace, and how can telcos support them?

AW: First of all, it’s very segment-specific.  Whenever I’m talking with clients who are looking to enter the SMB space, I have to ask them which one they are building for.  The needs of restaurants, store owners, doctors and dentists’ office, and others are quite different. But broadly, what you find is that small businesses lack IT skills and are generally frustrated with technology. The trick for the telco is to think about the things they need. They need the applications to do things, from accounting to taxes to reservations to storage of data that is compliant with regulations.  Right now, what they tend to have is a hodgepodge of different apps and a lot of frustration.  A telco could they bring an offer to a medical office to provide connectivity, TVs in the waiting room, a HIPAA-certified backup system and via a Microsoft partnership a scheduling system.  They don’t have to invent everything, they can become a channel for a package of software that makes it easy for the SMB to use. But then the danger area is that they don’t want to become the help desk.  I have heard stories from telcos who have launched such things only to get out because of the expense of answering vast amounts of really basic questions. The challenge, I think, is to bundle things in a way that can be self-service or self-served by AI.

TR: Are you suggesting that AI can help large companies stay focused by providing areas of specific expertise so that they don’t have to develop and manage a pool of human expertise to roll out such a product?  Is AI ready to do that?

AW: I think if you’re going to start to serve small businesses, you need to think about doing it differently. I think it’s probably a mix of AI solving some of the issues but also probably a lot of self-help videos.  If you look at a router from some of the telecoms, one has to go to the telecoms landing page to figure out exactly how to set it up … and the process and settings are often super complex.  Comparatively, looking at another router, there are no instructions at all.  But there’s a whole bunch of videos that different people have posted on how to do it.  It’s crowdsourced, which does not come naturally to the telco.  I think like anything, it’s going to take a little while and learnings to figure out what works and what doesn’t. But everyone’s pointed at this space, right, how to get the model right to serve the space. I don’t think anyone’s there yet.

TR: What about the enterprise space?  The last time we talked it was all about managing the transition to the cloud.  Where are we now?

AW: That is still happening, but I don’t think it’s happening at the same pace. There’s a more considerate approach to the cloud now than there was two or three years ago. Two or three years ago, if a CIO talked about moving to the cloud, the board would just say, “Great.” And if you weren’t saying that, the board would say, “How come you’re not doing this?” But now the conversations are about should we have gone all in, or should we divide things between multiple clouds.  Should we retain some parts of IT internally?  It’s a deliberate and more analytic approach, which in a funny way may create more opportunity for telcos. If an enterprise moves 100% of its IT to the cloud, then all the telco is needed for is transport between the office and the data center.  However, I think the days of a corporation having a phone on every desk and paying the telcos for voice are probably over. That was a huge source of revenue and profit.

TR: What has led to this more deliberate approach by enterprises?

AW: I think it’s a more informed consumer and there’s less pressure to go do something immediately. We’ve come out of COVID, so people are returning to the office or working hybrid.  When everyone was working from home, the deals that were coming from the cloud providers were almost too good to be true in some cases. If you don’t have people in the office that can manage the apps anyway, of course, you’ll move all your IT to the cloud. Anytime you swing a pendulum really rapidly in one direction, I think it’s natural for it to come back, and I think it has. The growth rate on cloud services is still pretty high of course, but the graph is evening out more, as you’d expect.

TR: Has some of that caution resulted from the experience of moving too fast and getting burned in some cases?

AW: Without question. We have plenty of conversations, particularly with CFOs who say that the business case they were promised didn’t work out.  Moving your IT to the cloud doesn’t itself actually give you new revenue. You actually have to change how you’re going to innovate. You’ve got to bring new products and services to market that are compelling. Moving to the cloud and having more upgraded systems processes, etc., may enable you to develop those faster and better. You’re not going to have a legacy stack that’s impeding you to the same degree.  But just because you’ve got better IT doesn’t make you generate more revenue.

TR: How has the relationship between telcos and hyperscaler/cloud providers in this segment evolved as a result?  Are they direct competitors, enemies, partners, or some combination?

AW: I don’t know if it’s more of a partnership or if it’s frenemies getting together, but it’s rapidly evolving. All of our communications clients acknowledge that the hyperscalers are competitors. Two years ago sometimes people looked at me like I was crazy when I said that.  Those guys are spending $100 billion a year collectively in capex on both data centers and the connectivity between them and have built huge global networks including undersea fiber.  There’s now a recognition that these are partnerships that must be dealt with deliberately, and that communications providers need to do more than just sell connectivity into them. They have to provide additional value-added services beyond that.

TR: Have perceptions also shifted on the hyperscaler side?

AW: Yes.  They grew super-fast and generated a lot of revenue. But their ability to support all of that and to deliver all of the promises has been a bit challenged.   One of the big reasons is that the cloud is a fantastic tool – but the clients need to change their ways of working to truly leverage it.  In addition, the complexity that exists in many organizations has impeded the pace of technological change.

TR: You now handle global markets rather than just North America.  How different has it been?

AW: It is very different actually. There are definitely cultural differences. The US carriers tend to be very confident in their path. They know where they’re going and they know it is in the right direction. The Europeans tend to be extremely inquisitive.  They want to know what is happening over here or over there. They’re sponges for learning as much as they can. The Asian carriers seem really happy to reconnect and to hear what’s happening elsewhere in the world because they were on lockdown so much longer. Their agenda right now is simply to reconnect.

TR: The third trend you mentioned was about the consumer and the home.  We are certainly seeing lots of FTTH investments, but what opportunities do you see beyond the connectivity?

AW: If you were to go back five or six years, telcos weren’t sure they wanted to engage in the home.  It didn’t seem like a good place to play.  But I think telcos have turned around.  But now you see some reasonably good home products from the telcos that have proved to be competitive.  And I think they now see that there’s a play here. Have they all figured it out? No, but they are experimenting and trying different offers. We really look at it as green shoots. You can’t look at any telco and say more than 10% of their revenue is coming from these new things. But you can say that they’re spending a lot of time and energy on innovation there. 

TR: I personally have never been interested in layering things on my home internet.  Do you think there’s a lot of room to grow in terms of getting consumers excited about such things?

AW: You may not be the target. But I think about my mom – will my mom buy it?  If there’s an easy-to-use video package that comes from the telco, will she use that? If there’s a home security package that comes from the telco, will she use that? If there’s a health monitoring package, will she use that? If you could make it easy, delightful, competitive, etc., will she sign up to the 10, 15, or 20 bucks a month for the additional service? I think that she will.

TR: When we began this conversation, you described the overall environment as challenged in the wake of 5G investments.  How do you think the industry is responding to the challenge?  Are they responding aggressively or are they pulling in their horns?

AW: I think that 5G network CAPEX will be the last thing cut. They’ll cut dividends before they cut that because not investing in your network puts you in a downward spiral. I see responses on two fronts. The first track is a continued focus on digitization and AI. I see AI started to flow into core operations like ordering and provisioning as well as a lot more AI and network monitoring.  The second track is around structural changes. All the European telcos now have spun off their towers, or they are in the process of doing that. I think you’re going to see increasing splits on the NetCo front, where you get private equity to invest in that business. There’s still a lot of money floating around in the system, and the private equity guys are looking for places to get predictable returns.

TR: What are you focusing on right now?  Where are you spending your time the most?

AW: Personally, I’m a strategist. I spend my days helping companies figure out what the game plan is.  Where do they want to be and what does the strategy look like to get there? How do they set themselves up for comparative advantage in five years? Beyond that, it’s about leading our business.  How does Accenture position itself so we’re differentiated from our competitive set.

TR: How are you differentiating yourselves?      

AW: Our main points of differentiation are largely asset-based.  We have gotten to a scale where we’ve got a lot of people comms and media globally. What we want to have are anchor assets. For example, we’ve got a network deployment tool that we built, and we can bring that tool to clients. We can then hook into our client’s data feeds and all the rest and help them accelerate how they deploy fiber.  We have sets of assets and tools around B/OSS for those transformations as well. We have an advanced media advertising platform and a bunch of media clients and telco clients that have purchased this software.

TR: Thank you for talking with Telecom Ramblings!

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Categories: Industry Spotlight