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gregacosta
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The Internet has come a long way since its conception more than 20 years ago. From the Connectivity[1] to the Network Economy[2] phase, each stage builds on the progress of the previous one to create more value for businesses, governments and the people. Needless to say, service providers, the builders of the Internet, have greatly benefited from its meteoric rise.

 

Today, the Internet is already moving off its third phase - the Immersive Experiences phase[3] – and entering the Digitization phase where we are aiming to connect 99% of objects that were previously unconnected. This is what we mean by the Internet of Things (IoT).

 

Digitization is creating a tremendous amount of value and opportunities

Although digitization and IoT are still in their infancy, the immense potential they bring is undeniable. In ASEAN, the digital economy is already generating $150 billion worth of revenue per year, with connectivity and online services constituting more than 70% of this staggering amount[4].

 

The economic value of digitization is expected to grow as mobile connectivity and smartphone adoption continues to rise in the region. In Indonesia, there will be more than 550 million networked devices in 2020 and 77% of them will be mobile-connected. In the same vein, smartphone numbers will more than double, reaching 241 million at the start of the next decade[5]. In Thailand, mobile subscribers are expected to exceed 170 million in 2016 and mobile penetration is predicted to grow by three to four times by 2020[6].

 

Service providers at risk of being relegated

Although digitization brings about unprecedented opportunities across all sectors, mounting Internet traffic - brought about by more users, more devices, more connections, more video, and faster speeds - is also creating colossal challenges for the service provider industry. In ASEAN, online services have generated close to five times the value of connectivity over the past five years[7]. Over-the-top (OTT) players are getting the lion’s share of this value while using the service providers’ network as dumb pipes. As a result, many service providers are experiencing unparalleled double-digit growth in terms of network traffic but just single-digit revenue growth.

 

In addition, sprawling infrastructure, as well as increasingly diverse network requirements from a myriad of services and applications, are significantly raising operational complexity. This drastically undermines service providers’ ability to reduce costs and become more agile when bringing new capabilities to market.

 

Service providers’ road to relevance and success lies in the transformation

In order to stay relevant, service providers will need to transform themselves so that they are able to effectively address the aggressive Internet traffic growth, rigorous network demands and evolving customer experience in the digitization era. Simplifying their network infrastructure, and driving new business models and services are two approaches that they can explore while devising a transformation strategy.   

 

As organizations continue to deploy new digital services and IoT applications, the demand on networks not only intensifies but also diversifies. Network traffic is becoming increasingly unpredictable as applications can easily go viral within hours or die out just as fast. Networks need to be able to absorb and adapt to demands when required and shrink to conserve resources when allowed. Such agility can only be realized with virtualization which translates physical compute, storage, and network hardware into flexible virtual resources that can be used for service delivery. This allows service providers to take network functions in and out of service, and scale them up and down.

 

Beside virtualization, the orchestration is also vital to the simplification of network management. An orchestration platform that offers end-to-end automation will provide a single interface for all network devices, allowing service providers to intelligently supervise and carry out everyday management functions without manual intervention while accelerating service provisioning on a wide variety of devices. This not only ensures faster development and deployment of new revenue-generating products but also improves the quality of services and minimizes errors.

 

In order to innovate new business models and generate fresh revenue streams, it is also imperative for service providers to position themselves as a digital solution enabler. By migrating their services to the cloud and transitioning to a cloud delivery model, service providers are able to effectively and efficiently deploy and operate digital solutions on behalf of their private and public sector customers. Some digital solutions include Connected Warehouse for manufacturers, Smart Parking for governments, and Connected Homes. There is approximately $494 billion worth of value to be captured over the next ten years in this “service provider as an enabler” space[8].

 

The possibilities for service providers are just beginning. Over the next decade, there will be $2 trillion worth of digital opportunities for this sector[9] and service providers will need to transform themselves in order to capture the maximum benefit. The transformation will allow them to assert their rightful place in the digital age and continue to benefit from the Internet bonanza they have built over the decades.

 

[1] Connectivity phase is where service providers started to build the vast infrastructure upon which the Internet operates.

[2] Network Economy phase is the period of time which saw the development of ecommerce and digital business processes.

[3] Immersive Experiences phase is about digitizing interactions through social media, collaboration and ubiquitous mobility.

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