Everything-as-a-Service (XaaS) Telco Opportunity Expected to Hit $400 Billion By 2025
Over the last decade, the telecommunications industry has undergone tremendous changes. At the top of mind for most readers will be the increase in demand for data as one of the trends shaping the industry and will hopefully continue doing so going forward. The growth has, however, been a challenge to network service providers (NSP) since it has led to a decline in profits from voice, short message service (SMS) and pay TV among others. The decline in profits from these is attributable to the fact that customers are shifting to internet service providers.
To keep up with the changes and survive in today’s competitive telecommunications industry, network providers are responding by restructuring what they offer to customers. A clear example is how in the recent past the operators have started applying digital technologies. In addition, they are also looking for ways of improving their capital effectiveness.
Even though the changes are great, they do not reflect the latest trends. Experts argue that any realignment and changes should help tap the opportunities that exist in everything-as-a-service (XaaS). But what is XaaS? In a nutshell, Xaas refers to the delivery of any product or simply anything as a service. It includes products, tools as well as technologies that network service providers deliver to users as service over a network or the internet. To sum it up, anything delivered via cloud architecture as an on-demand service, qualifies to be among XaaS Services. At the moment, there are lots of opportunities that the XaaS model offers to network service providers.
The Growing XaaS Market and Why It Is Hotly Contested
Just to paint a picture of what awaits service providers if they can seize opportunities as early as now, XaaS comprises of vital products often referred to as core-of-the-core. Examples of these products are the SD-WAN and UCaaS. SD-WAN (Software-Defined Wide Area Networks) and UCaaS (Unified Communications-as-a-service) make it easy for service providers to run networking hardware on commercially available internet connections at low cost. It also provides a couple of other offerings that span infrastructure hosting, mobile devices, security, and applications performance management among others.
While, indeed, great and viable opportunities exist with XaaS much of it is a bit hard to take it up as it is already being utilized by industry giants namely Amazon, Google, and Facebook Platforms. Interestingly, these giants are not only focusing on having control of the public could, but they are also keen to tap other opportunities by diversifying into other related businesses that are not so much ventured into by players in the telecommunications industry. But even with all that, there are many opportunities that other companies in the telecommunications industry can seize. For instance, it is estimated that by 2025, opportunities worth $400 billion will exist in the XaaS market.
In the years to come, XaaS is expected to widen its scope to enterprise communications service market. In fact, it is expected that it will register a growth of more than 600% from its
estimated value of $60 billion in the year 2016. The largest share of this is expected to be taken by two segments that have been growing at a tremendously faster pace than the others. These segments are the internet of things (IoT) and infrastructure specifically, infrastructure-as-a-service (IaaS).
Why Network Service Providers Should Embrace XaaS
While for now, it seems to be an option that network service providers can take or leave, there is no doubt that in the future, XaaS will be inevitable. Just like other digital technologies, XaaS is a technology whose time in the telecom industry has come. In fact, it is just a matter of time before every network service provider is forced to take it up or risk missing out. There is all evidence that, indeed, there exists a great opportunity for NSPs to grow with XaaS.
Although questions about the cost and security have been raised by many, there’s a report
from chief information officers (CIOs) and chief technology and information officers (CTIOs) of leading companies that shows that there is nothing to worry about it. As a matter of fact, a wide range of players in the telecom industry prefers it over the traditional models.
Furthermore, there is also evidence that in a few years from now, the connectivity and
collaboration segments will enjoy the highest growth potential when it comes to services.
Here’s How Telcos Can Differentiate to Tap Xaas Opportunities
To seize XaaS opportunities, telecommunication companies will still need to keep their
networks. Although at some point some will create wholly new businesses, players can
differentiate themselves by tapping on large B2B segments to offer customers what they want. The most important thing is to be as flexible as much as possible to reap from the opportunities that come with XaaS while keeping any traditional models that can still operate well even with the new models.
Just to illustrate how business models with XaaS will be, banks, for example, will create new
business models or revitalize their current service offerings with new features. New features
will, for instance, include things like an alert or supply of information when a customer
approaches an ATM machine to transact. With XaaS contextual information such as usage
patterns, preceding location that the customer was when they transacted last and other vital
information not provided with traditional models. With such vital information, the bank can
establish whether the customer approaching the ATM is the real card owner or someone else is using it for fraudulent activities.
In short, XaaS-enabled networks will improve security and businesses that adopt it will enjoy an opportunity to develop new products or business models. That’s why there is no doubt that it comes with a host of opportunities that can be tapped and monetized as well. Therefore, those that will be quick to see the opportunities will enjoy new sources of revenue while those that will stick to their old models risk losing out. It is, however, expected that most businesses will heavily invest in XaaS in the years to come.
Steps to Take When Adopting XaaS
Make a choice of where to venture: the truth about XaaS is that you cannot do everything but if you carefully identify categories to play with, you increase the chances of success. For instance, you can decide to go for a broad category like UcaaS then major on specific solutions. With that, success is no doubt going to be possible provided you remain up to date.
Open New Capabilities: Once you are there, it would be great to evolve network capabilities by transitioning to software-defined networks. However, this should be done in a way that is secure so as to keep the integrity of your network. Once that is assured, then carefully open new capabilities to third parties.
Build While Also Buying: Apart from working on what you have specialized in, it is also great to buy what other specialists have built in other segments of XaaS. Most importantly, note that it is sometimes cost-effective to buy rather than to build it yourself. It, therefore, makes sense to have this knowledge at hand, and make such decisions when it is appropriate.
Explore and Learn with Other Players in the Industry: Embracing new technologies as a team together with other partners in the industry is far much better than doing it alone. In fact, it is not only great to do so but it also helps when it comes to keeping up with the evolving market.
In a nutshell, there are lots of opportunities that telecom companies can seize from XaaS. Some NSPs are already making great strides with it, and it is just a matter of time before all other players are forced to make an entry too. However, while it is at the moment not at the
expected adoption level, the telecom industry is beginning to realize its potential. Indeed, there exist great opportunities with XaaS.