The Solution for "Telcos Can't Innovate"

Whether in the business or consumer segments, tier-one telecom providers tend to agree they must “add value” to their connectivity services (“avoid becoming a dumb pipe”) by “moving up the value chain” (“moving up the stack”). It is a fundamental strategy, for simple reasons. In the Internet era, applications and access are formally separated.

The phrase “over the top” literally refers to the way all apps and services now are delivered, no matter which entity owns the particular apps and services.

The way some of us would describe the strategy is that “you have to own at least some of the apps that flow over your pipes.” In the consumer area, that might mean video services. In the business customer segments, that might mean information technology solutions.

NTT Data, for example, has rolled up a number of IT-providing businesses, becoming a bigger system integrator and information technology consultancy. For example, NTT Data has acquired Dell Services, Keane, Carlisle and Gallagher Consulting Group, Optimal, Intelligroup, Centerstance, giving NTT Data accounts, competencies and staff able to provide IT consulting and technology implementation and support (SAP, Oracle and Salesforce implementation, among other things), on a global basis.

NTT DATA arguably is strongest in healthcare, life sciences, financial services, manufacturing, and public sector verticals.

The oft-noted observation that “telcos are not good at innovation” arguably is largely true, but also less important than we often think. So long as managements do not meddle, acquired assets and people who are free to do their jobs will work. Those assets simply must be allowed to function as they must in the spheres where they operate, even if owned by new telco entities.

In other words, Comcast’s ownership of NBCUniversal assets is not a problem so long as content units are free to produce the best content they can, within the constraints of their business models. IT consultancies in various verticals can win, so long as they are allowed to succeed.

That arguably was more a problem in past decades, when acquired assets often failed because they were essentially bent to the needs of the access or transport business units. These days, there is far-wider recognition that the access and transport business units are there to support the applications units.