TaaS Coming Your Way. The Government Says So.

During the 15 years that Voco has been working in technology enabled change, the market has seen some seismic shifts that have impacted both how enterprises consume communications capability and how the supplier community, especially the big players, organise themselves to meet and – preferably for them – make the market.

The decade from the mid-nineties saw the convergence of voice and data networks, driving pricing down and ushering in the demise of the circuit switched telephone network in favour of Internet Protocol (IP). Voice is now just another data stream. Nobody runs two separate networks for voice and data any more.

Around 2005-06 the (sometimes abused) market dominance of Telecom, long recognised by user advocacy and lobby groups, came under sustained and determined government and regulatory scrutiny, ultimately resulting in the operational separation of Telecom and a few years later the structural separation of the historical market leader. The resultant formation of Chorus and the three Local Fibre Companies under government’s Ultra Fast Broadband (UFB) initiative created an infrastructure utility layer and significantly reduced barriers to entry for a host of ‘Over the Top’ (OTT) service providers.

This should have been great news for companies, large and small, for whom communications across the supply chain is a cornerstone of their business model. However the latent potential benefits from both increased technology capability (fibre) and industry structural separation has, to date, been largely unrealised by enterprises for three main reasons:

  1. With complex core systems and legacy processes that have a high cost of change, coupled with intensifying competition, incumbent telcos have had a vested interest in maintaining the status quo (or at best, slowing the pace of change).
  2. Potentially formative standalone enterprises have adopted a generally conservative ‘wait and see’ stance through recent sourcing cycles, preferring fast-follower positioning rather than being at the van of change.
  3. A cohesive demand pool with sufficient scale and motivation to leverage the new environment and drive supply-side change has not formed up and organised.

The confluence of three factors in the past two years has changed this.

Firstly, enterprise organisations have recognised (or perhaps, more accurately, been ambushed by) the need to drive process efficiency and agility in line with customer demand, and deliberately rationalise legacy cost structures. Sourcing strategies are changing accordingly. Digital business has become a catch-cry.
Although, at the same time, telcos (which are, of course, also big enterprises,) have hit the wall and realised that they need to standardise, simplify, cut operating cost and leverage assets in the face of falling margins and ARPU as consumers embrace new digital models (Google, Amazon, Apple, etc).

Government has organised its $500m p.a. demand pool around a deliberate push to consume telecommunications capability as-a-Service and shift asset management and decision rights to service providers. This is a cross public sector programme called ‘Telecommunications as a Service’ or TaaS. It is driving the service provider market to inter-operate and commoditise. TaaS represents a circuit breaker context to exploit the motivations in supply and demand communities to drive change. And its impact is not confined to public sector enterprises because enterprise cost and agility imperatives mirror those of government.

The changes that the telco service providers need to make to their products and services to deliver them on an as-a-Service basis will take time to wash through the system, but government (through DIA & MBIE) has put a very clear stake in the ground and is committed to backing this up from GCIO/CEO/Cabinet levels. After early scepticism, the service providers have also recognised that this is an opportunity to transform the ecosystem and take cost out for both their enterprise customers and themselves. It’s not just the latest bright idea for price bashing – rather the major service providers see it as the next generational change in this fast-paced industry.

So the take out for enterprises is…?

For any enterprise with multi-year telco services supply contracts expiring between 2015 and 2018 timing is good because the supply market is already primed for change. If you can create an attractive scope for the market to pursue, and have an appetite to leverage as-a-Service models to drive efficiencies in your internal ICT operating model, then your enterprise is well positioned to adopt these new service models in a risk-managed manner as a fast follower. The cost structure gains across the supply chain look enticing.

There is still room for functional price decreases, especially for services that may have been cross- subsidising others, but we advise that focusing singularly on this traditional sourcing sweet spot will mean that the real prize will be missed.

To discuss the topic further, please get in touch with the author, Michael Foley, on 021 777 684.


Voco is now a Microsoft Gold Partner.

We did it, now how do we do it…..

Voco is introducing a free app "R U OK?" to help you look after your staff during the COVID-19 lockdown

Thanks – you're signed up. Enjoy the blog.
It's a fascinating time we live in.