In 2022, we entered yet another period of change with inflation and energy costs hitting record highs and the continued effects of the pandemic triggering shifts in digital transformation and working practices industry-wide. As we say goodbye to 2022 and look forward to the New Year, below are my predictions of the key trends that will take shape in 2023.
1. In 2023, CSPs will have to step up and play a bigger role in sustainability
The growing climate crisis coupled with the dramatic increase in energy costs means sustainability will become a matter of urgency for CSPs and their customers in 2023. From using renewable energy and more sustainable data centers to cloudifying their networks, CSPs have taken many steps this year to reduce their emissions. In 2023, we will see them continue to focus on becoming more sustainable, but most importantly, taking things a step further by helping their SMB and Enterprise customers become “greener” and more energy-efficient businesses. We will see them collaborate with partners to co-create and launch sustainable offerings and integrate them into their marketplaces. Sustainability is not just an internal initiative focused on making networks and data centers more energy efficient, it’s also about helping customers and ecosystems to become more sustainable and ensuring that the services they consume are better for the environment. Achieving this will be a real differentiator for CSPs next year.
2. CSPs will be responsible for ensuring SMB business resilience amid the economic crisis
Over the next year, half of SMBs will increase their ICT spend by 6% [Beyond Now research]. SMBs are accelerating their adoption of technology, despite the economic downturn. This is because they make the direct link between technology and improving business resilience. With inflation rising and energy costs spiralling, it will be the digital SMBs that weather the storm. In 2023, CSPs will have to play an important role in helping SMBs to adopt technology faster. SMBs are the bedrock of society and CSPs are perfectly placed to help them realise their ambitions and achieve their business priorities through technology. SMBs’ technology needs will place great importance on CSPs orchestrating partner ecosystems to build technology solutions and take them to market through digital marketplaces. This means developing multiple solutions that address vertical industry requirements and doing so at scale. SMBs will also look to CSPs to provide flexibility in their pricing models and creativity in payment terms to help them navigate the economic climate.
3. PE investment in the telecoms sector will increase
Over the past four years, CSPs have merged or sold their network assets to help address the issue of a lack of differentiation and counteract the gradual decline of their stock market valuations. In 2021 alone, the total value of private investments in the industry reached US$104 billion.
But the debt problem is still very real. Earlier this month Vodafone announced it will sell up to half of its 81.7% stake in towerco Vantage Towers while Telefónica is considering selling its stake in UK towers firm Cornerstone. As those CSPs look for a solution, it will not only open the door for more PE firms to play an increasingly important role in the industry in 2023 and grow their investment but also for more alternative players backed by PE firms to take bigger shares from traditional CSPs. Being owned by a PE firm however has implications. Their mentality and the pressure to make money and deliver a substantial return on investment in a relatively short time means CSPs will have to finally get real about diversification and rethink their business model, step up to a new role and prioritize growth in B2B. Innovation will also be key. We’ll see CSPs embrace international partnerships and collaborate with members of the ecosystem to co-create and exchange solutions.
4. Dilution of R&D resources sees CSPs turn to partners to develop B2B solutions
CSPs’ R&D spend remained comparatively low in 2022. This is an issue for CSPs as their businesses are indistinguishable from one another, competing on price and selling ‘bits and bytes’ with a focus on the B2C sector. While some CSPs plan to hire thousands of software engineers to address the ICT demands of the B2B sector, their analytics, AI and cloud platforms increasingly come from the likes of AWS, Google and Microsoft. CSPs suffer from incredible inertia, so to overcome a lack of innovation and lacklustre R&D spend, CSPs will turn to partnerships in 2023. Collaboration, co-creation and co-innovation will drive change. CSPs will not only partner with Hyperscalers in 2023 but they will also need to take the meaning of collaboration with a partner ecosystem more seriously. We’ll see this lead to increased partnerships between CSPs, with both tapping into each other’s pools of innovation and R&D investments, while also collaborating with smaller, more agile, specialist technology players. The aim of this model is to broaden CSPs’ capabilities to co-create technology solutions and win B2B revenues on a global scale. CSPs will look for ways to create platforms that will help them orchestrate and automate the co-creation and the exchange of solutions and offerings.
5. In 2023, who will claim the 6G throne?
CSPs are still very focused on 5G ROI as they accelerate plans to address B2B growth through solutions marketplaces and partner ecosystems. In 2023 CSPs will define 5G use cases in multiple industries but will have to move away from experimentations with limited customers in niche markets to achieve the scale needed to monetize 5G at scale. In 2023, CSPs will finally take a real stand on how they work with partners and develop solutions around the business needs of enterprises and SMBs. But with every passing year comes a new technological horizon to chase. And CSPs will be on their marks as the 6G race heats up.
There is major potential here as the high bandwidth and low latency of 6G can help speed up system responses, enabling faster transactions and improved experiences that could be vital in near real-time applications. Breaking vendor lock-in and the demand for more openness amongst CSPs also naturally paves the way for 6G. Europe and the European telcos are trying to position themselves at the 6G forefront, but will they see success? This will depend upon whether Europe is ready for the rapid innovation that the US and Asia are famous for. The Japanese and UK governments recently agreed to share information and facilitate joint efforts between industry and academia in both countries to develop future communications technologies such as 6G. It will be fascinating to see how that pans out and who in 2023 will be claiming the 6G throne.