For years, communications service providers (CSPs) have ridden the crest of the wave; business was booming, and sales were good. During the last decade, Internet usage exploded as the number of users grew from 745 million to 3,035 million. CSPs could be forgiven for forgetting what happened to many retailers when consumers switched their buying habits from brick-and-mortar establishments to online purchasing.
However, as the saying goes, all good things come to an end. CSPs are now facing increased competition and lower revenues, and they are seeking new ways to boost income and profitability.
Apart from intense competition, they are confronting other challenges such as losses due to inefficient business practices, fraud, and security breaches. These challenges threaten their profitability and indicate the need for proactive measures to stop these losses and increase operational efficiency.
Learning from the Retail Industry
In many ways, CSPs are facing what store-based retailers, also known as brick-and-mortar stores, experienced during the early days of Internet shopping; at this time, they started to feel the pinch as online retailers began to undercut their businesses.
Prior to this, retailers’ main concerns were local competition from other retailers. They didn’t grasp the significance of the threat created by emergent online retailers until they experienced reduced revenues as their customers, attracted by the lower prices such operations could offer and their ability to sell a far wider range of products than the brick-and-mortar retailers could stock, left in droves.
By this time, much of the damage had been done, and many brick-and-mortar retailers did not recover.
Impact of Market Forces on CSPs
Inevitably, the same market forces that caused the demise of well-established brick-and-mortar retailers are now hitting CSPs, and, in many ways, they are equally unprepared.
Their initial responses were to offer faster and better services, but these changes came at significant costs due to the expense of upgrading fixed line infrastructure, installing fiber cables, and purchasing hardware to increase broadband speeds and to extend their reach to wider segments of the population.
Also, in the face of competition and regulatory pressure, CSPs have tried to increase turnover by engaging in price wars, offering value-added services, and bundling products. They are also engaged in massive cost-cutting exercises to reduce fixed costs and improve profitability. Nevertheless, many CSPs are facing a difficult future.
In addition to CSPs’ efforts to boost revenue by cutting costs and improving services, several surveys showed they were losing as much as 10 percent of their gross revenue through inefficient business practices, poor business management, and fraud. This led to the introduction of sophisticated software and hardware management practices to monitor systems continuously so that they could identify and deal with losses quickly.
While these steps helped stem the flow and were largely successful, by their very nature, they are reactive in response to incidents that have already occurred. More recent incidents, such as the Home Depot data system breach in September 2014, show that the industry needs to find proactive methods of dealing with such attacks so as to prevent their occurrence and to limit their impact.
Need for Prevention
CSPs cannot afford to be reactive. They need to adopt a proactive stance by implementing business assurance practices that mitigate risks to revenue and profitability.
They have to be continually on guard to prevent malicious attacks and security breaches. To achieve these goals, they need to implement proactive business assurance systems that continually monitor system activity and that identify and close loopholes before hackers find them.