Technology not business convergence

March 28th, 2014 by · Leave a Comment

This article was authored by Jouko Ahvenainen, and was originally posted on telecomasia.net.

IT and telecom convergence was a hot topic at MWC this year. At the same time it is nothing new as discussion topic. It was discussed already 15 years ago, when Intellectual Networks (IN) came to telecom networks. IN never amounted to real convergence. Since then we have got packet-switching, and now Software-Defined Networking (SDN) and Network Functions Virtualization (NFV) are coming. But is this just a technical convergence, will IT and telecom businesses also be independent in the future?

It is not only the packet, IP and software networks that are coming to telecom, but at the same time telcos would like to offer traditional IT services, like hosting and cloud services. Google has started to offer fast internet connections. Google and Apple sell most apps to mobile devices.

We have at least three kind of players in this convergence field now: 1) telcos that have a long history in building infrastructure and ‘carrier grade’ services, 2) IT companies that offer IT devices and services like hosting and outsourcing for corporations, and 3) newcomers like new cloud services (Amazon and many new companies), internet, mobile and content providers like Google, Apple and cable companies. We see all of them apply similar technology today.

It is still hard to see a real convergence from a business point of view. Telcos have struggled to win new business areas and most revenue comes from very basic communication services. IT companies can manage corporate networks, but they haven’t really been able to expand business e.g. to consumer or mobile communication services. And it looks like ‘new areas’, like cloud and app offerings have been won by new companies in the field.

It is always hard for large companies with a long history and strong core business to expand into new areas, and especially if it should offer solutions that could compete with their existing business. This seems to be case for telecom and IT services . We also have fundamental limits in the telecom business, like radio frequencies, expensive nationwide cable networks and the existing consumer customer base.

IT and telecom convergence looks today more technology than business oriented. As a customer we still see clear differences between different service providers and have quite a clear idea from whom we buy different services. Telcos and IT companies are often very technology oriented, and this is one reason why companies like Google, Apple and Amazon have been able to win new emerging business areas. To see more real convergence from a business point of view, those companies must rethink these services more from a business than technology point of view. Until that happens, this convergence is mainly a discussion topic for engineers at telecom and IT conferences.

Jouko Ahvenainen is serial-entrepreneur and co-founder of Grow VC Group, a new funding solution. In the 1990s Jouko worked for Nokia in Europe and Asia, and then lead the 3G practice at Capgemini globally. The last 12 years Jouko has been an entrepreneur and investor.

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