MSPs Must Use Startups as an Asset for their UnTelco Strategy

For MSPs, the need to move beyond their legacy systems and thought processes is becoming a more and more common topic of discussion. As a result, many MSPs drafted new strategies centered on different facets of digital transformation. This was done, for instance, by Orange with its Essentials 2020 plan, which is focusing on Internet of Things (IoT) and new areas such as banking, and by KT Corporation, which is following a “platform” strategy across many verticals, including media, energy, and security. MSPs have also been deploying specific technologies to upgrade and improve their own internal operations, as is the case with Telefónica’s network virtualization program. MSPs have also worked to identify new verticals, such as manufacturing, mobility, and smart cities, as key areas of future growth so as to efficiently focus their resources in selected growth areas. There is no right or wrong strategy for UnTelco, but all MSPs must realize they must take action to grow past connectivity. All of the above approaches are implementation of such a strategy.

All these initiatives feed into the UnTelco paradigm. However, they are not the only solutions supporting UnTelco as many MSPs are exploring new opportunities, technologies, and businesses by tapping into the potential of startups.

MSPs address innovation in multiple ways, including using investment arms; creating sector-specific units, such as Telenor Connexion; and rebranding, as is the case with V by Vodafone for consumers. Along with these initiatives, the majority of MSPs launched startup accelerators as a way to tap into the technological and innovative opportunity presented by startups. These hubs/accelerators often have a local flavor supporting local companies within the MSP’s footprint. For instance, Telefónica Wayra has 11 hubs located in Brazil, Argentina, Colombia, Chile, Peru, Mexico, Venezuela, Spain, the United Kingdom, and Germany, all countries belonging to the MSP’s footprint. This trend is in line with the overall MSP’s business, which is heavily shaped by strong ties to local markets.

For the MSPs these investments can lead to new solutions and offerings, potentially accelerating a company that can generate synergies with its own core business or with new adjacent areas. For the startups, joining an accelerator program is a way to gain funding and expertise in areas such as business development and marketing, mentoring, office space, access to technology labs and assets, and sales channels

In terms of size, MSP activity in this field is significant. For instance, the Telefónica Open Future_ initiative, which includes programs such as Wayra, Crowdworking, and funding such as that from Telefónica Ventures, is supporting more than 1,700 startups. However, MSPs are also working with partners in what is an emerging trend of MSPs’ increased collaboration to tackle technology challenges and opportunities. For instance, the startup accelerator initiative Go Ignite was established in December 2015 by an alliance of four leading MSPs (Deutsche Telekom, Orange, Singtel, and Telefónica). Go Ignite leverages each MSP’s own startup accelerator program: hub:raum, Orange Fab, Singtel Innov8, and Telefonica Open Future_. In its latest call, the initiative endeavors to find startups working on solutions in the fields of IoT, AI, cybersecurity, 5G, customer experience enhancement, and big data analytics.

Creating startup accelerators to find, grow, and invest in young companies with promising solutions is nothing new; however, with MSPs being at a crucial stage of their digital and UnTelco journey, startup accelerators can become a new source of innovation.

So far, there are partial success stories in the market with companies that after the acceleration period are now providing services on their own. An example of this is CARTO, a location intelligence company that was part of the Telefónica Open Future_ ecosystem and that now counts on client cases including Leroy Merlin, BBVA, and the city of Medellín. Another example is provided by eParkomat, a smart parking provider that received investment from hub:raum and that launched smart city pilots in partner with T-Mobile Czech Republic—part of the Deutsche Telekom group. However, despite few success stories, the big market-changing success stories that few MSPs were looking for have not materialized yet, and startups have often been funded but not fully integrated within the MSP.

Nevertheless, there are more hidden benefits that MSPs should draw from these experiences. MSPs can benefit and learn from exposure to a different company culture that has little to no legacy and that is focused on innovation and speed. While this can be a difficult task, it can help MSPs to improve their internal company culture, shifting away from some of its more traditional aspects. MSPs can also strengthen their ties with local entrepreneurs and communities, thus solidifying the relationship of their company on the territory.

MSPs and vendors must continue to finance startups, even though their efforts have brought only mixed results so far. This is needed as startups can be an asset but also a competitive threat. Hubs and accelerator help MSPs to create a relationship with this threat and to potentially guide it toward a more beneficial relationship. The Technology, Media, and Telco (TMT) market is at a crucial stage now. IoT and digitization are shaping all vertical markets, and with 5G and other technologies having the potential to revolutionize the market, MSPs should use and direct their startup accelerator programs to develop technologies and business cases in areas such as 5G, Artificial Intelligence (AI), Augmented Reality (AR)/Virtual Reality (VR), cloud gaming, robotics, and cybersecurity. This will allow MSPs to further integrate their own Research and Development (R&D) with the complementary innovative force of the startup community. Proven use cases for 5G are still an open question that lacks a clear answer, and startups could be used for providing real applications for the technology or solutions integrating 5G with other transformative technologies.

IAs seen in smart cities, startups play a central role, with companies such as ofo (bike sharing) and Citymapper (public transit application and smart ride) shaping the market. The AI space provides another example of the potential of startups with companies such as DeepMind, which was acquired by Google and now is a central piece of the company’s AI strategy. 5G will open endless possibilities on the back of ubiquitous connectivity, data bandwidth, reliability, and latency, and this will enable innovation from all players in the market. Startups have led disruption before in the 4G area, with examples such as Airbnb, and we expect they will do the same in the 5G world. MSPs and vendors have been blindsided by startups in the 4G era, but they now have a chance to channel that disruption to drive new UnTelco revenues.

Startups are a key asset in the technology market, and MSPs are not the only companies with similar initiatives. One of many examples is Google with its own Launchpad Accelerator Program. This highlights the potential that the startup community has as an engine for growth but also the common need from all established companies to keep an eye on potentially disruptive innovation. Nokia also targeted the startup arena, and in July 2018, it launched an Open Innovation Challenge for startups with ideas in the sector of industrial automation and the industrial IoT. This is the correct approach to channel startup innovation. Nokia has increasing ambitions in the industrial vertical, and leveraging startup innovation can help the company to develop new applications to win over a very difficult market.