Enterprise Digitization Requires More Than Just Private Networks

While the telecom industry is gearing up towards the Mobile World Congress (MWC) of 2022 in Barcelona, within enterprise implementers the initial hype around private networks is vanishing as the discussion about enterprise digitization matures. Perfect examples of this are the recent announcements of vertical-specific players like Siemens and Bosch, who both announced their enterprise digitization platforms (SCALANCE and ctrlx Automation, respectively) that bring together cellular connectivity, with other enterprise technologies, such as industrial Wi-Fi, Bluetooth, ZIGBEE, or proprietary protocols. Furthermore, enterprise implementers continue to demand specific applications to build up their business case, rather than resting their hopes on private cellular as the only available technology.

There are two important questions arising from this for the telecom industry to prevent losing out on the enterprise business opportunity, which is needed to remain profitable, as consumer average revenue per user (ARPU) continues to decline: one, what are the underlying reasons for this vanishing interest? and two, what is the industry turning towards instead of private networks?

There are a few individual reasons for why private cellular is losing interest within enterprises. Firstly, 5G is still not fit for enterprise-grade applications, as most of them require capabilities that have been standardized by the Third Generation Partnership Project (3GPP) for Release 16. Even though the release had already been frozen in July 2020, not enterprise-grade compatible devices have still emerged on the market. The effect of this unreliable communication on enterprise perception and why this hampers enterprise cellular adoption has been discussed in a range of previous ABI Research deliverables (IN-6236: What went wrong with 5G?).

Secondly, enterprise verticals and other players within the value chain realize the private cellular will always remain one of many enterprise connectivity technologies. In other words, the telecom dream of private networks replacing all existing enterprise connectivity and placing them under a single umbrella will most certainly not happen. The initial hype around private networks will therefore ease off sooner rather than later as the ecosystem begins to realize that a lot of the anticipated use-cases either are much too advanced for implementers (such as enterprises slicing their own network to cater for a range of heterogenous use cases) or can be addressed through existing technologies on a best effort basis.

It seems that the telecom industry keeps dwelling on the topic of private cellular network for enterprise verticals for lack of any appealing alternative. While this approach might have worked in the consumer domain (as consumers are ultimately reliant on any technology that Communication Service Providers (CSPs) provide), this approach is unlikely to resonate well will enterprises as they have a plethora of connectivity technologies (cellular as well as non-cellular) available to them to be used as an alternative. The telecom industry therefore is at the brink of loosing enterprise verticals if they continue resting all their hopes on private cellular networks.

To remain a relevant digitization partner for enterprise verticals, the telecom industry therefore needs to considerably broaden their focus to include adjacent connectivity technologies (such as Wi-Fi, Bluetooth, ZIGBEE) into their offerings, as well as positioning private cellular connectivity accordingly in this sphere of enterprise digitization.

To do this successfully, it is not strictly necessary for every actor to build up their own expertise in other technologies from scratch, as this would unnecessarily consume resources and therefore increase time-to-market. Instead, it underlines once more how important it is for each actor to orchestrate their partnership network in a meaningful way, which then allows them utilize partners’ domain expertise. From a go-to-market strategy point of view, this understanding also carries important implications, as it narrows down the opportunity for direct to-enterprise sales. Since enterprises ultimately are interested in full end-to-end digitization platforms rather than individual connectivity components. Any successful provider, therefore, will need to have expertise designing such platform for vertical-specific players and hyperscalers to develop applications on top. Furthermore, this new (somewhat humbler) understanding of private cellular means that suppliers need to have additional expertise in orchestrating and integrating cellular connectivity with other digitization technologies present on enterprise sites.

While ABI Research has been stressing the importance for a strong ecosystem partnership network in the past, this new understanding of private cellular exacerbates this need even further. As such, this will require telecom actors to reach out to vertical specific players (such as machine automation vendors) and strengthen their ties with System Integrators (SIs) to get their enterprise Information Communication Technology (ICT) strategy in place and thus remain relevant in the broader digitization discussion.