The wholesale carrier industry is, well, challenging. That’s the one-word summary of this year’s Confidence, Innovation and Leadership (CIL) report from Capacity. This is the fifth annual report we’ve produced. The 2017 report, like all our previous reports, is based on a survey of senior executives in the wholesale carrier industry, on the promise of anonymity. That guarantee allows them to be candid in their assessment of the industry.
Five senior executives discussed the findings of the report in a panel session at the Capacity Europe conference in London. It’s one of those who provided the quote at the bottom of page 77, the one that starts “Most executives will say they are innovators …”. Our survey shows that the industry has identified a number of opportunities for growth.
Cloud was hailed as a growth opportunity by 63% of our respondents, up from 53% last year. The internet of things (IoT) and security were both seen as sources of growth for the industry.
Voice is going down. That’s no secret and this year’s CIL recognises it, with 52% of respondents from the voice market either not confident or not at all confident about their sector. In a different section of the survey, exactly the same percentage expects voice revenue to fall, compared with 40% in 2016. Last year 44% still thought voice revenue would rise; this year it was down to 40%. On the data side, no surprise, confidence is much higher, though 18% of this sector of the industry still expect revenues to fall – a rise from 7% last year. Price compression and over-the-top providers are the two biggest threats.
Questions on innovation provided some surprising results. A surprising 81% think that innovation can be achieved without spending money, yet budgetary constraints are the single biggest obstacle to innovation, the same people told us. Meanwhile our C-level respondents recognise the two biggest game changers facing the industry: IoT and software-defined networks.
Overall confidence
General confidence across the entire wholesale industry has remained flat compared with 2016, but those lacking in confidence were much more noticeable.
The number of respondents who were very confident remained at 26%, after an 8% fall in 2016, while the number who said they were confident dropped to half overall.
The not-at-all confident hit the highest amount since 2013, while not confident respondents were at an all-time high, showing a fall in overall confidence in the industry connected to falling revenues and greater demands on connectivity.
Attitudes to innovation
The number of companies that consider themselves pioneers, in terms of its attitude to innovation has almost doubled over the last 12 months. Interestingly, the number of companies that would describe themselves as a strong innovator has fallen by 15%, likely owing to the fact that more of the same group from last year now consider themselves as pioneers. The number of followers fell by 5%, the number of ‘could do more’ increased by 10% and those who identify as having no innovation culture remained at 2%.
Most important drivers of innovation
Partnerships emerged as having the biggest growth in the area of; drivers of innovation. Up by an impressive 17% from the previous year, it goes to the show the importance these interdependencies have on growth and technological evolution. Research and development only rose by 1%, while acquisitions fell by 2%, showing the preference for organics growth and less expensive means.
Leadership style
Diplomacy is out in 2017 and vision and entrepreneurship is back. Last year 40% of leaders saw themselves as experienced guides, the biggest category, after two years when the top category was entrepreneur or creative visionary.
This year entrepreneurship and vision led the vote, with a whopping 56% of our respondents identifying this as their leadership style.
Only 23% saw themselves as experienced guides in 2017, and those who saw themselves in the ambassador/diplomat category fell from 34% in 2016 – the second biggest category last year – to a trivial 7%.
In 2016 we suggested that industry leaders were more cautious than in the past. Now, with more than half espousing vision and entrepreneurship, perhaps we’re in for an exciting year.
Key issues with international business
Pricing and regulation are at the top of the industry’s agenda in 2017, but recruitment has become easier. However, worries about political or civil unrest have increased.
Last year transit pricing was identified by 45% of our respondents as a key concern; this year it has gone up to 56%. Similarly 48% said regulatory risk was an issue in 2016 – people could choose more than one topic – and in 2017 this has been identified by 54%.
For more than half the top concern in 2016 was recruiting local talent. Now that’s dropped to just 37%; still a concern, but only three out of five.
Perhaps an unstable or uncomfortable political climate in parts of Europe, the US, the Middle East and east Asia has contributed to an increasing concern about political or civil unrest: identified as an issue by 27%, sharply up from last year’s 16%.
An increased tax burden is less of a worry this year. It was second from the bottom of the list last year, above civil unrest, with 21% concerned about it; this year just 17% – about one in six respondents – think it an issue.
Priorities over the next three years
Reshaping the business model has topped the list in this section for three years. In 2015 more than two-thirds of respondents – actually 69% – identified this as a priority. Last year it was still top, but with 57%.
However, in previous years we’ve asked executives to identify more than one priority, so total scores added up to more than 100% – in fact 249% and 262% respectively.
This year we asked people to select just one priority, so the scores add up to 100%. And this year reshaping the business model is top again, picked by 37%.
This is perhaps more representative of real priorities. Infrastructure is number two at 28%, and next-generation technology at 14% – though who’d build out infrastructure with last-generation technology?
Revenues by region
We went back to a former methodology this year when asking where respondents earned their revenue. Until 2015 we allowed people to make multiple choices for the regions in which they operate, but last year we limited CIL respondents to just one choice.
So it’s hard to compare 2017 with 2016. However, looking back at 2015, it’s clear that Africa and the Asia-Pacific are both more important to wholesale carriers, while North America, South America, Europe and the Middle East are less important than two years ago.
This is giving a wider global picture to the CIL report – and shows that, yes, as many people are observing, Africa is becoming increasingly important to this sector, as is the Asia-Pacific.
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