At the PTC Academy training event held in Bangkok Sept. 20 and 21, 2018, we spent some time looking at changes in the core business models of several parts of the communications ecosystem. And it was hard to avoid some discussion of 5G, internet of things, network virtualization and the coming era of millimeter wave use.
As always, opinions differ about the revenue and business value upside from 5G and IoT. Some believe 5G and IoT will not produce big revenue opportunities for communications service providers. Others believe 5G and IoT could do so.
Yet others, such as me, believe it is possible revenue upside might not be as big, over the the next decade, as some predict. On the other hand, 5G (and the associated other changes in core networks, bandwidth, latency, virtualization) and IoT represent the biggest opportunities for communications service providers to create big new revenue sources to offset a loss of perhaps half of present revenues.
So 5G and IoT are big gambles, but gambles that must be taken. Success is far from guaranteed. But the relentless search for big new revenue sources is imperative. Right now, 5G and IoT seem to offer the greatest upside for massive new waves of revenue growth.
One rule of thumb I use when looking at business model change is to assume that a tier-one service provider will have to replace half its current revenue with new sources every decade. And that might be a reasonable rule for suppliers of apps, platforms, devices and components as well, not just communications service providers.
Im 2012, for example, Intel earned nearly 70 percent of revenue from “PC and mobile” platforms. By 2018, PC/mobile had dropped to about half of total revenue. By 2023 or so, Intel should generate 60 percent or more of total revenue from sources other than PC/mobile.
If you hear executives talking so much about innovation and new services, that is why: companies need to replace half their revenue every decade, and do so in every decade, from now on.
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