Resource Regions: Central and Eastern Europe

Next week I am attending the Smart City Expo World Congress in Barcelona. I’ve have been an attendee, exhibitor and speaker at this annual gathering for many years now, and it’s great to see that in the past couple of years there has been a growing focus on inclusion.

Gone are the days when speaking about bright and shiny new tech toys was enough. Cities are eager to understand how to become truly people centric, including for people with disabilities. On the inclusion front, one topic that I’d like to hear more about at the Expo, in 2022 and beyond, is how to make cities autism friendly.

A Global Phenomenon

According to the World Health Organization, one in every 100 children has autism spectrum disorder (ASD). The US Center for Disease Control estimates it is one in every 44 in the US. If we consider a conservative estimate of one in every 100, then of the 4 billion people worldwide that live in urban areas, 40 million would have ASD. UN projections indicate that we’ll have 7 billion urban dwellers by 2050, meaning 70 million with ASD, assuming the prevalence of ASD does not change.

Autism is a challenging neurodevelopmental disorder. It’s a broad spectrum that includes people with cognitive, speech and motion disabilities, people with milder challenges but that still have a hard time speaking and socialising, and people with high-functioning autism (such as Asperger’s Syndrome), who can be like the genius “good doctor” in the TV series of the same name, but with the crying, screaming and lashing out when overwhelmed by stress, shiny lights, loud noise or unexpected events — stress that can be caused by hypersensitivity to noise, light, smell, touch and an inability to comprehend social interactions. Coping with ASD in a hyper stimulating environment like a city is like trying to share a file between a Mac and a PC in 1985. I know this because I have a beautiful eight-year-old son who has ASD.

Making the Urban Space and the Community Liveable

Making cities liveable for the millions of people that have ASD is a global inclusion imperative. Cities such as Aberdeen, Edinburgh, Liverpool and Glasgow in the UK; Phoenix, Mesa and Austin in the US; Prato in Italy; and tiny villages such as Clonakilty, in Ireland, are exploring how they can reimagine urban spaces and community services to become more autism friendly.

When it comes to urban spaces — both indoor, such as shops, theatres, cinemas, restaurants, museums, public transport, and outdoors, such as streets and parks — unpredictable noises, lights, smells and queues may cause sensory distress to people with autism. Adjusting ventilation, acoustics, heating, lighting, creating quiet spaces to recalibrate after a stressful moment, deploying visual signage that combines words with images, making available sensory guides and social stories to reduce the unexpected and making available small kits with “stim” toys can go a long way to improve liveability for people with autism.

When it comes to the community, lack of awareness about autism can lead to judgements. Autistic people talking to themselves in a library, for instance, can get unfriendly looks. As a result, people with autism and their families tend to isolate from social life.

It’s essential to educate people working in shops, restaurants, cinemas, museums, libraries, schools and healthcare facilities. Business owners need to understand how they can leverage the great skills that many autistic people can bring to the workplace, such as declarative memory.

Government institutions have a role to play to provide coordinated support across family allowance programmes, mental health services, job training and placement, and schools, without requiring people with autism and their families to explain their condition and needs at every point of interaction with the public administration.

How Technology Can Help

Technology is not a silver bullet. Cities have had enough smart techno solutionism. Autism is the least suitable area for cookie-cutter approaches because every person with autism is at a different place on the “spectrum”, with their own special characteristics and needs. But technology can help.

When it comes to urban spaces, using location-based intelligence, digital twins and other tools can help map areas of the city that are the least liveable for people with autism and plan alternative designs. Apps can be used to offer people autism-friendly sensory and navigation maps.

When it comes to the community, online training can help increase awareness. Apps can help communicate with people with autism who are not verbal.

Online services can be used to pre-book fast-tracking entry at certain facilities to avoid the stress of queueing. And public administrations across the city ecosystem should scale trusted data sharing to do a better job of coordinating public services that support people with autism and their families.

I look forward to hearing and learning more about autism-friendly cities at the Smart City Expo and beyond. My son and the tens of millions of people with autism deserve to be included.

Retail has undergone a huge transformation in the past few years. It’s also still under pressure from external forces and changing buyer behaviour. With buyers changing how they shop and why they shop, retailers need to ensure that their brand purpose aligns with their customers and enhances their internal operations. At the recent IDC Retail Summit, IDC analysts and industry leaders got together to discuss how retailers can operate in a purpose-led world.

Watch IDC’s 2022 Retail Summit on demand here.

The Need to Bridge the Gap Between Online and Offline Retail Experience

The pandemic has forced many changes in retail and now, with offline beginning to expand again, retailers need to bridge the gap between expectations created by online experiences.

Customers are used to a certain experience online, and this can cause friction between their online experience and their experience in brick-and-mortar stores. Technology can help bridge this gap, bringing aspects of the online experience such as personalisation, rewards and speed into the offline experience.

A huge part of bridging this gap is identity management. Identity management isn’t just about security. As digital shopping experiences pick up, retailers can gather more and more data on buyer behaviour. Customers and the way they buy are changing quickly. Understanding who your customers are and how they are buying is important to ensure your company can adapt to a changing buyer.

Digital Transformation Needs to be Practical

Digital transformation is a key part of retailers’ development, and is key to bridging the gap between offline and online experiences and communicating and demonstrating brand purpose. But with all change, it must be effective. Technology that is implemented must be useable and easy to adopt, for employees and customers. Incremental changes that bring value without too much disruption are ideal.

Technology can be a bridge between stores, HQ and employees. Implementing technology as part of digital transformation can help break silos in retail organisations and drive innovation and collaboration by streamlining processes. It can empower teams in stores by giving them information and connecting them to the wider team. It can provide HQ with real-time store data and ensure that teams that work in all parts of the retailer work together effectively and efficiently. Collaboration and communication are vital. When introducing new programmes, tech or functionality, being able to communicate why is important across the organisation. Retailers’ key personas and employees need to understand business priorities but also feel that changes are there to help them and build towards achieving their goals and brand purpose.

Brand Purpose Impacts Everything from Buying Decisions to Employee Productivity

Purpose is becoming increasingly important to brands, but especially those in the retail sector. Customers are becoming more conscious of the social, ethical and environmental impact of the products they buy, and purpose is now part of many customers’ buying decisions.

Customers have expectations for a brand or company experience, not just for the retailer itself but for the whole supply chain. While some of those expectations might not be realistic, retailers have to ensure that their brand purpose is as much a part of their messaging as product information.

Brand purpose is also important for employees. A clear brand purpose that aligns with the products sold is effective in both recruitment and in creating a strong company culture. A strong company culture impacts productivity and improves the customer experience. A company purpose that reflects the core values of your staff and products is now crucial.

Purpose connects value for retail optimisation. It defines the what, the why and the how of a retailer’s business, and it is one of the most influential connectors for retail proceedings and a powerful facilitator of operation and process optimisation.

Retailers are operating in a shifting environment. Purpose is key to ensuring they continue to align with their customers. It also promotes internal coordination and the drive towards an aligned and connected organisation that delivers value. It enhances performance and creates value. This is why, of all the topics discussed at IDC’s 2022 Retail Summit, purpose stood out.

For more information, please watch IDC’s 2022 Retail Summit on demand here. For more insights and key takeaways from the summit from IDC Retail Insights analysts, see Retail Operations in a Purpose-Led World: Key Insights from the IDC European Retail Executive Digital Summit 2022.

For more on our coverage of the retail sector, please visit our website.

Agile development empowers teams with many benefits but also presents challenges around managing and measuring its effectiveness. The way to resolve these is Function Point Analysis.

From business impediment to business enabler, IT development has come a long way since Agile has become the favored practice. Now empowered with speed and responsiveness, organizations have left the days of slow, cumbersome, inflexible, and unresponsive practices behind in the dust. Instead they’re able to support business needs and experience better alignment with changing business environments better than ever before.

It’s easy to understand why Agile is experiencing a strong increase in adoption; as companies become more nimble to embrace the pressures they’re facing in digital transformation, IT development is able to respond aggressively to evolving competitors and exploit markets more easily. But these benefits rival the frustrations on the management side of Agile teams. The nature of Agile makes it so that IT has lost visibility and scope control while the business has lost predictability. While Agile might make teams fast and responsive, businesses don’t know when projects will be delivered, and quality of delivery is often poor.

This is due to story points. Story points is a relative and subjective effort measurement that allows teams to estimate how much work of a certain item is required compared to a certain reference story with a fixed number of points. Story points can be used as an assessment method within a team. But how do these points happen? In an Agile Scrum environment, productivity is often associated with delivered story points, often expressed in Velocity as an estimation unit. The problem is that story points are not standardized, and productivity based on story points means nothing outside of a team itself. Even within a team, story point deflation is always lurking.

Is it even possible to objectively measure productivity? This blog will show that using a ratio scale is the way to objectively measure productivity as proven by IDC Metri’s years of helping clients turn around this common challenge. Management information can be established through a ‘unit of measurement’, bringing answers to long-sought after questions such as which teams are performing well, which teams are not performing so well and when is which functionality ready at what cost?

If you want to use productivity to compare teams, departments, organizations and/or suppliers, or the market, it’s a necessity to use a standard measure of output. Even when this data is about trends on your teams, this insight creates a unified and common view.

For years IDC Metri has been offering function points to create this factual view to clients. Function point analysis was developed in the 1970s to determine the productivity of development teams when it was impossible to do this by counting lines of code. By making function point analysis independent of the technical implementation (programming language, architecture, etc.) and the development method (Waterfall, Agile, etc.), it’s also relevant today and fits into the solution that Agile teams and management need to resolve the challenges that story points create. In short function points are the de-facto standard to express the amount of functionality in a standardized size unit.

Several manual standards are available and one international ISO standard is available for automated function point analysis: ‘Automated Function Points (AFP)’. IDC Metri prefers to use automated measuring of functional size but also employs certified analysts who can manually measure when automated measuring is not possible for whatever reason.

To measure the size of the output of a team, it is also important to not only look at the added functionality but also at the changed and removed functionality. IDC Metri uses automated measuring of ‘Enhancement Function Points (EFP)’ to measure how much functionality has been added, changed and/or removed during a sprint, release or project. This gives the ‘Project Size’ in EFP, a standardized method to measure the output of a sprint or release.

While Agile is hard to measure and manage for full value, the IDC Metri proven approach of using function points transforms a team-driven, fast-moving, rapid iteration process that evaluates progress on qualitative measures into something that can be quantified and predicted.

Governments have never been in a storm like the one we’re in today, and national and local administrations need to reinvent themselves as a new era is about to start.

In these unprecedented times, European governments are aiming to improve their ability to withstand long-term volatility and uncertainty, particularly through digital trust and operational resilience programmes.

In doing so, new business models will emerge to fulfil current and future challenges:

• Allocating the Recovery and Resilience Funds to the right priorities and purposes
• Selecting the right technologies to achieve short-term efficiency and long-term resilience
• Improving the citizen and civil servant experience by making the most of technology but also implementing deep cultural and organisational transformation to enable them to reimagine service delivery

IDC conducted an in-depth survey, including 230 senior executives and directors, to investigate the strategic business priorities and key action plans for European governments. The survey looked at the technology solutions that governments are investing in to execute their strategy and action plans, and the challenges they face in their strategic technology innovation investments.

European Government Business Transformation and Technology Priorities

According to the 230 European government decision makers that IDC interviewed:

• Their main purpose is to improve citizen experience and quality of life. By keeping this in mind, they might also facilitate other short-term initiatives. This goal must become a state-of-mind for every civil servant and government decision maker.
• The main barriers to innovation are not only budget (with RFFs impacted by fast-growing inflation) but also citizen trust and outdated IT. Again, both technical and cultural changes should occur simultaneously to regain trust.
• Redesigning services and business processes around the needs of citizens are key steps to achieve resilience. Technology is a critical part of this transformation, but it should go hand in hand with innovative approaches and a greater focus on change. European governments believe that governance, risk and compliance and data management tools are critical to execute digital trust programmes. Digital sovereignty is frequently discussed by European policymakers, but our survey shows that only civil servants in some countries, such as France and Germany, are already prioritising it to increase digital trust.
• Emerging technologies such as 5G, AR/VR and edge computing are key areas of investment to imagine new ways of delivering public services.
• European governments that want to master a citizen-centric approach are adjusting their KPIs accordingly and aggregating data to build a holistic view of citizen needs and implement the once-only principle.
• Long-term challenges — especially sustainability — can’t be fought alone. Governments’ ability to work closely with an ecosystem, through data sharing and massive investments in data capabilities, will be key.

What Are the Key Components of a Disruptive Approach?

Check out the following IDC European government “PRIME” survey studies (subscription required) to learn more about how European governments are aligning technology investment to societal Purposes, strengthening Resilience, Imagining new service delivery models, Mastering citizen and employee centricity, and opening up to the Ecosystem:

• European Governments’ Purpose Programs: The Role of Technology in Improving Citizen Experience and Setting Up New KPIs
• European Government Resilience Programs: Digital Trust, Operational Redesign, and IT Architecture Transformation Must Converge to Achieve Resilience
• European Government Technology Innovation Strategies: Reimagining Public Sector Services and Operations
• What European Governments Need to Master Their Future: Citizen Experience, Employee Experience, and Environmental Sustainability Goals and Capabilities for the Future
• European Government Ecosystem Strategies: Accelerating Digital Transformation Through Ecosystem Collaboration

From Digital Sovereignty to Data Spaces

Digital and data have transformed enterprises and changed consumer experiences and society. According to the European Political Strategy Centre, “In the 21st century, those who control digital technologies are increasingly able to influence economic, societal and political outcomes. In this context, the growing ‘geopoliticisation’ of technology implies a paradigm change for the notion of strategic autonomy … the EU’s ability to defend and promote its interests — as well as its credibility as a strong foreign policy actor — is ever more a function of its cyber resilience and technology leadership.”

The European Union has responded to the challenge with the ambitious Digital Decade plan to “pursue a human-centric, sustainable vision for digital society” and increase the EU’s “strategic autonomy in tech and develop new rules and technologies to protect citizens from counterfeit products, cybertheft and disinformation.” One of the eight objectives of the 2030 Policy Programme Path to the Digital Decade is to “ensure digital sovereignty notably by a secure and accessible digital infrastructure capable of processing vast volumes of data that enables other technological developments, supporting the competitiveness of the Union’s industry.”

The programme also proposes to establish multicountry projects to develop “European common data infrastructure and services”. In combination with regulations such as GDPR, the upcoming Digital Operational Resilience Act and Data Act, the Digital Decade programmes and projects aim to put Europe at the forefront of reshaping the global data economy along two closely intertwined axes: digital sovereignty and data spaces.

How Are Digital Sovereignty and Data Spaces Paving the Way for the Data Economy in Europe and Beyond?

IDC defines digital sovereignty as the capacity for self-determination by nations, companies and individuals. Digital sovereignty is more than just data sovereignty or data localisation. It entails cloud platforms, workload software, datacentre assets, communications infrastructure, processes, and operations used to control and manage digital infrastructure, services, and access and identity.

It underpins a digital-first Europe where governments, enterprises and individuals have genuine choice to control their data and digital destinies. But digital sovereignty alone is not enough. It’s a means to achieve outcomes, such as realising the value of data and data spaces through interoperable, innovative, easy to operate and control, secure, energy efficient, regulatory compliant and resilient next-generation infrastructure and platforms.

The European Union’s European Strategy for Data sets a bold vision “to create a single European data space — a genuine single market for data, open to data from across the world — where personal as well as non-personal data, including sensitive business data, is secure and businesses also have easy access to an almost infinite amount of high-quality industrial data, boosting growth and creating value, while minimising the human carbon and environmental footprint.” That bold vision is far from accomplished. IDC’s research shows that a unified data space for Europe, let alone the globe, will not exist in the near future. There are too many digital sovereignty, governance, semantic and technical interoperability challenges to overcome. Nonetheless Europe is setting a direction of travel that other regions and countries are watching.

Private and public sector entities understand that data sharing is a critical success factor to accelerate their success in the data-driven economy. And they understand that to realise the benefits, data sharing needs to happen not only within each organisation, but also with external partners, including beyond one’s industry.

In fact, our research on the future of industry ecosystems found that over 90% of public and private sector organisations globally share data with external partners, although around 60% do it only in a limited fashion or when strictly necessary. Europe’s strategic data spaces vision is the next stage of evolution, where data sharing can happen at a greater scale and beyond industry boundaries, thanks to:

1. Federated architectures that dynamically match data demand and supply
2. Governance policies and processes where matching of demand and supply takes place thanks to trusted rules and intermediaries that enable secure, transparent and fair participation of both data users and data providers
3. The ability to provide and use data to and from the common space, either for non-profit/altruistic purposes or for-profit purposes, or both

What Can European Public Sector Leaders do to Benefit from the Digital Sovereignty-Data Spaces Twin Transition?

As for the rest of the economy, public sector organisations are trying to figure out how to leverage data to improve policymaking, service delivery and operational efficiency. Beyond EU-wide initiatives, public sector leaders across the region have a role to play to:

• Incentivise the private sector to help achieve both for profit and non-profit outcomes, while protecting personal data, intellectual property and trade secrets
• Work with the tech industry to promote the use of semantic and technical interoperability standards
• Collaborate with the tech industry and academia to foster R&D to accelerate adoption of technologies, such as secure hardware architectures, probabilistic computing and homomorphic encryption, which in the future will enable trusted data sharing even on non-trusted systems
• Invest in digital sovereign infrastructures and services, for the data spaces where digital self-determination can accelerate value realisation
• Initiate data spaces that have immediate societal benefits, such as digital citizen wallets that ensure citizens have to provide data to public administration once only, and contribute critical data that they own, to data spaces that encompass a public-private ecosystems, such as health, mobility and the built environment

Join IDC experts and public sector leaders from around Europe at the IDC Government Summit to learn more about digital sovereignty and data spaces, and to share your experiences.

How companies are partnering with a service for true end-to-end process support that brings full cloud cost savings

48% of enterprises plan to keep spending steadily on cloud, according to IDC research, making cloud costs a focus for IT leaders. And, the majority of organizations believe they’re overspending on cloud.

Many organizations are aware that they need to improve their cloud spending habits, but the process that it takes to get there often seems exorbitant, causing them to instead disregard the changes needed to turn their cloud spending around. This blog intends to show that the time and resources involved in executing shouldn’t deter companies from making the necessary changes.

From insights to process, these two companies found that hiring a partner to guide them through the work needed to transform their cloud costs, in ways that were custom to their needs, made all the difference in ensuring that they not only followed through on executing a plan of action but giving them a successful outcome.

An international telecommunications company has migrated its entire infrastructure to the public cloud (AWS and Azure) and uses a broker towards AWS and Microsoft, performing contract management and basic security services. For both providers, a System Integrator (SI) has been contracted to provide managed services (IM and TAM) on top of the cloud providers. 

During the migration, cloud costs rose above the available budgets that had been set, based on advice by the SI’s. During migration, the SI’s focused on the project deadlines rather than optimizing and saving on what was already running in the cloud. The telecommunications company turned to IDC Metri for independent advice on cloud cost savings.

IDC Metri has helped to improve tooling, and to define processes and ways of working, for this telecommunications company to analyze and manage cloud costs themselves. IT leaders can learn from their experience that recommendations from tools, including those from cloud providers, aren’t always realistic. They tend to be opportunistic, like suggesting that all instances should be reserved for three years, and that this will save over 50% of costs for those instances. That is the same as expecting your IT landscape to remain the same within that time – this is simply not true.

PostNL has been one of the first listed companies in the Netherlands to go ‘all in’ to the public cloud, starting in 2012. Nowadays, PostNL is in the second stage transforming all of its bespoke applications from IaaS to PaaS solutions, like BI/Analytics platforms, container platforms and serverless computing. When compared to IaaS, price models for PaaS are more usage based than capacity based. Saving costs on usage-based priced services means optimizing the software, rather than the underlying infrastructure.

Unlike the anonymous international telecommunications company in our example, PostNL doesn’t have SI’s in-between them and the cloud providers that offer managed services. The application teams, mainly DevOps based, are managing the cloud infrastructure themselves. Also here, cloud costs had an upward trend, from which PostNL has asked IDC Metri to bend it.

IDC Metri has made recommendations, which were much less supported by tools, since these focus on IaaS, rather than PaaS. With the top 10 teams concerning costs, alignment has been done on savings, which has led to about 8% savings. A must know here is that large scale optimizations, such as applying savings plans, had already been done by PostNL itself. The savings IDC Metri helped to achieve were more on architecture and licenses.

In conclusion, using tools that generate recommendations is only the starting point for achieving savings. First of all, the recommendations need to be taken with a grain of salt since they tend to be rather opportunistic. Furthermore, a list of recommendations is one thing, to actually achieve savings, hereby overcoming indifference or even resistance to save costs, is another thing. IDC Metri does support the full process, from analyzing costs through setting up processes to actually achieving savings.

Can’t wait until the next blog is published to learn more about cutting cloud costs? Contact us to schedule a conversation.

We recently had our Advisory Board meeting, comprised of senior executives from European manufacturing organisations, with an objective to understand the latest topics or challenges they are dealing with. The two main challenges that were on their lists were energy prices and cybersecurity, how these two converge, and the role that technology can play to overcome the obstacles created by these threats.

Exploding Energy Prices

Unsurprisingly, the first challenge is exploding energy prices and how most manufacturers are struggling to cope with the ongoing situation here in Europe. They are in firefighting mode and find it extremely challenging to make profits from their operations.

Many companies have had to completely stop production for a few weeks, and this will continue even more in the coming months as prices rise exponentially. Some European manufacturers that have recently announced shutdowns are Arcelor Mittal (Germany), Aperam (Belgium), and CF Industries (United Kingdom).

Manufacturers tend to get energy price visibility only a week ahead and are therefore unable to plan for longer. Unless these costs can be passed on to customers, they have an impact on everything else and are pushing manufacturers beyond limits.

The cost uncertainty significantly complicates the S&OP process. For instance, frozen food requires storage in cold conditions and soaring energy prices lead to planning constraints. The bigger challenge is that this doesn’t seem to be going to stabilise anytime soon.

Are such high prices now the new normal? It is getting complex, since absorbing the costs or keeping high safety stock is making it difficult for manufacturers to even stay afloat.

Cybersecurity

There has been a shift from traditional closed systems to interconnected and open ones as part of digital transformation in manufacturing. This has made the industrial internet environment extremely complex, leaving the internet with many weaknesses and attracting more and more criminal attacks.

These cyberattacks have risen massively in the past six months. The manufacturing industry is only now waking up to the need for and importance of cyber security.

Most manufacturing organisations are increasing their investments in cybersecurity, but this is also leading to limitations in their operational technology (OT). They have mentioned how some of these cybersecurity measures had to be disabled because they impacted the performance of their equipment.

The desired output wasn’t being achieved, which required decision-making between a secure environment and the performance of the equipment.

When cyberattacks are successfully made on the systems or equipment that produce gas, it leads to a production shutdown causing an energy war. Unfortunately, this is the current reality that manufacturers are dealing with.

Producers acknowledge supply chain struggles caused by the pandemic, but these attacks on energy-producing equipment are hitting them at their core. The situation is making them rethink their IT capabilities — what to continue to do in-house vs. what to outsource/partner with and with whom.

The most important thing in such times is to be resilient, but the question is how? How to have safe energy, smarter supply chains, optimised and secure systems, visibility into what is happening and what needs to be done?

This is where technology can play a key role and manufacturers are looking for technology partners, not just to help them solve these challenges but also to build long-term resilience, especially around energy and materials. These challenges also provide an opportunity to think differently, innovate, and explore different business models, and only those manufacturers that can sail through this challenging phase will stay relevant in the market.

IDC the European Manufacturing Summit

Join us on November 15 at IDC’s European Manufacturing Digital Summit as it will be a perfect opportunity for manufacturing executives to discuss further on these challenges, share lessons learned, and network with the peer group.

Our advisory board members are keen to hear from technology providers during our summit about how they are helping solve these challenges. A summary of previous discussions with our Advisory Board can be found here. The summit also provides an opportunity for manufacturing organisations and technology providers to discuss how they can thrive in an increasingly digital and sustainable but also uncertain, volatile, and complex economy.

IT executives and senior decision makers can register here for the summit.

For more information about the summit, please contact Stefanie Naujoks or Gunjan Bassi, or head over to https://www.idc.com/eu

Connectivity is a defining feature of the modern digital economy. The increasing ubiquity of mobile and fixed connectivity has enabled new digital economic models and these had already become part of people’s daily lives before the COVID-19 pandemic made digital interactions unavoidable.

Ubiquity and regular use have turned connectivity into a vital commodity which, paradoxically, telcos find difficult to grow revenues from. This commoditisation has steadily shrunk the value of telco shares over the past five years.

This is driving an industrywide imperative to change as Europe’s multibillion-dollar telecoms market seeks to embrace new technologies (cloud, AI, 5G), new ways of working (agile and DevOps) and new revenue opportunities (B2B and B2B2C). These trends play out against a backdrop of war in Ukraine, high inflation, a race for talent and an increasing need to show a strong commitment to climate change and social issues.

Technology, Services and Customers

Telcos are eager to reinvent themselves as technology companies that can continue to play a vital role in business and consumer communications. This transformation will need to be deep and will need to be made across dimensions such as technology, services and customers.

Technology

• Between 2021 and 2026 the amount of data created, captured, replicated or consumed in Europe will increase by over 126%, according to IDC’s latest Global Datasphere forecast. Coupled with regulatory obligations, this piles the pressure on European telcos to continue investing heavily in network capacity upgrades throughout the decade to maintain the performance of their core products.
• This includes the rollout of 5G access networks and increasing their fibre broadband footprints.
• Investing in capacity alone will only enable telcos to stand still. To improve the management, creation and experience of their services they must also invest in their core network architecture and supporting IT systems.
• In IDC’s 2022 digital transformation survey of European telcos, 58% cited BSS investment as the most impactful transformation investment to grow revenues. Other investments include modernising systems to be cloud native, converging core networks to support fixed and mobile services, and developing OSS/BSS platforms that support deeper network monetisation and better customer outcomes.

Services

• We expect FTTP to account for the majority of broadband lines by 2024 and to represent 58% of total lines by the end of 2025. On the mobile side, European operators are currently rolling out coverage of 5G, which will also require heavy investment.
• We expect 5G to account for the majority of mobile network connections by 2025, reaching 57% of all mobile connections by the end of that year.
• As telcos’ core networks and IT systems evolve, operators are also keen to explore new business models that expand their role in consumer and business value chains beyond connectivity. Many of these new business models, from private networks to 5G gaming bundles to network as a service, will require partner-driven ecosystems to supercharge and build extensive value multipliers.
• As such, 40% of large European operators identified integrating partner services into their ecosystem as a crucial impact of an API-driven strategy in IDC’s European Telco Digital Transformation Survey 2022. For these investments to pay off, telcos need to ensure that the APIs they provide are simple enough for developer partners to use and are supported across heterogenous network infrastructures.

Customers

• While the bulk of telco revenues has traditionally come from consumer services, the commoditisation of connectivity has made it harder to grow revenues by just selling minutes, texts and data volumes. In 5G, operators are looking to grow their place in the enterprise value chain.
• This means chasing opportunities such as the 83% of European enterprises that use or plan to use IoT technologies in their operations within the next two years. This shift in customer target cannot be successful without fundamental shifts in how telcos operate and strong insights from trusted partners that understand the B2B and B2B2C customer bases operators intend to create value for.
• As operators look to acquire new segments, they are also fighting across the board to retain the customers they do have. Over 95% of European telcos are investing in AI/ML, and their main use case is improving customer insight.
• Building deeper customer insights has a dual purpose — keeping customers happier for longer and helping telcos to identify, develop and productise the new value they offer. Those telcos with the deepest insights will be the most successful in the long term.

What’s Next for European Telcos

Success across all aspects of technology, services and customers requires careful balancing of many transformation initiatives. The competition for the financial and talent investment to succeed across the breadth of initiatives is further complicated by the macroeconomic and geopolitical headwinds blowing through Europe.

The underlying message is that Europe’s telcos can no longer afford to stand still. They must invest and improve across all aspects of their network, operations and organisation if they are to revitalise their space in the broader technology landscape.

IDC’s Telco Digital Summit, on November 22, will look at these themes in more detail. The summit will feature Europe’s leading telco analysts and senior telco executives, and will include keynotes from industry leaders to help attendees chart a path through the storms in the European telco market.