Telecom vertical acquisition and approach for enterprise architecture
Authors: Marie Michelle Strah- Senior Principal-Enterprise Applications; Vishwanath N Taware- Senior Principal-Enterprise Applications
Portfolio diversification, creation of new revenue streams and business model transformation are driving vertical acquisitions.
In the previous topic, we addressed how Infosys with its robust portfolio management approach can accelerate and add value to horizontal mergers and acquisitions (M&A) in the telecommunications industry. We defined horizontal integrations as those arriving from mergers within the telco space for network expansions or strategic service consolidation.
In this post, we will dive more deeply into recent trends in vertical M&A by the US telcos. These are significantly different as they are truly transformative. They collapse industry verticals, and introduce new business capabilities. While a main business driver may be increasing market share and customer retention, they are also essentially creating new markets, digital products, and entering new competitive landscapes.
Some recent examples of vertical integrations include:
- Comcast and NBC Universal - integrating telco and media and entertainment industries enabling end to end content lifecycle management from content creation through content distribution and generating new revenue channels in advertising sales.
- AT&T and DIRECTV - integrating traditional telco and satellite provider enabling content distribution across multiple channels to end consumer increasing revenue and margins from new service bundles.
Key business drivers for these vertical acquisitions include portfolio diversification, creation of new revenue streams in saturated markets, and business model transformation to address new competitors in the media and entertainment space such as Facebook and Netflix. Companies are not only looking to increase market share, they are also interested to create new markets through globalization and digital transformation to address fundamental changes in viewing habits and traditional advertising sales revenue.
These M&A and integration projects are typically businesses led to maximize core business functions as well as develop realistic future state plans leveraging innovative technologies to transform and create new digital markets and audiences. As a result, traditional enterprise architecture approaches for portfolio integration may not address these unique needs. While Infosys recommends leveraging best practices of portfolio management, we differentiate for these clients by adopting a capability driven, vanguard enterprise architecture approach.
Since companies in this model are essentially mixing apples and oranges across industry verticals, Infosys developed and adapted a different approach that brings both business and information capabilities to the fore.
- Business capability matrices are critical in identifying future state roadmaps as well as identifying current state gaps that may not be apparent to transformation teams.
- Information capability matrices are essential to create roadmaps for enterprise data and metadata governance and key to monetization of content through advertising sales. In addition, effective data governance can significantly reduce costly data integration efforts and provide key foundations for cloud and infrastructure consolidation and transformation efforts that may result.
- Furthermore, capability based business and information architectures are key to effective cybersecurity and risk management for the target state enterprise and planning future state architectures.
- Finally, vertical acquisitions are excellent opportunities to adopt bimodal enterprise architectures that address systems of record (core business operations and capabilities) and systems of engagement (customer facing, media, and content) to appropriately phase and manage integration activities.
Adopting capability based enterprise architectures will enable renewal of IT architectures and reduction of architectural and technical debt in these value-driven acquisitions. Transforming to digital, cloud, data source name (DSN) / network functions virtualization (NFV) and IoT in the wireless industry alone brings different paradigms to existing complexities in systems architecture. Media acquisitions with digital-driven platforms and architectures bring additional pressure to the telecommunications industry dealing with significant changes in network, billing, and cloud architectures.
In our experience, vertical integrations succeed when adopting multiple and parallel work streams that create both top- down and bottom-up roadmaps to address different revenue and business cycles of different entities across industry verticals. Having core teams to address systems of record (reduce technical and architectural debt) and systems of engagement (innovate and introduce new capabilities) can also accelerate the pace of integration and ensure focus on innovation and business goals.
We will close with some additional best practices capability-driven enterprise architecture for vertical acquisitions in the telecommunications industry:
- Align service asset with business architecture and business operation, and create shared services with consistency at the core and agility at the edge
- Enhance unified purchase and service path by decomposing monolithic legacy core into smaller high-impact capabilities to deliver better digital experience
- API first, interoperable, and standardized Integration using hybrid approach of micro services for catalog, order entry, and service oriented architecture (SOA) based architecture for order management and service fulfilment
- Infrastructure independent business applications and enablement of partner; app developer collaboration such as DevOps and resource optimization across centralized and business led IT functions
- Data driven architecture for customer, product / service allows more changes via configuration and reduced time to market (data-as-a-service)
In our next and final post in this series, we will look specifically at the transformations impacting the media and entertainment vertical not only in light of vertical acquisitions but also addressing emerging markets, technologies, and competitors.