Last month, pal Dean Bubley had a blog post about the rising tide of non-traditional telcos. I tend to agree with Dean (as usual), but not for all the same reasons. The reason telecom is changing is because of where the brain drain is going. In the past getting hired by AT&T, Verizon, BT, France Telecom, Bell Canada was an opportunity to have financial security, an opportunity to work with best and the brightest in the lab, develop new services and be part of the changing landscape within a global industry.
But at some point, Bell Labs became a thing of the past, the cable companies created CableLabs, third parties like Ericsson, Nokia, Alcatel all took over running parts or all of the modern day telco's wireless networks, in essence outsourcing the management and operations, which in turn drove what is called vendor lock-in. Those companies took the talent from the telcos over onto their payroll, kept the best, shed the rest. That ensured for the Communications Equipment Providers, who have now also became software providers, a steady stream of business, while the telcos moved from operators to really managers of networks, not builders and maintainers, or improvers of them. Add to that, the US operators steady moves to gut the unions by selling off assets that were heavily unionized and you have a cadre of information pipe owners, not innovators.
However the innovation wasn't coming from that sector anyway, it was coming from startups in Silicon Valley and across the USA, Israel, Asia and elsewhere. And, as a result, talent and thinking wasn't going in the direction of the telcos any longer anyway. It's also going to the likes of Amazon, Google and Facebook. It's also residing inside Microsoft and Apple. Twilio is a perfect example of the decoupled telco. Buy the parts and pieces you need, avoid the rest. Companies like Comcast and Cablevision in the USA have long been building their own networks too, looking to leap over and be unencumbered by the telcos and as they too want to be less encumbered, they will be building upon the infrastructure of the likes of Twilio and the Twilio like companies which is why Vonage bought Nexmo, as both a hedge, and as a way to sell very customized services that previously were the realm of the CEPs.
Once the largest customers of AT&T and Level3, the cable operators in the USA realized early on that their enemy was the telco and that someday, the telcos would be their competition. Just look at AT&T buying DirectTV, Verizon buying AOL, having a property to add to with Go90. This was after the cable companies rolled out VoIP using Level3, the established telco's biggest nemesis for years.
Amazon's cloud is a big part of the developer's world. And in turn, a major supplier of service to so many businesses that telecom is part of the fabric, without anyone even knowing that Amazon is likely the switching platform for the calls. Using AWS and the other Amazonian infrastructure is powering new services today, that used to be invested in by businesses at all levels. Now, a startup can run on Amazon, hook in Twilio, Nexmo or build their own features and services in on their own. As Dean wrote today, "telephony and UCaaS do start to look a bit more like today's other SaaS offers - which can be hosted in telcos' own data-centres, but are more often anchored in Microsoft's or Amazon's."
Talent rich teams is no longer the sole domain of the established. The brain drain started as innovation inside the large companies began to be outsourced along with the technology itself. So, if the reasons companies are being acquired is for technology or talent, and often both, one only has to look at the reason why. Management outsourced, gave away and shifted their focus. No longer was it the best and the brightest who shined, but who was the best corporate politician, and who gave better PowerPoint and Excel presentations.
Today, the best and brightest don't use the tools that big telco relies upon. They use others that cost less, work better and create more value more quickly. That all means, in the brave new world we're in today, that no matter how much smarts telcos embed in their networks, its the upstarts that create universal value, for all. Just watch as Google, Facebook and Microsoft's investments in underwater fiber further devalues the likes of those who own and control the current undersea cable world, as those new pipes won't be anything like the old pipes.......