With telecoms service providers looking for growth in enterprise revenues from the small and medium-sized business (SMB) market, the combination of intense competition, the long-term impact of the 2007/08 financial crisis, and the Ukraine war are set to squeeze market opportunities in the immediate future, says GlobalData, a leading data and analytics company.
Until recently, businesses of all sizes have benefited from various types of government COVID-19 pandemic support and ultra-low interest rates. However, the sudden and substantial rise in interest rates and increases in basic costs of fuel and energy have driven costs up and negatively impacted consumer demand.
The upshot of this is that the SMB market is being hit hard, especially amongst smaller “mom and pop” and family businesses. Costs have been rising and small enterprises are tending to cut costs.
Robert Pritchard, Principal Analyst in Enterprise Technology and Services at GlobalData, observes: “With SMBs accounting for 90% of businesses and over 50% of employment worldwide, they are a natural target for telecoms service providers to look to for growth. As a historic driver of growth both through new business ‘births’ and an increasing reliance on communications services, most telcos have intensified their efforts to win SMB business and drive revenue growth.”
The 2007/08 global financial crisis resulted in ultra-low interest rates, effectively making money “free” alongside government bailouts. The COVID-19 pandemic drove the creation of new small businesses and “side hustles” as people learned new ways of working and re-evaluated their careers.
The Ukraine war marked a tipping point as costs rose and central banks ramped up interest rates, causing a double whammy for small businesses just embarking on their journey, and “zombie” businesses (those that were just making ends meet due to low interest rates and government support). This has led to a reduction in the birth of startups and an increase in business failures.
Pritchard concludes: “With most telecoms services providers looking for growth in the increasingly competitive SMB market, it is more important than ever for them to define who their target customers are, understand their needs, and articulate what their USP as a service provider is – this could be based on product offerings, sector expertise, price, value-added services, optimized channels, or partnerships.
“At the same time, they need to optimize operations to make use of digital transformation opportunities such as automation, AI, process and people rationalization, and exploitation of digital channels. There is still a vast SMB opportunity that will continue to drive growth in future, but there will be bumps in the road ahead.”