Telcos struggle to balance SME needs with cost efficiency

SME spending on connectivity increases 8% annually.

Small- and medium-sized businesses (SMEs) represent 30% of global enterprise spending on connectivity and information and communications technology (ICT), with their spending in this category growing at around 8% annually, according to Bain analysis of IDC data.

“The key challenge that telcos face with serving SME businesses is they find it tricky to crack the operating model,” explained Glyn Truscott, Practice Director at Bain & Company. He highlighted the dilemma telcos encounter when deciding whether to treat SMEs like large enterprises or individual consumers. “And of course, the answer is neither,” he added.

Truscott pointed out that telcos often fall into one of two traps: providing bespoke services similar to those offered to large enterprises, which results in high costs, or treating SMEs like consumers, which can lead to dissatisfaction. This misalignment is evident in customer loyalty metrics. 

He said that SMEs frequently find themselves stuck in the middle, with services that either overshoot or undershoot their needs, compounded by a service model that disrupts their economics.

“Generative AI can help telcos address this stuck-in-the-middle problem,” he said. AI has the potential to provide a more customised service by enhancing the channel experience while also reducing costs. A key example of this is through improved segmentation. “AI can analyse vast streams of unstructured data to understand the individual, small and medium-sized businesses and classify them in more actionable and nuanced ways for the sales representative.”

Once these SMEs are properly segmented, sales and marketing teams can leverage AI to offer products and services that are more aligned with the specific needs of each target customer. Truscott noted that this approach has already shown tangible benefits. “In a recent survey conducted by Bain, we also found that an average of 28% time savings for sales and marketing representatives through the use of AI,” he added.

However, Truscott also warned that implementing an AI strategy is not without its challenges. Many telcos tend to focus heavily on the technical aspects, such as hardware, while neglecting the human side of the equation. “It’s important to do both,” Truscott advised. He emphasised the importance of customer data security, particularly as telcos manage legacy systems. “It is important that telcos have systems in place to maximise usage of the data without putting data security at risk.”