As core connectivity revenues plateau, telcos are venturing into B2B information and communications technology (ICT) services to drive growth. Success relies on balancing synergy with agility through the right operating model — integrated, independent, or leveraged — between the telco and the ICT business. By overcoming cultural inertia and capability mismatches, telcos can unlock immense value and position themselves as digital transformation partners. In this Viewpoint, we explain why this balance is key to thriving in the fast-evolving ICT landscape.
With core connectivity revenues plateauing, telcos are increasingly moving into the B2B ICT domain to find new growth avenues. To unlock the B2B ICT services opportunity, telcos must adopt operating models that balance synergy realization with the independence needed to innovate and scale, supported by agile and robust governance. An effective operating model enables telcos to recognize and act on opportunities — through forging strategic collaborations with ecosystem partners, staying closely attuned to the evolving needs of enterprise customers, or countering competitors as they build momentum and expand their footholds. The question is not just about being present in the ICT market, but whether current telco operating models are attuned to fully capturing the potential — or if the opportunity is quietly slipping away.
Telcos occupy a strategic position in the digital infrastructure ecosystem, which gives them a unique opportunity to diversify and become essential partners in the digital transformation journeys of their clients. This is particularly true in geographies where ICT supply is not yet mature. Many telcos have already begun this journey; seizing this opportunity, however, requires a fundamental transformation of their operating model, processes, and governance structures.
Arthur D. Little’s (ADL’s) extensive benchmark of over 100 diversification initiatives from telecom operators across the globe shows that a growing number of players are making bold moves into adjacent businesses (see Figure 1). Indeed, telecom operators are exploring a wide array of new areas not directly related to their connectivity solutions.
The complex digitalization demands of B2B clients, coupled with the rapid innovation and fierce competition from both established tech companies and agile start-ups, require significant shifts in telcos’ mindsets, business models, and customer engagement, as well as their capabilities, to succeed in the ICT arena. Telcos face several challenges to accessing the full potential of B2B ICT markets, primarily driven by the fundamental differences between traditional telcos and new ICT businesses.
The essence of the traditional telco business is heavily rooted in infrastructure, a product-centered culture, and the stable delivery of services, which emphasize network reliability and customer retention through service quality. In contrast, the ICT business demands a mindset oriented toward anticipating new market and technology trends, constant innovation, agility, and a customer-centric approach that prioritizes bespoke digital solutions over uniformity. Cultivating a culture of continuous learning and innovation becomes paramount to adapting to the dynamic nature of the ICT sector. Developing this culture involves enhancing internal processes to foster collaboration and innovation while retraining existing staff and bringing in new talent that possesses the requisite skills and mindset.
What we are seeing now is a shift in the telco business model — from service-based payments to value-driven partnerships that ensure customer success. For instance, pricing ICT projects might tie to the revenue increase enabled by the service, the efficiencies gained, or the cost savings delivered rather than fixed-service delivery contracts. This shift involves a deeper understanding of customer business challenges and industry specificities enabled by continuous client engagement and a consultative selling approach.
Telcos venture into ICT to develop a significantly expanded set of capabilities that goes beyond their core focus on infrastructure and network management and spans different domain areas (e.g., cloud, cybersecurity, or data analytics). These types of capabilities are significantly different, as is the way they are sourced, specifically when it comes to the increased role of creating ecosystem partnerships to tap into specialized skill sets. Building a broad partnership ecosystem is crucial to accessing specialized technologies and expertise, thereby enhancing the service offering and addressing the diverse and complex digitalization requirements of businesses. Taking advantage of partnerships accelerates time to market for new solutions and also helps manage the risks associated with investing in fast-evolving technologies.
The distinct differences between the traditional telecom and the ICT business pose a strategic dilemma for telcos (see Figure 2): how can they leverage some inherent advantages to effectively enter and thrive in the ICT market while not being impeded by their established core business?
To effectively harness the B2B ICT opportunity, careful considerations for closer integration or independence between telco and ICT are essential. Telcos must evaluate the degree of integration or independence required for their ICT entities vis-à-vis their core telecom business. To this end, various operating models have been adopted across the industry, each with its own implications and strategic considerations. Broadly, these models are categorized into three archetypes: integrated, leveraged, and independent (see Figure 3).
In the integrated model, the ICT business remains a part of the larger telecom B2B entity. This model allows for leveraging the established brand and customer relationships and utilizes established infrastructure, resources, and sales channels. The model can facilitate cross-selling opportunities and provide a unified front for the entire range of services offered, from traditional telecom services to new ICT solutions. However, this approach may limit the agility and innovation typically required in the fast-paced ICT sector (see “Case study — Verizon”).
Case study — Verizon
By strategically diversifying into ICT services, Verizon successfully expanded its business portfolio, driving growth in a competitive market environment. In 2019, it launched a single B2B organization, combining the core connectivity and ICT businesses under one entity to address the growing demand for integrated ICT solutions among its business customers. Verizon revamped its go-to-market (GTM) strategy to prioritize solution-based approaches tailored to address enterprise business challenges, which involved shifting focus from product-centric to customer-centric solutions to align sales efforts with specific customer needs and objectives. Simultaneously, Verizon enhanced sales team expertise by investing in training and strategic partnerships. This approach empowered Verizon’s sales professionals to better understand customer needs, articulate value propositions effectively, and position the company as a trusted adviser to clients.
The independent model entails the creation of a separate legal entity for the ICT business, which allows for greater focus, agility, and flexibility, which are crucial in the fast-evolving ICT sector. A separate legal entity can foster a more entrepreneurial culture, more akin to that of a tech company than a traditional telecom operator. This autonomy can attract talent and partnerships more aligned with the ICT industry. However, this model risks lower margins; it dilutes the brand and can lead to challenges in cross-selling and existing customer relationships (see “Case study — T-Systems”).
Case study — T-Systems
Deutsche Telekom (DT) has successfully managed to diversify in the ICT space, striking a balance between leveraging its core telco strengths while giving independence to its B2B ICT business. DT recognized the unique demands of the ICT market and established T-Systems, a separate business entity dedicated to ICT services. The new entity has the autonomy to innovate and respond to market dynamics in the ICT sector and capitalize on emerging opportunities. T-Systems forged strategic partnerships with leading technology providers and software companies to enhance its ICT offerings and access specialized expertise. It also aligned its culture, processes, and capabilities with the demands of the ICT market. At the same time, the GTM approach is coordinated, allowing T-Systems to tap into DT’s extensive network and customer relationships to offer bundled solutions, catering to the diverse needs of business customers.
The leveraged model is a hybrid approach, where the ICT business operates semi-autonomously but still capitalizes on certain resources and capabilities of the parent telecom company. This model allows the ICT arm to benefit from the parent company’s scale and resources while retaining autonomy to be agile and innovative. However, the leveraged model can lead to resource-allocation conflicts and strategic misalignments. Managing this model requires careful navigation of potential cultural clashes and operational complexities to ensure both the ICT and the core telco operations thrive harmoniously (see “Case study — Solutions by stc”).
Case study — Solutions by stc
Saudi Telecom Company’s (STC) subsidiary, Solutions by stc, is an independent legal entity that operates in the ICT space. In the Middle East, Solutions by stc sets a benchmark in the ICT diversification landscape with ~23% market share in ICT. Solutions by stc offers an extensive range of services, including system integration, cloud services, cybersecurity, communication, and managed services. Its growth has been predominantly organic but has recently been propelled by acquisitions. Although Solutions by stc is an independent legal entity, it makes sales by leveraging STC’s B2B account teams and their relationships. This structure has allowed Solutions by stc to operate with the agility and innovation mindset of a tech start-up while still benefiting from the support and scale of STC, its brand, and its dominant access to the B2B clients in the Kingdom of Saudi Arabia.
Various strategic factors influence the decision to adopt an integrated, independent, or leveraged model for ICT diversification (see Figure 4).
The predominant path suggests a preferred model, even though not all criteria may consistently point to the same choice. Ultimately, this approach prioritizes the key drivers for success and accepts that while a few secondary criteria might not align perfectly, the overall model still maximizes the strategic benefits:
This approach, which considers the strategic and market-specific factors, tailors the model selection to strategic and market-specific factors, ensuring that the final choice aligns with the core business objectives and market realities.
Several enablers are critical to the success of telco ventures in ICT, regardless of the chosen model:
In summary, while the choice of model sets the strategic direction, the successful execution of that model hinges on the above critical factors, tailored to the unique dynamics of each model.
When market dynamics or internal performance reveal misalignment with growth objectives, telcos must reassess their operating model toward the ICT opportunity. A shift becomes critical if the current approach hinders agility, innovation, or scalability. Key triggers include external pressures like intensified competition, rapid technological advancements, or shifts in customer demands — such as a preference for end-to-end solutions in some markets. Internally, declining market share, reduced profitability, or customer dissatisfaction further underscore the need for change. Evolving the operating model to align it with both market opportunities and internal priorities could unlock new value and drive sustainable growth.
In a rapidly evolving landscape, the line between staying relevant and falling behind is becoming ever finer. For telcos, the challenge extends beyond merely being present in the ICT space; they need to truly unlock the full potential. The signs are often subtle — an overlooked opportunity to collaborate with key ecosystem players, a diminishing ability to connect with enterprise customers and anticipate their evolving needs, or competitors building momentum and expanding their foothold. Is your organization truly prepared to seize the opportunity, or are you quietly letting it pass by?
Unlocking the potential of B2B ICT services requires telcos to use a strategic approach that balances innovation, governance, and agility while acknowledging the inherent differences between traditional telco business and the dynamic ICT market:
By Vidhitha Kanakamedala, Gergana Rangelova, Andrea Faggiano, Bela Virag
cloud technology
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