By Curtis Price, IDC, Program Vice President, Infrastructure Service

Service Provider Digital Maturity Index

In 2018, IDC developed the Service Provider Digital Maturity Index to define five levels of SP digital maturity. This index provides a roadmap to help SPs assess the progress of their digital journey versus their desired end state. The development of the Service Provider Digital Maturity Index was driven by IDC'sService Provider Digital Readiness Survey, which analyzed the digital initiatives of 400 SPs worldwide and the business value derived from these efforts. The index measures digital maturity across seven SP domains (See Figure 1).

In 2021, IDC conducted an updated study that produced a solid basis of comparison with 2018 results and provided the ability to identify where SPs have made progress and where challenges still exist, both at an overall level and within specific domains.

As SPs embarked on their digital journey, there were three key common business outcomes that all SPs were trying to achieve: improved customer experience, revenue growth/profitability, and development of new sources of revenue. The surveys conducted in 2018 and 2021 consistently show that Pioneers, which correspond to the highest level of digital maturity, enjoyed significant improvements in areas considered most strategic for SPs.

The 2021 survey results revealed that Pioneer SPs experienced the most significant business performance gains. They not only reported improved operational metrics such as reduced costs and process cycle times but importantly also reported improvements in key business outcomes such as revenue, profitability, customer satisfaction, and customer retention. Figure 2 depicts the most notable business improvements for Pioneer SPs compared to Ad-Hoc SPs, which correspond to the lower level of digital maturity.

2021: The Evolution of SP Digital Maturity

In the three years since IDC developed the 2018 Service Provider Digital Maturity Index, several market dynamics have impacted SP strategies. These include an increased focus on customer experience, the SP drive to reduce costs, and increased competition on traditional and non-traditional players. These factors helped shape SPs' digital strategies and initiatives. For the 2021 survey, we observed the following three key changes from 2018 related to SP digital transformation readiness.

1. The Role and Influence of IT

In 2018, most SPs had only a limited number of digital initiatives and had no real digital strategy.  According to the 2018 survey, 62% of organizations had developed DX (digital transformation) task teams responsible for driving individual DX projects (as there were no DX programs back then). Yet, most initiatives (76%) were driven by senior business leadership. IT primarily had a supporting role with responsibility only for implementing technologies related to DX projects. When it came to driving DX projects, IT ranked third behind business leadership and special DX organizations. In 2021, the roles for driving DX initiatives have shifted; IT has become the primary enabler (for 66% of DX initiatives), followed by specialized groups (30%) and senior business leaders (25%).

2. Shifting Business Priorities

In 2018, SPs were trying to recover from a couple of lean revenue years as demand for services shifted.  In the 2018 survey, IDC asked SPs to rank the reason why they undertook DX initiatives. Improving customer experience (#1) and driving revenue growth (#2) topped the list. Then COVID-19 happened, and SP businesses shifted their priorities. In 2021, revenue growth has dropped to#4, giving way to a focus on organizational efficiency (#1) and operational efficiency (#2). Customer experience is#3.

3. Challenges Are Less Daunting

In 2018, IDC asked respondents, "what are your top three challenges in meeting your Digital Transformation (DX) priorities?" A slight majority of SPs -55% -replied, "our culture is too risk-averse." SPs appear to be less risk-averse now and are committed to achieving business goals through their DX initiatives. Today's top challenges are more structural:#1: their organizations are siloed, and#2: they do not yet have the right people/skills in-house. In 2021, SPs realize that organizational and cultural changes are needed to successfully execute their digital initiatives.

COVID-19 Impact

The COVID-19 pandemic has by far had the most significant impact on SPs' digital strategies since 2018. The pandemic created a shift in business and consumer behavior for SPs that led to a greater dependence on secure network connectivity. With countries on lockdown and organizations worldwide shifting to a work-from-home model, SPs experienced a significant increase in demand for bandwidth for connectivity services.

IDC's Service Provider Digital Readiness research tightly correlates digital maturity to improving business outcomes. The results of this year's study revealed that Pioneer SPs had implemented digital technologies and created a level of business resiliency that enabled them to respond more quickly to the effects of the pandemic. According to IDC research, 73% of Pioneers wereexceptionallyprepared for COVID-19 compared to only 15% for all other SPs.

Conclusion

As this year's survey results indicate, SPs have made significant progress as they continue executing their digital strategies. IDC believes that digital transformation is a continuous process, and SPs must adjust and react to changing market dynamics. The progress shown by Pioneer SPs in the three years since the initialService Provider Digital Readiness Survey and the operational resilience they demonstrated during the global pandemic should be viewed as a benchmark by those SPs looking to transform their business for future success.

To learn more about the state of SP digital transformation, please join the one-hour webinarIDC 2021 Research -The State of Service Provider Digitalization on Thursday, June 3^rdat 8 am PDT.Additionally, we encourage you to visit our interactive Digital Transformation assessment tool to learn how digitalization can help reduce operational costs and deliver new services faster.