Think you’ve already lost to Twilio? Think again.

Everybody says 5G is going to be about enterprise and B2B use cases. Even GSMA Mats Granryd, my guest on a recent Telco in 20 episode, believes the business-to-business community is the one that will benefit the most, and that APIs are key to success. Communication service providers (CSPs) are on the bandwagon, too. Recent industry moves, including Proximus Group’s acquisition of Route Mobile and Ericsson’s acquisition of Vonage, are more proof that interest is high.

With all the attention focused on network APIs, why hasn’t the telco industry been able to deliver for developers, unseat software vendors like Twilio, and win back SMS revenue?

At Totogi, where I’m acting CEO, we decided to initiate a comprehensive study to understand the challenges telcos face in the enterprise messaging API market. Clarity Research surveyed 150 telecoms leaders and decision makers in July 2023, including C-suite, executives, and managers in the UK and US. 

Our survey found four significant insights:

  • Telco leaders believe enterprises are seeking a less expensive alternative to Twilio.
  • Telcos currently struggle to meet this demand due to their pricier and more complex offerings, primarily in the form of proprietary APIs.
  • Telcos believe that a Twilio-compatible solution could significantly enhance their competitiveness.
  • Telcos lack the software chops to develop such a solution themselves.

Enterprises are looking for a cheaper alternative

Twilio’s user-friendly experience comes with a high price tag. A staggering 93% (UK) and 88% (US) of respondents affirmed their enterprise customers are looking for a Twilio substitute, with 91% attributing this to Twilio’s high pricing.

Furthermore, 58% of respondents were optimistic that their enterprise customers would transition to a competitively priced, operator-owned CPaaS offering, provided it’s as easy to use as Twilio. The conclusion? Customers are ready to switch, but only if the transition is effortless and the price is right.

The opportunity

There is a belief among telcos that a solution compatible with Twilio could greatly enhance their market competitiveness. The challenge lies in developing such a solution. Many telcos lack the internal software development capability to do this independently, creating a significant opportunity in the market.

The takeaway

Jeff Bezos once said, “Your margin is my opportunity,” and Twilio’s margin is telcos’ opportunity. Instead of chasing new “CPaaS 2.0” use cases (where operators are trying to create market demand to drive product adoption), we should attack the heart of Twilio’s already well-established revenue base: enterprise customers and “simple” SMS code. Twilio’s gross margin sits at 52% as of its Q2 2023 earnings report. This means it takes your product—the network—doubles the costs, and sells it to customers. This is where operators around the world could cut into Twilio’s margin in a product area that’s already well established and that has developers already coding with connectivity APIs. Price your offering at 50% of Twilio’s offering, and enterprises would switch in a heartbeat.

The key? It has to be crazy easy to flip a Twilio codebase into your APIs. With that simple move, telcos would regain their strategic position with enterprise IT departments, and they could build the developer community they need for their network APIs. With a 100% Twilio-compatible replacement, telcos can reclaim enterprise revenue, capture traffic on their network, and own the developer ecosystem they need for their future.

How are we going to do it? I’ve been working on an idea since March and I can’t wait to share it with you. Stay tuned for my latest talk, airing on TelecomTV on September 5, which will introduce a three-step plan coupled with a new Totogi product that telcos can use to take on Twilio. Are you ready?

More from TelcoDR:

READ: Telco execs, are you jealous of Twilio?

LISTEN: Can telco compete in CPaaS?

WATCH: Mats Granryd talks Open Gateway

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