Karl Whitelock

By Karl Whitelock, Research Vice President, Communications Service Provider Operations & Monetization, IDC

The Midsize and Small SP Market Segment

Midsize and small SPs—service providers with a customer base of 1 million customers or less—have relatively small customer bases and limited technical staff. However, they possess many of the same business and operational challenges as larger operators, but their approach to executing business strategy is noticeably different from the rest of the market.

Specialization and business focus are essential actions for midsize/small SPs, as their competitive landscape is expanding. IDC estimates there are more than 3,000 midsize/small SPs globally, with the Americas region accounting for over 80% of the global market. IDC also estimates that midsize/small SP global revenue in 2020 was approximately $10.6 billion.

Midsize/Small SPs and the Digital Maturity Index

Recognizing the scope and complexity necessitated by the digital transformation journey of a typical service provider, IDC worked with Cisco to establish a framework that could make the journey manageable and measurable. The outcome of this effort is the SP Digital Maturity Index, which provides a guide to help service providers improve the effectiveness of their digital transformation initiatives and to show how they can measure the progress of their digital journey. The Index describes various levels of service provider digital maturity along a scale of five designations defined as:

  • Ad hoc. The lowest degree of digital maturity.
  • Shows some digital maturity, but much is still to be done.
  • Adopters have some digital capabilities, but they must do more.
  • Digital enablement is core, with some work still to be done.
  • Pioneers are the top of the Digital Maturity Index but know improvements are ongoing.

Figure 1 shows an overall comparison of digital maturity levels for midsize/small SPs and large SPs across these five domains.

Figure 1 – Digital Maturity Measure of Midsize/Small Service Providers Versus Large Service Providers n = 401 Source: IDC’s SP Digital Readiness Survey, 2021

Only a small percentage of midsize/small SPs have achieved high levels of digital maturity, while most are in the early stages of implementing new technologies, shifting from manual to automated processes, and deploying new services.

Key Needs of Midsize/Small Service Providers

Regardless of the level of maturity that a large or midsize/small SP may possess, there are several needs that both groups are keenly aware of, and they know they must provide dedicated attention to each need. For midsize/small SPs especially, the IDC SP Digital Readiness Survey 2021 report offers survey-based insight regarding many of these needs including:

  • Investment Priorities and Drivers
  • Accommodating Customer Needs and Market Priorities
  • Business and Operational Challenges
  • Competitive Pressures
  • Incorporating Changing Technology
  • Impact of COVID-19 and the Post Pandemic Recovery

Although discussion of each category of need is the purpose of the IDC SP Digital Readiness Survey, a sample containing some of the report findings is as follows:

Investment priorities and market drivers. Midsize/small SPs are facing several competitive challenges that are forcing prioritization of their strategic imperatives and investments. Much like larger operators, midsize/small SPs are focused on reducing operating costs through greater operational efficiencies. In fact, according to the survey, nearly one-third of the midsize/small SPs respondents cited improvement to operational efficiency as their top business priority (see Figure 2). Accomplishing this goal requires automation in areas where it will have the most business impact to an SP’s operations. This is an important point, since the communications industry has repeatedly marketed automation as the cure-all to solving service provider operational challenges.

Figure 2 – Top Business Priorities for Midsize/Small Service Providers Q. What are the top 3 high-level business priorities for your organization? n = 201 midsize and small service providers Source: IDC’s SP Digital Readiness Survey, 2021
  • Accommodating customer needs. Improving the customer experience is also a key business priority noted in Figure 2. As midsize/small SPs struggle with customer churn and customer retention, devising strategies to improve customer service is radically important. Making such improvements can drive higher NPS and then publicizing higher scores can help drive competitive differentiation.

IDC believes greater use of automation and analytics plays an important role in improving the customer experience, but we remain concerned about the time and effort needed to reach this goal. However, the ability to analyze and correlate various types of customer information and then use the insight gained from this data to recommend new services or upgrades to existing services is an area that many midsize/small SPs are focused on today. With a focus on improving NPS as a strategic goal and using high scores as a source of differentiation, IDC believes that midsize/small SPs can prioritize investments in customer-facing systems that generate actionable insights that will play a strategic role in improving the customer experience.

  • Business and Operational Challenges. Perhaps the greatest challenge midsize/small SPs face as they embark on a digital transformation journey is related to organizational structure and culture. According to findings from the survey, over one-fourth of the respondents said their current investment focus is on implementing business continuity plans. However, the migration from legacy solutions (many that were developed in-house) to advanced digital platforms in support of new services and technologies, requires a shift to new business processes and greater coordination between technical teams. However, only 15% of respondents are targeting investment in digital transformation to generate growth, while another 15% are looking to prioritize investment tied to new business or operating models that have a growth element involved.


While midsize/small service providers have made solid progress toward their digital transformation goals, there remains plenty more to accomplish to reach higher levels of digital maturity. In virtually all domains studied as part of IDC’s Digital Transformation Survey, very few of the midsize/small providers surveyed have reached pioneer or deployer status. Midsize/small providers expect to make significant strides over the next two years, and this will be critical to success as the midsize/small communications segment becomes much more competitive with new providers entering the market.

Increasing competitive intensity, changing customer preferences, and rapid technological advances make digital transformation a continuous effort. For midsize/small SPs, success will be determined by the ability to transform their business model and utilize technology, data, and processes in ways that will improve operational efficiency, enhance customer experience, and drive growth through the pursuit of new revenue streams.

To learn more about the opportunities and challenges of midsize/small SPs, please join a one-hour webinar Midsize/Small SP Opportunities and Challenges on December 7, 2021 at 8:00 a.m. PST.


Yaron Agami

Senior Manager

SP Product Marketing, Cable and Satellite Segments