Telecom Market Transformation Trends in 2025
The annual IDC Telco Forum: Barcelona was held Sunday, March 2, to kick off the Mobile World Congress (MWC) 2025.
During the event, IDC delivered presentations that addressed pivotal transformation and monetization opportunities in the telecoms sector, as well as our expectations for the industry’s development through 2030. Key executives and stakeholders across the telecoms ecosystem and technology sectors attended the meeting (previously known as the IDC pre-MWC Brunch).
Telecom Industry: A Massive Market Undergoing Bold Transformations
Spending by telecoms worldwide is projected to reach $1.375 trillion in 2025, accounting for 24% of the global ICT market. Meanwhile, telecom service provider CAPEX intensity is declining year on year but is expected to reach $309 billion in 2028. This shift reflects the focus of telcos on network efficiency and simplified, cost-effective operations.
Internal Telco Transformation Trends in 2025
The telecom industry is undergoing a profound transformation, driven by slowing mobile data growth, market fragmentation, and increasing financial pressures. As the industry evolves, telcos are shifting from being traditional connectivity providers to being full-stack technology suppliers that require structural changes to sustain profitability.
Market consolidation, workforce realignment, and strategic investments are now central to long-term success.
Reinventing the Business Model
To enhance efficiency and financial resilience, operators are consolidating in domestic markets and reassessing international operations. European regulators have approved key in-market mergers that come with network investment commitments, signaling a broader acceptance of industry consolidation.
Middle Eastern telcos are strategically acquiring stakes in European firms, capitalizing on stock market fluctuations to expand their influence. Operators are streamlining their international presence, divesting from underperforming markets and leveraging joint ventures to optimize scale and operational efficiency.
The Rise of LEO Satellite Partnerships
Satellite technology is playing an increasingly strategic role in telecom operations, addressing connectivity gaps where terrestrial networks are insufficient. The convergence of low Earth orbit (LEO) satellite networks with mobile infrastructure is gaining traction, particularly in the realm of direct-to-device (D2D) connectivity.
By forming alliances with satellite providers, telcos can extend their service footprint, unlocking new revenue streams in remote and underserved regions. Some LEO providers are partnering with chipset and device vendors to enable direct satellite connectivity on standard mobile devices. Efforts are underway to expand dedicated satellite frequency bands to support this growth.
Programmable Networking Gains Traction
The shift toward network programmability is pushing telcos to embrace API-driven ecosystems that enhance service agility and unlock new monetization opportunities. Network API monetization is becoming a key revenue stream, with operators engaging enterprise developers, aggregators, and cloud marketplaces to integrate network capabilities into digital services.
In the short term, quick-win APIs such as SIM swap and number verification are gaining traction. More advanced APIs, like quality on demand (QoD), hold greater long-term potential but remain a secondary focus.
The real value lies in combining multiple APIs, such as QoD with security or edge computing, to deliver differentiated, high-value solutions.
To scale these opportunities, multi-operator collaboration will be essential to ensure broad applicability across industries. Additionally, developers will require training and certification to fully leverage telco APIs, raising questions about who will provide this support.
As telcos expand their API strategies, they must also address a critical challenge: avoiding commoditization and securing a strong position in the evolving digital value chain.
AI Moves from Hype to Execution
AI is rapidly moving from theory to real-world deployment, transforming both network operations and customer engagement. GenAI is already driving measurable improvements in predictive maintenance, automated network management, and customer service.
The next stage of adoption will integrate task-specific AI agents to further enhance efficiency, streamline operations, and optimize service delivery. However, challenges persist: Security risks are the primary reason for GenAI project delays or abandonment (43%), while project costs rank lowest (10%), according to IDC’s 2024 Future Enterprise Resiliency and Spending (FERS) Survey.
Telcos are leveraging GenAI across two key areas: operational efficiency and customer experience. In network operations, AI-powered copilots assist with incident management, collaborative network operations, and intelligent field support, while SOC-NOC collaboration enhances user experience assurance. On the customer experience side, GenAI is improving business support systems (BSS) knowledge sharing, lead generation for enterprise markets, intelligent service recommendations, and complaint handling.
With adoption accelerating, telcos must address security concerns, workforce adaptation, and cost control to fully capitalize on GenAI’s transformative potential.
Telco Monetization Strategies
As traditional telecom value chains evolve, operators must rethink their approach to monetization. A customer-centric mindset, combined with rapid experimentation and continuous iteration, is essential to stay competitive.
Leveraging composable technology stacks is a key enabler of monetization. By adopting modular, API-driven architectures, telcos can achieve greater flexibility, enabling mass customization and cost-efficient service delivery. The transition to 5G standalone networks is further driving the need for new monetization models, particularly in network slicing and private 5G solutions that offer premium, differentiated services for enterprises.
AI and API monetization are expected to become major revenue contributors. The telco AI market is projected to grow from $235 billion in 2023 to $632 billion by 2028, capturing 6% of global AI spending.
Similarly, the telco API market is forecast to reach $6.7 billion by 2028, expanding at a 57.1% CAGR, with significant contributions from the Americas ($2.7B), Europe ($1.9B), and APAC ($2.1B). Industry-wide initiatives such as the GSMA Open Gateway — supported by 67 mobile operator groups across 265 networks and covering 75% of global connections — highlight the strategic importance of API-driven revenue growth.
Winning Strategies for Telcos
Service Play
Telcos must focus on select industry verticals, leveraging in-house capabilities and strategic partnerships to develop specialized solutions. The ability to deploy rapidly, monetize effectively, and refine value propositions based on market feedback will be key to success.
Platform Play
Connectivity remains central to telco operations, but its value proposition is evolving. Operators must enhance their offerings by prioritizing security, performance, and flexibility, ensuring that their networks support a broad range of enterprise use cases beyond basic connectivity.
Vertical versus Horizontal
Telcos must determine whether to pursue vertical or horizontal service models. A vertical approach focuses on industry-specific solutions, including private 5G, edge computing, network as a service (NaaS), and network slicing, providing tailored services to high-value sectors. In contrast, a horizontal approach emphasizes the development of scalable, reusable capabilities that can be deployed across industries, optimizing efficiency and cost structures.
META: The Emerging Digital Hub
The Middle East, Turkey, and Africa (META) region is emerging as a key digital hub, driven by large-scale infrastructure investments and regulatory support. Network expansion is accelerating, with increased investment in datacenters, subsea cables, and carrier-neutral facilities.
Strategic initiatives are enhancing regional interconnectivity, particularly in Africa and major hubs such as the UAE, Saudi Arabia, and Turkey. Favorable policies are enabling digital transformation, fostering internet traffic growth, and supporting the proliferation of digital services.
The Future of Telco Transformation
Sustained success in the telecom industry requires a shift toward platform-based, adaptable service models that serve multiple industries. As telcos position themselves as digital transformation enablers, they must balance efficiency, innovation, and strategic investments to remain competitive in a rapidly evolving landscape.
Key Takeaways
- Slowing mobile data growth necessitates new monetization strategies beyond traditional bandwidth expansion.
- Telco transformation must focus on efficiency, simplification, and adaptability.
- Attracting and retaining top talent is crucial to leveraging disruptive technologies.
- Collaboration across ecosystems is essential for both commercial and technical advancement.
- Energy efficiency is a strategic priority, directly impacting both OPEX and CAPEX decisions.
The telecom sector is entering a decisive phase. Those who embrace transformation will define the industry’s future.
If you missed the IDC Telco Forum: Barcelona session, you can watch the content in a webcast on March 12: MWC2025: Telco Transformation and Monetization in EMEA.
What Does Amazon's New Milan Beauty Store Mean for Its Retail Strategy?
When Amazon opens a new store, it’s never just about adding another retail location. The company’s recent launch of a beauty and personal care store in Milan (Amazon Parafarmacia & Beauty store, opened on February 12, 2025) offers fascinating insights into Amazon’s evolving retail strategy and suggests ambitious plans for the European market.
Beyond Digital: Why Physical Beauty Retail Matters for Amazon
Amazon’s choice to open a beauty store is telling. Beauty products represent a unique challenge in eCommerce: customers often want to test, try, and receive personal recommendations before purchasing. By tackling this challenge, Amazon addresses a critical weakness in its digital-first approach to beauty retail.
The Strategic Playbook Revealed
In a recent IDC Link, we discussed how Amazon’s new store prioritizes customer experience and personalization. Our visit to the store reinforced our idea of what Amazon is thinking:
- Rather than focusing on immediate sales through frictionless checkouts (like Amazon Fresh stores), this location prioritizes customer experience and brand building.
- The integration of “Place & Learn Stations”, interactive screens through which shoppers can access detailed product information, and a “Derma-bar”, where shoppers receive bespoke skin analysis and expert recommendations, signals Amazon’s understanding that beauty retail requires education and personalization.
- The carefully curated selection of premium brands suggests Amazon is positioning itself to compete with high-end beauty retailers, not just mass-market stores.
The Bigger Picture: European Market Expansion
The Milan store serves as a strategic launchpad for Amazon’s broader European beauty ambitions. By establishing a physical presence in one of Europe’s fashion capitals, Amazon is:
- Building credibility as the go-to retailer for the premium beauty sector.
- Creating a showroom for brands to expand their sales across its European online platforms.
- Developing a model that could be replicated in other key European markets.
Strategic Implications
Amazon’s physical retail journey began with Amazon Go in Seattle in 2018 and has been one of constant experimentation. The Milan beauty store reveals several key aspects of Amazon’s evolving retail strategy:
1. The company is willing to take a long-term approach, prioritizing customer experience over immediate sales.
2. The company is using physical locations as brand-building tools, not just sales channels.
3. Amazon is tailoring its retail approach to specific product categories rather than applying a one-size-fits-all solution.
We recently mentioned in a LinkedIn post how Amazon strategically leverages physical stores to compete with retail giants like Walmart in the U.S. market (as well as how Walmart is taking new revenue generation approaches from Amazon’s book). This beauty store opening represents another calculated move in the company’s evolving retail playbook.
What This Means for the Retail Industry
For other retailers, Amazon’s beauty store strategy offers important insights. The future of retail isn’t about choosing between physical and digital — it’s about understanding when and how to use each channel effectively. Amazon’s investment in an experience-focused beauty store demonstrates that even a (predominantly) eCommerce pure-play retailer recognizes the value of physical retail when used strategically.
The Milan beauty store is a window into Amazon’s thinking about the future of retail. As the company continues to evolve its omni-channel strategy, this store could serve as a template for how digital giants can effectively blend physical and digital retail experiences in specialized product categories.
If you are interested in knowing more about IDC’s Retail research, visit our website here.
Leveraging GenAI for Cloud Sustainability in 2025
The rapid adoption of GenAI is reshaping cloud computing, offering transformative solutions while accelerating the achievement of sustainability goals. As cloud providers navigate regulatory complexity, escalating costs, and environmental pressures, GenAI is emerging as a critical enabler of innovation and efficiency.
This post explores how GenAI empowers cloud ecosystems to thrive in 2025 and beyond.
Navigating Regulatory Challenges in Cloud Sustainability
Navigating complex and ever-evolving regulatory landscapes remains a challenge for cloud technology vendors. Governments worldwide are implementing stringent regulations to curb carbon emissions and promote sustainable practices.
The EU’s Corporate Sustainability Reporting Directive (CSRD), for example, mandates comprehensive sustainability reporting. The European bloc’s Energy Efficiency Directive (EED) has introduced obligations, especially for datacenter operators, in terms of energy saving and energy efficiency. Noncompliance can lead to hefty fines and damage to a company’s reputation.
GenAI can potentially assist cloud vendors in ensuring compliance with regulations by automating the collection, analysis, and reporting of ESG data. AI can process vast amounts of data from various sources, identify relevant regulatory requirements, and generate accurate and comprehensive sustainability reports.
This not only reduces the administrative burden on cloud vendors but also ensures timely and accurate compliance with regulatory requirements.
Managing Cloud Energy Consumption and Carbon Footprint
According to IDC, global IT datacenter capacity will grow from 180GW in 2024 to 296GW in 2028, and electricity consumption will rise from 397TWh to 915TWh in 2028. Electricity is the largest ongoing expense to run a datacenter.
As the demand for cloud services continues to surge, so does the energy required to power datacenters. This presents a significant challenge for cloud vendors striving to reduce their carbon footprint.
To address this, vendors must invest in energy-efficient technologies and collaborate with energy providers to ensure a steady supply of green energy. An IDC survey found that while 31% of organizations are looking to deploy GenAI workloads in locations able to offer renewable or zero-carbon energy supplies, 31% also say that GenAI workloads are helping the company reduce its overall greenhouse emissions through business-level optimization and efficiency improvements.
AI models can optimize cloud datacenter operations by predicting and managing energy consumption more efficiently. AI-driven energy management solutions can analyze patterns in energy usage, predict peak demand periods, and optimize cooling systems to reduce energy consumption.
Cloud Vendors: Balancing Cost and Sustainability
Cloud vendors are increasingly adopting FinOps and GreenOps. These — along with advanced analytics, AI, and machine learning — will provide better data and insights and increase visibility into cloud resources, resulting in better optimization.
GenAI can analyze spending patterns and recommend cost-saving measures. AI-driven financial models can analyze the costs and benefits of various sustainability initiatives, helping cloud vendors make informed decisions that maximize both sustainability and profitability. For instance, AI might suggest moving non-critical workloads to less expensive storage options or shutting down underutilized instances automatically.
We predict that 60% of organizations will leverage GenAI for sustainable transformation by 2026, reflecting a significant shift toward data-driven decision-making in ESG initiatives.
Conclusion
As we move deeper into 2025, cloud technology vendors are facing a multitude of obstacles in their quest for sustainability. Navigating complex regulatory landscapes, managing energy consumption, ensuring supply chain sustainability, balancing costs, meeting customer expectations, and innovating and optimizing for sustainability are all critical challenges that vendors must address.
GenAI offers a powerful tool to help overcome these challenges and propel sustainability in the cloud tech industry. By leveraging AI, the cloud ecosystem can optimize operations, enhance supply chain sustainability, balance cost and sustainability, drive innovation, and contribute to a more sustainable future.
How IDC Can Help
IDC’s Custom Solutions portfolio can assist cloud ecosystem players in addressing sustainability challenges through tailored services and strategic guidance.
1. Research and Advisory Services: IDC provides in-depth research and expert advice on trends, regulations, and best practices specific to the cloud industry.
2. Custom Market Intelligence: Vendors can gain insights into market dynamics, competitive landscapes, and customer expectations.
3. Strategic Consulting: IDC consultants work with vendors to develop and implement comprehensive strategies, including on “where to play” and “how to win” in the marketplace.
4. Content Marketing Services: We can help create compelling content to communicate the value proposition and enhance brand reputation and customer engagement.
5. Sales Enablement: Equipping sales teams with knowledge, tools, and content helps to effectively communicate the value proposition to customers and stakeholders.
SAP’s New ERP Transition Offer: Key Impacts and Insights for Service Providers
SAP’s new subscription offer, “SAP ERP, private edition, transition option,” expected to be available by 2Q25, will give SAP customers an additional three years to transform their ECC6-based legacy SAP systems.
Customers can subscribe to this new option from 2031 until 2033, as a natural extension of the current extended support period that runs to 2030, which also requires a premium. Mainstream support is set to end in 2027.
The offer is being introduced amid a tense environment for SAP customers. Many organizations have already migrated to SAP’s cloud options: One-third (34%) of European organizations currently use S4/HANA Private Cloud Edition. But many customers are still at the beginning of their transformation path.
According to an IDC study, 17% of European organizations currently have no migration plan, and 7% remain undecided. Another key point is that the RISE with SAP program has attracted only 7% of organizations planning to migrate to S/4HANA in the coming months.
In a blog post, SAP shared further details about the new offer:
• It applies only to ECC — not the entire Business Suite 7 — with SAP validating eligible systems.
• It targets large-scale, complex SAP implementations engaged in the RISE with SAP program.
• Adaptations will be required to subscribe to the new offer, including data transformation efforts and addressing dependencies on third-party technologies. The subscription will be limited to the HANA database.
• Eligible organizations are required to migrate to S4/HANA private edition before the end of the extended maintenance period in 2030.
• SAP emphasizes that this is not an extension of the maintenance period but a new subscription service.
Impacts on Service Providers
As highlighted in IDC MarketScape: European SAP Modernization Services 2024 Vendor Assessment (IDC, December 2024), service providers play a pivotal role in SAP migration and modernization strategies across Europe.
The dual focus of service providers is a key trend: enhancing the value proposition of RISE with SAP while positioning SAP modernization as a cornerstone of broader business transformation. Migration to S/4HANA is framed as a critical step in overall enterprise modernization.
The introduction of this transition option requires service providers to adjust their strategies and emphasize certain services.
Strengthening Assessment and Consulting Services
Developing robust consulting services is crucial for assessing legacy systems. This involves analyzing the current state of the code base, system dependencies, and architecture, and discovering business processes.
By offering in-depth assessments, providers can help orgs build tailored modernization road maps aligned with corporate strategies. Many service providers have enhanced their expertise in process mining, often using tools like Signavio (or Celonis or their own internal tools), and have established dedicated centers of excellence across Europe.
The new subscription offer reinforces the need for these assessments. We believe service providers should:
• Evaluate existing systems for compatibility with SAP HANA (the only supported database).
• Help clients manage third-party software dependencies.
• Develop extended road maps that fit both business objectives and operational constraints.
Additionally, providers will need to guide clients on cost analysis to weigh the benefits of the new offer, particularly in cases where completing the migration by 2030 may not be feasible, or what would be the cost of the transformation with RISE with SAP, including in the new subscription.
Build Long-Term Customer Relationships
The new subscription and extra period should push service providers to start creating long-term modernization plans that balance evolving business needs and IT budgets. This involves fostering deeper client relationships with SAP users targeted by the new subscription.
Integrate AI to Optimize Business Processes
The integration of AI will play a central role in business process transformation by 2025, according to SAP’s roadmap. Service providers can embrace a long-term vision and capitalize on this by offering AI-driven process optimization and further enhancing the value of RISE with SAP.
Providers will need to implement training programs for both developers and end users to ensure broad adoption of new models and systems. This requires repositioning key roles (e.g., SAP developers) to transition from managing highly customized code to supporting externalized, standardized processes under the RISE with SAP model.
Change management will be critical, particularly for organizations with complex processes. They will increasingly demand structured, gradual change management programs from their partners to ensure both technical and organizational readiness.
Enhance BTP and Integration Services
Expertise in SAP’s Business Technology Platform (BTP) has become a market differentiator. The new subscription option will likely push service providers to focus on deeper integration services, AI, and third-party cloud services to rebuild business processes on top of S/4HANA.
For large-scale projects, balancing a “clean core” of standardized processes and customized processes will be critical, making integration via BTP a must-have capability.
Modernize Data Models and Streamline Data Migration
Data modernization is a core component of the HANA migration process. Providers will need to help businesses redesign data models and develop tools and accelerators to streamline the transformation. Many providers are partnering with specialized vendors such as SNP. These efforts will be vital as organizations assess the feasibility and costs of migrating to HANA while leveraging SAP’s new subscription model.
IDC has published a number of documents designed to provide a better understanding of the SAP systems modernization market and the role played by service providers in this context.
These include:
• The IDC MarketScape: European SAP Modernization Services 2024 Vendor Assessment (IDC, December 2024) analyzes the positioning of service providers in Europe and their service portfolios when it comes to SAP modernization.
• SAP Modernization Services in Europe: Insights from IDC’s 2024 European Cloud Survey (IDC, December 2024) provides insights into organizations’ intentions on the transformation of their SAP systems, in particular the evolution of S4/HANA private edition and public edition implementations in Europe.