5G, IoT and Edge Driving Telcos to Embrace Platform Architectures
The overarching theme in the telecoms marketplace is that the rise of 5G, IoT and edge is driving telcos to consider new platform architectures and ecosystems to deliver the right solutions for their customers. Telcos are searching for more intelligent ways to monetise their network data and to create value beyond connectivity as we surge towards an increasingly connected world.
Increasing connectedness also increases the amount of data that telcos must support. IDC’s Global DataSphere Forecast projects that data created and consumed will grow at a rate of 26% through 2024, topping 142EB.
To support the vast increase in data, and to successfully monetise adjacent services, telcos must embrace intelligent automation, containerised architectures and cloud-native principles to modernise and simplify operations for business agility and faster time to market. This will be facilitated through cloud platform solutions that can scale in line with continuously changing market demands and requirements, and which necessitate a new class of digital ecosystem partnerships.
Driving Revenue Growth Through Programmable Networks
Telcos globally are at different stages on their journeys to becoming cloud native. Some are aggressively pursuing a public-cloud-first strategy while others are taking cautious steps away from on-premises by having a hybrid cloud focus.
Most telcos are taking a pragmatic approach and have begun their migration from legacy and network functions virtualisation (NFV) platforms to container-based, cloud-native platforms. These shifts are driven by the lower cost of ownership and elastic scaling of the network.
Cloud-native network functions (CNFs) are being progressively deployed alongside virtual network functions (VNFs) so that customer-centric services can be scaled, updated and orchestrated more easily. However, the vast majority of telco cloud workloads still leverage VNFs and we expect the overall spending on telco cloud software to grow from $7.5 billion in 2020 to $29.0 billion in 2025 at a CAGR of 30.9%.
Cloud and the convergence of compute, storage, networking and edge will enable CSPs and enterprises to offer their customers completely reimagined user experiences. The openness and programmability of telco cloud will also give rise to further industry collaboration — Vodafone teamed up with AWS in 2021 to launch Europe’s first public multi-access edge computing (MEC) deployment providing a platform for applications developers to deliver low-latency use cases leveraging the full breadth of AWS cloud services, right at the edge of 5G networks.
This enabled AWS Wavelength customers to explore new business opportunities, build applications and services that were not possible before, and transform user experiences. Unlocking 5G revenues will also depend on a major shift towards adaptable operations and monetisation systems.
Across EMEA, particularly in Europe, partnerships between telcos and public cloud providers to support OSS/BSS deployments continue to strengthen as operators seek to implement deep digital transformations to drive revenue growth. Examples in the first half of 2022 include Vodafone’s deal with Oracle in June 2022 to migrate many of its IT systems to Oracle Cloud Infrastructure, and BT’s five-year deal with AWS announced in May 2022 as the telco seeks to modernise its IT infrastructure.
Three Emerging Business Models for Telco Cloud
The relationships between telcos and their cloud/technology partners are complicated and still evolving. CSPs are still refining their own network transformation and road maps, while having to decide between using their own private network cloud solutions versus working with public cloud providers.
We have seen the formation of three business models between the CSPs and cloud providers:
- Outsourcing back-office and IT functions: CSPs runs back-office operations like billing, service management and customer relationship management in a public cloud environment.
- Enabling service channels, partnerships and application creation: The telco and cloud providers work together to deliver end-user services (sell-with model), mainly to enterprise customers.
- Migrating network workloads: This involves shifting the core, RAN and other essential networking components of the telco to the cloud.
Of the three business models, telcos using cloud to host network workloads is the newest and the riskiest. This model received mainstream attention when AT&T announced it would use Microsoft Azure to host its mobile core network.
The purpose of this action is to enable the migration of AT&T’s 5G core workloads to Azure as AT&T continues its transformation into a cloud-native 5G mobile operator. AT&T is not the first mobile operator to do this — DISH had already announced plans to work with AWS to host its network functions.
The difference here is that AT&T has an established network with traffic and DISH is a greenfield network operator. Outsourcing a core network competency requires significant trust and confidence between the telco and cloud provider as any notable disruption or interference could negatively impact operations and cause outages, seriously harming the business reputation of the telco.
To provide relevant 5G solutions to the market and drive revenue growth, telcos must go beyond connectivity and focus on delivering outcomes. The deployment of 5G core will further anchor the importance of having a cloud platform solution in place since the standard defines a service-based architecture (SBA) and implements IT network principles with a cloud-native design approach.
These deployments were ongoing in 2020 and will continue into 2022 and beyond.
What’s Next for European Telcos
Telcos are increasingly embracing disaggregated, cloud-native architectures as part of their next-generation network deployments — mixing bare metal, Kubernetes containers and IaaS solutions.
Our 2022 IDC Telco Transformation Survey listed cloud and cloudification as a top transformation activity to implement for CSPs on their journey to becoming DSPs, and we are witnessing telcos adopting new methodologies, practices and tools to underpin their cloud-orientated digital strategies. These strategies also depend on what they deem as best in class to meet their expectations.
This will require a complex web of alliances and partners ranging from legacy vendors to hyperscale cloud providers to other software vendors. While there are challenges to overcome, there are many technological, commercial and strategic advantages to be gained.
IDC’s Telco Digital Summit, on November 22, will look at these themes in more detail. The summit will feature Europe’s leading telco analysts and senior telco executives and will include keynotes from industry leaders to help attendees chart a path through the storms in the European telco market.
This is the second blog in IDC’s Telco Digital Summit Series. The first blog — How Telcos Are Transforming in Europe: Technology, Services and Customers — is available here.