neXt Curve attended the premier global event for digital transformation in the telecommunications industry – Digital Transformation World 2019 – held from May 14th through May 16th and hosted by TM Forum. Leading vendors and operators converged in lovely Nice, France to discuss what it will take help the telecom industry reinvent itself and aid operators in becoming digital service providers. Now that 5G has arrived in select markets around the globe, the pressure is on for telecom operators to transform their operating models to capture the value promised by the next generation network.
Here are our key takeaways from our coverage of Digital Transformation World (DTW) 2019:
Digital transformation for telecom operators is table stakes for 5G
According to Nik Willetts, CEO of TM Forum, the next 3 years will be the most important for the telecommunications industry as they face the competitive driver that is 5G. We could not agree more. Traditional models of operating a telecommunications business will no longer be sufficient to capture the first-tier value of 5G realized through dramatic improvements in cost-efficiency thanks to the virtualization and “cloudification” of the network.
The transformation of the network needs to be in lock step with the reinvention of the telecom operator’s operating model and ultimately their business model. TM Forum’s research indicates that 72% of 5G opportunities require a radical rethinking of the operating model, but have operators appropriately considered the dramatic changes they will need to make to operate 5G networks and deliver the innovative new services on top of the new network? How do operators go from the 18-month average concept-to-cash cycle to 18 days that could be potentially realized via a “digital” operating model?
This year, TM Forum introduced the Open Digital Framework which lays out a blueprint for an operating model attuned to delivering digital services on the 5G network We had a chance to sit down with Andy Tiller, EVP of Collaboration & Innovation at TM Forum who explained that the Open Digital Framework was developed in collaboration with TM Forum members to help operators accelerate their digital transformation while establishing a standard operating model template to foster process interoperability and ecosystem partnering.
The rise of the “Under the Bottom” telecom disruptor is nigh
Once of the big headlines coming out of Mobile World Congress 2019 this past March was Rakuten and their ambition to become the first Cloud-native network operator. They represent an emerging class of threat to the traditional telecom operator that brings a new, IT-oriented mindset to the game as well as a disruptive cost structure. According to Rakuten’s CTO, Tareq Amin, Rakuten is able to deploy 5G network infrastructure for one-third of the investment of incumbent telecom operators. With a virtual lack of legacy infrastructure to hold them back, Rakuten claims that they were able to stand up their 5G mobile networks in an impressive 8 months. Impressive but frightening at the same time.
From an operational perspective, Rakuten is taking a fresh approach to the management, delivery and monetization of network services as well as the software-defined network infrastructure that these new network services run on top of. Rakuten has been able to apply Agile and DevOps practices to the operation of their network as well as accelerate the development and go-to-market cycles for new network services enabled by a 5G-oriented OSS/BSS platform courtesy of Netcracker. Rakuten is betting on their IT-oriented operational mindset and culture to drive shorter cycles of product/service innovation and rapid monetization of new services delivered on their Cloud-native mobile network.
Rakuten should be a warning sign for the telecommunications industry as 5G technologies bring about an inevitable dynamic that neXt Curve calls the Under the Bottom (UTB) phenomenon. UTB is exemplified by OTT (Over-the-Top) and adjacent market players investing in spectrum and new digital network infrastructure to challenge the traditional telecommunications business model with a disruptive digital one. We can expect others to follow in Rakuten’s footsteps as spectrum auctions continue globally. It will be interesting to see how the new economics of the native-5G operator plays out in developing markets that do not carry the legacy luggage of advanced markets such as the United States, Japan and the EU/UK.
Investment in 5G may be outpacing business & operational readiness
5G is not just about massive M2M communications (MMTC), or ultra-reliable low-latency connectivity (URLLC) or enhanced mobile broadband (eMBB). For operators, 5G will also entail significant changes in the business and operations of a telecom service provider. But, according to our panel of interviews with leading OSS/BSS vendors, operators are generally slow to change their operations as they focus on the modernization of their network infrastructure and their operational technologies and tools for 5G. This begs the question, are operators ready for the dramatic changes that they will need to undergo as an organization, as a business and as an industry to capitalize on the 5G opportunity?
What is keeping operators at bay from readying their organizations for 5G? The general consensus among operators according to TM Forum research is that culture is the primary barrier to digital transformation. However, in our observation through briefings and meetings with leading operators in attendance at DTW, leadership appears to be the more critical element that is difficult to come by; essentially, the commitment by the organization to overhaul its conventional telecom service provider business into a digital service provider business. In our view, cultural change happens as an organic response to leadership – in this case – change leadership.
So, what is an operator to do to inspire and realized the commitment to change needed to be 5G-ready? neXt Curve spoke with executives from Amdocs, Netcracker, Sigma Systems and Nokia about the importance of advisory services needed to guide traditional operators through uncharted waters from where they are today to where they need to be in order to play in the 5G future. Technology vendors will have an increasingly vital role in driving the innovation and thought leadership needed to reinvent the industry operator by operator beyond the status quo. The operators are depending on their technology partners, but they need to deliver. As Elissabetta Romano, CTIO of TIM put it, “Don’t just talk about Cloud-native. Give me Cloud-native solutions!”
Network slicing is cool, but will it help telecom operators innovate?
Network slicing is a great capability that software-defined networks and radios bring to operators to improve the utilization of available spectrum and network capacity while enabling the configuration and delivery of granular, bespoke network services. All these benefits come with increased complexity driving the need for new models and tools for orchestrating and managing network resources and services. But will these new capabilities and new investments address the elephant in the room? According to GSMA research, demand for data will quadruple by 2025 with operator revenues expected to grow only 1 percent over the same time period.
One of the big innovation themes for DTW 2019 was the idea of ecosystem sharing that will bring about new business models that operators will need to monetize their 5G investments while creating new revenue opportunities through partnerships yet to be imagined. We were particularly thrilled to see the Catalyst work that Orange and Vodafone commissioned that was developed in collaboration with Infosys and Nokia that showcased the application of Blockchain technology for a telecom infrastructure marketplace where excess network resources and capacity could be brokered and transacted between operators. According to Orange, the goal of the Catalyst was to prove that a trusted, inter-operator platform could be designed and implemented to foster the sharing of resources and the cost of deploying 5G.
The operational systems of a digital service provider will require new capabilities that enable zero-touch provisioning and binding of network and digital services to devices and customers that simplify the entire experience of discovering, configuring and purchasing a service or connected product. Cognizant shared with us some of the innovative solutions they have developed with sponsorship from Telefonica to help operators innovate beyond their core and create vertical marketplaces that they host or operate for their enterprise customers. Cognizant’s 5G Profitable Lifecycle Catalyst demonstrated a digital marketplace platform that enables the dynamic configuration, provisioning and monetization of products and services across industry vertical applications and digital services providers and partners. Digital marketplaces look like they will be hot topic going forward and important in enabling operators to capture upstream and vertical industry market opportunities.
AI has the potential to optimize the status quo but is still immature
AI is very hyped with everyone claiming to use some form of AI for one thing or another. It has become a black box of marketing with little to back up assertions of grand AI value once you dig under the covers. What we continue to see in most instances of AI applications amount to nothing more than scripting and rules-based decision trees that we have lived with for years. The substantial uses of machine learning and deep learning are limited today and most telecom service providers and vendors are generally on a learning curve to deliver the lofty promises of AI. But that’s okay because we are still in the early days of AI and most telecom service providers have many other “digital readiness” issues to resolve and capabilities to build out across their software-defined networks before they need to worry about AI-driven competitive differentiation.
While we continue to suffer from AI fatigue there are innovative ideas emerging that are focused on enhancing customer experience and optimizing future 5G networks. The Catalyst spearheaded by Wipro and Amdocs and sponsored by Verizon and BT entitled “5G Optimized Capacity & E2E Experience” piloted a solution for closed-loop orchestration of network slices that could help operators manage the complexity of 5G virtual networks and ensure service quality. While this Catalyst and others demonstrate the potential for ML applications to optimize future 5G networks and operations, they are pilots that highlight the benefits as well as the challenges of realizing capabilities that operators will need to operate, scale and monetize the next generation network. We are excited to see how AI applications mature going forward as operators roll out 5G networks across the globe.
Automation and contextual awareness are key to scaling 5G services
5G will introduce a whole new level of complexity to the network, operations and business model of telecom operators. The benefits of a software-defined network will require intelligent automation of network operations, the orchestration of network functions as well as customer-facing services. Based on our briefings with leading OSS/BSS vendors, automation was consistently cited as vital for operators to realize operational efficiency and scalability as well as the flexibility to compose and deliver new network services.
While automation can be achieved in a number of ways including through AI-enabled closed-loop automation (CLA), a critical prerequisite for achieving autonomous networks is the establishment of contextual awareness of the network both from physical and virtual perspectives. Real-time contextual data through network, service and security monitoring will enable the intelligent network that is one of the key aspirations of operators and an unsung promise of 5G.
Automation and a contextually-aware network will also benefit operators on the innovation front. According to Akshay Sharma, the application of advanced analytics and machine learning in DevOps and production environments will allow operators to feed security and quality issues back into the product/service development lifecycle thus enhancing the service innovation and continuous service improvement capabilities of the organization. In essence, DevSecOps will evolve into AIOps (AI-Enabled DevOps). We will see if this idea catches on next year in Copenhagen.
Implications for Business and Technology Leaders
5G is here but the work is just beginning. While most of the oxygen in the room is being consumed by the ITU’s three pillars of 5G (eMBB, URLLC and MMTC), 5G is also about dramatic changes in operating and business models that will be required to realize the operational improvements and enable the service innovation that operators will need to get a return on their 5G investments. Each operator will have a unique 5G journey. Success will depend on a truly holistic, tailored approach for transitioning to a 5G future. Operators should find technology and advisory partners who see the big picture and are willing to tailor their services and support to the nuances of the operator’s business and their network.
TM Forum and contributing members have evolved the organization’s library of frameworks, architectures and methodologies to help traditional telecom operators make the transition to becoming a digital service provider in the 5G era, but this will not be enough. Operators need to recognize that the telecommunications industry in the next decade will become an unfamiliar landscape as new, unencumbered entrants such as Rakuten, Google and Space X enter the market and capitalize on the democratizing side-effect of 5G technologies.
For traditional telecom operators, 5G is not about transformation. It is about the reinvention and reimagining of the business of telecommunications. A conventional transformation roadmap based on conventional, siloed thinking is not going to cut it. Not by a long shot.
For more insights, our picks for “tech that matters” and neXt Curve’s predictions for 2020, check out neXt Curve‘s Podcast Channel and the replay of our webcast.
Contact us if you would like a detailed briefing of our analysis of the DTW 2019 event and to find out more about neXt Curve‘s advisory services.
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Managing Director, neXt Curve
Research & Advisory Fellow, neXt Curve
May 31, 2019
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