Agility has been an over-used word in telecoms, but its true meaning focuses on the speed at which direction can be changed and actions taken. For telcos, that means the ability to rapidly pivot and bring new service offerings to market. This can’t be done at the traditional telco speed, measured in months. New offerings have to come to market quickly to preserve competitive advantage or to defend against the new launches of others. Telcos need powerful, flexible platforms for agility and these can’t be replications of traditional monolithic systems, they must be infinitely scalable, feature rapid adaptability and have sustainable costs to serve telcos’ new needs, writes George Malim.
The good news is that cloud-native, software-as-a-service (SaaS) platforms for business support systems (BSS), such as Amdocs connectX, CSG Ascendon, MATRIXX Software’s Digital Commerce Platform, Netcracker Cloud BSS, Totogi Wholesale BSS and many, many more from vendors large and small, are being adopted and bringing true agility to telcos. The availability of these platforms comes as telcos are becoming truly agile, harnessing new platforms to enable ultra-fast service and offering launches. There is significant positive momentum in the telecoms industry as new services, enabled by AI, increased automation and improved multi-party business models start to enter the market.
The revenue generation benefits of these could be transformational to telcos’ financial performance, turning them from commoditised utilities into companies with margins closer to consumer technology and web companies. For now, that is a distant dream but putting the right infrastructure in place – not only from a network perspective but also from an IT and operational perspective – creates the foundation for telcos to compete and make themselves indispensable in these new market opportunities.
Warm-up exercises
Analyst firm IDC has reported that AI and application programme interface (API) monetisation are expected to become major revenue contributors. The telco AI market is projected to grow from US$235 billion in 2023 to $632 billion by 2028, capturing 6% of global AI spending. Tapping into that market comes with significant complexity and telcos will need to be able to enable and understand what is happening in their networks.
It’s not too great a stretch to see a situation in which a telco’s customer’s customer has an AI tool that requests network functions to support its activity from the telco. In that scenario there are two fundamental considerations – is the AI tool authorised to request that function? And, who will pay the telco for service provided? Modern, agile BSS needs to accommodate that and fully integrate with provisioning to enable and charge for the service.
Opening of application programming interfaces (APIs) will be an important enabler of these new models and multi-party business flows that will become routine. Juniper Research sees innovations, such as rich media messaging and conversational AI, representing 32% of operator revenue from APIs by 2027, for example.
IDC forecasts that the telco API market is forecast to reach US$6.7 billion by 2028, expanding at a 57.1% CAGR, with significant contributions from the Americas (US$2.7bn), Europe (US$1.9bn) and APAC (US$2.1bn). Industrywide initiatives such as the GSMA Open Gateway, which is supported by 67 mobile operator groups across 265 networks and covers 75% of global connections, highlights the strategic importance of API-driven revenue growth.
Consulting firm McKinsey also sees a glittering opportunity for telcos. It estimates that the network API market could trigger new spending by telco customers on connectivity and edge computing-related activities of US$100-300 billion over the next five to seven years. The open APIs themselves are set to generate an additional US$10 billion to US$30 billion. It won’t all be plain sailing; operators won’t have these new and lucrative opportunities all to themselves.
Through the pain barrier
McKinsey warns that the current market structure could see two-thirds of the value creation opportunity being lost to others, such as cloud providers and API aggregators. It’s therefore essential that operators change their approach to the market and ensure they build-in the agility they need to not only compete today but to have the flexibility, adaptability and elasticity to move into new markets as soon as they emerge.
It’s an oversimplification to suggest that telcos can simply junk their traditional operating technologies and blithely enter a frictionless era of as-a-service, cloud-based management technology. Few will be able to leapfrog a technical generation and retire their old systems and move to agile, cloud-native SaaS environments in one fluid motion. Instead, elements of new technologies are being introduced to support new business models alongside legacy technology.
That’s typical for telcos but the pace of the transformation from monolithic to agile IT is accelerating, largely because of AI and its demands. There’s a real need for telcos to pick up the pace and, for the first time in a long time, stakeholders can go to the CFO with a business plan that justifies investment with new revenues and profits.
Juniper Research has signalled that CFOs see the need to invest. The firm has found that operators are set to increase their annual investment in AI to US$22 billion by 2029, rising from US$13 billion this year. The firm predicts this substantial increase of 62% will be driven by operators’ targets of achieving zero-touch operations within their cellular networks. Zero-touch operations significantly minimise or eliminate human intervention in network operations.
Build core strength
To get there, telcos are not in the strongest position. They have struggled with mobile market saturation, declining margins and other organisations cherry-picking the most lucrative markets. This has led to lack of investment in systems and preparation for the new market dynamics. There is an element of playing catch-up.
Consultancy firm Accenture has reported in a recent survey that, while 59% of telco executives admit that the widespread availability, easy access and advanced functionality of today’s AI provide CSPs with great potential for innovation and growth, they face an urgent need to reinvent themselves. The firm says that many CSPs are still struggling with legacy systems and technical debt with 56% of their IT costs being due to outdated systems, which limits their agility and raises operational expenses. Modernising their digital core is now becoming essential to gain agility and increase viability, and therefore to fully make use of AI.
Telcos are devoting a lot of thinking time to repositioning themselves for new opportunities. Like athletes, they recognise that agility is built up from regular effort and training. It’s not something that is achieved overnight.
The fat-burning phase
Their focus has been on optimising their operations, right-sizing and looking to enter the new arena, match-fit, lean and ready to compete. AI is one of their levers here and consultancy Kearney says that in 2025 and beyond, telcos will continue to optimise costs via several avenues including downsizing, using AI to gain efficiencies, simplifying products, optimising their sales channel mix and better managing capital expenditure.
Based on a recent Kearney Global Competitive Benchmarking analysis, 60% of telcos have downsized in the past decade, with a 14% average decline in the number of full-time equivalent (FTE) staff between 2018 and 2023. IT was the only department where headcounts increased over this period as telcos have recognised that new digital solutions need more employees to support them.
AI is also set to play a significant role in reducing costs, the firm says, as telcos deploy AI-powered sales and service tools, use AI-driven analysis to optimise customer marketing and interactions, and automate vast amounts of time-consuming manual work. While telcos downsize and integrate AI technology, many – including Deutsche Telekom and Telstra – are also establishing multi-year product simplification strategies to cut down their costs. What’s clear from their efforts to date is that customer migration planning and execution must form a major part of these strategies. Otherwise, telcos may not reap the potential benefits, such as reduced expenditure or improved employee productivity without a decrease in retention, Kearney warns.
The next stage of adoption according to IDC will integrate task-specific AI agents to further enhance efficiency, streamline operations and optimise service delivery. Nevertheless, significant challenges remain to be overcome. IDC’s 2024 Future Enterprise Resiliency and Spending (FERS) Survey highlighted that these include security risks which are the primary reason for GenAI project delays or abandonment (selected by 43% of respondents), while project costs rank lowest (selected by 10%).
Telcos are utilising 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 service and network operations centre (SOC and NOC) collaboration enhances user experience assurance. On the customer experience side, GenAI is improving BSS knowledge sharing, lead generation for enterprise markets, intelligent service recommendations and complaint handling, IDC says.
Full cardio workout
The CFO recognition that results can’t be achieved without investment is feeding through to the systems telcos need to achieve agility. It’s a no pain, no gain situation in which the necessary investment must be made to deliver results. Significant additional investment in telco IT is underway and analyst firm Analysys Mason has predicted that telcos’ spending on SaaS for OSS and BSS is set to increase to US$15.8 billion by 2028.
The firm says that telcos’ spending on SaaS solutions and related services indicates that the market will continue to grow at a CAGR of 18.4% between 2023 and 2028. This spending is expected to account for 20% of CSPs’ overall spending on operation support systems (OSS) and business support systems (BSS).
Consultancy Deloitte also predicts that the combined OSS and BSS market will be worth US$70 billion in 2025, with cloud-based solutions, APIs and a unified, service-centric model leading the way. This push towards modernisation could accelerate growth and offer telcos greater efficiency, enhanced security and deliver better customer experience, the firm says.
Witness the fitness
The preparation phase for enabling AI-related services and offerings, for opening up APIs and monetising them and for providing a scalable, secure yet flexible platform for new business models has been an intense work-out for telcos. Repeat sessions are necessary both to build muscle and maintain condition.
The efforts that have been made so far are starting to pay off, though. Telcos have greater flexibility and agility and are developing enhanced stamina to fend off the competition and make an impression in new markets. The prizes will soon be earned. GSMA Intelligence, for example, has reported that operators have an addressable market of more than US$400 billion in the enterprise sector through selling B2B technology services. Current core telecoms services provided to businesses, such as SD-WAN, unified communications and mobile voice and data contributed approximately 70% of B2B revenues in 2023 but offer limited growth with a CAGR of 3% expected between now and 2030. In contrast, enterprises spent US$1.16 trillion in 2023 on technology services across cloud, datacentres, cybersecurity, IoT, analytics, AI, blockchain and network APIs. These services have a predicted CAGR of 14% in the period to 2030, by which time the market will be worth US$2.91 trillion.
Agile telcos are able to pivot, flex and extend into this market, taking a greater share of growing sectors. They are using their streamlined architectures to accelerate into opening markets and their technical strength to defend and enlarge their presence in established, high-margin opportunities.
George Malim