5G, IoT and Edge Driving Telcos to Adopt Platform Architecture
A key theme in the telecom market is that the growth of 5G, IoT and the Edge network is driving telcos to consider new platform architectures and ecosystems to deliver the right solutions for customers. Telcos are looking for smarter ways to monetize their network data and create value beyond connectivity as we move towards an increasingly connected world.
Increased connectivity also increases the amount of data that telcos must support. IDC Global DataSphere Forecast data generated and consumed projects will grow by 26% to over 142EB by 2024.
To support massive data growth and successfully monetize adjacent services, telcos must embrace intelligent automation, containerized architecture, and cloud-native principles to modernize and simplify operations for business agility and faster time-to-market. This is facilitated by cloud platform solutions that can scale according to the demands and requirements of the ever-changing market and requires a new class of digital ecosystem partnerships.
Revenue growth through programmatic networks
Telcos are at different stages of their journey to become cloud natives around the world. Some are aggressively pursuing a cloud-first strategy, while others are taking cautious on-premise steps with a hybrid cloud focus.
Most telcos have taken a pragmatic approach and migrated from legacy and network functions virtualization (NFV) platforms to container-based, cloud-based platforms. These advances are driven by low cost of ownership and flexible network scalability.
Cloud-native network functions (CNFs) are increasingly deployed alongside virtual network functions (VNFs) so that customer-facing services can be scaled, upgraded, and easily orchestrated. However, the vast majority of telco cloud workloads still use VNFs, and we expect overall telco cloud software spending to increase. From $7.5 billion in 2020 to $29.0 billion in 2025 at a CAGR of 30.9%.
The convergence of cloud and compute, storage, networking, and edge enables CSPs and enterprises to offer their customers a completely reimagined user experience. Telco cloud transparency and programmability enable further industry collaboration – Vodafone merged with AWS in 2021 deploying Europe’s first public multi-access edge computing (MEC), providing a platform for application developers to deliver low-latency use cases at the very edge of 5G networks from the full breadth of AWS cloud services.
This has enabled AWS Wavelength customers to explore new business opportunities, build applications and services that were previously impossible, and transform the user experience. Unlocking 5G revenues will also depend on a major shift toward more flexible operations and monetization systems.
Across EMEA, particularly in Europe, partnerships between telcos and public cloud providers to support OSS/BSS deployments are strengthening as operators seek to implement deep digital transformations to drive revenue growth. Examples from the first half of 2022 are included Vodafone and Oracle deal in June 2022 migrating many IT systems to Oracle Cloud Infrastructure and BT’s five-year deal with AWS In May 2022, the telco announced that it was looking to modernize its IT infrastructure.
Three Emerging Business Models for Telco Cloud
The relationship between telcos and their cloud/technology partners is complex and still evolving. CSPs are still refining their network transformation and roadmaps, while having to decide between working with public cloud providers and using their own private network cloud solutions.
We’ve seen three business models emerge between CSPs and cloud providers:
- Outsourcing back office and IT functions: CSPs handle back-office operations such as billing, service management, and customer relationship management in a public cloud environment.
- Enabling Service Channels, Partnerships and Application Creation: Telcos and cloud providers generally work together to deliver end-user services (sales model) to enterprise customers.
- Migrating Network Loads: This includes moving the core, RAN and other critical network components of the telco to the cloud.
Of the three business models, telcos using the cloud to carry network workloads are the newest and most risky. This model is the main focus AT&T has announced that it will use Microsoft Azure to deploy its mobile core network.
The goal of this move is to enable AT&T to migrate core 5G workloads to Azure as AT&T continues to become a cloud-based 5G mobile operator. AT&T isn’t the first mobile carrier to do so — DISH has already announced plans to work with AWS to host its network functions.
The difference here is that AT&T has a traffic-fixed network and DISH is a greenfield network operator. Outsourcing core network competence requires significant trust and confidence between the carrier and the cloud provider, as any significant outage or intrusion can adversely affect operations and significantly damage the carrier’s business reputation.
To provide market-relevant 5G solutions and drive revenue growth, telcos must move beyond connectivity and focus on delivering results. The deployment of the 5G core will further reinforce the importance of the cloud platform solution, as the standard defines service-based architecture (SBA) and implements IT network principles with a cloud design approach.
These deployments will continue in 2020 and continue into 2022 and beyond.
What’s next for European Telcos
Telcos are increasingly adopting distributed, cloud-native architectures mixing bare metal, Kubernetes containers, and IaaS solutions as part of their next-generation network deployments.
Our 2022 IDC Telco Transformation Survey We’ve listed the cloud and cloudization as the top transformational action for CSPs to take on their journey to becoming a DSP, and we’re seeing telcos adopt new methodologies, practices and tools to underpin their cloud-focused digital strategies. These strategies also depend on what they believe is best in class to meet their expectations.
This requires a complex web of alliances and partners, from legacy vendors to hyperscale cloud providers and other software vendors. Although there are challenges to overcome, there are many technological, commercial and strategic advantages to be achieved.
IDC’s Telco Digital Summit, on November 22, we will consider these topics in more detail. The summit will feature leading analysts and senior executives from Europe’s telecoms industry and will feature keynote speeches from industry leaders to help attendees navigate the storms in the European telecoms market.
This is the second blog in IDC’s Telco Digital Summit Series. First Blog – How telcos are changing in Europe: technology, services and customers – available here.