Facing a landscape of changing trends, telcos need to reinvent themselves to stay relevant. Innovation is important, but so is having a growth mindset that understands where the overall industry is headed, and what telcos will need to get there.
In Part 1 of a special three-part series of interviews about driving growth mindets in telecoms, Mei Lee Quah, director of ICT Research at Frost & Sullivan, speaks with Shirin Esfandiari, senior product marketing director at Oracle Communications.
Esfandiari outlines the challenges telcos face in adapting their mindset to the new paradigm of complex ecosystems, and why cloud-native architectures and automation are critical components to taming that complexity.
Diverse ecosystems are the future
Mei Lee Quah: What are your thoughts on the “build it and they will come” approach? Is it suitable or sustainable as we head into the future with 5G?
Shirin Esfandiari: For the longest time, everything – the whole economy – was organized across traditional industry lines focused on one value proposition for one type of client across one value chain. However, this is breaking up and getting reorganized to meet customer needs. Customer needs no longer follow traditional industry lines and enterprises are looking for solutions that cut across industries and value chains for a truly integrated customer journey.
As such, they are not looking for 5G, AI, edge and slicing technologies. This is truly an ecosystem model, whereby ‘ecosystem’ refers to partnering with other companies that can at times be from very different sectors to create a truly integrated customer journey.
Most ecosystems will not be ruled by one large company. This is not what customers want. This is not what stakeholders or regulators want. Most ecosystems will be orchestrated by a partnership with many partners taking different roles. According to a recent McKinsey & Company study, over the past two years, $8 trillion has moved into ecosystem players. The markets are expecting to see early movers grab a large part of this future value because in this new ecosystem, the key success factor is no longer market share — it is customer ownership. Therefore, a one-size-fits-all approach is no longer sustainable.
Cloud-native is a strategic imperative for telcos
5G standalone (SA) is not just about mission critical, low latency machine to machine (M2M) applications. 5G also drives programmability into the core of the network, which is what drives automation and insight-based decisions enabled by analytics. Cloud-native network operations are becoming a strategic imperative for telcos as these capabilities provide laser focus on accountability by introducing more measurement, visibility, and observability.
Combined, they enable business decisions based on customer behaviour and insights, which are a requirement for intelligent automation and a critical pillar for customer experience (CX) improvements. Collectively, these new capabilities form the fundamental pillars that will help telcos look from the edge inwards helping them move away from a “build it and they will come” model.
Why is there so little disruption in the telecoms industry? What can telcos do to drive disruption?
There are telcos out there that are disrupting in ways not traditionally recognized as disruption. An example is DISH Network in the US with one of the first truly cloud native Open RAN 5G SA network, albeit a fully greenfield deployment.
Some challenges holding the industry back include the need to go beyond the traditional business and operational model, a skillset shortage that hampers the adoption of new practices for automation and analytics, and delivering a frictionless experience for partners and customers alike within cost-efficient and revenue-generating partner ecosystems.
5G commercialization dilemma
Why has there been so little progress with 5G commercialization?
As an industry, we have spent decades and trillions of dollars building networks to support growing consumer demand for broadband and evolving services. Having known we have saturated the customer base, the industry had the insight to build 5G specifically with the objective to support the enterprise segment with massive-scale industrial IoT.
People are working on solutions to completion, and industries are being transformed post-COVID-19, but progress with 5G commercialization has indeed been slow. That’s pushing stakeholders to ask where the killer applications are.
The dilemma stems from the current industrial IoT ecosystem, and – perhaps more importantly – the future potential whereby the universe of possibilities is simply too vast and diverse for there to be only answer. A recent IDC report forecasts that by 2025, there will be 55.7 billion connected devices through global IoT platforms – in the same year, these connected devices will generate 50 times the data of the consumer internet. The data generated globally in the next three years will be greater than the total data from the past 30 years! No one application can drive that kind of scale.
Use cases telcos should prepare for
The answer to how to seize this opportunity is to build networks that are capable, flexible, and efficient enough to support a vast array of different services i.e., from small scale to hyper-scale, and build an organization around it that can react at light-speed to deploy new capabilities to cater to new opportunities as they arise.
While most connections on mobile networks today still facilitate human-to-human communications or consumption of streaming media, the use cases that telcos should be preparing for lie within diverse enterprise and industry 4.0 opportunities. These use cases will require cloud-native architecture that is fully automated, scalable, and distributable. Although telcos are transitioning towards this end, ultimately, striving towards fully automated without cloud-native does not make sense.
Also, where 4G was about connecting humans, 5G is about connecting our society and the world, which demands a different standard of networking. In the past, a lot of data was collected, but it wasn’t helping with on-the-fly insight-based business decisions. With 5G, image processing and analytics technology can help achieve this.
What’s needed to move the needle
However, bottlenecks have slowed down progress. As telcos have traditionally struggled with understanding what is needed in the market, they are often not the first ones to go out to enterprises to say they understand what is needed and have the solution. Telcos often try to solve problems with technology – which is what they do best – but not all problems need the bells and whistles, which makes the solution out of whack in terms of effort and cost.
Separately, IT companies coming from software development backgrounds see a lot of ways to improve things with 5G that don’t need telco support. There is now a skew towards more innovation coming from non-telcos. But having said that, opportunities remain for telcos, as they have the enterprise relationships in place built on trust from having supplied communications services over the years.
What’s really needed to move the needle is telcos finding the right partners to help them understand the pain points and challenges of vertical industries to address the underlying problem statement. We are seeing some examples of this having gone to market but there are still too few examples to convince stakeholders of progress.
The ‘innovation conundrum’
Lately, I see a lot of telcos focusing on automation. What’s driving the need for telco automation, and what are telcos hoping to achieve?
5G is an ecosystem play, and ecosystems imply complex diverse environments where 5G networks need to serve. Even today, the reality is such that there are multiple spectrum bands, different RAN architectures and diverse business models. A recent industry brief referred to the current situation as the “innovation conundrum”, and the situation exists because the value of 5G depends on the diversity of open-source multivendor best-of-breed technology to enable network and business compatibility.
For a start, there are more individual functions in a 5G core (5GC) network than in a 4G evolved packet core (EPC). The use cases that a 5GC needs to support can comprise of up to thousands of locations and, potentially, up to millions of end devices if we’re talking about supporting IoT use cases. There’s no doubt that 5G networking has become complex. Future networks may face even more complexity. The more complex the problem, the harder it is for any one player to have the optimal answer to every scenario.
What brings the value of 5G will be the complexity of three or four different and diverse bands of spectrum, three or four different RAN architectures operating in the network, and diversity in the evolution of the business model. Business models can range from unlimited service and simple for consumer to metered service for selected high-value IoT applications. More advanced business models include the potential to charge for the relationship.
Automation requires culture and operational change
In ecosystems, the successful deployment and management of various 5G SA edge computing use cases, services, and applications will require an evolved level of intelligent context-aware automation and real-time correlation of networks, services, and application resources. Automation is the only way to operate cloud native architecture.
I believe that effective automation combines the right architecture and open-source tooling with network data and customer insight. The steps to get there include getting the basics of cloud-native – starting with testing – then continuous integration and continuous delivery/continuous deployment (CI/CD) and automation.
For telcos, this is more of a culture and operational change than a technology challenge. Previously, with 4G, the big challenge with automation was having to solve all the vertical components of the stack and attempting to automate a 3G/4G on-premises network. To do this, you had to have some degree of autonomy around the physical infrastructure and the virtual infrastructure, then you had to put on top of that the actual autonomy at the network function layer, and then you would find yourself in the inevitable multi-vendor situation at functional level while at the mobility level, you were likely going to have different vendors. This was a very complex automation layer to stitch together.
Future success of telcos depends on automation
Now with 5G, automation can be done more easily than with 4G. Cloud-native architectures offer environments that are already automated, since all hyper-scalers have these capabilities available out of the box. The telco no longer needs to stitch together automation at the different layers of the stack and then try to make them all work together.
But at the same time, these automated hyper-scalers are increasingly competing against telcos, especially for the enterprise services and value add areas such as IoT. The only way that telcos can compete will be to step up their game and leverage automation when it comes to things like security, operations, services, and agility.
The future success of the telecoms industry depends on telco automation. Automation creates a more agile approach for the business, and can shape strategy. If telcos don’t have the right level of programmability, then they don’t have the capability to leverage when exposing services.
It has never been so important for telco business development and network people to be in tune. Both need the same level of understanding of how automation can help them, and both need to be in sync and empowered to have the right incentives and culture. Getting the architecture and data right within the network means that telcos have a stable place on which to build 5G networks, identify new business opportunities, and unlock business value.
Shirin Esfandiari, senior product marketing director at Oracle Communications, is an expert in marketing and sales enablement, customer program management and sales consulting. As part of her current and past roles, she engages with telcos, service providers and partners around the world.
Dive deeper: F&S is hosting an on-demand webinar on Wednesday, March 8 titled “Innovation in Telecommunications: Driving Growth Mindsets”. You can register for it here.