5G and IoT are main drivers to telcos’ digital transformation

Photo by Mario Caruso on Unsplash

 

Nearly 70% of leading telco  said that 5G and Internet of Things (IoT) are the most important emerging technologies driving their digital transformation over the next five years, according to the latest EY report, Accelerating the intelligent enterprise.

Other emerging technologies that are pushing forward the industry’s digital transformation journey include automation (62%) and AI (58%).

However, according to the report, the telcos’ current use of digital technologies is heavily weighted toward customer-related rather than network-related gains. And while telco leaders are optimistic about the promise of digital transformation, but there is a lack of synergy in the application of emerging technologies at the network layer.

“While the network accounts for the lion’s share of industry investment and operational expenditure, telcos continue to focus the power of emerging technology around the customer,” said Tom Loozen, EY global telecommunications sector leader. “It is now critical that they take a holistic approach to the adoption of AI and automation by shifting their investment priorities and applying greater focus to use cases in less advanced areas like networks.”

The results of the EY report showed that nearly half (48%) of respondents said improving customer support is the main catalyst for adopting automation, while 96% said customer experience is the main driver for analytics and AI use cases over the next five years. Only 44% see network-related use cases as critical during the same timeframe.

Telcos must tweak current approach

The report found that the current approach to emerging technology adoption is out of sync with telcos’ long-term ambitions. Seventy-six percent say IT and the network are most likely to benefit from improved analytics or AI capabilities over the next five years, despite their reluctance to move beyond customer applications. This disconnect is echoed by the views of nearly half (46%) of respondents, who believe that a lack of long-term planning is the biggest obstacle to maximizing the use of automation.

Inadequate talent and skills is also cited as a key barrier to deploying analytics and AI, according to 67% of global industry leaders surveyed, while a third (33%) cite poor quality data.

“Migration to 5G networks and the rise of the IoT means the pace of evolution across the telecoms industry is rapidly accelerating. Operators have no choice but to transform if they are to remain relevant to consumer and enterprise customers, and achieve growth,” Loozen said. “To succeed in this environment, they need to take a long-term view of emerging technology deployment and create a more cohesive workforce that thinks and collaborates across organizational barriers.”

The imperative for telcos to be bolder in their approach to digital transformation and innovation is highlighted throughout the report.

Nearly all respondents (92%) admit they need to be more agile to realize transformation gains, while 81% agree that they should adopt a more experimental mindset to maximize the value of analytics and automation. As the choice of emerging technologies and processes continues to widen, most respondents (88%) also believe that their organization requires a better grasp of interrelated digital transformation concepts.

In the next wave of telecoms, are bold decisions your safest bet?

Telecoms must transform to remain relevant to consumer and enterprise customers. Our survey findings explore priorities and next steps.

The global telecoms industry landscape has been changing rapidly for many years. But today, the pace of evolution appears to be faster than ever before. Migration to 5G networks, growing use of evolving technologies, such as automation and artificial intelligence (AI), and the rise of internet of things (IoT) applications, are coinciding with intensifying competitive and regulatory pressures.

The result is that operators have no choice but to transform if they’re to remain relevant to consumer and enterprise customers. It’s clear the major driver for this transformation is digital technologies. The only question now is how to plan and navigate the transition successfully.

Accelerating the intelligent enterprise, EY’s global telecommunications study 2019, monitors and evaluates the views of leaders across the global telecommunications industry.

Information technology (IT) spending continues to shift to digital …

As telcos’ 5G investments ramp up, the complexion of IT spend is also changing as they overhaul their IT estate to lay down a solid bedrock for digitization. The next few years will see the balance shift decisively from conventional IT to digital, which includes new cloud infrastructure, edge-computing systems, content delivery networks (CDNs) and other elements. This will account for over four-fifths of IT capex by 2024.

… as emerging technologies power the transformation agenda

At the same time, emerging technologies, such as AI, analytics and automation, are critical to serving customers’ rising expectations while delivering greater levels of agility and operational efficiency. EY research on the announcements made by the top 50 telcos worldwide by their revenue shows that adoption of analytics capabilities is in a mature phase, with automation initiatives ramping up in 2018 to play a complementary role.

Despite progress, profitable growth remains challenging. Overall, the telecom industry’s digital transformation is yet to be translated into sustainable financial gains. Revenue growth has fluctuated over the last 10 years, while earnings before interest, tax, depreciation and amortization (EBITDA) margins remain low compared to the previous decade.

Over the past three years, operators’ aggregate revenue has increased at a compound annual growth rate (CAGR) of 3.7%, while EBITDA margin has risen by just 0.6% over the same time frame. Given that ongoing investment in network expansion is a necessity, the underlying task facing telco leaders today is to find a way to break out of this holding-pattern of continuing profit pressure.

Chapter 1

Five key findings

Based on our survey results, we’ve identified some areas where digital transformation and adoption of emerging technologies resonate most strongly.

1. AI, 5G and automation are the key technologies driving digital transformation.

IoT or 5G networks, automation and AI are identified as the key drivers of change by the survey respondents when they were asked which emerging technologies and processes would be most important in driving their organization’s digital transformation journey over the coming five years. More than half of respondents ranked them one of their top three transformation drivers.

It’s clear that the transition to 5G is viewed as a fundamental game changer, with AI and automation not far behind. Automation will have a fundamental impact on both the customer experience and the back office.

“5G moves IoT from being a data network to being a control network. The network becomes more predictable and you can control things, and 5G helps move this control into the cloud. It is vital to resetting the value of the connection.”

However, other emerging technologies are at a much more nascent stage, with less than 1 respondent in 10 mentioning blockchain, and less than 1 respondent in 20 citing edge computing or quantum computing.

While there are hopes that blockchain may be valuable in helping to overcome issues around data and asset ownership, as telcos form more vertical industry partnerships, the general view was that its applicability in telecoms isn’t yet clear. Edge computing’s low score may be more cause for concern, given its role to enhance data processing and storage in a 5G world.

2. Customer experience improvements are the top rationale for AI, with agility the key driver of automation adoption.

Zeroing in on the importance of AI and analytics to telcos’ long-term digital transformation agendas, we asked participants about their most important rationales for building these capabilities. Almost four-fifths of the respondents cited that the importance of optimizing the customer experience was the key reason for their adoption of AI.

More than half of the respondents also said accelerating business efficiencies was a top-three driver of AI, while four in ten picked out the new business models and services.

The verbatim comments from the interviewees underline both the rising tide of investment in AI in the telecoms industry, and also its pivotal role in efforts to improve the customer experience.

Looking ahead, respondents see customer experience — including sales and marketing — retaining its prominence as an AI use case over the next five years. This is understandable given the gains operators are achieving in terms of NPS. Network performance management is another important domain for AI, cited by almost half of the respondents.

However, operators are less confident in AI’s role to improve service-creation activities, with only one in five seeing this as a critical use case in the long term and concerns surrounding customer trust issues acting as a potential inhibitor.

Turning to their reasons for adopting automation technologies, telco leaders view increasing agility and scalability as their leading driver. Greater workforce productivity and improved customer support rank second and third respectively.

Automation’s role as a catalyst for incremental digital transformation is a little more muted, with less than one-third citing this as a reason for adoption.

Across all rationales, OPEX and CAPEX gains are important considerations — a point underlined by the respondents’ verbatim comments. Yet, respondents’ focus on productivity and customer experience gains also show that the human outcomes of automation, be it for the customer or the employee, are also one of the major concerns. “We’re a bit late to process automation and need to play catch up. For us, it’s about fixing the basics.”

3. Missing skills, poor data quality and a lack of long-range planning are holding back the transformation agenda.

While telco leaders are energized by the potential of AI and automation in areas such as customer experience, they also acknowledge that they face significant barriers, both strategic and operational, that prevent them from realizing the full potential of these technologies.

As cited by 67% of respondents, inadequate talent and skills are overwhelmingly the leading pain points affecting the deployment of analytics and AI. Beyond this, lack of alignment between analytics or AI initiatives and business strategy, low-quality data and metadata, and poor interdepartmental collaboration — all feature as significant hindrances.

All of these barriers are reflected in the respondents’ verbatim comments, with a surprisingly heavy focus on the problems posed by the “silo mind-set,” an age-old issue for many operators.

Looking at the barriers to successful automation, telco leaders mention a range of issues, with no single factor alone being cited by more than half of the respondents. Out of the many cited issues, the most frequently mentioned one is a lack of long-term planning, followed by poor linkage between the automation and people agendas.

What shines through is that many telcos lack an overarching approach to automation and that the organizations must bring their people with them on the automation journey. Both of these factors are underlined by our respondents’ verbatim comments.

4. Customer and technology functions are viewed as the prime beneficiaries of AI and automation over the next five years.

Customer and technology functions lead the way as the parts of telco organizations most likely to benefit from AI and automation over the next five years. Although marketing is seen benefiting more from AI than from automation, the balance with other functions such as finance and human resources (HR) is the other way around — with AI expected to have a greater impact.

Together with the verbatim comments from participants, these findings suggest that there’s still plenty of impact yet to come from AI in sales and marketing, and that network teams are also in pole position to take advantage of both automation and AI. Interestingly, while three-quarters of respondents see IT and network teams as primary beneficiaries of AI over the next five years, under half of the respondents see network-related use cases as critical over a similar time frame.

5. Operator sentiments on emerging technology pain points diverge according to market maturity

An analysis by geography of telcos’ responses regarding technology drivers and AI and automation pain points shows their sentiments vary significantly. When asked which emerging technologies will drive transformation, emerging market operators more likely put AI, automation and 5G on an equal footing as transformation drivers.

Developed market operators have a more singular focus on 5G and IoT networks as a catalyst for transformation.

Also, the perceived pain points regarding AI and analytics vary between regions. Low-quality data and metadata are the leading concern alongside missing skills in developed markets, underlining that elemental challenges persist even while use of analytics is in a mature phase.

Meanwhile, lack of skills, leadership buy-in and collaboration all rank higher as barriers in emerging markets, underlining the need for better organizational alignment.

 

Chapter 2

Four next steps for telcos

To maximize the value generated from analytics or AI and automation across their operations, telcos can prioritize these areas.

Step 1: Prioritize the mutually reinforcing impact of emerging technologies with an informed and holistic mindset.

The impact of emerging technologies is not limited to IT, but are pervasive across the organization. They’re also mutually reinforcing, amplifying and enhancing each other’s ability to create value.

Given these factors, it’s vital to take a holistic approach to deployments that defines the optimal interplay and phasing of different technologies, balancing growth and efficiency goals in the process. It’s also important to take a long-term view of emerging technology deployments — while automation is already delivering plenty of benefits, long-range planning is often lacking.

Assessing emerging technologies and processes

As the choice of emerging technologies and processes continues to widen, it’s essential to take action in order to increase internal knowledge and education, particularly given the potential interplay between them. The vast majority of telcos agree that they need to do more in this area.

Step 2: Engage and empower the workforce as agents of change

To transform successfully, telcos need to leverage the most powerful change lever at their disposal — their own workforce. This means ensuring they take their people with them on the journey and begin taking actions to create a more cohesive workforce that collaborates across age-old organizational barriers — including those between IT and the business.

To achieve all this, and drive transformation at the necessary scale, engaging process owners is critical. Instilling a greater sense of ownership of change among them by more clearly articulating roles and responsibilities around digitization is important.

A renewed sense of purpose among process owners will also support relatively new leadership roles, such as that of a chief digital officer, that are designed to broaden organizational commitment to transformation.

At the same time, telcos need to do more to break down silos. Trust between business units is often lacking, and sustaining collaboration between product development, marketing and IT remains challenging.

Also, centralization strategies remain in flux, making it more complicated to create and apply a consistent transformation agenda across geographies. All of these internal barriers need to be tackled through a new mindset, roles and ways of working.

Step 3: Extend AI and automation efforts well beyond the customer

Telcos’ current use of AI or analytics and automation is weighted heavily toward optimizing the customer experience. However, use cases for AI in areas, such as networks and security, where they’re currently less advanced, would benefit from greater focus going forward.

This will require a shift in investment priorities and telcos should also take into account that AI and machine learning have an important role to play in supporting new business models, through capabilities such as such as network slicing for enterprise customers.

Step 4: Revisit and refresh your digital transformation fundamentals

If telcos are to maximize long-term value creation in the evolving landscape that we’ve described, it will be essential for them to have an agile transformation road map — one based on fundamentals that they would need to revisit and refresh continually to stay abreast of developments and ahead of competitors. Nearly all operators in our study agree that they require a step-change in agility levels in order to maximize their digital transformation journey.

This will involve applying four specific principles. One is prizing innovation as well as efficiency gains. Compared with the previous surveys of industry leaders, our 2019 survey underlines growing fears around telco rates of innovation.

AI, analytics and automation have a substantial role to play in overcoming this challenge by providing greater levels of customer- and product-level insights that can aid new service creation.

The second principle is to achieve a better balance between experimentation and execution. Experimentation remains a critical route to new learnings and new competencies. The overwhelming majority of telcos in the study agree that their organization needs a more experimental mindset to get the greatest possible value from analytics and automation.

The third principle for maximizing value from AI or analytics and automation is applying improved governance and metrics. As digitization matures within telcos, new forms of measurement and oversight will be essential to maintain visibility, control and alignment with the strategy.

Finally, it will be vital for telcos to recognize not just the potential of digitization, but also its limits. Transformation is a human-centered process, and while AI and automation have a major role to play, it’s imperative for organizations not to lose sight of the human aspects and also to ensure they take their people with them on the journey.

Sources:

EY: 5G and IoT are main drivers to telcos’ digital transformation

https://www.ey.com/en_gl/tmt/in-the-next-wave-of-telecoms-are-bold-decisions-your-safest-bet
03 12 19

Storage: Quenching the thirst for more

PwC’s Mobile Technologies Index forecasts a compound annual growth rate (CAGR) of 35 percent for NAND flash memory, as measured in Megabytes per dollar (Mb/$), through 2015. NAND is the storage component in our Index because it is used in solid-state drives (SSD). Mobile devices created an early market for SSDs, replacing larger mechanical hard drives. Now, mobile innovation is benefiting from the growing demand for solid state in all other computing devices, and the volume-driven, price-performance improvements the broader demand sustains.

Our 35% CAGR forecast means that OEMs in 2015 will be able to install more than three times as much NAND for the same price as they do today. Average flash capacity in high-end handsets is already 22GB, and will grow to 50GB by 2015. These numbers are averages — some smartphones and tablets already offer 64GB. We expect to see some 128GB tablets soon and some 256GB tablets are likely next year.

What will users do with three-times the storage they have now? Much of it will be used to store more HD video and photos at higher levels of resolution. A 128GB drive could store HD versions of the last four or five Oscar-winning films on your tablet.

Cloud-based applications and storage services will also factor into mobile use cases and business models.

To learn more about how increased storage will impact new uses cases and how cloud storage will come into play, read or download the full article.

Source: http://www.pwc.com/gx/en/technology/mobile-innovation/mobile-storage-quenching-the-thirst-for-more.jhtml

Tekelec Index Highlights Coming LTE Diameter Signaling Storm

The last few days leading up to the just announce iPhone 5 have been filled with product introductions from the Android Nation seeking to take some wind out of Apple’s sails and sales. While focus has been on device sizzle, lost in the hoopla has been the possible/probable havoc the proliferation of these LTE devices will have on wireless networks.

For those who follow my postings, you know I have been an unashamed booster of paying attention to not only the data storm the proliferation of next generation smart devices will generate as they exploit new functionality and apps, but also the signaling data storm that needs to be dealt with so the user experiences for all those toting their new personal communicators are compelling.

What has been interesting is that quantification for what the future looks like based on the explosive sales of new devices, coupled with the rapid deployment of LTE networks, has been limited. That is until today with the release by the Global Mobile Suppliers Association (GSA) of their latest survey of LTE deployments, and the release by Diameter signaling leader Tekelec of the new Tekelec LTE Diameter Signaling Index™ — the first ever look at the global signaling storm heading directly at wireless service provider networks.

Before getting into some of the details, just looking at the Index from a high level is illustrative that what is coming is big. Tekelec is predicting Diameter signaling traffic growth will more than triple mobile data traffic growth through 2016. It forecasts that Diameter Messages per Second (MPS) will increase to 47 million Diameter MPS by 2016, representing a compound annual growth rate (CAGR) of 252 percent between 2011 and 2016.

A useful tool for industry executive, network architects and engineers

As Tekelec points out, the Index is an industry first. It goal, like such indexes that look at traffic in the data networking world, is to help business executives, network architects and engineers forecast Diameter signaling traffic growth associated with:

· Policy management which intelligently orchestrates the subscriber experience

· Communications among policy servers, charging systems, subscriber databases and gateways; d

· Mobility management functions, including subscriber authentication onto networks and roaming between partner networks

The Index provides guidance on how data sessions, video streaming, voice over LTE (VoLTE), and sophisticated policy and charging rules impact Diameter signaling traffic growth. It calculates LTE Diameter MPS based on assumptions relevant to LTE services such as third party LTE subscriber forecasts, subscriber usage, the number of active subscribers, the number of concurrent sessions, mobility busy hours, subscriber busy hours, policy sessions and online and offline charging interactions.

In addition, 3GPP and GSM Association standards and documentation are used to establish Diameter traffic profiles based on service type. And, possibly the most valuable tool associated with the Index is the incorporation of this information into the Tekelec Diameter Signaling Index Calculator™ which allows service providers to forecast Diameter signaling traffic growth on their LTE and 3G networks.

As a package the Index along with calculator provides a traffic demand model and serves as a reference point from which service providers can layer on critical factors such as network architecture, topology, capacity requirements, geo-redundancy and other implementation-specific factors that are needed to architect a robust, reliable and scalable Diameter Network.

A look at the forecasts

This is a case where if a picture is worth a thousand words, then two are some multiple. The first figure is of considerable interest is because it shows the growth in traffic by message type. While the tendency would be to just look at the mobility area, it is critical to acknowledge the even faster growth in the policy and charging areas since these go to the heart of providing new user experiences and the move to usage-based pricing and things like multiple devices and people sharing data plans.

* Source: Tekelect LTE Diameter Index™: Forecast Report and Analysis 2011- 2016

Equally as interesting are the forecasts by service type in the next graphic. The acceleration of LTE deployments and the expected increase in VoLTE, along with what everyone believes will be an explosion of both real-time videoconferencing, interactive gaming and increased streaming are the big drivers here.

* Source: Tekelec LTE Diameter Index™: Forecast Report and Analysis 2011- 2016

The real story here is that all of those apps on all of those devices that are running in the background or are just one open process of several concurrent sessions all are signaling intensive. And, just think of the additional signaling caused by people roaming in the traditional sense or roaming as in switching between macro-cellular connections and WiFi ones.

A summary of the key findings from the above includes:

• Policy      has the largest impact on total Diameter signaling traffic with nearly 24      million MPS crossing LTE networks by 2016 in support of policy use cases      —a CAGR of 269 percent over the 2011-2016 period — based on the growth of      sophisticated data plans, personalized services, and over-the-top (OTT)      and advertising models.
• Online      charging is the largest area of growth for Diameter signaling MPS as      service providers migrate their charging networks to all IP-based      architectures — forecast to increase from nearly 18,000 MPS to nearly 14      million MPS by 2016, for a CAGR of 280 percent.
• Subscriber      authentication will generate 5.4 billion messages in 2016. Social      networking activity is forecasted to spike from about 155 million Diameter      messages in 2011 to 17 billion in 2016.
• As      mentioned, VoLTE and video streaming will sharply increase Diameter      signaling with about 36 billion and 30 billion Diameter messages,      respectively, in 2016 — generating high amounts of Diameter signaling due      to Quality of Service (QoS) requirements.
• The      growth in Diameter signaling traffic directly correlates with innovative      LTE services and new business models, such as:

o Rate plans based on usage, quality of service, application and time of day

o Mobile cloud services

o OTT application services such as video and social networking

o Machine-to-Machine (M2M) services

o Mobile payment and advertising services

Diameter signaling growth by geography

• North      America: Diameter signaling traffic will rise to 15.9 million in 2016, for      a 216 percent CAGR. North America will be the largest contributor to      global Diameter traffic through 2015.
• Asia-Pacific      (APAC): Diameter signaling traffic will rise to 16.7 million MPS in 2016,      for a 263 percent CAGR. APAC will lead the world in Diameter MPS starting      in 2016.
• Europe,      Middle East & Africa (EMEA): Diameter signaling traffic will rise to      13.8 million MPS in 2016, for a 320 percent CAGR.
• Caribbean      & Latin America: Diameter signaling traffic will rise to nearly      540,000 MPS in 2016, for a 962 percent CAGR. A sharp rise in LTE      subscribers is expected in the region beginning in 2013.

This is not surprising based on known LTE rollouts around the world and the expectation that the hotly competitive North American market has the most early need, especially given the LTE device wars that are now fully underway.

Taking note of the findings, Doug Suriano, chief technology officer, Tekelec stated: “Diameter signaling growth is more dramatic than mobile data traffic growth. The rise is steeper, the time to plan for it is shorter and there are no offload solutions like there are for data traffic. But here’s the good news: service providers now have a way to forecast Diameter signaling traffic on their LTE networks. This is critical because an increase in Diameter signaling means an increase in personalized services,
higher revenues, and happier customers.”

Are the networks ready?

Good question with a somewhat ambiguous answer. We are still early in the deployment of LTE networks around the world, particularly those that support VoLTE, which means the timing for service providers to take advantage of the information in the Index is propitious.

In fact, Mike Thelander, CEO of Signals Research Group feels that: “Unlike the ongoing 3G signaling storm which is being created by smartphone-based applications and social networking services, the eminent Diameter signaling phenomenon can also have positive implications in the form of new revenue-generating opportunities for service providers and differentiated service offerings for subscribers. The industry, however, first needs to fully understand and appreciate the Diameter signaling implications associated with various policy control and enforcement initiatives, new services, such as VoLTE and M2M, not to mention the underlying network architecture.”

In discussing the release of theTekelec LTE Diameter Signaling Index™ with Travis Russell Tekelec technologist, strategic marketing leader and Joanne Steinberg, director, strategic marketing broadband network solutions, they each were highlighted the value of the Index based on how it was created and how it can be used.

Russell noted that, “the modeling done here was unique because it looked at the device and behavior of the device in the network and looked at use of network service types meaning the numbers are based not on an assumed presumption of growth but on a good view of subscriber behaviors.” Steinberg added that: “as a result of all apps generating Diameter traffic be they native or in the cloud, they are constantly interacting. And, the shift to usage-based plans means exponential increases in communications with policy servers, billing systems and subscriber databases. All of this needs to be modeled and planned for and managed centrally because at the end of the day the Diameter signaling function rests at the foundation of enabling user experiences that delight customers and are central to the implementation of new billing scenarios, particularly as the world goes all IP.”

Tekelec says the interest from customers around the world in the process of executing their LTE plans has been strong for their products and services. They also stated that in their socialization of the Index that interest has been intense in terms of having well-reasoned information that allows them to put metrics and parameters on what they are looking at in the not too distant future.

Back to the question of readiness, the answer is not ready yet, but capable of being ready in time to prevent the types of network outages and throttling that has already been experienced as a result of previous signaling storms.

The Index is a snapshot that will be updated periodically. Tekelec says that its forecast should be viewed as being conservative. It will be fascinating to see if this conservatism is reflected when the updated Index is produced, given the pace at which new devices are purchased, activated, put on usage plans and start downloading apps and using more video, and how fast competitive imperatives drive LTE deployments. For this moment in time, a tip of the hat to Tekelec is extended to Tekelec for providing this first view on what typically is a critical area of the industry where light does not shine often when it really should.

Source: http://www.mobilitytechzone.com/topics/4g-wirelessevolution/articles/2012/09/13/307417-tekelec-index-highlights-coming-lte-diameter-signaling-storm.htm September 13, 2012  By Peter Bernstein