The health of the telecommunications industry is vital to global growth, innovation, and prosperity. Most, if not all, industries transmit data, messages, and signals each day to facilitate operations. For this, communications service providers are tasked with providing secure, reliable, and fast solutions.
As various industries grow, the demand for improved solutions is also increasing. As such, the telecommunications sector is in a continuous state of evolution in order to cater to increased demand and the need for more advanced solutions. However, along with the surge in demand also comes challenges. Operators are now under immense pressure from increased competition and increasing operating costs.
There is a great need to innovate and achieve operational agility to meet the fast-changing customer expectations. This is especially so after the COVID-19 pandemic as organizations are relying more on digital business models.
5G offers a glimmer of hope for changing fortunes for communications service providers (CSPs). Projections indicate that the technology will enable a global economic output of $13.2 trillion by 2035. However, the ability to unlock value in the enterprise and B2BX market is what will benefit operators most. By 2025, Everything as a Service (XaaS) is expected to grow exponentially and reach a value of $400 billion, much of which will go to network operators.
Before capitalizing on such opportunities, telecommunications companies need to adopt a more collaborative approach and redesign their operating models. This means evolving from traditional product and legacy systems to those that support as-a-service capabilities. In this transformational process, switching to a modern, software-based operational model is crucial.
Importance of a New Software Approach
As digital technologies evolve, so too have customer demands. As a result, the telecoms sector has transformed exponentially in recent years. Though 5G is set to unlock value in many industries, operators are not guaranteed any share. Digital natives such as Google, Facebook, Alibaba, Tencent, and Amazon present the biggest challenge. This is because they have already adopted modern software engineering in their models and continue to implement new technologies.
The role telecom operators have played in facilitating the growth of digital business and service models is unquestionable. However, despite playing a starring role, they are yet to benefit from such growth. A report published by the World Economic Forum in partnership with Accenture provides a clear picture. Between 2010 and 2018, operators’ proportion of industry profits reduced from 58% to 45%.
Due to a slow response to changing market conditions, this trend is expected to continue in the coming years. Considering that operating costs are also rising, a dwindling profit share and increasing competition will only pile more pressure. This is why operators must transition to open software-based modular architectures quickly.
New Infrastructure Requirements for Service Providers
For CSPs, offering greater value to customers always comes at a hefty price as they have to invest in infrastructure. Whereas such moves greatly benefit consumers, operators do not enjoy proportionate commercial gains. For instance, consumers benefited from faster and more reliable data speeds, improved coverage, and lower latency. It also triggered the emergence of the cloud services market, which is now worth billions of dollars. On the other hand, providers only managed marginal commercial gains.
Compared to 4G, 5G offers greater potential but similar risks. No revenue avenues will be unlocked, but failure to adjust accordingly beforehand will see operators miss out. Some of the new revenue streams include smart cities, smart health, manufacturing, and automotive. To adequately meet such sectors’ needs, operators will need to operate and deliver at 10-100x and diversify and enhance their services by 10x to 100x.
Achieving this requires massive changes in their infrastructure and rethinking software choices. OSS/BSS legacy systems are designed to perform at a set scale and for a specific product set. These will have to be replaced with Open Digital Architecture supports multi-tenancy and have no restrictions on scaling. They also enable continuous integration/continuous deployment (CI/CD).
The Emergence of Software Marketplaces
At an approximate cost of $1 billion, according to TM Forum, the process of selecting and procuring software in the telecoms sector is expensive. Due to lengthy and rigid requests for proposal (RFP) processes, indirect costs push this figure much higher. However, this will change as Open Digital Architecture (ODA), makes it easier for CSPs to discover, procure, and implement ODA-compliant software.
This will lead to the emergence of software marketplaces for ODA-compliant software, micro-services, and Open-APIs. By facilitating digital transformation, such marketplaces will enable providers to test new software elements to develop an ideal solution quickly. It will also be easier and faster to onboard new partners and their offerings, creating minimal viable products (MVPs). As a result, there will be fewer barriers to entry, and the ecosystem will encourage innovation in software solution development.
As marketplaces become more popular, they will transform how CSPs and their partners sell their products. Providers that want to offer their capabilities as a service will have a good platform to reach their market. They can also expand their reach to millions of business users by availing cloud-based software capabilities to others.
Software marketplaces will allow providers to dominate new markets in two main ways. With the agility, speed, and innovation capacity gained, providers can match sellers and B2B expectations. They also eliminate the need to invest a lot during the early stages of a product’s lifecycle.
In summary, the objective of software marketplaces include:
- Accelerating the IT and business transformation of CSPs
- Reducing the risk and cost of transitioning to open architecture
- Support compliance of ODA and Open API standards
- Providing a platform for accessing necessary software thus reducing the need to build from scratch
There is a need for new platforms and services to integrate seamlessly with existing OSS, BSS, and network infrastructure without code-level customization for software marketplaces to succeed.
Symphonica embraces TM Forum Open APIs to enable interoperability, open digital architectures and seamless end-to-end management.
How Software Marketplaces Can Work
Software marketplaces will serve as platforms where service providers and other organizations offering Open Digital Architecture-based services can advertise their certified software components. Providers can also use them to discover suitable software components.
There are five key elements within Open Digital Architecture components. They include:
- Notification and reporting
- Core component functions
- Environment dependencies
- Management and operators
- Requirements and security
Under the component model, things such as a meta-data description and the cost of components are included.
There are two modes that can be used to run software marketplaces. The first is as an open commercial marketplace that supports the distribution of commercial and open source components to service providers across the globe. Alternatively, they can be run as closed marketplaces where a group of providers and partners can distribute common software components.
Such marketplaces support collaboration and healthy competition among market players. Typically, software marketplaces will have the following categories for components:
- Knowledge applications ( IT, telecom, and industry)
- Core applications
- Core ecosystem Toolchain
1. Knowledge Applications
Microservices and technologies such as RPA and AI will play a key role in knowledge applications. They will support the customization and differentiation necessary to determine ownership of applications and identify providers’ new services.
With the rollout of 5G, software marketplaces will be accessible to a wide range of developers, including startups who can create niche knowledge applications.
2. Core Applications
There is a lot of value to be derived from core applications. Service providers have an opportunity to build core applications independently or as partners. Components that will replace BSS/OSS will be developed by tier 1 and 2 vendors.
3. Core Ecosystem Toolchain
Production and transaction environments such as test/interoperability and Canvas tools, which are built with related toolchains to pre-defined standards, will be in this ecosystem. It will also contain a wide range of open-source options.
Implications for the Vendor Community
There are many challenges (shrinking budgets and deployment risk) within the telecoms software market that have forced vendors to consolidate or exit. This is further compounded by many barriers of entry that reduce the capacity to innovate. When new innovations arise, they are first adopted in other markets as the risk is high.
The market is in an unhealthy state for all service providers, and there is little room to seize emerging opportunities. Open Digital Architecture (ODA), helps offers a new lease of life as it reduces vendor’s risk for integration and costs. This allows them to innovate and test new business models.
Additional markets will also emerge, providing CSPs with additional streams of revenue. Though there will be a significant risk in competition, it will be offset by the increase in opportunities. However, all this is dependent on the telecommunications sector’s ability to transition to ODA quickly.
Using the Open Digital Framework to Build the New Telecoms Software Marketplace
The highly customized monolithic systems currently in use take too long to procure, are costly to implement, and cannot be reused. The modern software-based architecture that will replace them makes it easy to discover and procure, even from multiple vendors.
As the costs and risks reduce, communications service providers will have more funds to invest in technology and software. This will lead to increased differentiation among CPSs’ businesses and open up new channels to reach the global market.
Symphonica embraces TM Forum Open APIs to enable interoperability, open digital architectures and seamless end-to-end management.
