Insights

From Telco to Techco – Transforming Network Providers for the Cloud Era

The Telco to Techco Journey for Telcos Represents a Wholesale Embrace of the Cloud Era.

Service providers like Vodafone are embarking on a journey to transform from ‘Telco to Techco’.

It’s the headline strategic theme that defines the role of Cloud Native computing for the telco industry.

Writing on Linkedin Mark Düsener describes how Swisscom began their Cloud Native adoption as part of meeting the demand for 5G services, seeking to pioneer a software driven approach instead of buying ‘boxes’, monolithic telco platforms consisting of an integrated HW/SW stack.

The reasoning for this is product innovation. The technology advancements, especially around 5G Standalone, are now enabling this transformation to meet customer demand for more tailored solutions like slicing based products or Mobile Private Networks.

Cloud Strategy

That goal is simple, but achieving it is complex.

Most importantly the Cloud Native Telco conversation often focuses excessively on the networking aspect, but as Moor Insights describe in this Forbes article smart operators like Vodafone realize it is a holistic transformation, one that encompasses the business systems too, like OSS/BSS, CRM et al.

Digital service innovation also encompasses aspects like the customer front end, and for this to be a seamless provisioning experience it needs to tie in with a well integrated back-end. The article highlights that Vodafone runs 15,000 databases and 8,000 associated applications, so this legacy system complexity is one major pillar of the challenge.

It also emphasizes the end-to-end role of Cloud services. Oracle themselves offer Cloudified services including IaaS, PaaS and SaaS models. Their Autonomous Database service uses AI to automate tuning, security and maintenance and it is serverless and elastic, when it’s not running there are no charges, so there are key back-end services available via the Cloud that telcos can integrate into their overall strategy.

Critically there is a link between this estate and the ability to enable new telco services.

For example Vodafone is monetizing IoT services using Oracle Communications Billing and Revenue Management (BRM) which runs on OCI. Sensors in connected vehicles can enable services such as GPS map updates or infotainment, charged on a subscription or consumption basis. The solution runs on the high-performance OCI Container Engine for Kubernetes and is automated with OCI Resource Manager and Terraform across multiple Oracle Cloud Regions.

Oracle explores these dynamics in detail in their white paper: Enabling Telco to Techco Transformation.

Use Case Solutions

The purpose of the Roadmap is to distill these insights into an actionable blueprint plan, that offers market knowledge and technology product considerations, built around specific use cases and the solutions that can address them.

STL offers insightful research on the Telco to Techco journey, which provides a strategic context. They report that techcos enjoy a higher share value as they are perceived to be capable of faster, more innovative growth, visibly demonstrated by the fact Techcos 10-25% on product R&D vs 3% for Telcos, who instead emphasize Capex investments: Towers, cables etc.

In short:

So telcos are spending a lot on building their networks and relatively little on creating new things to sell. Unfortunately for the telcos, all that network spending is not generating much or any new growth revenues.

They also highlight how another consequence of this is that Telcos have become reliant on their vendor suppliers for new product innovation, and make the #1 critical insight: Adoption of Cloud is good, it transitions from capex to opex, but that alone is not enough, the most important strategic advance is that this boosts a Telco’s capability for internal new service innovation.

Digital Ecosystems

STL headlines this objective by saying the key market dynamic are industry ecosystems, for example Digital Healthcare, with Telcos providing enabling services for them to collaborate in new ways.

Analyst Shiv Putcha builds on this, referencing the TMF’s Open Digital Architecture as a systemic method for prosecuting this strategy, exploring some examples of product scenarios such as Edge Computing.

He cites Verizon’s MEC product range as one example of an Edge Computing strategy. This is an especially powerful segment as it presents the opportunity to treat ‘infrastructure as a product, where Telcos leverage their own Cloud Native capability as a service for customers.

For example Home Depot rolled out Kubernetes to manage the distribution of code to retail outlets. This requires an expertise in distributed computing, the sweet spot for what Telcos are already doing, and that can therefore be extended as an enterprise capability.

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