The evolution of telcos in the 5G era

In the modern era of the ICT (Information and communication technology) industry, 5G prevalence is on the uptake across geographies, and telcos are looking to transition into large domain service enablers, driving the need to rethink traditional business and operating models and most importantly re-envisioning their product portfolios. However, this transition isn't entirely new. The tech transition started in 2016, when the 3G to 4G transformation took place, and the 'customer' became the heart of this change. "Omni-channel" became a buzzword, and service delivery excellence across channels became the heart of differentiation for telcos. With 5G, the emphasis has moved to faster time to market and catalog-driven operations spanning BSS, OSS, and network layers. Hence, 'automation' is the key, followed by multi-domain orchestration, which has become the real deal, given that 5G is a platform-based technology.

At present, telcos are striving hard to convert themselves into platform players or service enablers rather than vanilla service providers. They are now calling themselves the 'Tech-Cos' of the world, a term which perhaps never existed earlier with reference to major telecom players earlier than 2022. As much as we would like to believe that this is the mantra for success for modern telecom players to realize their holy grail to make profits, one must acknowledge the realities of modern trade and its corresponding limitations that it comes with. The legacy, which has been running for ages, is not easy to decouple and suddenly transform into a pure play technology operator, given that the DNA of a typical Telco beyond connectivity has always been very challenging.

From Telcos to Tech-Cos: The transformation

The question is- Why are telcos looking to transform themselves suddenly?
The answer is obvious and very simple: they have not made the desired top line for quite some time now, and the CAGR of the industry has hovered around 2% globally, which is far from acceptable for any industry. As a result, 5G is not getting monetized at the rate that it should have been; hence, the aggressive mindset and 'fire in the belly' attitude of most telcos are not in place, barring a few exceptions, who are doing path-breaking work and have the right organizational setup to pull off a broad portfolio of offerings.

What does a modern telco need?

Let us now explore the aspects of a modernized telco setup and what it needs to deliver regarding its business model. This is a fundamental change, a prerequisite, and a much-needed aspect to provide any next-generation over-the-top service on top of the network estate to deliver tangible and optimal value to the end clients. Besides changing business models that are more networked and platform-led, one also needs to focus on the corresponding products and services portfolio of a modern telco. This next-gen portfolio should reflect beyond connectivity and similar offerings.

Once the business model is redefined with the right endorsements by the stakeholders, aligning the organizational DNA with the initiative is crucial. This requires understanding the current people landscape and fostering a culture that supports both the evolution of business models and the adoption of a new-age integrated product and services portfolio.

Two key factors will be instrumental in driving this transformation:

People-centric support: Teams must seamlessly integrate the new-age portfolio as a core offering, complementing traditional connectivity services to create holistic solutions.
Adaptability and change management: Organizations, particularly long-standing enterprises like telco service providers, must cultivate adaptability to evolving technologies and establish robust change management functions to navigate this transformation effectively.

In addition to evolving the business model, embracing people and organizational change, and developing new-age products and services, a strong emphasis must be placed on implementing an operational blueprint to support the transformation into a next-generation digital telco. This framework, commonly called the Digital Target Operating Model (D-TOM), is the cornerstone of operational strategy. It drives large-scale transformation efforts and ensures the seamless adoption of new product and service portfolios. Operating models are also responsible for driving any managed services offering that the new age telcos might want to roll out, like Cloud as a Service, Analytics as a Service, or Network as a Service, depending on their maturity, uptake, investments, and partners. Not every telco will opt for the same strategy, and the market will not have a 'one size fits all' perspective.

Engagement models and industry focus

Now that we have discussed the prerequisites from a business and operations standpoint, it's imperative to investigate the engagement models and the underlying technology domains.

First, let's investigate the engagement models by identifying the PILOT industries where telcos want to monetize their significant investments in 5G infrastructure. That's the narrative that is basic to everyone else. So, anything that can be rolled out as an over-the-top service yielding money will be given more preference and considered a standard use case. 5G, as we know, is not B2C or consumer-driven, so all use cases that are going to the key focus areas mapped to identified industries across healthcare, automotive, engineering/manufacturing, or smart cities need to map into the URLCC or mmTC /m-IOT domain which will be led mainly by B2B or B2B2X. These industries demand scalable and targeted solutions, enabling telcos to shift their engagement models toward serving SMEs, SOHOs (Small office/Home office), and large enterprises. In addition to targeted verticals, telcos can explore standalone use cases that demand heavy bandwidth consumption through network slicing. These propositions cater to niche verticals, providing flexible offerings tailored to specific needs.

Secondly, we explore the basic technology domains, and to start with any telco, we would be looking at 2 fundamental ones- cloud and analytics. For the cloud, the basic offering would be 2 folds: one focused on application and infra modernization narrative followed by the cloud-native ADM (application dev and management story) in line with the TMForum Open APIs, and the second is the deployment of cloud-in-a-box kind of solution targeted towards any domain within the front office, middle office, or back-office applications landscape. In continuation to this, we also package the NW cloud virtualization story where the physical network infrastructure acts as a larger cloud platform complimenting the 5G in a box or private 5G connectivity deployments, which will be part of the core offering in the connectivity space for telcos while targeting their end clients.

For Analytics-as-a-Service (AaaS), telcos can look into deploying a larger narrative of cognitive offerings where either analytics or AI is bundled as a service in a typical Software-as-a-Service (SaaS) targeting all selected industry domain-related use cases, given the choice of the PILOT industries that it decides to ride on as part of their B2B enterprise strategy and roll it as a service for consumption. These use cases will combine a bunch of analytical lead use cases and AI use cases to cater to all exceptions within the detection and prediction space or to make any 'data-driven' value proposition. Analytics and AI will continue to be the underlying narrative that drives technology differentiation and benefits. Telcos will seek industry support and expertise from their technology partners and other platform providers to roll out these services and make them a reality.

Challenges, opportunities, and the road ahead

Besides all of the above ideas, the reality is that telcos are also investing heavily to come up with their own BSS (Business Support Systems) and OSS (Operational Support Systems) stack in anticipation that they will be reselling the same to smaller operators or MVNOs (Mobile Virtual Network Operators) and MVNEs (Mobile Virtual Network Enablers) who would be keen to look at cloud-native SaaS alternatives. These alternatives leverage low-code and no-code capabilities, rapidly replacing traditional COTS (Commercial Off-The-Shelf Software solutions that, while cloud-ready and deployable, often lack the agility demanded by modern markets. However, the success of this strategy is yet to be determined. Neutralizing the entrenched dominance of 20–25-year-old COTS solutions is no small feat, particularly when competing against decades of experience and market trust. Ultimately, the buying mindset of CIOs will play a critical role—will they be open to investing in and transitioning to newer, more flexible stacks? Only time can tell.

The Tech-Co transformation is gaining significant traction across all frontiers. Tier-1 operators are redefining their business and operating models to address evolving market needs and target specific industry segments. This shift is marked by establishing digital captives- innovation hubs laser-focused on driving next-generation transformation agendas while enhancing brand equity. Surely, but truly, it's starting a new era of partner ecosystem-led play where no one knows everything, and there is a unique proposition of co-opetition rather than competition at play. At the heart of these changes lies B2B2X, which remains a cornerstone of telcos' long-term sustainability strategies. This is a massive opportunity for the industry to play the narrative well, and those willing to place bets should ride the tide!

The blog explores the transformation of telcos into tech-cos in the 5G era. This shift stems from stagnating revenues and the need for innovative business models, emphasizing automation, multi-domain orchestration, and next-gen product portfolios. Telcos are targeting B2B and B2B2X markets, leveraging 5G infrastructure to offer scalable solutions in industries like healthcare, automotive, and smart cities. Cloud and analytics are key enablers, with telcos exploring cloud-native solutions and AI-driven analytics services. Despite challenges like legacy systems and market resistance, this transformation presents immense opportunities for telcos to redefine their role as platform players in a digital ecosystem.
Discover how telcos are transforming into tech-cos to unlock new revenue streams and lead the 5G revolution. Explore innovative strategies and opportunities to stay ahead in the digital ecosystem with Virtusa.

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