The Prospect for a Services-Led Model in Telecoms

Ecosystem disaggregation raises several challenges. For example, in 5G networks, if core networks and base stations are disaggregated, then they must be reaggregated for performance, security, and lifecycle management. This goes beyond the traditional interoperability supported by 3GPP. Feature sets, roadmaps, different implementation options, and operability concepts should be aligned adequately between suppliers of different components, namely the Radio Unit (RU), Distributed Unit (DU), and Centralized Unit (CU) in Open-Radio Access Network (O-RAN). O-RAN compliant networks will have to coexist with non-O-RAN compliant parts, much like Cloud Radio Access Network (RAN) and 5G Core (5GC) need to co-exist with purpose-built hardware, at least in the early stages of adoption. The challenge is exacerbated by mazes of partnerships, and a raft of vendors and Communication Service Providers (CSPs). The process of disaggregation is reciprocal with a reaggregation/integration effort required to achieve interoperability and to manage operational costs.

Furthermore, with O-RAN and 5GC, the number of ‘profiles’ is expected to explode. Any given 5GC/O-RAN configuration will consist of a high degree of permutation of different radio heads, base bands, and core network elements. In that environment, system/component integration (reaggregation) services are required for basic interoperability and performance. That reaggregation effort should go beyond functional integration typically offered by system integrators (SIs). Consequently, ABI Research posits that, over time, the industry will be services-led, not technology-led. A services-led model is a new direction that must be acknowledged as the industry charts a (new) profitable course. This insight builds on Cloud-Native Computing Promises Nimbleness, but Can CSPs seize the Opportunity? report. In that deliverable ABI Research noted that a future report will discuss how telecoms can complement its product-led foundation with services-led commercial models.

Today, value creation stems from use cases that, by and large, center around uniform subscriber offerings. In the future, growth is likely to come from diverse use cases that are stitched together from an ecosystem of providers. That, in addition to ongoing ecosystem disaggregation, renders (IT and telecoms) services a growth segment of the industry overall. With a diverse supplier base, customers value solutions that drive relevance by bringing a broad set of players together into some sustainable commercial relationship. Importantly, those solutions need to deliver long-term value and integrate technology into busines processes. That integration should be industrialized at both a product level and deployment level. Also, vendors realize that they need to deliver long-term value or utility. They start with a ‘problem’ and work backwards rather than focus on what technology they can build/design and who to sell it to.

Juniper, for instance, recently highlighted an “experience-first” end-to-end product strategy. With Juniper Support Insights, a customer-experience focused solution, Juniper seeks to understand the (integration) requirements of its customers. This can, in turn, enable its CSPs and SI partners to be flexible and agile in a very dynamic marketplace. In a similar vein, Nokia recently launched its Nokia Cloud Transformation consulting. With this, Nokia aids CSPs with their cloud technology transformation. Technology strategy, blueprint design and roadmap, and execution are services-oriented dimensions aimed at delivering utility. Ultimately, the quest for service-centric business models will push the industry to think differently rather than assume the ecosystem is the same. This bodes well with current market realities for solutions that deliver business results rather than piece parts that provide technology features.

Increasingly, CSPs seek a company that goes beyond its own products for maintenance and services. They seek a partner that takes over and acts on their behalf in all aspects of technology, from building apps to defining architectures to managing workloads. This constitutes a services-led model. Therein lies an opportunity for new value creation and it aligns well with this restructuring of the industry around obtaining (or delivering) long-term value. Long-term value, or utility, is a measure of commercial usefulness that accrues from adopting a ‘solution’, now and in the future. With cloud and software innovation making inroads in telecoms, the underlying foundation to deliver value is changing. It is logical to deduce that entities that build on that foundation are going to have to change accordingly. Much like Juniper and Nokia, a plausible consideration for telecom entities may be to accompany today’s walled garden approach with one that builds from outside in.

In the case of 3G and 4G, the target group was consumers. CSPs based their revenue flows on reselling and upselling mass-market, consumer-centric offerings. With 5GC, O-RAN networks, and the cloud, the target group is enterprises, governments, and industries. These buyers seek business expertise and results. Technology investments by enterprises is driven by business buyers as opposed to IT/network buyers. The business strategy sets the technology agenda rather than the other way around. There is evidence of that trend developing in the industry as CSPs and/or enterprises look for services-led models that help them envision, design, and reaggregate end-to-end solutions that leverage cloud and software. A services-led industry, anchored on value/outcome-based commercial arrangements as ABI Research reflected in ‘Tis the Time for Consumption-Based Economics in Telecoms, stands to take center stage in the coming years. There are, however, long-term implications that telecoms must contend with.

For example, with cloud encroaching all around telecoms, products will unavoidably become services or processes. To that end, ABI Research observes that in the future, telecoms, much other like other industries, will be more of a services-led industry, and less technology led. For the first time, services companies—not technology vendors—will be the tail wagging the dog. Suppliers that fill that role exert tremendous influence over solution choice, from architecture and apps to hardware and software. It follows that the product suppliers of today should start reengineering and equipping themselves with the skills needed to become the services suppliers of tomorrow. But reengineering is like starting a fire on one’s head and then putting it out with a hammer. Elisa, as contemplated in ABI Research’s insight How Can NEPs Satisfy Today’s Market Demands while Pursuing Tomorrow’s Growth Opportunities?, is an example of a company that is reengineering itself while on the road.

In conclusion, ecosystem disaggregation necessitates reaggregation that cannot be addressed by a walled garden approach. Given that Software Is the Name of the (New) Game In Telecoms, that reaggregation must, by extension, extend to a world that goes beyond telecoms. CSPs should take a global customer/technology view driven by customer requirements. The focus should be offering application- and industry-specific services rather than standardized products. The outcome changes form upselling or reselling products, to selling solutions. But for CSPs to succeed in selling solutions, they should shed the institutional viewpoint that anything important starts on the inside. They should build from outside in. CSPs should take their business, products, and people out of a self-contained, self-sustained telecom-only world and make them thrive in a hybrid ‘telecom plus software’ world. ABI Research posits that, eventually and unavoidably, this hybrid world will converge into a software-only environment.