What current service operation investment says about CSPs’ strategies

We have been analyzing CSPs’ IT spending patterns as part of our research for the upcoming TM Forum benchmark report, Telco to techco: capex and opex implications, which is due to be published later this month.

Areas where we are seeing the most growth in IT spending include automated ordering, fulfilment, orchestration and revenue management — essentially the order-to-cash (O2C) process.

At the same time, these current hotspots of OSS/BSS spending tally with a shift away from network-heavy and towards a renewed focus on IT systems (and related vendor professional services).

This confirms something that we have suspected for a while — we’re now in the scaling phase of 5G and new FTTx networks build-out, and it is becoming imperative to modernize service operations to both catalyze new service creation and to significantly improve efficiency and the total cost of ownership of existing service lines.

As a frame of reference, overall OSS/BSS revenues have been growing at about 1-2% year-on-year for the last decade. However, between 2020 and 2021 we saw categories such as order management and service assurance grow 6%, while service orchestration, product/service catalogs and revenue management (billing/rating/charging/partner) grew at 5%.

Obviously, these are all mature application categories, and the current spike reflects the imperative to optimally monetize 5G investments as CSPs scale up networks.

There is also something else going on here, and it relates to both the near future and the longer term ecosystem.

Let’s take the example of a service model that the telecoms industry doesn’t currently support: mobile cloud VR gaming (this is a mode of service model that I would have been skeptical about producing genuine revenues until fairly recently, but it has suddenly been thrown into the light because of the prospect of the Metaverse).

Many people currently play games on their mobile devices, but this type of service is a different prospect altogether. If a user is to enter into this type of next-generation immersive experience, they will need:

• A headset (probably more like a pair of sunglasses than today’s clunky VR headsets) connected to their phone
• A 5G network slice automatically spun up by their MNO when they open the game app, managed and charged on a usage basis with all of the associated QoS monitoring and management
• Much of the operational data for the game available in an edge cloud geographically close to them for zero latency and large throughput processing
• The ability to have in-game purchases charged straight to their mobile subscription, requiring automated partner settlement micropayments
• A consistent experience, whether they bought the service from the MNO, the games developer, or a third party

The CSPs needs to ensure customer knows nothing of the moving parts behind the scenes, which is ehy they want to tightly align all of the automated OSS/BSS functionality now, to be ready to provide this kind of customer experience.

We hear a lot about the end-to-end (E2E) automated operations for certain new service models, In this example, the idea of E2E extends beyond the CSPs’ own domains and out into the partner ecosystem. So, any software systems within the CSP need to be able to interface seamlessly with the outside world through open APIs.

One operator I spoke to in Asia said they plan to go live 5G SA for both enterprise and consumer services by the end of 2022, when I asked if this was motivated purely by the beneficial economics of cloud networks, they said no, it’s motivated by providing network slices over 5G and pushing on with the generation of new service models.

Their operational team is working closely with their ecosystem partner teams to ensure that cloud service providers, edge players, IT vendors, enterprises, systems integrators and other partners and suppliers, And their IT investment phase is focused not only on immediate challenges, but also the five-year horizon. So, even though this current hike in IT spending is following the classic network investment cycle, this time around it also seem to be based on the pursuit of future growth and a clear diversification strategy.