Large telecommunication providers are exiting 2023 in a precarious financial position as they look to now squeeze a financial return on their 5G network investments, which in turn is applying significant pressure on their vendor ecosystem. At least one of those vendors thinks a bigger focus on digital transformation efforts can help mitigate this challenge.

A recent IDC report predicts $3.9 trillion will be spent on digital transformation efforts around the world in 2027, however, only that firm’s European analyst cited telecommunication providers as being a driver for that spend in their respective region.

Dennis Hoffman, who leads Dell Technologies’ telecom systems business, sympathized with this challenge, noting that the telecom industry faces a number of unique challenges that make their digital transformation journey more perilous.

“I would say the big difference in telecom is that any change effort implies risk and in telecommunications it's for very good reason one of the most risk-averse industries in the world,” Hoffman told SDxCental in an interview. “They are held accountable by law for being up and being reliable.”

Operators have repeatedly cited this public accountability metric as reason for why they are viewed as being a step behind more lightly regulated industries in terms of their digital transformation journey. As an example, Joe Russo, EVP and president of Verizon’s global networks and technology business, recently told SDxCentral that the carrier has held back on deploying a 5G standalone (SA) core due to reliability concerns.

“We’re not going to put technology in the network that steps us back from a reliability and performance perspective,” Russo said. “And I would say generally, based on the testing we’ve done, based on the work we’re doing trialing our standalone capabilities, we are not ready to put that out into the network.”

Russo specifically mentioned challenges with handling voice traffic on 5G voice-over-new-radio (VoNR) technology that is comparative to its already established voice-over-LTE (VoLTE) network.

“We want to make sure it’s done right, so we’re doing a lot of testing with that right now,” Russo said. “We’re trying to make sure that we have that really at the standards of Verizon before we put it out.”

Hoffman noted that while these concerns are legitimate, telecommunication operators need to continue to work with their vendor partners in order to surmount these technology challenges. This includes admitting to and putting efforts toward this change.

“It's about time we acknowledge that we have to change. It’s no longer an option,” Hoffman said, adding that smaller operators have begun to show that this transition is possible. “Some of the larger operators are now starting to embrace this more in earnest and I think it'll snowball from here because the question will be, ‘do I really want to compete with somebody that's got this all figured out?’ … There is risk inherent in architectural change. I am in a very risk-averse industry, and pursuit of opportunity has not been significant enough a motivator to get over that fear. I think we're getting to the point where, frankly, suppliers and operators alike are all basically deciding it's time.”

But, what does that change look like and what is the investment timeline?

ABI Research in a recent report laid out what it sees as four steps telecom operators should make toward becoming “techcos,” steps it says they need to make “to survive.” From a high level, these steps include embracing 5G-as-a-service, investing in vertical ecosystems, digitizing network management and becoming active contributors to cellular innovation.

“The traditional telco business model must be reinvented,” Dimitris Mavrakis, senior director at ABI Research, wrote. “ABI Research sees a clear signal for mobile operators to increasingly deploy automated solutions to streamline operations, optimize resource allocation and drive cost efficiencies. At the same time, the big focus now for mobile operators is on added consumer services and enterprises in dire need of 5G connectivity for their digital transformation efforts.”

Hoffman said that 5G deployments based on disaggregated architectures and cloudification have laid the foundation for these transformation efforts, but that operators now must take that next step in taking advantage of that new network architecture to support revenue-generating digital applications and prepare their networks for further advances.

“Since this is a heavy lift, you do not want to do your architecture transformation at the same time as you're doing a new ‘G,’ you'd want to split them up,” Hoffman said. “You've got a new ‘G’ coming in about five years. … Now that the initial rollout of 5G is done, go clean up the underlying infrastructure architecture, get those applications fully virtualized and make the 6G transition a software upgrade instead of a hardware upgrade. We've got a really interesting window of time on our hands here.”