Communication service providers (CSPs) that deploy cloud-based telecom software can save up to 25% on IT costs over a five-year period, according to an Analysys Mason report commissioned by Nokia. 

The shift from traditional software running on operator-owned data centers to a cloud-based model of delivery and consumption represents a significant opportunity for carriers to stay ahead of the technology curve and realize more efficient operations, the market research firm concluded.

It also frees operators from burdens associated with procuring, managing, and maintaining complex hardware and software infrastructure, the analysts said. On-premises data center resources typically have to be upgraded every five years and IT consultants are commonly required to manage those systems on an ongoing basis.

“Care, therefore, should be taken to compare not just the licensing costs for various deployments, but also the costs associated with end-of-life upgrades, staffing and maintenance in order to understand the full range of cost savings that can be achieved by using a SaaS-based deployment,” the analysts wrote in the report.

Operators Confront Ongoing Cloud Dilemma

Wireless carriers have confronted this dilemma for at least a decade. Some have made the shift to the cloud without reservation while many still remain reluctant to place critical services on the cloud because it represents a loss of control.

There are varying degrees of cloud adoption in every network, but the challenges remain largely unresolved. It also impacts additional opportunities carriers are pursuing in the 5G era, including mobile edge computing and private enterprise networks.

“A lot of carriers have outsourced their IT to different companies,” Strand Consult CEO John Strand said on a recent panel organized by IEEE. “So why should I as a company outsource my vital infrastructure to a company which has outsourced its vital infrastructure?”

Nokia’s Shift to Cloud-Based Telco Services

Nokia, of course, has a lot riding on the extent to which network software runs on the cloud. The radio access network (RAN) initiated a large-scale pivot in early 2021 to make its software available to carriers as a service. 

Moving on-premises and tightly integrated software and network functions to the cloud is in the early stages and the shift will be gradual, but enterprises and carriers that don’t adopt these frameworks will face problems down the line, Raghav Sahgal, president of Nokia’s Cloud and Network Services unit, said at the time.

“As 5G accelerates and becomes more pervasive, you have to be able to do this, otherwise you will not be able to get the true benefits of cloudification,” Sahgal said, describing it as a multi-part strategy that will evolve differently for each carrier.

Nokia continues to make good on this objective and revealed a trio of software-as-a-service (SaaS) offerings for 5G operators in late 2021. The company said it’s targeting a SaaS addressable market of a cumulative $3.1 billion through 2025 and it expects the market to grow at an annual growth rate of 25% to 30% through 2025.

SaaS Savings Lack Immediacy

While the cost savings can be significant, operators shouldn’t expect immediate benefits on that front. Analysys Mason quantified the long-term costs and benefits of SaaS deployments in networks and concluded much of the savings for operators occur on the backend. 

“The subscription fee for a SaaS deployment is likely to run in excess of the initial fee paid for software in an on-premises or hosted-cloud deployment, but CSPs are likely to make large savings overall once the benefits included with a SaaS subscription are taken into account,” the analysts wrote.

Whereas ongoing costs and degradation of infrastructure is baked into on-premises systems, SaaS-based services represent long-term cost savings for operators because they don’t carry additional costs beyond the subscription fee, according to Analysys Mason.

Carriers also benefit from continuously upgraded software in a SaaS model, which allows operators to sell new services to customers and generate additional revenue, the analysts added.

The choices and various paths mapped out for operators remain mired in uncertainty, thereby requiring a balancing of pros and cons that may not fully materialize for at least a few years.

“SaaS is typically perceived as being more expensive over the lifetime of the deployment due to the high recurring costs compared to the software costs of on-premises and hosted-cloud deployments,” Analysys Mason analysts wrote. “This view may not necessarily reflect all the benefits of SaaS and may over-emphasize the lower operational costs of non-SaaS deployments.”