Telecommunications software and related service providers are poised to land revenue at a compound annual growth rate of 8.8% through 2025, according to Analysys Mason. Operators' total spending on software is forecast to jump from $80 billion in 2020 to $126 billion in 2025.

The market research firm expects more than half of global operators’ software investments to be directed to the cloud by 2025. “Cloud technology is rapidly invading and transforming the network. Spending is shifting from traditional network equipment to virtual networks and orchestration,” Larry Goldman, Analysys Mason’s head of networks and software research, wrote in the report.

“No other single factor is as important as cloud in our software forecast,” he wrote, adding that 5G is the second biggest driver of growth.

While software continues to eat telco-centric workloads and capture market share from legacy network technology at large, operator investments in 5G software will represent about 20% of all software spending by 2025, according to Analysys Mason. 

Operators’ cloud spend will surpass spending on legacy services and technology at some point next year, and investments in 5G software will nearly match that directed to legacy frameworks in 2025, the market research firm said.

The rise of software directly tied to 5G is being fueled by network virtualization, automation, and orchestration, Goldman explained. “Virtual networks are a fundamental part of 5G roll-out plans and are resulting in a shift in spending from traditional network equipment to virtualized network functions,” he wrote. 

Network automation is also taking root globally, which requires operators to manage and infer more outcomes from data. “Both human job functions and business processes can now be automated,” Goldman wrote. 

The omnipresence of COVID-19 is impacting operator activities with software and cloud services vendors, but the downside will be short term, according to Goldman. “Overall spending will rebound in 2021 as 5G spending growth returns and [carriers] make pent-up decisions to expand the use of automation, virtualization, and cloudification, which the pandemic has shown to be essential to business continuity and efficiency.”

While many changes in network architecture are underway, he noted that operators will still be obliged to invest in the maintenance and upgrades of established software systems. “The maintenance and enhancement of systems that are already in place today will account for 25% of communications service providers’ software spending in 2025.”