CSP's Digital Transformation, from Telco to TechCO

-- According to the recent TM Forum Digital Transformation Tracker, most CSPs want to transform into a comprehensive digital technology company (TechCo) by providing end-to-end digital services. This article is an interview with George Glass, CTO of TM Forum, and SuYu, Chief Architect of Huawei Digital Operations Transformation about the driving force, strategic direction and path selection of CSPs' digital transformation. Mr. Suyu also discusses how the new Digital Operation Transformation Framework (DOTF) can be used to evaluate the maturity of digital operations.

WinWin Editor: Good afternoon gentlemen, and thank you for joining me today to talk about the implications of the latest research published by the TM Forum on the digital transformation of network service providers. Let me begin with George Glass, who is CTO with TM Forum.

WinWin Editor: George, I'd like to start with strategy. What does your research say about the current digital transformation aims of network operators?

George: When embarking on digital transformation, it is important for a company to decide what type of digital business it is seeking to become. Digital aspirations vary across communications service providers -CSPs. TM Forum's most recent Digital Transformation Tracker, published in June, revealed that only 15% of the surveyed CSPs wish to stay as digital connectivity providers. Another 19% aspire to become multi-play operators, while 13.5% seek to become platform providers offering services by partnering with others. However, an overwhelming majority of the CSPs (52%) are aspiring to become full digital service providers offering a variety of end-to-end 2C and 2B services built on their existing telco capabilities and supplemented with capabilities from partners in different industries.

WinWin Editor: You mentioned 2B customers. How will the digital transformation of network operators impact them?

George: In a traditional CSP business, customers were unaware of the technology or vendor ecosystem that lay the foundation of the services they received. However, as CSPs evolve to become TechCos, delivering an entire gamut of digital services, there is a need to co-create value by collaborating with their 2B customers and their partners. As a result, a majority of CSPs believe that pushing technology functions closer to customers will help drive co-creation and this will in turn accelerate the Telco-to-TechCo evolution. This requires a fundamental restructuring to devolve the telco's centralized functions to become more customer facing.

WinWin Editor: This will clearly be a big change for network operators. Why have they now decided to embark on such a journey?

George: CSPs mostly view digital transformation as a key strategy to drive business value and improve customer experience. TM Forum has found that digital transformation is enabled and driven by several considerations.

• 5G advanced technologies are opening up a wide range of industry applications.
• The need to flexibly allocate and schedule computing, storage and network resources on demand.
• The need to reduce energy consumption for environmental and economic reasons.
• 10Gbits/sec, ultra-low latency, high availability connectivity can deliver more immersive experiences that connect the virtual and real worlds.
• Deterministic SLAs are now possible with scenario based slicing and elastic bandwidth to meet traffic and service demand in real time.
• The need for zero-wait provisioning and preventive maintenance to deliver zero-trouble experience.

WinWin Editor: Ok, so there's lots of technical reasons for pursuing digital transformation, but what benefits are network operators seeking?

George: That's a good question. After all, the whole point is to get business benefit, and not just invest in shiny technology. Our research shows that 69% of CSPs see improved operational efficiency as the most important. However, customer engagement is gaining in importance, with around 64% of CSPs now aiming to achieve stronger customer engagement. Thus, CSP's digital transformation primarily revolves around operations and digital services.

However, transformation has to be anchored in both what the customer wants and the CSP's own business goals. This is crucial as CSPs have to maintain a cautious approach about their business. In fact, our survey revealed that only 11% of CSPs reckon solid growth will come from expansion to TV, IoT and ICT, as compared to 18.5% in 2020. Overall, the percentage of CSPs who expect at least some increase in revenues from IoT and ICT is just over half, at 55%.

WinWin Editor: It's clear that this is a challenging time for network operators. Did you research reveal anything about the main obstacles facing operators as they pursue transformation?

George: Yes, definitely, there are many obvious barriers to digital transformation. Firstly, CSPs see a lack of a clear, aligned vision as the biggest obstacle with 36% of the vote, while a lack of top management support is seen as a barrier by 34%. The lack of flexibility caused by legacy IT and skills shortage are also concerns.

Also, the transformation from Telco to TechCo requires some major changes in their processes. Automation was an absolute priority for over 82% of the CSPs as they seek to reduce the complexity and improve the consistency of their operations. Vendors must play a significant role in this by providing the technology and resources to support the desired changes, so it is important they are viewed as a partner rather than just a supplier. Then, the relationship will benefit them both as it leads to understanding the capabilities and delivering on the requirements in a more cooperative way. It is not surprising then, that a majority of CSPs (>55%) believe that a 'partner' approach will be beneficial.

WinWin Editor: As operator transformation progresses, what are the key trends you are seeing?

George: Well, the first thing we are seeing is that as the legacy monolith architecture of a traditional telco evolves into a digital-driven business journey, CSPs are gaining value in terms of customer experience and digital touchpoints. The evolution is also marked by the adoption of cloud and open APIs, and the development of partner ecosystems and marketplaces. The journey is catalyzed by trends such as IoT and 5G. As telcos move up the ladder to emerge as TechCos, they can more deeply engage in cross-industry collaboration and more easily utilize the open source developer community and its innovations.

WinWin Editor: And finally, how is the introduction of 5G influencing the operators' transformation programmes?

George: They are going hand-in-hand. Delivering differentiated customer experience is an important consideration for the Telcos operating in a 5G environment. With telcos evolving as next-gen digital technology providers, they must be capable of offering flexible products and services that suit the distinct requirements and real-time use cases of their 2B customers. For example, imagine an engineer at a manufacturing facility being guided remotely through an AR headset to repair a machine. Such a use-case can now be delivered by the ultra-high bandwidth and lower latency promised by 5G, and similar use cases will have a huge impact across industry.

WinWin Editor: Thanks George for those insights. Its clear that network operators can achieve significant business growth through digital transformation, although success will not come easily. So now let me turn to SuYu who is Chief Architect for Digital Operations Transformation at Huawei. He is part of a team working with network operators world-wide to support their digital transformation efforts.

WinWin Editor: How is Huawei's services business helping network operators to digitally transform their operations?

SuYu: Well, while CSPs are usually clear about their digital transformation goals and the benefits they are seeking, they often lack clarity on where to begin and what elements to focus on. This is where Huawei can help.

Firstly, using the Digital Maturity Model from TM Forum we can get a baseline of an organization's existing digital maturity and help the CSPs identify and prioritise their maturity gaps. Then, aiming to accelerate digital operations transformation, Huawei and our carrier partners have developed the Digital Operations Transformation Framework (DOTF). This model identifies five distinct domains including Organization & People, Data & Platform, Process Optimization, Transformation Strategy and Value Criteria, with five-levels of achievement in each area, to help carriers to design the specific transformation actions and improve the digital transformation maturity.

WinWin Editor: Oh, that's interesting. So, with this new model you must have a good insight into the current state of network operators' transformation progress. Can you tell us where they are doing well, and maybe where they are struggling?

SuYu: Yes. Based on our DOTF model I can tell you that most carriers are progressing well with the Strategy dimension. With an average score of 3.4, this is the highest across the 5 domains, and shows that carriers already have a clear strategy to guide their transformation work. Data & Platform is the second highest scoring dimension with a 3.3 average score, suggesting that carriers realize the importance of data and platform-based operations. The Process Optimization and Organization & People domains are relatively lagging. Process links digital capabilities to business outcomes, so optimizing processes to improve working efficiency and quality must be a priority in the next stage of transformation. Finally, helping people develop new digital skills, and encouraging teams to introduce digital tools and practices remains vital for continuous progress.

WinWin Editor: So overall, are you optimistic about network operators' prospects?

SuYu: Absolutely yes! By following the DOTF sequence above, with a clear strategy and line of sight to business value, we have shown that it is definitely possible to deliver real business value with digital operations transformation; delivering both higher revenues and customer experiences while at the same time increasing operational efficiency.

WinWin Editor: Great - that's a positive note to end on. Thank you both for your time today.