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Unlock data's power: Transform telecoms with a modern digital core
6-Minute read
October 10, 2024
“How do I stop my IT investments creating yet more cost and complexity?”
It’s a common question from the telecommunications leaders I speak to. They know that new technologies can improve their business and operations, but after years of investment, many face growing complexity due to IT proliferation. The answer lies in a strategic overhaul—one that revolves around what we call the digital core, which can unlock the power of data and drive the next wave of innovation.
CSP executives are acutely aware of the challenges posed by rising tech debt – that is the cost of managing complex, legacy systems. Tech debt has risen as the industry has contended with evolving business models, acquisitions and new competitors, as well as a range of new technologies. To date, telcos have responded through adaptation and incremental tech investments. No surprises, then, that our latest research, From Survive to Thrive: Achieving Tech Transformation for Communication Service Providers' Future, shows that over 66% of respondents are now concerned that their companies are weighed down by tech debt, and 63% admit that the complexity of current IT systems is a significant barrier to progress.
These issues not only slow down operations but also hamper the ability to innovate and scale effectively. The stakes are high. This is happening just as many pursue ambitions of becoming tech service providers in the face of competition from digital natives.
A staggering 84% of telecoms executives believe that their companies will miss future growth opportunities if they fail to achieve ongoing IT transformation
The benefits of a data-driven digital core
Instead of letting tech proliferation create roadblocks, CSPs can adopt a more coherent approach by building a digital core. The digital core is the critical foundational tech capability required for greater performance and continuous change. It comprises three essential elements: open digital platforms, secure cloud-based infrastructure, and a data/AI backbone.
Crucially, these elements must be integrated for AI to achieve its full potential. When cloud, platforms and data systems are integrated, gen AI can work across the enterprise and its different pools of data, including the unstructured and synthetic data that was previously off limits. As a result, AI can undertake complex tasks that traditionally required multiple processes and human intervention. An example? An AI customer care agent, engaging with data and functions across the business as it converses with a customer over several iterations to respond to multiple requests and offer new options.
The digital core also helps adopt new technologies required for new growth models. For example, it includes micro-services, API-enabled collections of loosely coupled software modules delivered by SaaS. These make it easier to manage services independently, faster to scale them, and more readily open the business to ecosystem partners. An effective digital core will also ensure that data residing on legacy technology is accessible through APIs to feed AI modules.
Unlock the full potential of your digital core and network
Today, however, most CSPs cannot benefit from such advantages. Only 26% of telco executives say they are fully transforming their operating model to the cloud first approach that’s at the heart of the digital core. Greater cloud adoption would not just lower IT costs but make it easier and faster to configure the data, apps and digital assets needed to deliver new products to market or to support new processes.
When it comes to data, only 28% of execs say they currently provide seamless access to data with decentralized control, a key requirement for market-responsiveness and customer experience. A digital core would allow them to consolidate siloed data sources into a unified data model, create data products and deploy effective decision engines to interrogate that data and automate processes.
Three steps to build your digital core and boost growth
Does building a digital core require abandoning existing technology? No. It’s about pivoting and rebalancing investments continuously over time so that when the next big technology arrives, the systems are agile and ready to embrace it. Here are three actionable steps:
01
Build a digital core aligned with business strategy
Prioritize customer experience or network capabilities. Take a modular approach to IT transformation, minimizing disruption while supporting multiple business functions.
Focus on your major strategic plays. Is your strategy to prioritize differentiated customer experiences with the help of AI, or to develop network-as-a-service capabilities? Whatever the focus, take a modular and phased approach to building the digital core, migrating critical systems first to minimize disruption, and ensuring you have a transition architecture that helps you gradually roll out your IT transformation beyond a handful of pilot projects. And keep that core clean so that it can support multiple parts of the business.
02
Invest in reducing tech debt for long-term gains
Dedicate 15% of your IT budget to tech debt reduction. Streamline cloud operations, clean data, and upgrade systems to boost agility and fund future innovation.
This could include optimizing cloud operations, cleaning data, consolidating vendors, upgrading IT skills or replacing obsolete systems. Accenture suggests committing 15% of IT budgets to this end. Not only will this result in lower technical and cultural barriers, or greater tech resilience and agility, it will generate savings that can be reallocated to innovation.
03
Shift IT spending to foster innovation
Allocate at least 6% of your IT budget to innovation annually. Balance operational efficiency with adopting new technologies to drive both growth and profitability.
Whether funded by savings from reduced tech debt or fresh financial sources, we suggest an increase of at least 6% each year in IT budgets devoted to innovation. The precise figure will depend on your situation. The goal is to balance operational efficiency with the pursuit of innovation, ensuring that maintenance isn't compromised when adopting new technologies.
For example, we worked with a North American comms and media company with more than 10 million subscribers. In their focus on customer-centricity, they faced a typical mix of business and tech challenges – and the two had to be tackled together.
We helped them redesign a range of processes and new ways of working, and we supported that with a simplified, cloud-based architecture that brought stability and agility to their technology and data landscape. We also helped introduce new software engineering skills. These interventions did not just reduce development costs by 30% and shorten build times, they allowed the telco to achieve their goal: to improve customer experience through a unified system to manage both customer care and retail channels.
For CSPs, the promise is clear: in place of underwhelming returns from IT investments, building a digital core offers the prospect of simplicity, flexibility, and cost-effectiveness. It enables them to respond to whatever new technology or business model comes down the track. The good news is that, today, the conversations I have with industry leaders are already beginning to shift—from questions about managing tech debt to discussions about how to fully unlock the power of data to drive growth, to take on digital natives, and to transform their telecoms companies into technology service providers.