Building tomorrow’s communications on a modern digital core

In brief

• In a recent Accenture study, 66% of communication service providers (CSPs) were concerned about their tech debt, with rising IT costs and hampered growth.
  
  
• Modern IT systems can help CSPs reduce tech debt and achieve greater agility, cost efficiency, and customer differentiation.
  
  
• CSPs must accelerate technology transformation through a digital core, integrating cloud, data, AI, and open architectures.

Transforming with tech debt in mind

The average communication service provider’s tech debt (% of legacy IT in total IT costs) in 2023 was 56%. This unresolved tech debt hinders productivity and innovation across the company.

CSPs’ approach to IT transformation over the past decade+ has been through adaptation as the business embraced new models, architectures, and acquisitions. This approach multiplied the complexity of the IT components, compounding tech debt. As a result, initiatives have not always yielded high-value returns and business outcomes.

In Accenture's latest study—a survey of 250+ top CSP executives—less than 7% of respondents were fully satisfied with the return on their IT modernization investments in the past three years.

The rise of generative AI is pushing CSPs to address tech debt as a strategic priority. Accelerating efficiencies with next generation technologies will provide a valuable reallocation of resources to drive transformation.

The cost of delay

Tech debt impacts almost every facet of CSP operations. Failure to monetize assets, competition struggles, operation and maintenance costs, and slow time to market top the list of our global survey. All this indicates that there is a need for a comprehensive review of CSPs’ IT structure through a tech debt lens.

Companies with lower-than-average tech debt have performed better than their peers in revenue growth and expect better performance in the next three years (5.3% vs. 4.4% 2024-2026).

From cost to catalyst: IT’s role in driving growth

Cutting tech debt and building a modern IT infrastructure enables CSPs to shift IT from a cost center to an innovation catalyst. A robust digital core, built on cloud-native architectures, AI-driven insights, and interoperable platforms, will allow CSPs to:

1. Drive operational excellence and cost efficiency.
2. Provide personalized and seamless customer engagement.
3. Reduce time-to-market for new products and services.

Where aspiration meets achievement: telco’s emerging leaders

Though most CSPs are aware of the impact of rising tech debt, there is a gap between the vision for the future and the current state. For instance, 93% of CSPs cite Cloud First infrastructure as a significant capability, but only 26% follow advanced practices enabling scalability and agility.

Over the past three years, companies in the top quartile of technological advancement have been more cost-efficient than their low-maturity peers. They also set their sights higher for agility in the coming years.

• Lower IT opex: Tech-advanced companies reported only a 0.8% rise in IT costs vs. 3.4% for others
  
  
• Lower IT total cost to operate: Tech-advanced companies reported only a 1.5% rise in TCO vs. 3.7% for others
  
  
• Greater agility: Over the next three years, more advanced CSPs foresee a 32% increase in speed to market

The conventional IT function of CSPs has reached its practical limit for fueling further business growth and driving efficiency. By addressing tech debt head-on and embracing a digital core, CSPs can transform IT from a cost center into a powerful engine for growth and innovation. Anchored in cloud, data, AI, seamless interoperability, and APIs, the digital core blueprint empowers CSPs to build resilient systems that adapt swiftly to market shifts. With generative AI accelerating automation, CSPs can unlock new efficiencies and capture future growth opportunities, positioning themselves as leaders in a rapidly changing landscape.