ericsson White paper GFMC-17: Uen October 2017 TELECOM IT FOR THE DIGITAL ECONOMY

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1 ericsson White paper GFMC-17: Uen October 2017 TELECOM IT FOR THE DIGITAL ECONOMY

2 Introduction The rapidly expanding digital economy has exposed a clear gap in both the architecture and operational capabilities of telecom IT systems. Today s consumers require personalized, contextual services, but standardized subscriptions continue to dominate the market. A growing number of enterprises are demanding complete lifecycle services to support new digital business models, only to be met with offers of connectivity and bandwidth. Significant business opportunities lie in operators ability to address this gap between expectations and network capabilities. To do so, operators must focus on transforming from a supply-driven, mass-market provider model to delivering the new demand-driven digital communication services that are required by increasingly digital lifestyles and business models. TELECOM IT FOR THE DIGITAL ECONOMY INTRODUCTION 2

3 the challenge Telecom IT today is mainly designed to enable efficient production and distribution of mass market telecom services. In the digital economy the logic shifts from the current supply focus into a demanddriven reality where users expect services that are tailored to individual needs in real time. For consumers, potential use cases will vary widely according to the devices they use, their service preferences and the nature of their digital lifestyles. Still, they will all rely on enhanced user control. Connectivity will soon be universal, making it possible to connect any device or service desired at any time or place. The connectivity experience including all digital persona characteristics will be userdefined, making the operator an enabler of rich digital experiences. Similarly, future enterprises will require a new level of self-managed network resources. The network infrastructure could be specified by the enterprise itself, and provided according to real-time business requirements. It will support innovation with a portfolio of added business functions, including edge computing and real-time business analytics, as well as key network capabilities with speed, latency and security just to mention a few. Above all, services will be elastic and easily integrated, and will allow for the creation of new use cases to support digital services and connected devices across all industries and businesses. Finally, device makers will sell products with the confidence that digital services will be provided on the end user s or service provider s infrastructure of choice. Connectivity service profiles will, in turn, adapt intelligently to changing availability and service needs, and will be possible to update at the discretion of end users or device makers themselves. Cloud shift IoT Network virtualization Automation Consumers, enterprises and industries consume everything in new digital ways. The physical world becomes digitally connected. Everything is part of a digital experience. Horizontalized networks, defined by software delivering dynamic centric services. Enable mass market personalization and new value innovation. Customer centric solutions for all Connectivity is part of every digital experience Networks serve new users, purposes and markets Unique individual digital consumption models Figure 1: Digitalization and telecom change drivers Figure 1 presents four key telecom change drivers: cloud shift, IoT, network virtualization, and automation. Current technologies already enable networks to provide increasing degrees of automation and the intelligent data modeling required to start fulfilling the digitalization demands of individuals, enterprises and IoT players. However, the significant legacy burdens of the current IT infrastructure have increased in complexity due to a supply-push business model, which has led to industry inertia. The resulting spaghetti IT infrastructure which has been stacked and integrated repeatedly over a number of decades remains a serious obstacle to the future evolution of the telecom business. A long-overdue overhaul of this network-centric production model is required, to align it with the business models of the digital age. Such an overhaul will open up a new era for the telecom industry in which both the scale and scope of business are expanded substantially. It will require the support of a massively flexible and scalable infrastructure that operates at a fraction of today s cost and effort. The variety of use cases and consumption scenarios that to be supported will be almost unlimited, and will also be impossible to implement and deliver as pre-packaged static services. Instead, users must be in charge of defining what they need, while the infrastructure dynamically adapts and responds to those needs. To succeed, a solid IT foundation is required to support the new behaviors associated with telecom consumption. This foundation must offer the benefits of convenience and simplicity, facilitating the daily digital lives of individuals and the transformation of enterprises through digitalization. TELECOM IT FOR THE DIGITAL ECONOMY THE CHALLENGE 3

4 the solution REDEFINING THE SERVICE PRODUCTION MODEL To succeed in this new business environment, operators must be well integrated into the digital economy and the platforms that are the fabric of digital value creation. To achieve this integration, the current service production model must be redefined in four significant ways. First, the consumption experience must be defined near the user, rather than from deep within the network itself. Second, service production must shift from a process driven by people and supported by software, to an automated process developed by people and run by software. Third, operators must shift from the norm of maintaining full end-to-end control of the user relationship to participating with other players in new service ecosystems. Fourth, a new operational setup will be required in which new competencies will be leveraged to support continuously evolving business change processes. Adapt to customer-centric consumption models To move from network-defined to user-defined services, the focus must shift from the creation of connectivity to the actual experience that connectivity enables. The only way to generate truly rewarding usage-based service enhancements is with the help of insights about deep usage patterns and personal preferences. Additionally, the ability to respond in real time at the individual level to the digital needs and behaviors of digital consumers and enterprises will be essential to transition to a business model that grows with increasing digital usage. Figure 2 illustrates the evolving needs of consumers, enterprises and industry. Consumer Needs connectivity to thrive in a digital world with many devices, digital services and suppliers. Enterprise Needs connectivity to run a business with many devices, services and suppliers. Industry Needs connected products to evolve value propositions that deliver personal digital experiences. Figure 2: Evolving customer needs To succeed, operators must take customer intimacy to the next level. To build a close relationship with every user, there is a need for a (shared) information infrastructure that supports digital interactions between the various actors comprising the digital economy. Such an infrastructure bridges the information gap between operators, consumers and enterprises, and enables operators to interact and respond automatically at scale. Technology advances support this development and enable completely new levels of customer intimacy. Cloud services, mobile applications and voice-controlled home devices are examples of new data-generating interfaces that enable predictive, personalized services. Equally, telecom infrastructure and IT can evolve into one of the most powerful user-centric enablers that supports entirely new levels of insight creation, becoming a critical production resource for digitally enhanced customer business. Technologies such as software-defined networking (SDN) and Network Functions Virtualization (NFV) are by definition changing the future role of networks. They are also fundamentally changing the core telecom value proposition. It will be critical to capture the new value this implies, and it is here that operator IT will play a vital role. TELECOM IT FOR THE DIGITAL ECONOMY THE SOLUTION 4

5 Operators need to be able to turn an inflow of information into intelligent and relevant insights about potential new offerings that can create real value for users. The development of relevant, value-adding services requires a strong understanding of the realities of users, as well as intelligent data models and shared information infrastructures. Improving the usability and usefulness of the digital services that consumers use over the network is a good starting point for such a transformation. 2. Automate to serve dynamic production models efficiently There is no doubt that we are heading toward fully automated business operations. This is a clear trend across most industries, and telecom is no exception. While people will continue to design operations and control the outcome, all routine handling simple as well as complex will be automated. The obvious given outcomes for any player will be rationalization and cost reduction. More importantly, automation provides fertile ground for more rewarding results beyond pure cost savings. In an automated operation, new previously unimaginable offerings will now make perfect sense. Delivered services can be tailored to the user at web scale. Efficiency will continue to be an important business driver. In the short to medium term, recent technological advances in the virtualization and automation domains will serve as low-hanging fruit providing enhanced internal operational efficiency. Automation must therefore be on top of every operator s agenda. In the long term, however, increased efficiency will also come as a by-product of new and evolved software-driven business models enabled by innovative network technologies. A good illustration of the wider impact of automation can be found in the IT industry, which has embarked on an automation journey that impacts not only costs but also the core of the business. With cloud-based delivery and consumption models, the IT industry is undergoing a major transformation. Customer value is now packaged into a unique offering at the time of consumption, enabled by the computing power of the cloud. The cloud enables IT suppliers to orchestrate and customize complex solutions tailored to the individual user by fundamentally rethinking how best to serve their customers. Operators must begin to think, act, and operate like cloud providers to serve users, with an offering that is dynamically configured around each individual or enterprise and their specific needs. By adopting cloud business models, leveraging automation in production and establishing new levels of customer intimacy, operators can utilize software as the enabler for an enhanced telecom value proposition. Moving toward dynamic and user-defined service requires full, end-to-end business automation, together with a production model that can orchestrate and deliver a unique experience to every customer. Such a production model will be heavily reliant on business automation and the new virtualization technologies entering the telecom industry. Consequently, an automated production model will facilitate the realization of radically new kinds of connectivity offerings. These advantages can rapidly enable new service capabilities, opening up new markets where connectivity becomes an essential production capability integrated into the business processes of other industries. It is therefore necessary to evolve networks toward full virtualization while at the same time redesigning the supporting software to take full advantage of automation for efficiency reasons. This is a first step towards a new model in which customer intimacy can be leveraged for automated, real-time value creation. To move toward an automated operational setup, it is necessary to gain control of the legacy spaghetti IT. Rather than being driven by traditional key performance indicators (KPIs), this implies a web-scale operational setup that is self-supporting and controlled by a machine-type Service Level Agreement (SLA), meaning it is fully integrated, orchestrated and configurable in all dimensions, satisfying both internal and external needs. Well-designed business automation brings new dimensions to business control. The systems can instantly be linked to, and optimized towards, financial or business metrics, free from the constraints that typically plague the management of large and complex organizations. 3. Adapt production to a platform-centric industry structure Most industries are moving towards new value systems and market configurations that are based on platform business models and co-creation. Connectivity is already a critical asset in this development and it will only become more important as IoT usage accelerates, industries get smarter and more digital business models emerge. It is critical for operators to understand how to participate efficiently in the digital economy, and deliver value from connectivity and network capabilities in platform-centric ways. This transformation is clearly challenging for an industry that is deeply grounded in a vertically integrated business model with end-to-end service control and one-to-one customer relationships. As the telecom industry begins to support a wider range of devices and service configurations, together TELECOM IT FOR THE DIGITAL ECONOMY THE SOLUTION 5

6 with a broader customer base consuming connectivity for more diverse purposes, it becomes necessary to adopt platform models where the connectivity offering can be defined and packaged at the time of consumption. Industry cloud environments such as digital agriculture, digital health care and Industry 4.0 are examples of future vertical connectivity consumption platforms. Equally, enterprise IT clouds are examples of future horizontal consumption platforms. Connectivity must be a resource that is available where new business ecosystems grow and must become easy to consume and integrate into other businesses and experiences. Tomorrow s telecom consumption environment must match the needs of users with all of the resources required to fulfill them, and will thrive on information as the most critical source of business. In a platform-centric world, the user experience is a result of co-creation at many levels, completely redefining competition as it once was known. To emerge as winners, operators must be prepared to play by the new rules of the digital economy. 4. Evolve the organization to a new business reality Supporting dynamic consumption and production models requires a new level of business automation. The organizations supporting these dynamic software-driven services will face challenges similar to those currently resolved by the DevOps concepts that have emerged in the IT industry. Software will automate operations, and human efforts will shift towards managing change and development in a fast-paced business environment. This evolution will require a different set of competencies within the organization, requiring new ways of working. A new set of business development processes will take over as the previous core processes become automated. The entire organization must become fully aware of the current state of services and users, and be empowered to immediately mitigate any issues requiring human intervention. To remain relevant, the business needs to continuously learn and evolve with users and usage in real time. The time to act is now The transition of the telecom industry from a vertical end-to-end model to a co-creation model that works in new horizontal ecosystems is essential. In this new model telecom is not predefined and it does not serve mass markets. Instead, it is a key resource and enabler for the digitalization of enterprises and industries. New network technologies and 5G make this new way of working possible, but it will not materialize without a major overhaul of the supporting IT environment. The IT infrastructure in particular must move toward more flexible, agile, and higher-performing cloud-based solutions. New functional requirements will arise as new technologies emerge and software performance continues to improve. Technological progress in areas such as virtualization, artificial intelligence (AI), and automation is sure to play a key role in the transition. TELECOM IT FOR THE DIGITAL ECONOMY THE SOLUTION 6

7 KEY CHARACTERISTICS OF FUTURE TELECOM IT ENVIRONMENTS To turn the new business dynamics into satisfied customers and profit, the current way of operating will need to transition into virtual and real-time business execution. Figure 3 illustrates the telecom evolution. By moving in this direction operators will find themselves becoming part of a greater digital machinery supporting increasingly holistic customer journeys. Future telecom IT environments will need to demonstrate seven critical characteristics to be able to contribute to and benefit from this digital business evolution. Today Tomorrow Telecom services Consumers and enterprises Market Users Digital enablers Industries, consumers and enterprises Mass market Offering Individualized Human processes Operation Software executed Network performance Differentiation User experience Figure 3: Telecom evolution User-centric and user-near The IT environment must be user-centric and designed with the main purpose of maximizing the benefit and utility for the individual users. To capture consumption needs in real time, it must be positioned close the user rather than centered on network services or pre-defined products. Currently, processes are mainly designed around network services and asset utilization. Going forward, this must change. The coming automated processes and functions must start with user activities as input and result in user-specific services as output. In effect, processes must be completely re-engineered for a new purpose and a new value proposition supporting dynamic consumption needs. In the short term, a value-generating customer experience and customer relationship based on existing offerings is an investment that is future-proof in the sense that it serves as a bridge to introduce a new value propositions supported by dynamic production models based on user needs. Cloud-oriented Just as networks are becoming cloud-oriented, so must the operator s IT infrastructure. Network virtualization introduces a completely new dynamic attribute to networks and enables them in some sense to evolve freely with users and usage. In its simplest form, cloud-native architecture means operator IT must be able to operate naturally in a cloud-based IT infrastructure. However, cloud-native operator IT must also fulfill the role and promise of all cloud technology: namely to deliver the capability to orchestrate and manage massive amounts of virtualized hardware and software resources in real time. This, in turn, implies moving towards a fully automated DevOps operational model. Hyper-scale operation and other web-scale practices will become key future operational competencies. Platform-oriented Virtualization and other new network technologies, such as 5G, provide networks with new capabilities that enable the creation of personalized services that adapt dynamically as needs and preferences shift. The supporting IT infrastructure must be platform oriented to promote these new and important network capabilities to users and orchestrate resources according to users needs. The operator IT must also be prepared to interact and exchange value in other platform ecosystems. TELECOM IT FOR THE DIGITAL ECONOMY THE SOLUTION 7

8 Fully integrated and modular As a consequence of the platform orientation of the supporting operator IT, and the real-time requirements emerging from the need to support user-defined services, there is a strong overarching requirement for the operator IT environment to function as one unified and real-time business engine capable of orchestrating services based on every user s needs. There is little hope of a completely automated user-centric and dynamic business evolving from the current network-centric IT infrastructure. A new disruptive way of building operator IT is needed, and it must leverage a higher degree of industrialization to be both successful and cost-efficient. Model driven Due to the dynamic nature of a real-time and user-driven business, changes in processes, business rules or individual applications can no longer result in lengthy and costly integration and development projects. The future operator IT platform must be based on a high level of configurability that is controlled on a platform level, rather than an application level. To support internal as well as external actors, only one central point of platform configuration can exist. Supporting full business process automation End-to-end process automation for efficiency purposes has always been a top business reason for system integration in operator IT environments, and the fundamental rationale for operator IT. With the introduction of user-defined services, it is no longer sufficient to look at process automation from an end to-end perspective. It is also crucial to start automating the business from top to bottom. In such an automated business environment, user actions result in changes deep in the network, in real time. Analytics-driven and AI-ready An operator IT platform that can support users based on their individual needs and evolve the offering according to those needs over time will be heavily dependent on massive amounts of data made available as contextual information. This information must be processed through various algorithms to be turned into actionable insights. Although automation emerges from hard-coded rules that require human adjustments for optimal performance, AI already promises to deliver operational automation that is self-optimizing based on both historic business results and future needs. TELECOM IT FOR THE DIGITAL ECONOMY THE SOLUTION 8

9 conclusion Digitalization is already changing the telecom industry, not least in terms of consumption patterns and the front-end of business with its explosion of new digital customer engagements. Looking ahead, it s obvious that digitalization will continue to accelerate and will soon expand to include the production and operations side of the equation. The result will be a wide range of new market opportunities for telecom operators to develop and provide new kinds of offerings and to facilitate the creation of digital use cases across a variety of industries. New production model Digital platform participation Automation Deep customer insights New ways of working Figure 4: Telecom integration into the digital economy The effects of digitalization will be industry wide and significantly reshape the way business operates (as illustrated in Figure 4). To be able to capitalize on new opportunities and continuously meet rapidly evolving customer expectations in the digital economy, it is essential for telecom IT to transform into a business execution platform. Digital versions of today s processes need to be effectively implemented and efficiently optimized. A more intelligent digital infrastructure is required to support a business that is fully automated, platform-oriented, and highly adaptable to the user in real time. Automation must leverage machine intelligence and be designed and configured on a business level rather than a system level. TELECOM IT FOR THE DIGITAL ECONOMY CONCLUSION 9

10 glossary AI DevOps KPI NFV SDN SLA artificial intelligence a compound of software development and operations key performance indicator Network Functions Virtualization software-defined networking Service Level Agreement TELECOM IT FOR THE DIGITAL ECONOMY GLOSSARY 10

11 contributors The contributors to Ericsson s opinion on this topic are Patrik Regårdh and Ola Backlund. Patrik Regårdh currently serves as strategy manager for Solution Area OSS, where his work focuses on market development, industry dynamics and driving strategies and initiatives for Ericsson s digital business. He joined the company in 1994 and his previous positions have ranged from strategy and business development to account management. Currently based at global headquarters in Stockholm, he has also worked extensively in Brazil, Thailand and Germany. Regårdh holds an M.Sc. from the Royal Institute of Technology in Stockholm. Ola Backlund is senior portfolio manager for Business Area Digital Services, focusing on digital business strategy. Ola has worked for Ericsson for the last three years and comes from an entrepreneurial background driving several startups within the digital domain. Previously Ola has held various positions within a European telecom operator. Ola is based at global headquarters in Stockholm and holds an M.Sc. in telecommunications from the Royal Institute of Technology in Stockholm. TELECOM IT FOR THE DIGITAL ECONOMY AUTHORS 11

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