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Cloud & Automation: Changing CSPs’ OpEx outlook
Authors: Mark Newman, Chief Analyst & Justin Funnell, Contributing Analyst
Editor: Dawn Bushaus, Managing Editor
Communications service providers (CSPs) have grown comfortable talking to their investors about digital transformation programs, but they have a tough time explaining how transformation will impact their bottom lines. This has made investors cautious about building assumptions into CSPs’ future financial performance.
There are three main drivers for telco transformation: delivering a stronger customer experience, generating new revenues and achieving efficiency gains. In this research we are focusing on efficiency gains because they are the easiest way for operators to demonstrate the benefits of transformation.
Importantly, we have chosen to focus on OpEx rather than CapEx. There is already plenty of research available about the evolution of the network, which makes up the majority of CapEx. However, little information is available about telco OpEx trends, even though operators spend close to $1 billion annually.
OpEx falls into two categories: direct and indirect costs. Direct costs are expenses incurred to provide services, while indirect costs are general expenses to keep the business operating.
When it comes to items such as the cost to acquire subscribers – an essential expenditure if operators are to retain or grow market share – it is extremely difficult to make meaningful cuts. To lower OpEx CSPs are more likely to focus on indirect costs such as network and IT operations or reducing the number of employees and contractors across the organization.
The word “Legacy” often has unhappy connotations of being “outdated” and “high maintenance”. While this may be partially true, the business rules & transactions built into your legacy, over many years, are still highly relevant and valid. Your legacy assets, often become your core business differentiators.
A few ways to get more value out of legacy would be to:
A cloud native application model offers you building blocks that help you achieve the above four points and thus transform legacy. The key components of such a model are Containerization, Microservice based Architecture, Automatic Scalability and System Observability.
Typically, legacy applications can be categorized into one of three categories listed below:
In-house developed applications, built on outdated technology that is expensive to maintain, not scalable, with non-availability of skills for feature evolution. These systems severely impact time to market. In most cases, they are not integration-friendly, as they support outdated interfaces.
Third-party, out-of-the-box business applications, that were typically procured several decades ago. The vendor might have stopped developing new features and the systems are nearing sunset stage. Such applications are mostly monolithic in nature. They tend to be black boxes, with data and functions not exposed in a granular fashion.
Business critical applications that are fully functional but built on legacy hardware and operating systems such as Mainframes. The challenge with these applications is to make them integration-friendly and scalable through API-enablement.
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