ericsson White paperGFMC-17:000619 Uen | October 2017

TELECOM IT FOR THE DIGITAL ECONOMY

TELECOM IT FOR THE DIGITAL ECONOMY • INTRODUCTION 2

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.

Introduction

TELECOM IT FOR THE DIGITAL ECONOMY • THE CHALLENGE 3

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 demand-

driven 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 user-

defined, 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.

the challenge

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.

Consumers, enterprises andindustries consume everything

in new digital ways.

Customer centricsolutions for allCloud shift

The physical world becomesdigitally connected. Everything is part of a digital experience.

Connectivity is partof every digital

experienceIoT

Horizontalized networks, definedby software delivering dynamic

centric services.

Networks servenew users, purposes

and marketsNetwork virtualization

Enable mass marketpersonalization and

new value innovation.

Unique individualdigital consumption

modelsAutomation

Figure 1: Digitalization and telecom change drivers

TELECOM IT FOR THE DIGITAL ECONOMY • THE SOLUTION 4

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.

the solution

Needs connectivity to thrive in a digital world with many devices, digital services and suppliers.

Needs connectivity to run a business with manydevices, services and suppliers.

Needs connected products to evolve valuepropositions that deliver personal digital experiences.

Enterprise

Industry

Consumer

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 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 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 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.

Market

Users

Offering

Operation

Differentiation

Consumers andenterprises

Mass market

Human processes

Network performance

Telecom services

Industries, consumersand enterprises

Individualized

Software executed

User experience

Digital enablers

Today Tomorrow

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 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 • CONCLUSION 9

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.

conclusion

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.

New productionmodel

Newways of working

Digital platform participation

Automation

Deep customer insights

Figure 4: Telecom integration into the digital economy

TELECOM IT FOR THE DIGITAL ECONOMY • GLOSSARY 10

AI artificial intelligence

DevOps a compound of software development and operations

KPI key performance indicator

NFV Network Functions Virtualization

SDN software-defined networking

SLA Service Level Agreement

glossary

TELECOM IT FOR THE DIGITAL ECONOMY • AUTHORS 11

authorsPatrik 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.