In 2021, communication service providers (CSPs) will face the biggest change they've encountered since the digitization of the central office. It's called CSP digital transformation, and their customers are already experiencing it. It's as negotiable as an approaching freight train, and it's about to change the CSP industry forever.

Digital transformation changes the way businesses interact with their customers. It blends technology and cultural change to make them not only more responsive, but also more agile and innovative. The pandemic has accelerated the digital transformation journey, according to a McKinsey survey, which noted that participants were "three times likelier now than before the crisis to say that at least 80 percent of their customer interactions are digital in nature."

Drivers for CSP Digital Transformation

Competition from service providers that were born in the cloud is a major driver for digital transformation. These providers often deliver over-the-top (OTT) services that use communications networks as commodities. That leaves telcos with diminishing margins and falling average revenues per user. Meanwhile, OTT providers pick up the lion's share of the profit.

Communications providers have also had to invest in 5G to keep up with their competitors. They must find ways to claw back some of that expenditure. Revenues in the 5G world will come from services more than infrastructure fees.

Telcos must throw their hats in this ring by offering new services to elevate their revenues rather than relying on legacy connectivity-based business models. These services will help them drive their profits further up the technology stack, focusing on areas ranging from cybersecurity through to collaboration.

Connectivity will be a foundational platform for these service bundles, rather than a primary revenue driver. Telcos will evolve from mere connectivity conduits into broader digital service providers. They will combine these services with others from third parties, adding new integration revenue streams.

The Road Ahead for Digital Transformation

To make this transition successfully, a telco must do far more than develop new services; it must improve its delivery capability.

Cloud-native service providers have already shifted buying patterns forever. Customers who are now accustomed to buying everything digitally want their products and services immediately. Enterprises accustomed to spinning up compute and storage infrastructure in seconds on Google or Amazon Web Services will grow increasingly weary of 45-day deployment times for connectivity from their telco.

Once activated, these services will require new levels of management. Telcos typically view services as either working (hard up) or not working (hard down). Applications further up the stack are more nuanced. Cloud-based service providers enable self-service control and monitor the quality of applications like streaming and conferencing, ensuring not only that they're working but also that customers have an optimal experience.

Telcos must do the same, which means changing their existing service management operations. Manual service management using legacy operational support systems (OSSs) won't scale. The workload will be too high for human operators. The answer lies in automation.

Automating the Service Lifecycle

Automating service management begins with an intimate understanding of each service's characteristics, such as operating parameters and the load they place on the underlying physical and virtual infrastructure at each stage of the service lifecycle. Telcos will also need to anticipate service demand; this will enable them to plan enough infrastructure capacity to deliver a high-quality experience.

Telcos must automate the management of the physical network infrastructure itself, too. This will become more difficult in a 5G world—where high-bandwidth data connections are more complex and dynamic than ever, and advanced capabilities such as network slicing for tailored application support are a reality. They will need advanced technologies, including artificial intelligence (AI), to plan and manage network capacity and performance.

AI will also be instrumental in the third and final layer of automation: customer interaction. Customers will expect the same fast service resolution that they get with cloud-native providers, which often features AI assistance for human agents or entirely automated tier-one agents in the form of chatbots. They will demand more seamless navigation when buying new services, including personalized service recommendations.

Telcos Carry a Big Brand Advantage

For most CSPs, these challenges will be new. They are also both broad and deep. They entail wide-ranging changes that span both technology infrastructure and culture. Those changes will flow from the strategic level all the way through to daily operations.

The challenges are significant, but so are the opportunities. The good news is that telcos enjoy an incredible amount of trust and customer traction. People have depended on these organizations for decades, making them go-to companies for technology services.

The first step toward success is realizing that you can't do this alone. CSPs engaging in a new digital ecosystem need new vendor and integration partners to help them both redefine their technology infrastructure and create the software-defined architectures that will accelerate service delivery and management.

This also means adopting more standards-based technologies that will give them more agility in their architectures. This doesn't mean abandoning long-established technology partnerships with vendors, but it does mean seizing control and steering those relationships. It also means pushing back on vendor lock-in and forcing through the technology changes that will give telcos the agility they need to pivot quickly.

These steps will be critical as telcos approach a new period of network volatility in which technology infrastructure and the priorities driving it will change at unprecedented levels.

This is why digital transformation isn't called digital change. It goes deeper than cosmetic tinkering. It's more than a set of discrete but disconnected technology projects; it's a reimagination of a telecommunications company's basic function. The best time to embark on that strategy was yesterday. The next best time is now.

Explore how Telefonica enhanced its service operations with software-defined networking in this free case study from Analysys Mason.