0 6 . 2022

O P E R AT I O N S 4 . 0
The five tech pillars
that will make or breaktelco operators in 2022

CONTENTE XECUTIVE SUMMARY
1

3

THE CHALLENGE: MONETIZE INVESTMENTSI N T E C H I N N O VAT I O N

24M A K E T E C H W O R K T O E N A B L E D I G I TA L
T R A N S F O R M AT I O N

36

A I & A D VA N C E D A N A LY T I C S :NEW REVENUE STREAMS

48C L O U D & V I R T U A L I Z AT I O N T O
BOOST SYNERGIES

512R AISE EFFICIENCY & ACHIE VE
Z E R O -T O U C H W I T H A U T O M AT I O N

6A N T I C I PAT E T H R E AT S B Y I N V E S T I N G
IN CYBERSECURIT Y

7

20

BRING WORKPL ACES INTO
T H E D I G I TA L W O R L D

24

CONCLUSION

26

VINCENZO BASILE

SEAN MCDEVITT

Partner, TIME*
Rome
basile.vincenzo@adlittle.com

Partner, TIME
Bostonmcdevitt.sean@adlittle.com

SHINICHI AK AYAMAFABIO BIANCHI

Partner, TIME
Tokyo
akayama.shinichi@adlittle.com

Principal, TIME
Milan
bianchi.fabio@adlittle.com*TIME: Telecommunications, Information Technology, Media & Electronics

2

14

ARTHUR D. LITTLEEXECUTIVE SUMMARYR EAPI N G R EWARDS OF NE W TRE NDS
W I T HO UT B R EAK ING TH E BANKIn all markets, there is an alarming and growing gap
between stagnant revenues and the increasing levelof investment required to introduce new technologies
in the telco sector. The game has changed: supporting
soaring data traffic, improving quality of service, anddelivering new ways of working are no longer just niceto-haves, they are operational keystones upon which
the future of the entire enterprise depends.
The resulting pressure on margins and cash flow
intensifies as the need to deliver growth and better
quality of service faces off against increases in OPEX
and CAPEX, while management remains unwilling to
cut dividends for shareholders. The first action major
telco players have taken to fund investment needs issigning network-sharing agreements with TowerCos.
As a second step, telcos are even evaluating thecreation of NetCos to sell to the market.
As a result of continual technological disruption, suchas hypercompetition and sustainability at the global
level, the telco value chain is rapidly evolving toward
Operations 4.0 as an integrated part of its digitaltransformation pathway. In this Report, we highlight
five emerging tech opportunities that can drive radical
performance improvement in future telco operations
as well as generate new revenue streams to energize
telcos to establish a competitive advantage in the
new landscape.

3

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1. THE CHALLENGE: MONETIZEI N V E S T M E N T S I N T E C H I N N O VAT I O N

The telco industry has been changing rapidly
for many years, but the pace of evolution
now appears to be faster than ever. Telcos
face growing complexity due to technology
innovations like 5G and the Internet of Things(IoT), as well as increased competition. They
are also experiencing greater pressure on
their financial performance. In fact, Capital
IQ research has reported that, in the past few
years, revenues of the top 50 telco players byturnover have grown by 3.6% CAGR, while EBITDA
has increased by only 0.6% CAGR.1 The point is
not whether telcos must transform, but rather
how to successfully drive the evolution.
With cooperation from telecom CEOs and

MANY
TECHNOLOGYOPPORTUNITIESWILL HELP
DRIVE TELCOPERFORMANCESALONG THE
SUPPLY CHAIN

C-level executives across continents, Arthur
D. Little (ADL) has identified some criticalquestions that telcos must answer to illuminate
the challenge:
1. What disruptive forces are enabled by digitaltechnologies in our industry ecosystem?
2. What market and client requirements do weneed to meet with our operations, and how
important are they?
3. Which applications of technology will bringreal value to our operations, in the shortand long term?
4. What does the resulting future state ofoperations look like and what benefits(financial, business model) can we expect?
5. How do we get access to know-how andtechnology to successfully manage thistransition?

1

4“Accelerating the Intelligent Enterprise.” EY Global, 2019.

The need for growth and diversification beyond
core business, the demand for a best-in-classcustomer experience (CX), and higher complexity
due to new technologies are pushing executives
to look for a higher degree of flexibility andefficiency. Many technology opportunities,
including artificial intelligence (AI), advanced
analytics, autonomous systems, cloudcomputing, IoT, 5G, and smart robots, will help
drive telco performances along the supply chain.
All these new technologies will push far beyond
current efficiency targets and will redefine thetelcos’ operating model (processes, systems,
organization, skill set). We believe they also havethe potential to generate new revenue streams
and can improve current economics and enable
reinvestment in high-potential growth areas.

ARTHUR D. LITTLE

Some telco executives have already started

redefine value offerings and further adoption of

focusing on these topics and are redesigning the

Operations 4.0 (see Figure 1) to manage and surf

telco paradigm by rethinking their business andthe disruption, and new trends will overcome theoperating models. Increasing digitalization will

challenges they are facing.

Figure 1. Disruptive digital business model pathway to
Figure 1. Disruptive
digital business model pathway to Operations 4.0
Operations
4.0
Fully
digitalized

Revolutionary digital transformation

Redefined value
offering

Disruptive
digital business
model

Extendedvalue offering

Digitallystrengthened
operating model

LimitedDegree of “digitalized” value offering

Evolutionary digital transformation

LimitedNew digital
operating model
Operations 4.0

Fully
digitalized

Degree of “digitalized” operating model— Operations 4.0
Source : Arthur D. Little

Source: Arthur D. Little

5

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2. MAKE TECH WORK TO ENABLE
D I G I TA L T R A N S F O R M AT I O N

Mobile network operators across the globe

The main challenge for operators is how to

are investing — or will invest soon — in newmonetize these investments through revenue

technologies such as 5G, distributed antenna

generation and/or cost efficiencies. Before theysystems, small and pico cells, IoT, cloud, andcan make any strategic decision, telcos must

AI/machine learning (ML). This will requireassess and develop use cases to determine thehuge CAPEX (according to ADL analysis, up to

profitability of these new technologies within

20% of EBITDA, depending on market share,

the entire ecosystem.

market strategy, and average revenue per user).
Investments will enable new services like smart
cities, smart homes, eHealth, and autonomousvehicles, allowing customers to fully exploit
their experience with better quality of service(e.g., higher downlink and uplink throughput
for eHealth and low latency for online gaming).

Telcos must also consider how technologicaltrends, especially those involving the network,
can enable digital transformation. In thisReport, we focus on how new technologies arechanging or could impact telco operators froman operational perspective (how technologies
are evolving the industry and how players canmonetize them) and on the functions thatwill have the greatest impact on margins. The
majority of the OPEX spending is concentrated
in network, IT, and customer-facing
departments (see Figure 2).

Figure 2. OPEX spending distribution among telcoorganization
functionsFigure 2. OPEX spending distribution among telco organization functions
10%

5%

4%

19%
9%
48%

Network

4%

IT

Marketing

Sales*G&A = general and administrative expense
Source: Arthur D. Little*G&A = general and administrative expense
Source: Arthur D. Little

6

Customer
operations

G&A*

Other

ARTHUR D. LITTLE

To successfully manage this transformation,

In the next chapters, we share our perspectives

we propose a four-step process (see Figure 3).

on how five technology pillars will impact andFirst, align with the business to support thetransform the telco industry and what CxOs

achievement; second, reduce complexity byshould do to maximize their returns frombeing lean, efficient, and effective; third, ensure

adopting the technologies in these categories:that the performances are aligned to market
standards and best practices; fourth, operate

1. AI & advanced analytics

to reduce risk during the implementation of

2. Cloud & virtualization

new technologies.

3. Automation
4. Cybersecurity
5. Digital workplace

Figure 3. Key steps to transformation
Figure 3. Key steps to transformation

Align to business

Reducerisk
Reducecomplexity
Assureperformances

Source : Arthur D. Little

Source: Arthur D. Little

7

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3 . A I & A D V A N C E D A N A LY T I C S :NEW REVENUE STREAMS

The value of data is clear, and all industries

Data is the key to identifying process

and companies are moving increasingly to

improvements, building solid use cases todata-driven processes, organizations, andlaunch future technologies or maximizing

applications. Digital native companies likevalue to extract from existing ones, andGoogle, Amazon, and Facebook built theirscaling up company strategy based on

business models around extracting thequantitative analysis. The enablers are strong

highest value to improve the operating model

data governance and a clear path to change

and monetize data. Others, including telcos

management.

and insurers, are learning how to transform data

AI, along with its main components ML andinto an asset they can leverage. ADL recognizes

machine reasoning (MR), is an innovation we

five main areas to assess within any company

experience every day and where the technology

and around which to build a solid data operating

giants have invested significantly in recent

model (see Figure 4).

years. Nowadays, this technology is pervasive;
we use it in our daily lives to use maps, surf theWeb, or call on our home assistant.

Figure 4. ADL’s smart data operating model
Figure 4. ADL’s smart data operating modelManagement & support processes

Data-driven
process
efficiency

Use case
R&D
Customer-driven
investment
planning
Procurement
Production
Supplychain &
logistics

Use case
Data-driven
workforceplanning

Use case

Data pool

After
sales

Use case“Real-time”
CX optimization

Source: Arthur D. Little

From start —clear scaling
strategy

Data pool

Data lake

Global data
governanceconcept

Active change
managementfrom day 1

Global vs.
local

Use case

Sales &
service

Source: Arthur D. Little

8

Business use
case–driven
data pools

Scaling byprocesses
Scaling by
location
Scaling byproduct

Data-driven thinking
from topCEO

Positioningof CDataO

Handshake with“the business”

CDataO

CxO

CIO/
CDataO“Healthy” scaling &smart initiatives

CDataO

CDataO
focus

Global CDataO
community

Data strategy üAdv. analytics ü x
AI & MLü x

RPA/Auto.

ü x

…

ü x

Do not underestimate
efforts

Data-driven
organization

ARTHUR D. LITTLE

The explosive growth in traffic volume,

We expect AI adoption to become pervasive

connected devices, interconnected applications,

across many functions, including marketing,

services, and the massive amount of data iscustomer operations, and networks. In fact,

overwhelming telcos and operations teams,

almost everyone we have interviewed isin particular. These massive amounts of data

convinced AI in marketing will be crucial toexceed the ability of human operators alone to

implement next best action initiatives andperform analysis and take action. AI, ML, andfinally improve CX. The majority also indicate

MR allow telcos to explore the complexity andcustomer operations as an area where AI candeliver event processing, correlate insights,

be used for complaints resolution and virtualand guide remediation.

assistance as well as network operations to

Cisco Fellow JP Vasseur has remarked, “Byimprove assurance and performance.

2025, AI-enabled network assurance tools will

Our own experience in running client projects

fully automate several well-defined, specificconfirms this trend, which involves customer-

tasks very well. However, the majority offacing functions such as marketing (launching

operational tasks that demand more flexible

tailored offers and promotions, potentially inand contextual decision making will still require

real time, to specific customers — so-called

the expertise and intervention of human

one-to-one marketing) and customer care (real-

operators.” 2 Telco groups worldwide are alreadytime assistance to customer inquiries throughusing AI to support their network operations

chatbots). AI also enables “social listening”

to manage the complexity and deliver a higher(reading massive volumes of unstructured data)

quality of service, reducing outage periods

to generate business opportunities, capture

and related costs. According to Cisco’s “2020opinions to enhance retention, or form habits

Global Networking Trends Report,” a single

influencing customers.

network outage in the US costs on averageapproximately US $400,000. The report foundthat 22% of telcos surveyed currently use AI for
network assurance, 72% are expected to adopt
AI for predictive maintenance and remediation,and 50% are considering AI as a top priority for
network investments.

3

We analyzed AI from several different
dimensions to highlight the changes itbrings to an organization, looking not onlyat cost (OPEX and CAPEX) and revenues, but
understanding how the operating model(processes, systems, and organization) should
be adapted as well as how the required skill set
needs to be modified (see Figure 5).

Figure 5. AI introduction’s impact on telcos
Figure 5. AI introduction’s impact on telcos

DIMENSION
Processes

AI IMPACT

OPEX

Revenues

Systems

CAPEX

Revenues
CAPEX

Organization

Processes

Systems
OPEX

SkillsOrganization

AS IS

TO BE

Skills

Source: Arthur D. Little
2
3“2020 Global Networking Trends Report.” Cisco, 2020.
Ibid.

Source: Arthur D. Little

9

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Based on our experience, AI could increase

Processes must be lean, as simple as possible,

revenues and bring down OPEX and CAPEX

and integrated to ensure an end-to-end vision.

(for better utilization of the network assets)

They must also break down overarching barriers

but will require a redesign of the operating

and silos to instill collaboration (i.e., between

model. AI requires maintainability, scalability,

product development, marketing, and IT). In

interpretability, and reliability to move projects

network operations, for example, which mustbeyond proofs of concept and prototypes tomanage several technologies and new services

full-scale production.

(each with specific service levels), processes

AI stands upon three pillars: DataOps,
ModelOps, and DevOps. Organizations must
revisit processes, systems, and organization
based on these pillars in order to implement
new principles across the entire pipeline tosustain high-speed code changes and reap areturn on investments. In network operations,for example, where AI may be introduced tocorrelate alarms, telcos must identify the best
potential solutions according to a problem’sroot cause and apply algorithms for predictive
maintenance. This requires analyzing huge

platform/technology, despite the reality thatmonitoring and troubleshooting will remain
centered on platforms, to identify the root
cause and solve the problem. The organizationmust also be organized to streamline new roles(for instance, a chief data officer to ensure endto-end data integrity across different systems,
processes, and departments). Telcos should also
consider new right-sizing, which is often lower
than before and thus may require managing
potential overstaffing.

volumes of data for the continuous improvement

Implemented appropriately, AI can become aof ML techniques. The entire organization, fromreal competitive advantage for telco players,

the front office to field maintenance, should

not just because it helps executives tobe redesigned to ensure AI adoption’s success,rebalance their decreasing EBITDA margins but

including the number and type of engineers,

it also enables the creation of an ecosystemprocesses, and competencies. Furthermore,that moves toward a fully digital transformation

telcos should pay additional attention tothrough the digitization of manual activities.

skills, as AI alone cannot solve network issues.

This move can enable telcos to regain some

Adopting AI still requires human intervention

control over overall industry revenues thatwith highly skilled resources.

were lost in past years. In fact, according to

Results from AI implementation projects
provide a synthesized view of how AI adoption
impacts all seven dimensions of our analysis(shown in Figure 5). The benefits from reducing
or optimizing OPEX and CAPEX spending arequite straightforward, as is identifying potential
revenue upsides. To transform successfully,
telcos need to reshape the processes and theorganization by leveraging their resources.

4

10

must be redesigned by service and not by

the World Economic Forum, carriers’ controlof the telecom industry’s profit pool has been
shrinking globally in recent years, from 58% in2010 to 45% in 2018.4 At the same time, content
manufacturers and distributors have started
to control more industry profits through digital
media experience and are targeting ecosystem
growth areas such as cloud to compete withcarriers in the fields of emerging technologies.

“Digital Transformation Initiative: Telecommunication Industry.” World Economic Forum, January 2017.

ARTHUR D. LITTLE

11

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4 . C L O U D & V I R T U A L I Z AT I O N
TO BOOST SYNERGIESThe $163 billion that operators spend on their
networks today is comprised of passive andactive mobile and fixed infrastructures, suchas radio access network (RAN) equipment,
switches and routers, cables, and fiber ducts. 5
Only a small part of CAPEX will ever be a target
for cloud investment: the computing elementsthat can be disaggregated and centralized.
Until now, operators have been reluctant

VIRTUALIZATION
OF NETWORKFUNCTIONS HAS
INCREASED OVERRECENT YEARS

to consider the public cloud for network
expenditure, but as mobile operators roll out
5G core networks and push capabilities tothe edge, this could change. Virtualization of
network functions has increased over recent
years, and many operators plan to evolve tofully cloud-native core networks. As applications
and workloads migrate to the cloud, operationalroles and responsibilities will change and, insome cases, disappear. Overall, the potential
for cost savings may be greater in the network
than in IT because network spending is somuch higher than IT expenditure. However,cost savings in IT may be more tangible andachievable in the short term. (Based on ADL’s
project experience, the reduction in the total
cost of ownership from moving IT to the cloudis up to 50%.)
Cloud solution providers can achieve 40% costsavings by avoiding operational challenges suchas frequent hardware upgrades, time spent on
manual deployments, prolonged development
and release cycles, and frequent production
deployment roll-backs.

5

12

We have seen no evidence so far of operatorsthat have moved completely to the public cloud.
Some have moved to private cloud leveraging ahigh degree of virtualization (up to 80%-85%),and others have moved just non-mission-criticalapplications requiring heavy elaboration timeand high volumes of data (depending on privacy
law constraints). However, Rakuten Mobile
serves as a case study for potential industry
cost savings. Rakuten developed a native
cloud platform based on open RAN standards,
which it now offers to other mobile operators
as a service. Rakuten’s claimed results are
significant: reduced CAPEX by 40% (mainly inhardware and deployment, which dropped by
60% and 50%, respectively) and OPEX by 30%(reducing rent and electricity [-25%], operations[-50%], and field maintenance [-70%] primarily
due to needing fewer resources to manage the
network, while doubling data center costs andincreasing transmission costs by 50%) compared
to a traditional mobile operator.

Newman, Mark. “Cloud & Automation: Changing CSPs’ Outlook.” TM Forum, April 2021.

ARTHUR D. LITTLE

A Tier 1 efficient operator on average invests

moving to contact center as a service (CCaaS)

13%-16% of yearly revenues in network CAPEX

to support their customers in a more agile way,

and OPEX spending. Hence, we estimate an

introducing flexibility, effectively managing

EBITDA margin increase for Rakuten that isvolume fluctuation, optimizing utilization

somewhere in the range of 4%-5% and CAPEX

of contact center applications, reducing

savings equivalent to 5%-6% of revenues.

IT dependencies with classic on-premises

Figure 6 reveals cloud’s impact on a telcoorganization to be pervasive and significant.
Cloud adoption not only impacts cost andmargins but also requires the telco operator
to completely revisit its operating model.
With cloud adoption, entire processes are
simplified or even disappear as they become
the responsibility of the cloud provider.
Resources that previously worked in-house on
applications are no longer needed or are reduced
to a few, while completely new competencies
are required. We have found that cloud, as withany outsourced activity where a vendor has
full end-to-end responsibility for activities

solutions, and supporting customers potentiallyfrom everywhere. According to Grand View
Research, the CCaaS market is expected to growwith a 15.7% CAGR from 2021 to 2028.6 Demand
for the CCaaS model has grown, as the model
is affordable, adaptable, and always prepared
to deliver the newest communication tools.
Moreover, the penetration of AI/ML technologies
in contact center businesses is expected tocreate growth opportunities for the market.
This phenomenon, together with the demand
for remote working, is forcing the shift to cloudbased services to reduce integration, support,
and IT costs (e.g., software licenses).

and performances, requires a strong contract,

In general, the cloud supports the move to a

vendor management, service-level agreements

digital workplace that followed the pandemic(SLAs), and KPI monitoring competencies inas well as the return to the so-called new

the retained organization. Skill requirements

normal, by enabling operations and deployment

cannot be considered just by analyzing theof business services across distributed

fit of current skills with the target required.

infrastructure located anywhere. The model

Instead, it requires organizations to manage

that enables operations performed anywhere

resource redundancies with reskilling programs

to provide a seamless and scalable digitaland reallocation, while identifying and planning

experience requires changes in technology

for specific initiatives.

infrastructure, operating model, employee

One example of cloud technology adoption’s
impact on the business relates to the contact
center. Many players across industries arecompetencies, customer engagement models,and sometimes underevaluated security
policies.

Figure 6. Cloud introduction’s impact on telcos
Figure 6. Cloud introduction’s impact on telcos

DIMENSION
Processes

CLOUD IMPACT

OPEX

Revenues

Systems

CAPEX

Revenues
CAPEX

Organization

Processes

Systems
OPEX

SkillsOrganization

AS IS

TO BE

Skills

Source: Arthur D. Little
6“Contact Center as a Service Market Growth & Trends.” Grand View Research, July 2021.

Source: Arthur D. Little

13

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5. R AISE EFFICIENCY & ACHIEVEZ E R O -T O U C H W I T H A U T O M AT I O NEnterprises are rapidly automating a wide

we believe that automation is the killer

range of processes that require intensive

application to improve the quality of service.

human intervention, ranging from back-office

Overall CX depends on the coordination andactivities to customer-facing ones, such as

performance of the different network domains

customer operations and sales. The market

that multiply the elements to manage while

size for robotic process automation (RPA) ispreserving revenues and OPEX efficiency. In

estimated to be nearing $3 billion, with many

fact, Ericsson estimates that costs for telcos

players already in the market, including giants

to improve CX will double in the next five years

like Microsoft.7 Introducing automation is a clear

without employing automation, while investing

ambition for any organization, including withinin automation could mitigate or offset these

the telco industry. Drivers for adoption relate tocost increases. Automation, especially on RAN,

a company’s specific objectives.

which according to ADL analysis accounts for

In collecting clients’ opinions about what drives
automation adoption and determining the most
relevant and impactful ones, ADL recognizes

about 50% of overall network costs, can enable
faster time to market; operational flexibility
with automated RAN deployment; operational,
optimization, and energy savings; end-to-that each driver is a lever to move to the next

end integration of operations and service

level of efficiency, with just one exception:

Figure 7. Barriers to automation adoption

experiences that increase satisfaction; andFigure 7. Barriers to automation adoption

several examples of European telco players

higher lifetime value for customers. There arethat have already adopted automation, thus

Lack of people and skills

56%

increasing their efficiency by up to 20% andreducing time to correlate alarms and identify
the root cause (see ADL Viewpoint, “Extracting

Low data quality

33%

Poor interdepartmental collaboration

30%

Network Operations Efficiency in the PostCOVID-19 Era”8).
Automation is not straightforward, however.
Telcos face a variety of barriers to adopting

Pressure on budgets

22%

Data privacy & security concerns

22%

automation that must be addressed properly,
as shown in Figure 7. In our discussions
with telco executives, most assert that themost critical roadblock is represented bycompetencies, while we view two additional

Lack of clarity on use cases

19%

issues that are critical: data quality andreliability and automation implementation.

Source: Arthur D. Little

Source: Arthur D. Little

7
8

14

Sutner, Shaun. “RPA Market Booms as Enterprises Automate with Bots.” TechTarget, 26 August 2021.
Basile, Vincenzo, et al. “Extracting Network Operations Efficiency in the Post-COVID-19 Era.” Arthur D. Little, February 2021.

ARTHUR D. LITTLE

D ATA F O R N E W
TECHNOLOGIES ISA S I M P O R TA N T A S
A S O L I D F O U N D AT I O N
IS FOR A BUILDING

Data for new technologies is as important asa solid foundation is for a building. Withouta structured data architecture, integration,and governance among the systems anddepartments involved, it is very hard to properly
implement automation that brings expected
results in terms of efficiency and productivity
improvement. Not all automation adoptions
are implemented properly due to two primaryissues: a lack of integration between the frontoffice and back-office processes and processes
digitally automated without a real thought toAutomation adoption is company-wide.
Much has been written on RPA applicability
to different departments, and examples

whether they should be reengineered. Bothinclude replies to customer inquiries to theare a prelude to failure, as the result is merely

contact center provided using chatbots,

automated inefficiencies. We suggest starting

frequent repetitive tasks in the back officeby highlighting areas for potential efficiency(administration, procurement) performed byfrom data analysis and processes redesign tosoftware applications, and logistics and sales

ensure delivering an effective, efficient, andprocesses done through Web apps. A full set of

consistent to-be solution.

use cases in different areas exists to support
operators in applying automation to achieve awide range of benefits (see Table 1).

Table 1. Applying
automation:
benefit use cases
Table
1. Applying
automation:
benefit use cases
AREA

USE CASE

BENEFITS

Service assurance

•
•
•
•

Improved service provisioning
Faster time to market
Consistent network experience
High efficiency

Service ticket resolution

•
•
•
•

Minimize human interaction
Improve response times
Time savings
Improved QoE

Asset lifecycle management

•
•
•
•

Increase CAPEX efficiency
Reduce network costs
Maximization of asset utilization
Data consistency

Optimization•

Better QoE

Configuration•••

Parameters consistency
Policies control and enforcement
Know-how sharing

Integration•••

Increased efficiency
Rollout capacity increase
Time savings

NOC automation

•
•
•
•

Troubleshoot accuracy
Time to resolve
Team efficiency
Escalations reduction

Predictive maintenance

•
•
•
•
•

Operations consistency
Minimize malfunctioning risk
Time to resolve
Team efficiency
Escalations reduction

Service improvement

•
•
•
•

Faster issue resolution
Higher efficiency
Human error minimization
Maximized QoE

Customer operations

Network planning

Network rollout

Network operations

Source: Arthur
Source:ArthurD.D.Little
Little15

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Automation adoption impacts all seven

CX management impacts the entire industry, as

dimensions of our analysis (see Figure 8). The

illustrated in Figure 9. Preventive and predictive

degree of impact likely differs by department,

tools (e.g., customer self-service) will take thedepending on the depth of automation and theplace of more reactive instruments. Thus, even

operator’s starting point.

if network environments become more complex,

We have observed that the average impact of
initiatives in the industry varies dramatically,
especially in network operations. 9
Automation is a prerequisite to moving fromreactive to proactive and predictive event
management, looking at operations, orprovisioning network slices for end-to-end
service orchestration. Operators have always
built their internal and external processes using
the customer as the foundation of any analysis.
Well before 2000, for example, Vodafone
Italy built a predictive engine to anticipate
customer behavior and churn by leveraging adata warehouse system that stored customer
information. Nowadays, data is a mantra and big
data, advanced analytics, and AI technologies
have created the right conditions to employ
more sophisticated analysis and achieve
more challenging targets. Operations andmaintenance are shifting from being networkand business-oriented to paying increasing
attention to customers.

customer-oriented predictive tools will leadto the reduction of network faults, processing
time, and operations cost of ownership.
A benefit of automation is increased efficiency
across the whole chain that comprises theimplementation and provisioning of modern
networks. Automation gradually voids numerous
costly and time-consuming legacy practices
surrounding manual equipment configuration,
troubleshooting, and maintenance, greatly
reducing OPEX as well as the risk of humanerror and enabling improvements in network
performance, leading to a self-learning, selfimproving automated network. According
to CTOs’ points of view, repetitive network
maintenance activities that can be automatedare in the range of 70%-80%, improving
consistency and being 100x faster in responding
to customers. Initial results from automation
are encouraging: up to 80% effort reduction inengineering tasks and just one to three hours to
get a site ready for on-air, thanks to automation
algorithms. Improved CX, time to market, andefficiency demonstrate that early adopters canenvision secure long-term returns; in fact, Cisco
clients have reported 383% ROI.10

Figure 8. Automation introduction’s impact on telcos
Figure 8. Automation introduction’s impact on telcos

DIMENSION
Processes

AUTOMATION IMPACT

OPEX

Revenues

Systems

CAPEX

Revenues
CAPEX

Organization

Processes

Systems
OPEX

SkillsOrganization

AS IS

TO BE

Skills

Source: Arthur D. Little

910
Source: Arthur D. Little

16

Basile, Vincenzo, et al. “Extracting Network Operations Efficiency in the Post-COVID-19 Era.” Arthur D. Little, February 2021; Basile, Vincenzo, et al.
“Beyond the Best Network Operations!” Arthur D. Little, January 2017.
“The Business Benefits of Automation and Orchestration White Paper,” Cisco, 24 January 2022.

ARTHUR D. LITTLE

Figure 9. CEX impacts on network operations

Customeroriented

Passive response
to customer
complaints

Active identificationof customer
perception &identification of
weaknesses/
complaints

Customer selfservice

Businessoriented

Passive response
after businessinterruption

Service end-to-end
management,
automatic process
management

Support rapid
development ofservices and
SRE operations &maintenanceTraditional network
passive response

Active discovery of
performance andfaults through tools
for traditional NW &ICT infrastructure

Proactive
identification ofpotential faults toprevent interruptionof traditional &virtualized networks

Passive

ActivePredictive

Networkoriented

Operations & maintenance focus

Figure 9. CX impacts on network operations

Customer experience management
Source: Arthur D. Little

Source: Arthur D. Little

T H E S TA R T I N G P O I N T
OF TELCOS’ E VOLUTIONTOWA R D AU TO N O M O U S
NE T WORKS IS MOVINGFROM ZERO DEFECTS
TO ZERO COMPL AINTS

networks deployed as yet, most advanced
operators are in the middle of the journey
between Level 1 and 3 (see Figure 10). However,some telcos in more advanced and mature
markets have already started the so-calledzero-touch journey. As an example, the Germanbased Deutsche Telekom group recently began
its zero-touch development journey, aiming at
removing any human touch starting with its
network management and all the way to thefinal user experience.

ADL advocates for turning the focus to theAutonomous networks are fully automatednext level of automation, which is the starting

networks supporting self-healing, self-

point of telcos’ evolution toward autonomous

optimizing, and self-evolving infrastructures

networks: moving from zero defects to zeroand operations. There are six main elementscomplaints. Thus far, this is an achievabletarget: although there are no fully autonomous

characterizing autonomous networks:

Figure 10. ADL roadmap for automation evolution

Figure 10. ADL roadmap for automation evolution
MACHINE-ASSISTED AUTOMATIONAUTONOMOUS OPERATIONSHuman intervention necessary, with decreasing
involvement

Tool
assistanceLevel 1

Partialautomation
Level 2EVOLVING TOWARD TELCO NATIVE
Including cognitive AI/ML solutions

Human intervention is no longer involved

Model-based
automation
Level 3Highautonomy
Level 4Fullautonomy
Level 5BEYOND AUTOMATION

Toward Level 5 network operations

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1. Self-governing — meaning that every
action and behavior is controlled within
an autonomous domain.
2. Programmable — thanks to open APIs andstandardized external reference points that
support interoperability.
3. Explainable — meaning that every action
and decision made can always be explainedin terms understandable to human beings.
4. Composable — which means that smaller

A BALANCE BETWEENNEW TECHNOLOGIESD E PLOY E D A N D
C A PA B I L I T I E S I S
I M P E R AT I V E T O E N S U R E
NET WORK PERFORMANCEM AT C H E S D E M A N D A N D
E X P E C TAT I O N S

functions can build themselves up to create
a new, more complex function.
5. Business-driven — aiming at reachingbusiness goals and objectives.
6. Always run model-driven engineering.
Autonomous networks have the potential, on
one hand, to significantly increase revenues
and reduce churn by delivering real-time,
high-quality services. On the other hand,
they can greatly reduce long-term costs.
However, there are two key issues to addresswhen implementing such a disruptive andrevolutionary system. First, the initial costof the investment may be significant and thus
should be financially managed with proper
attention. In addition, operators should also
strategically manage the implementation ofautonomous networks to avoid a significant
impact on the client’s processes and on thebusiness itself.

18

Telco operators will rely on and adopt
automation in general and autonomous
networks specifically to manage the complexity
behind the deployment of 5G, including private
networks and slicing, and strict SLAs forcustomers that request specific services (e.g.,
low latency required by companies offering
autonomous vehicles). A balance between
new technologies deployed and capabilities
is imperative to ensure network performance
matches demand and expectations. To provide
the required and requested level of service withan increased architecture complexity, network
executives must guarantee faster response timein case of fault. Autonomous networks provide
a means to compete and acquire market share,especially in B2B segments.

ARTHUR D. LITTLE

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6 . A N T I C I PAT E T H R E AT S B YINVESTING IN CYBERSECURITY

In a world where the pace of technology
advancement keeps increasing rapidly, cyberthreats are constantly transforming, becoming
more and more sophisticated and dangerous.
As the number of devices increases, theattack surface becomes wider and it is thus
impossible to contain it in well-defined andsafeguarded perimeters. Nowadays, perimeter-

IT WILL ALWAYS
BE HARD TO SPOT
ALL THE THREATS
IN A SYSTEM

based security is no longer able to successfully
defend against some of the most advanced
cybersecurity threats. Therefore, to effectively
identify and contain threats, network andsecurity operations are required to cooperate,share data, and integrate tools and workflows.
The adoption of new technologies, models,and frameworks is generating new testing
challenges, which most enterprises’ current
security systems are not able to address
properly. We believe that there are five primary
high-risk challenges that the industry mustovercome.
First, the increased scale and complexityof cloud-based and mobile-based systems
challenge the solidity of current security
frameworks. At the same time, however, ADL’s
global benchmarks on telco spending revealthat operators in the past three years havespent much less than 1% of revenues on security.
As time passes, those systems, especially thecloud-based ones, will continue to become
bigger, more complex, and, therefore, more
vulnerable. Setting up adequate security
to address those threats requires top-tiercompetencies and awareness of what exactly
those threats are and how they should bemanaged.

20

The second, third, and fourth challenges
we have spotted concretize themselves as
natural consequences of the fast growth of
this industry. On one hand, as companies growthey become richer, therefore increasing thepotential payoff of a cyberattack. Innovation
in attack methods, technology, and modus
operandi will continue to develop. On theother hand, a growing industry means more
devices, and therefore a continuous increaseof attack surfaces. On top of that, the wideningof the volume that must be controlled comes
inevitably with some lack of visibility: it will
always be hard to spot all the threats in asystem. All three of these challenges require
security systems to be adequately prepared.
Finally, as systems become increasingly
complex, the fifth challenge arises: it will bevital for security frameworks to be compliant
with the new regulations, continually being
monitored and updated.

ARTHUR D. LITTLE

Addressing all these challenges requires a

Several drivers — such as the increasingchanging role for security. As we said, it is now

number of cyber attacks over time; the morenecessary to deeply integrate security andattractive potential payoff for cyber criminals;

network in order to effectively tackle these new

greater sophistication of attacks (e.g., self-challenges. Efficiently combining network andpropagating ransomware); and rapidly expanding

security, thus providing flawless communication

number of devices (including IoT ones, with few

and interactions between the two, will be vital

embedded security features) — worry security

to build a defensive framework embedded

executives and their implication for customers

with four key pillars of a successful security

and business. Cisco’s “2020 Global Networking

structure (see Figure 11):

Trends Report” highlights the importance of

1. It must be a zero-trust network, meaning thatevery user or device is equally suspected andthus controlled.

managing security in the proper way. According
to the report, 48% of network teams recognize
the improvement of security capabilities asa priority; network strategists consider it as

2. It should guarantee continuous protection.

a top investment area, just after AI; 48% of

3. It should be based on trustworthy network

to remediation is a key indicator to monitor for

infrastructure.

security C-level executives believe that time
performance evaluation; and security operations

4. It should decisively favor flawless andseamless workflows between security andnetwork operations.

According to Forrester research, a zero-trust
network must embed three main aspects.11 In
the first place, it should apply controls on the
network only after it has been appropriately
segmented to make these controls moregranular, ensuring end-point devices can linkwith other networks (competitor or suppliers).
Second, the output of these controls should
be reported with specific visibility for threat
detection and response. And finally, a zero-trust
network’s foundation should be completely
integrated with automation and supported by
cryptography algorithms (e.g., International

prioritize dealing with complexity at scale.12
ADL sees some critical aspects to be deeply
analyzed and addressed to be prepared topotential increase in cyber attacks:
1. Security is a process by design (e.g., telco
security team should provide requirements todevices’ vendors to reduce risk).
2. Avoid “man in the middle” attacks: critical dataand processes must be encrypted (e.g., IMEI
can be used to simulate a safe user using “postquantum encryption” to follow computational
capacity increase).
3. Ensure authentication confirmation to all users
inside your network.

Mobile Equipment Identity number), as data

FigureFourpillars
canbe used11.
as anentry key
point forcyber attacks.
Figure 11. Four key pillars
Four key pillars to a successful security structure and defensive framework
Each and every user or
device is equally suspected
and controlled

Guarantee continuous
protection

Based off of a trustworthy
network infrastructure

Decisively favor flawless andseamless workflows between
security and network
operations

Zero-trust best practices
Identify

Classify

Identify the data
and assets thatare most valuable
to theorganization

Classify the levelof sensitivity/
restriction
required for each
asset

Map
Map data flows
across all entities
across yournetworkGroup

DeployDefineGroup assets withsimilar sensitivity
andfunctionalities

Deploy asegmented
gateway (virtualand physical) to
maintain control

Define a “leastprivilege” accesspolicy for each of
the assets

Source: Arthur D. Little

11
12

Shey, Heidi, et al. “The Zero Trust eXtended Ecosystem: Data.” Forrester, 11 August 2021.
“2022 Global Networking Trends Report: The Rise of NaaS.” Cisco, 2021.

Source: Arthur D. Little

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4. Implement a two-level protection (e.g., use

If, in the past, security could be treated with a

two levels of antivirus to reduce probability

best-effort approach with appliances overlayedof success).

to network equipment, the target in the digital

5. Inform and train employees to potential
risks, as a majority of successful attacks
derives from behaviors not following proper
rules, processes, and procedures due to lackof knowledge.
Figures related to security imply that systems,
skills, organization, and processes must
be adapted to manage such a threat andcomplexity to avoid loss of revenues and payoff
costs (see Figure 12). Access to systems and dataalso must be secured following the latest laws
and policies regarding data protection.

era should consists of an intent-based approach
where security is automated and detects
emerging potential threats and adapts tochanging policies and regulations. To achievethis, operators should invest in skilled resources
fully dedicated to adapting systems, processes,
and organization (e.g., establish a dedicatedstructure for security operations) to inspectmassive volumes of data, detect and protect
access to resources, and act properly in caseof suspicious penetration.
In conclusion, cybersecurity is one of themost important and immediate aspects thatcompanies must address. New challenges andnew solutions are arising, requiring readiness toact. A flawless security system makes the digital
environment a much safer place for customers
to actively and willingly store their information.

Figure 12. Cybersecurity’s impact on telcos
Figure 12. Cybersecurity’s impact on telcos

DIMENSION
Processes

OPEX

Revenues

Systems

CAPEX

Revenues
CAPEX

Organization

Processes

Systems
OPEX

SkillsOrganization

AS IS
Source: Arthur D. Little

Source: Arthur D. Little

22

TO BE

SkillsCYBERSECURITY IMPACT

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7. B R I N G W O R K P L AC E S I N T O
T H E D I G I TA L W O R L D

A digital workplace is crucial when it comes

Structuring an adequate digital workplace

to understanding how new technologies

means addressing some of the most crucial

can make companies better. A beautifully

challenges within most industries and providing

integrated digital workplace can significantly

measurable business value.

raise employee efficiency and engagement,
thus reducing costs and increasing work
output and profitability. Top companies expect
their digital workplace solutions to empower
employees, making them able to deliver better
outputs faster. When it comes to the digital
workplace and its value, two main areas are key:

Aside from productivity increases, the othermain advantage of implementing a proper
digital workplace lies in employee engagement.
People are quick to acknowledge that today’s
workplaces characteristics are changing.
Employees now expect a digitally driven work

productivity and engagement.

experience that is personal, real-time, mobile-

A well-designed and properly structured digital

new technologies. Five years ago, a study

workplace is widely acknowledged to optimize

commissioned by Dell and Intel conducted

workers’ productivity. A plethora of studies show

online interviews with 3,801 people around thehow much it can boost collaboration, lighten theworld working full-time across seven different

workload, and reduce employee stress. However,industries (education, government, financial

we focus here on a key advantage that setting

services, healthcare, manufacturing, media andup an efficient and technologically updated

entertainment, and retail).15 The results weredigital workspace can bring to an organization:

convincingly indicative of people’s awareness:significantly increasing productivity and

44% of employees surveyed felt that their

reducing wasted time.

workspace was not smart enough, while more

An efficient digital workplace can break down
technological barriers between people andoffices, thus enhancing information flow andcontributing to speeding up repetitive tasks.
A pair of studies analyzed most of thesetasks and found that they can cost as muchas $29,000 per employee per year in termsof wasted time and reduced productivity.13 In
2009, a study commissioned by the Information
Overload Research Group discovered that the
average employee wastes 25% of their time
due to various inefficiencies; reducing wasted

enabled, and collaborative — all exploiting

than 50% expected to be working in a smart
office within the next five years. Five years later,
the awareness of new technologies’ potential
is pushing people to expect highly digital
workplaces even more. In addition, anothersurvey of HR professionals conducted by theSociety for Human Resource Managementfound that implementing user-oriented digital
workplaces has positive various externalities,
such as lower absenteeism, fewer minor healthproblems, fewer signs of depression, fewer sleep
problems, and reduced stress levels.16

time and thus increasing productivity per

In light of all this, the reasons to implement a

employee could help companies reduce costs

properly designed digital workplace are clear,significantly.14 To put it into perspective, asince it can extensively increase productivity,

500-employee company could save more than

thus reducing costs and heightening people’s$2 million a year. Twelve years later and throughengagement.

a pandemic that forced many to work from
home, wasted time remains a huge obstacle.
13

24

14
15
16

Schubmehl, David, and Dan Vesset. “The Knowledge Quotient: Unlocking the Hidden Value of Information.” IDC, July 2014; “A Study of Trends, Costs,
and Attitudes Toward Business Travel and Teleconferencing, and Their Impact on Productivity.” InfoCom, 2018.
Ganz, John, Angele Boyd, and Seana Dowling. “Cutting the Clutter: Tackling Information Overload at the Source.” IDC, March 2009.
“Future Workforce Study, United Kingdom.” Dell/Intel, 2016.
“Workplace Flexibility in the 21st Century.” Society for Human Resource Management, 2008.

ARTHUR D. LITTLE

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CONCLUSION

Operators face inevitable changes driven
by technological advancements that will be
key to enabling faster time to market, higher
revenues, increased CX, and overall operational
efficiency. By taking a decisive strategic
shift in transforming the organization sothat it can support a future, more customercentric business, operators make technology
transformation a viable and natural option.
Driving a transformation across a multifacetedorganization requires challenging the statusquo across the areas we have described in thisO P E R AT O R S M U S T
R E A L I Z E T H ATTECHNOLO GY IS
NO LONGER JUST A
PREREQUISITE BUT
CAN BE A DRIVER OF
VA L U E T O E N H A N C E
CX AND SUPP OR T NE W,
I N N O VAT I V E S E R V I C E S

Report:1. AI & advanced analytics- Invest in AI technology in any function — frommarketing to customer operations to network-

and IT.
Divert employees’ skills to support fast
introduction and proper use of AI as a lever for
CX improvement (especially for after-sale andoperations) and monetization.

- Incent customers to use digital touchpoints tofacilitate AI use and maximize its benefits.

2. Cloud & virtualization- Adopt the cloud as widely as possible to reducecomplexity as well as operative costs on IT-

systems and applications.
Partner with cloud providers to enrichcommercial offerings to customers, especiallytargeting B2B.

- Explore cloud innovation in the network

domain to leverage the technology as earlyas possible, to reduce the cost to evolve
infrastructure and follow market demand.

- Combine IT and network infrastructure tocreate synergies.

26

3. Automation- Adopt automation as broadly as possible toenhance efficiency in repetitive tasks for backoffice and customer-facing processes.

- Innovate sales and after-sale processes in all
customer touchpoints and transition to selfservice interactions.

- Move toward zero-touch in network andIT operations domains to minimize humaninteractions and boost responsiveness in caseof fault to maximize the quality of service
and CX.

4. Cybersecurity- Increase security investments in the network

and IT areas, especially on firewall equipment
and software to prevent fraudulent access.

- Adopt zero trust to detect threats and invest in
cryptography to defend your environment fromcyber attacks.

- Periodically perform vulnerability assessments
through penetration testing to identify

potential lack of security to be recovered
and improve overall security levels.

ARTHUR D. LITTLE

5. Digital workplace

Operators may find this endeavor demanding,- Invest in digital technologies to enhanceand they may well face barriers such as lack of-

productivity and reduce office and travel costs.
Increase flexibility for employees to workfrom different locations using technology
as support.

- Rethink using KPIs to evaluate employees’

performances, moving instead to a resultsbased approach.

valuable resources or required skills, among
others. To succeed, operators must realizethat technology is no longer just a prerequisite
but can be a driver of value to enhance CX andsupport new, innovative services. They mustalso establish grounded processes and ways of
doing business and ensure efficient execution,leveraging technology as a competitive
advantage. In this way, operators can effectively
navigate the strategic choices that leverage theright support and methodologies. In turn, they
will realize their transformation visions and bebetter prepared for the new landscape of nextgeneration connectivity.

27

Arthur D. Little has been at the forefront of innovation since1886. We are an acknowledged thought leader in linking
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Our consultants have strong practical industry experience
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