VIEWPOINT2024

A GOLDEN BULLETO R PA N D O R A’ S B O X ?
Overview of GenAI opportunity in CPAAS

Rapid growth of generative artificial intelligence(GenAI) has unlocked significant opportunities in thecommunications platform as a service (CPaaS) space,

AUTHORS
Christoph Uferer

with those able to harness its potential poised

Michael Eiden

to strategically differentiate. Leveraging GenAI

Daniel Guzmics

facilitates dynamic solutions that offer contextspecific experiences for end users — revolutionizing
current offerings. But how should CPaaS players
approach such an opportunity, and what are theimpacts for the wider ecosystem? To answer this,
this Viewpoint explores GenAI foundations, uses
cases, and myriad impacts for CPaaS markets.

Vineet Talwar

ARTHUR D. LITTLE

VIEWPOINT

THE AGE OF AI IS NOW

The result: strengthened customer loyalty via
AI-customized recommendations.

AI and machine learning (ML) have existed

As explored in the Arthur D. Little (ADL) Blue Shiftsince the last century, but as shown in Figure 1,

Bulletin, “A Guest Role for AI,” AI technology has

development has accelerated in the past decade(most notably the past few years), with four trends
driving growth:

the potential to address key challenges faced byenterprises by making sense of large volumes ofdata. Such benefits are mainly derived via three

1. Data availability — providing rich resources

techniques:

for training/fine-tuning AI algorithms

1. Classification (classifying data into

2. Computing advancement — enabling faster,predefined categories) — the ability to analyze

more efficient processing of complex AI

past transaction data and/or customer

calculations/tasksinteractions and identify those likely to churn,allowing for preventative measures

3. Decreased data storage costs — reducing
storage costs and the cost to analyze large

2. Regression (learning the relationship between

data sets

input variables and outputs) — allowing thedetermination of optimal pricing levels based

4. New mathematical theory — enabling

on a variety of inputs and outputs

increasingly sophisticated/accurate
algorithms to be applied across domains

3. Clustering (grouping of similar data) —The potential to gain a competitive edge isenabling more sophisticated customer
segmentations based on factors like purchasesparking AI market adoption, including its

history and geography

solution/capability maturity, rapid use-case
implementation, and increasing consumer

Beyond these foundational techniques, AI

readiness for AI. Beyond core use cases, AI

empowers data management through automatedexhibits radically transformative capabilities indata cleansing and anomaly detection, ensuring

newly emerging applications across industries.

high-quality data that fuels accurate algorithms

For example, Accor, Europe’s leading hospitality

and insightful decisions. Advanced naturalgroup, leveraged AI to automate time-consuming

language processing (NLP) lets AI extract

tasks, optimize resource allocation, and adjust

meaning from unstructured data like text andFigure 1. AI and GenAI timeline

pricing to meet demand volatility.

images, enriching the information landscape forinsightful analysis.

Figure 1. AI and GenAI timeline
1965

ELIZA
First chatbot invented by
Joseph Weizenbaum

2011

1974–80

AI WINTER 1
Funding decline/large decrease in AI
research (e.g., DARPA funding cuts)

1997

SIRI
Voice recognition on iPhone(intelligent speech assistant)

DEEP BLUE
IBM’s chess computer beats world
chess champion Garry Kasparov

2011

2014

WATSON
IBM’s supercomputer (Watson),wins first place on Jeopardy!

2022

GAN
First generative adversarial
networks introduced

2022

MIDJOURNEY
AI-generated art piece wins atColorado State Fair’s art competition(using Midjourney)

CHAT GPT
Introduction of OpenAI ChatGPTGPT-4
GPT-4 passes US bar exam
(90th percentile)

AGE OF GENAI
Microsoft announces CoPilot& Bing’s use of ChatGPT,
Google launches Bard

2023

2023

1980s

NEW HOPE
First expert systems & commercial
applications reignite AI interest

1987–93

AI WINTER 2
Overhyped expectations/technicallimitations result in setbacks(e.g., with expert systems)

2017

ALPHA GO
Google’s AlphaGo defeats
Go world champion Ke Jie

2020

T-NLG & GPT-3
Introduction of Microsoft T-NLG& OpenAI GPT-3

2023
WAYMO, CRUISEFirst fleet of driverless taxis
launched in California, US

Source: Arthur D. Little

A GOLDEN BULLET OR PANDORA’S BOX?

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ARTHUR D. LITTLE

VIEWPOINTA I E M P O W E R S D ATAMANAGEMENT THROUGH
A U T O M AT E D D ATA
CLEANSING AND
A N O M A LY D E T E C T I O NSpecifically, GenAI presents a unique opportunity
for CPaaS providers to develop enhanced
offerings. By developing dynamic/interactive
solutions that engage in a personalized, contextspecific fashion, CPaaS providers can enhance
end-user experiences, overcome the limitationsof one-size-fits-all content, and foster deeper
customer connections. GenAI’s ability to define

A simplified distinction of non-generative versus
GenAI can be used to provide a framework for
AI comparison:- Non-generative AI — systems focused onprocessing and analyzing existing data,

recognizing patterns, and making predictions
without generating new content or creative
outputs- GenAI — AI that can generate new content
or create original outputs based on input
variables from multiple data sets

rules for learning/adaptation over time facilitates
continuous optimization of CPaaS offerings,
ensuring differentiated market positioning forcompanies that master it.
Various CPaaS players are starting to venture
into the AI space (see Figure 3). CPaaS solution
providers have initially taken the lead. Twilio’s
announcement of its 2023 partnership with
Frame AI to extend its customer data platform(CDP) solutions is a good example of integrating
GenAI capabilities into CPaaS offerings.
Leveraging Frame AI’s consumer intelligenceplatform/capabilities, Twilio is poised to extend

G en AI (R) E VOLUTIONIN CPA AS

its existing solution suite to customer-intention
and case-severity analysis. This will help

Initially, AI in CPaaS was limited to basic chatbot/
voice-recognition functions such as automatedresponses to common queries. Today, as GenAI

Twilio’s clients train models that can define andcategorize customer intentions for better productdecisions.

unlocks more advanced CPaaS/CXaaS (customerexperience-as-a-service) applications, it is driving
market hype and serving as a key source of future

igure 2. Examples
non-generativeand GenAIvalueoffor CPaaS
players (see Figure 2).

Figure 2. Examples of non-generative and GenAI
Non-generative AI
Relevant CPaaS/CXaaS examples:

GenAI

Relevant CPaaS/CXaaS examples:•

Simple chatbots (rule-based)•

Text creation/voice/image/video creation•

Automated billing & support••

Network traffic analysis

Advanced data analytics &customer-centered product offering•

Usage monitoring•

Advanced orchestration/routing•

Proactive service alerts•

Fraud prevention via anomaly detection•

Enriched knowledge management•

Customer sentiment analytics

Source: Arthur D. Little

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ARTHUR D. LITTLE

VIEWPOINT

THE SCALE OF AIADOPTION WITHINT H E C PA A S D O M A I N
IS DEPENDENT ON
OVERCOMING POTENTIALHURDLES ACROSS
THE MARKET

Other companies are emerging in this space,including IntelePeer, whose CEO Frank Fawzi
highlights the huge opportunity AI presents for
CPaaS players. Fawzi told ADL that CPaaS players
can unlock significant potential via GenAIenabled communication-automation platforms.
“Recent experiences of enterprise customers
show more than 80% of call center traffic optingfor GenAI solutions over real agents — optimizing
both operations and experiences,” said Fawzi.
As a result of these applications, GenAI is positioned

It is relevant to note that the scale of AI adoption

to be one of the fastest growing subsegments

within the CPaaS domain is dependent on

within the global CPaaS market and is expected

overcoming potential hurdles across the market,

to reach approximately US $4.3 billion by 2027,

including customer readiness, investment

representing approximately 6% of the global CPaaS

returns, and regulatory risks. Despite this,market (forecast to reach $68.6 billion by 2027).

market trends demonstrate that customer and

These estimates stem from market expectations

regulatory readiness is on the rise, with a wide-that as the technology matures, CPaaS market

scale transition of CPaaS players to AI-powered

penetration will follow a ripple effect toward GenAI

solutions and the establishment of common AI

solutions (see Figure 4).

regulatory frameworks (e.g., EU AIA). Furthermore,

Although non-generative AI is expected to grow

top-performing implementations can break

and remain important in the global CPaaS market

even on initial investments within less than six(reaching approximately $3.9 billion by 2027),

months — presenting a highly attractive ROI for

GenAI is identified as the key value source for

AI solution investment.

CPaaS players in the coming years.

Figure 3. Important developments among key AI players in
CPaaS space
Figure 3. Important developments among key AI players in CPaaS space

Twilio launches AI
autopilot platform

2018

Acquires conversation
AI start-up (Over.ai)

2019

Avaya
showcases AI,
IoT-powered CX
solutionsTwilio launches Media Streams
API, which streamlines
layering AI solutions like NLP
on live calls

2020

Acquiresconversation
AI start-up(Chatlayer.ai)

Partners with
Launches intelligent
Tanla & Kore.ai enter
Frame AI to
AI customer services
partnership for
embed GenAI for
conversation AI solutions Vonage acquired
sales & marketingby Ericsson

2021

Acquiresconversation
AI start-up(Jumper.ai)

2022

Launches
AI studio

2023IntelePeer
integrates GenAI
solutions

Cognigy, aconversation AI
player, forms
alliance with Avaya

Source: Arthur D. Little

A GOLDEN BULLET OR PANDORA’S BOX?

Source: Arthur D. Little

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VIEWPOINT
Figure4. GenAI and non-generative AI potential in global A R T H U R D . L I T T L E
CPaaS market, 2022–2027

Figure 4. GenAI and non-generative AI potential in global CPaaS market, 2022–2027
in $US billions

CAGR
2022–2027
8.2
97%

2.5

3.3
1.6

2.0
0.6

0.4
2022

1.2
0.5
0.7

0.9

2023

2024

4.3

5.2

69%

2.7

1.7

1.1

2025
Non-GenAI

55%

3.9

2026

2027

GenAI

Source: Arthur D. Little

Source: Arthur D. Little

S TR ATEGIZING VIASEGMENTATION

3. Security/fraud prevention — stopping
spam and phishing in real time using large
language models (LLMs) and deep learning

Of course, CPaaS players must be mindful aboutin GenAI (including future-pattern prediction),

which segment(s) to target with GenAI and should

enhanced firewalling for mobile network

identify natural combinations/integrations of use

operators (MNOs) to enable better networkcases for an integrated offering. Figure 5 outlines

monetization beyond short message service

the four principal areas of application for end-

(SMS) and voice, and advanced fraud-user provision, with relevant market examples

prevention applications (e.g., ATM fraud

highlighted for each segment:

detection via detection of account owner’s
mobile device in vicinity of the bank)

1. Conversation/content creation — enabling
enterprises to create personalized customer

4. Routing/orchestration — GenAI-powered,journeys (e.g., text-to-voice/voice-to-text

real-time selection of optimal telco routing;translation and real-time textual sentiment

most are in early rollout phase, withanalysis/adaptation)

TelecomsXChange (TXCX) currently developing
GenAI telecom routing strategies as a priority

2. CDP (data insights/personalfor 2023

recommendations) — intelligently

recognizing customer intent and providing
Figure 5. Players
in four principal end-user applications
data-backed recommendations for betterbusiness decisions

Figure 5. Players in four principal end-user applications
Conversation/
content creation

CDP

Security/
fraud prevention

Tanla

Routing/orchestration

TelecomsXChange

Source: Arthur D. Little

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ARTHUR D. LITTLE

VIEWPOINTC PA A S P L AY E R S M U S T B E
MINDFUL ABOUT WHICHS E G M E N T ( S ) T O TA R G E T
WITH GenAI- Develop/use smart chatbots andcommunication solutions that help CPaaS
players transition from static/genericmarketing messaging to personalized(auditive) experiences with potential
customer sentiment adaptation. GenAI
can also be used to train/refine chatbots

Many use cases exist; Figure 6 highlights 10 GenAI
applications that are strategically relevant forby creating large volumes of test scenarios.
2. CDP. Predictive purchase analysis and

CPaaS players.

marketing is a key CPaaS application. With

Below, we describe four specific examples

GenAI-enabled CDP, customers can store

within the four principal areas to provide a more

historic purchase data and leverage LLMs tocontextualized view of the benefits GenAI holds

identify new patterns in purchasing behavior,for CPaaS players:

enabling sales recommendations at the most
likely conversion time. Relevancy for CPaaS

1. Conversation/content creation.

players derives from the ability to:Considerable potential is attributed to- Build robust CDP toolkits that enabletext-to-voice/voice-to-text (first pioneered

better engagement tools, leveraging

by Google about five years ago) because it
facilitates the transfer of text-to-speech

available customer data to create more

output and verbal feedback processing, either

relevant communication strategies andactively (robocalls) or passively (call centers,

improve customer rapport.

helplines). Relevancy for CPaaS players isderived from the ability to:- Provide a target offering for small andmedium-sized businesses (SMBs) — a- Provide service offerings catering toquickly growing segment — which often

content generation based on targeted/lack proper in-house sales suites and thespecific features (e.g., demography,

ability to conduct large-scale customer

sales channel).

analyses. GenAI-enabled CDP can be basedon shared customer data/insights, letting

Figure 6. GenAI application areas for CPaaSmarketers
playerslearn from the platform offeringand tailor commercial efforts.
Figure 6. GenAI application areas for CPaaS players
NON-EXHAUSTIVE

Conversation/
content creation

Security/
fraud prevention

CDP

1

Text to voice/voice totext (active & passive)

5

Predictive purchaseanalysis & marketing

8

Advanced anomaly
detection

2

Real-time transcription& translation (IVR)

6

Sentiment-based
marketing campaigns

9Sign-up-related fraud
prevention/spam shield

3

Real-time textual
sentiment analysis& adaption

7

Best practice crosscompany marketingtransfer

4

Improved messaging,(e.g., branding, target
group)

Routing/orchestration
10

Dynamic routing &workflow optimization

Source: Arthur D. Little

A GOLDEN BULLET OR PANDORA’S BOX?

Source: Arthur D. Little

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ARTHUR D. LITTLE

VIEWPOINT

3. Security/authentication. GenAI supports
enhanced firewalling for MNOs (via dynamic/
adaptive firewall rules that evolve in real time)

CONSIDERING IMPAC T
ON TELCO ECOSYS TEM

that enables network monetization beyond

GenAI will generate considerable benefits for

SMS and voice. Emerging applications focused

the CPaaS space, but its impact on the wider

on sign-up-related fraud prevention/spam

ecosystem must be considered. There are several

shield offer additional commercial potential,

opportunities and risks posed to CPaaS players,

leveraging GenAI pattern detection to reduce

enterprises, and telcos:

the negative business impacts of fraudulent- Opportunities for CPaaS players. Using theaccounts. CPaaS players gain the ability to:-

move up the value chain and target segments

do not have the resources to invest in theirpreviously untouched (e.g., content creation).

own solution development.

In this setting, CPaaS players can offer value-- Provide a communication platform that

also authenticates customers, ensuring
efficient deployment of resources to build
relations with verified customers only.

4. Routing/orchestration. Smart routing
automation is becoming prevalent in themarket, with solutions such as Vonage’s
Dynamic Call Routing using a self-learning,algorithm-based mechanism to ensure highquality. GenAI will play a critical role byfacilitating the implementation of dynamic
traffic-type categorization. Using GenAIpowered pattern detection, these applications
will be able to categorize traffic (especiallywholesale traffic), serving as an input for
optimal routing, with one-time passwordidentified messages sent via low-latency,
priority routes. CPaaS players will be able to:-power of GenAI, CPaaS players will be able toAdd value to corporate enterprises that

Increase margins on messaging traffic via
optimal route selection (lowest cost route

add services to their customers, such as
bundling content generation with message
orchestration, and move toward a softwareas-a-service offering compared to current
transactional models. This will help them
unlock further value via increased stickinessof customers and greater service margins.

- Opportunities for enterprises. We see

significant potential for customers from
SMBs to multinational enterprises. While thelatter can further increase the effectivenessof their marketing campaigns via improved
data analysis and predictive models, SMBs
can access an effective toolkit for targeted,personalized customer interaction. By
combining CPaaS with a GenAI-enabled CXaaS
suite, SMBs will have an easy-to-use, no-code,
one-stop shop for all customer interactions,from content creation to cross-channel
information transmission.

that still provides the required quality).

- Automate human-led, manpower-intensive
categorization of transmitted traffic.

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ARTHUR D. LITTLE

VIEWPOINT- Opportunities for telcos. With GenAI,

marketing messaging will move toward visual
formats (images, videos) and away fromtraditional text messages. This is expected tohave a disruptive effect on bulk SMS-related
marketing activities, with considerable impact

THERE ARE SEVERALOPPORTUNITIES AND
R I S K S P O S E D T O C PA A S
P L AY E R S , E N T E R P R I S E S ,AND TELCOS

on telco revenues. However, telcos can takeadvantage of this shift by leveraging theirstrong salesforce in the B2B segment topromote their own (or a third-party) GenAIbased CPaaS product to SMBs and others.

- Flip side of the coin. Integration of GenAI

Ultimately, GenAI will fuel the CPaaS ecosystem,
benefiting CPaaS players, enterprises, and otherentities in the telco ecosystem that manage
to unlock this potential. Only by proactively

technology within CPaaS players, enterprises,

adopting these applications will companies be

and telcos may encounter regulatory

able to turn GenAI into a golden bullet for their

obstacles (e.g., evolving legal frameworks

operations.

and the requirement for uniformity acrosslegal jurisdictions). Variance in data-privacy
regulations and concerns about potential
bias/misuse of AI-generated content posecompliance hurdles that will need to be
overcome. Adaptation to evolving legal
landscapes demands agility, and achieving
uniformity across legal jurisdictions requires
a balance between local compliance andglobal innovation.

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VIEWPOINT

A GOLDEN BULLET OR PANDORA’S BOX?

ARTHUR D. LITTLE

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ARTHUR D. LITTLE

VIEWPOINT

CONCLUSIONI S G e n A I T H E F U T U R E O F C PA A S ?

C O N T I N U O U S O P T I M I Z AT I O N O F G E N A I O F F E R I N G S
E N S U R E S D I F F E R E N T I AT E D M A R K E T P O S I T I O N I N GPlayers that harness GenAI’s potential can strategically differentiatethemselves in the CPaaS space. Key takeaways for those looking to
unlock GenAI opportunities include:1

AI and ML are revolutionizing industries, with CPaaS players
poised to seize GenAI opportunities.

2

GenAI enables dynamic, interactive solutions for personalized,
context-specific experiences, potentially revolutionizing existing
CPaaS offerings.

3

Key applications for GenAI in CPaaS are conversation/content
creation, CDP data insights, security/fraud prevention,and routing/orchestration.

4	Strategic targeting of segments and use cases is required(this is crucial to maximize GenAI’s potential).
5

Continuous optimization of GenAI offerings ensuresdifferentiated market positioning for CPaaS providers
that can harness its potential.

6

GenAI use cases yield a range of new opportunities across CPaaS
players, enterprises, and other entities in the telco ecosystem.

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ARTHUR D. LITTLE

VIEWPOINTNOTESA GOLDEN BULLET OR PANDORA’S BOX?

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