Leading CSPs Digital Transformation Initiatives are Driven by a Motivation to Improve Market Valuation

By: John Abraham , Larry Goldman

Nearly every CSP worldwide is pursing some sort of digital transformation. Although the term digital transformation is widely accepted, there is no consensus on what digital transformation really is, as there is no one-size-fits-all approach to transforming the underlying infrastructure and each CSP takes a unique path. For instance, in our research covering 34 CSPs, we found that may CSPs in emerging markets favor a high-impact end-to-end approach to transformations, while most in developed regions prefer a more conservative, phased approach. Typical transformation programs can take multiple years and cost the CSP tens – if not hundreds – of millions (USD). The key issues for CSPs include defining their digital transformation strategy, tracking progress (or success) of the transformation, and anticipating returns on their investment.

This article briefly discusses the primary motivations driving CSP investment in digital transformation. Figure 1 gives an overview of those motivations. In general, the degree of commitment to digital transformation is represented by the arrow on the right, and each of the concentric circles, from the outside to the innermost, represents an increasingly direct connection with the CSP's bottom line. The new virtualized network is the the base that nearly all CSPs will transform, while the most fundamental changes that change the way investors value the CSP business will be those that take more time to materialize.

Figure 1: CSP motivations for digital transformation [Source: Analysys Mason]

1.   Network transformation

Network infrastructure is rapidly shifting from proprietary hardware to virtualized network technology running on industry standard IT hardware. This virtualized network infrastructure involves network function virtualization (NFV), software defined networking (SDN), a range of private and public cloud IT, and new orchestration to manage the new network. Most CSPs will implement virtual networks, if only because their suppliers are changing to offer new network capabilities through virtualized products. According to Analysys Mason’s estimates, CSP spending on NFV and SDN software, services and hardware will increase by a CAGR of 59% and 38% respectively between 2017-2021.


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