Current State of 6G

As the development cycle of the 5G era reaches the halfway mark (Check out this infographic!), the telecom industry has begun positioning for the commencement of the 6G era. The first set of 6G specifications is expected to be established in 2028 as part of the 3GPP (3rd Generation Partnership Project) Release 21 and initial commercial 6G network deployments are expected by 2030.

 

The telecom industry and global government entities have begun preparing for the 6G era via initiatives including determining criteria for standards development, establishing research consortiums and other strategic partnerships, identifying probable spectrum bands to support 6G, and exploring potential 6G use cases.

Telecom Industry and Government Entities Have Begun Preparing for 6G

Government Initiatives

Numerous countries and regions have begun pursuing initiatives to be at the forefront of 6G development. For example, in the U.S. the Federal Communications Commission’s (FCC) Technology Advisory Council established a 6G Working Group to provide recommendations to the FCC for 6G development. The Biden administration also recently announced the National Spectrum Strategy, which identifies potential future spectrum to support 6G (and 5G).

 

Other examples include South Korea launching a $325 million 6G commercialization and standardization R&D strategy; India establishing its Bharat 6G Vision, which aims for the country to launch 6G services by the end of 2030; and the European Union funding the Hexa-X research consortium, which includes leading vendors and operators. China has also begun embarking on research initiatives and experimentations to launch 6G by its target of the end of 2030.

Identifying 6G Spectrum

The clearance of additional spectrum in global markets will be essential in supporting escalating data traffic long-term as 6G is projected to support a 10x increase in usage on networks. Spectrum in the upper midband range (7GHz-24GHz) is being targeted as prime spectrum to support 6G as it is expected to provide an ideal balance of speed, propagation, coverage range and capacity.

 

Additional spectrum being considered for 6G includes lower-band spectrum (below 7GHz) due to its more widespread coverage range as well as millimeter wave spectrum due to its high bandwidth and capacity and low latency. Sub-terahertz spectrum (90GHz-300GHz) is also being explored for 6G, which would be able to support extremely high data rates though deployments would likely be limited to specific localized use cases, such as supporting holographic communications in a hospital or factory.

Use Case Exploration

6G is expected to support various use cases in areas including holographic communications, digital twins, AR/VR and autonomous robotics. Many of these types of use cases will have initially released to market during the 5G era but will gain greater adoption during the 6G era due to evolved network capabilities as well as supporting players such as device vendors providing more advanced accompanying solutions.

 

Network as a sensor is also being targeted, which will enable 6G networks to sense their surroundings to support a variety of use cases including public safety, healthcare and security. 6G will also enable operators to more cost-effectively support escalating data traffic on their networks as 6G provides advanced AI/machine learning (ML) capabilities and is more energy efficient than 5G.
 

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Primary Driver for CSPs to Deploy 6G

Members of the telecom industry are cautiously optimistic about 6G due to its expected network efficiencies, ability to support escalating data traffic and potential 6G use cases. However, they are also voicing uncertainty and reservations around 6G, which is largely due to the high investment costs and limited monetization opportunities communication service providers (CSPs) have experienced in the 5G era.

 

Though 6G technical specifications and expected use cases are still in the developmental stages, TBR believes operators will be more calculated and tactical in investing in 6G compared to 5G, with a deeper emphasis on ensuring a clear line of sight to ROI before significant spending occurs.

 

The telecom industry has begun exploring 6G use cases, though the time frame for commercial readiness and the willingness of customers to pay for these solutions remain unknown. AR/VR use cases are a targeted area for 6G, including the metaverse and real-world simulations to provide training for users such as military personnel and first responders. Use cases around autonomous vehicles, advanced robotics, drones and 8K video are also key solutions being explored.

 

TBR expects the most beneficial use cases for 6G will involve the provisioning of advanced technologies that will enable operators to more cost-efficiently support rising traffic on their networks. For instance, deeper implementation of AI and ML technologies will enable operators to enhance self-optimizing network (SON) capabilities to realize cost efficiencies.

 

6G is also expected to result in deeper implementation of digital twins, which will help operators better anticipate potential outcomes to their networks and optimize their operations in areas including site management and field operations. Additionally, 6G is expected to be significantly more energy efficient compared to 5G, which will enable operators to improve cost efficiencies while helping to support corporate sustainability goals.

Conclusion

The telecom industry is on the cusp of the 6G era, with the first set of specifications expected to be established in 2028 and initial commercial deployments projected by 2030. Governments and industry players are actively preparing for this transition, with initiatives ranging from spectrum identification to use case exploration.

 

While there is cautious optimism about the potential of 6G, there are also concerns about the high investment costs and limited monetization opportunities that characterized the 5G era. However, with advancements in AI/ML capabilities, energy efficiency and the promise of transformative use cases, 6G is expected to offer significant benefits, including cost efficiencies and improved network performance.

 

As the industry continues to evolve, it will be crucial for stakeholders to carefully assess the ROI and strategic value of 6G investments.

 

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Understanding Current IT Services Market Dynamics

Overall IT services revenue growth decelerated in 2023 as the market outlook remained uncertain, clients tightened budgets, and IT services vendors re-evaluated talent strategies in areas including hiring, composition and training. The majority of clients focused spending on run-the-business managed services as well as the integration of AI and digital solutions that provide more efficient ways of working, reducing overall expenses.

 

Additionally, cloud migrations and transformation-led activities helped clients reduce tech debt and consolidate cloud and application environments. According to TBR’s 3Q23 IT Services Vendor Benchmark, published on Jan. 16, “Enterprises are looking to establish strong and secure digital cores, paving the way for vendors to continue capitalizing on the need for cloud migration, applications modernization and data transformation services as well as cybersecurity opportunities. Vendors continue to experience profitability pressures due largely to rising labor and SG&A costs.”

 

In 2024, the needs emerging out of limited client budgets and centered on AI and efficiency will continue to guide IT services vendors’ portfolio expansion and talent development.

The Crucial Role of Competitive Intelligence in the IT Services Sector

To ensure business segments and portfolios are aligned with client needs, IT services vendors forge partnerships, such as with the hyperscalers, to create the ability to work within and across clients’ multicloud environments. For example, forging large-scale partnerships with Google Cloud, Amazon Web Services, Microsoft, Oracle and SAP equips vendors to deliver at scale across client needs and more easily support transformation projects even in a mature IT environment. With clients being more cost conscious, vendors that can seamlessly take over peer-driven transformations will be more successful in capturing new client engagements.

 

Acquisitions have proved to be a vital way for vendors to quickly add in-demand services and solutions as well as talent to better deliver on clients’ emerging needs. While overall acquisition activity slowed for most vendors during 2023, purchases that were finalized brought in specific capabilities that complemented existing strengths while also infusing new portfolio offerings. More specifically, vendors looked to deepen their capabilities and presence around cloud, security and AI, a trend we expect to continue — and possibly gain speed — in 2024.

 

Lastly, taking note of peers’ talent strategies and overall organizations enables vendors to effectively develop internal abilities and practices and strengthen client relationships. According to TBR’s special report IT services and consulting in 2024: Traversing GenAI pressures, talent challenges, and regulatory waves, “To battle employee attrition and take back control, employers ramped up training and other retention-enabling investments. While many tech companies made news by shedding headcount, most global systems integrators (SIs) and consultancies have sought to keep trained and experienced talent, minimize turnover, and prepare for renewed growth from late 2023 into 2024. … The 2023 focus on reskilling and training will pay off in accelerated revenues in 2024 as IT services vendors will have the trained and certified professionals to staff what TBR expects will be growing IT services demand.”

 

While most vendors look to certify employees on partner technologies, keeping pace with peers’ skills and certifications will enable vendors to better pursue software-driven projects. Additionally, efforts to reduce turnover remain similar across vendors, with a focus on training, culture and workplace flexibility. Vendors with more aggressive workplace practices and return-to-office policies may experience higher turnover than their peers. Across the IT services market, talent remains the key asset — vendors must keep in mind their peers’ strategies, investments and composition to successfully deliver client projects.
 

The Outlook for Competitive Intelligence in the IT Services Market

As uncertainty remains the common thread across market conditions as well as client and ecosystem company activities, vendors need to re-evaluate client retention strategies to ensure service quality standards are met. A focus on client management and success will enable vendors to effectively preserve market share by matching or exceeding peers’ client relationship efforts.

 

Limited budgets require more than communication, pushing vendors to ensure they can deliver on technology-driven transformation that infuses AI and automation capabilities as well as digital workplace services to drive operational efficiency and cost reduction for clients. Ensuring the right talent is in place to support innovation activities and maintain client relationships will be vital for vendors to secure positioning and remain ahead of peers.

 

Internal transformation projects to align business segments more closely with emerging technologies and services, including restructuring talent and spinning out or separating business units, will help vendors reposition and better compete for new opportunities. Additionally, offshoring and nearshoring will support vendors’ ability to deliver more cost-competitive contracts while also improving vendors’ profitability.

Conclusion

Competitive intelligence provides ongoing and context-specific guidance in the face of changing client needs and peers’ strengths and strategies. Keeping track of peer investments continues to increase in strategic importance to help vendors retain market share and capture projects with new clients.. Ensuring talent, business composition and positioning, and partner ecosystems are competitive with peers’ will further improve vendors’ stability by adding services capabilities and expertise, which will facilitate discussions and improve market leverage.

 

Maintaining a broader portfolio of services that address a wider range of digital, AI and cloud needs while also having partner expertise across a variety of IT environments will dictate vendors’ ability to compete effectively, expand presence and preserve existing client relationships.

 

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Current Cloud Market Landscape

The cloud market has been on a more than 15-year growth trajectory that rewarded leaders for establishing scale above all else. Early-to-market vendors, such as Amazon Web Services in infrastructure and Salesforce in SaaS, capitalized on the consistent market expansion to establish themselves as not only some of the largest cloud providers but also the largest vendors in their market segments across all delivery methods.

 

However, those firms also experienced some of the most dramatic slowdowns in revenue growth as the market softened in 2023. Part of that slowdown is undoubtedly the “law of large numbers,” meaning growth slows as size increases, but it also reflects a broader market shift toward growth created by new features, capabilities, and go-to-market programs.

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Strategies to Gain Cloud Market Share in 2024

In 2024 we expect vendors that successfully implement the following strategies will become growth leaders in the cloud market:

Effectively Monetize Next-gen Features for AI-led Growth

While the market for GenAI and AI solutions more broadly is still developing, the investments from end customers appear to be very real and meaningful. Despite the intent to invest and spend, there are many hurdles for vendors to clear before they can start recognizing the revenue opportunity.

 

These hurdles include identifying and articulating use cases, measuring benefits and returns, implementing pricing models that work for both vendors and customers, and developing an ecosystem to support all these tactics. Vendors that make progress tackling these challenges stand the best chance of realizing AI-led growth in 2024.

Expand Addressable Markets

The benefits of an ecosystem have been clear for decades, but for many IT and cloud vendors, the changes to their business models have been too significant to overcome. However, in an environment where cloud vendors are experiencing slower growth and still trying to control expense levels, the ecosystem model is even more impactful.

 

Proficiency in orchestrating service partners, ISVs, resellers, and joint solution alliances around core offerings will be another growth driver for vendors in 2024.

Orchestrate Multivendor Partnerships

Managing a customer base that spans traditional legacy solutions and cloud-delivered ones has been a challenging task. To date, it has been simpler and easier for born-on-the-cloud providers to use a disruptive model to sell a simplified set of offerings to establish their position in the market.

 

However, there is now an advantage for multimode providers in controlling the transition to new solutions and delivery methods in a slower-growth environment. In the clearest example of this advantage, SAP has been able to sustain growth in 2023 even as its more cloud-dependent peers have experienced the impacts of the market slowdown.

 

The maturation of AI opportunities will also play a role in this advantage, as customers may end up with data models stored in a variety of places within their IT landscape, based on performance and security requirements.

Conclusion

In 2024 the cloud landscape will become segmented between vendors that can sustain high rates of growth and expansion and those that cannot. Simply providing cloud services at scale is no longer enough for vendors to gain cloud market share. More complex strategies will define the cloud leaderboard in 2024. Additionally, delivering AI-enabled next-generation capabilities and nurturing ecosystems will garner investment despite the slower market growth and macroeconomic uncertainty.

 

To learn more about TBR’s predictions for the cloud market in 2024, download your free copy of Top Cloud Predictions for 2024, featuring a look at GenAI and cloud evolution in 2024 and beyond.

The open RAN market is developing slowly due to technological complexity and relatively high cost compared to classic RAN. These factors mean the open RAN market is unlikely to scale to mainstream adoption in 2024.

Current Trend in Open RAN

Despite heavy (and sometimes excessive) marketing by vendors and hope among communication service providers (CSPs) around open RAN, the reality is that the technology remains immature.

 

Open RAN gear has been implemented successfully and is running live traffic in a few commercial networks (mostly in greenfield environments) in various parts of the world, but significant gaps still need to be closed in feature parity, performance parity and implementation cost parity with traditional RAN before open RAN can truly replace or augment traditional RAN.

 

This inflection point remains at least another year away, and until this occurs, open RAN will likely remain a very small portion of the overall RAN market.

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Open RAN Outlook for 2024

CSPs that have been clamoring for open RAN remain committed to the technology, but there is increasing acceptance that open RAN is not ready to be commercially deployed at scale (especially not in areas of the macro layer that are heavily trafficked) as a viable alternative to traditional, purpose-built RAN — and may not be viewed as ready at least through 2024. As such, open RAN will continue to have a limited impact on the RAN market in 2024.

 

Conclusion

CSP urgency to stay competitive from a time-to-market perspective in some markets has prompted many CSPs to continue down the traditional RAN architecture path, at least for their initial 5G deployments because this architecture is proved, ready and currently able to be scaled faster than open RAN and/or vRAN.
 
Significant hurdles (e.g., feature parity, performance parity and implementation cost parity gaps relative to traditional RAN) still need to be overcome for open RAN to commercialize, mature and scale, especially within brownfield network environments. Thus far, open RAN deployments have been primarily limited to greenfield networks, such as DISH Network and Rakuten Mobile, where the technology is easier to roll out.

 

vRAN, on the other hand, has been commercialized and is gaining traction in the broader RAN market, with key CSPs like Verizon deploying the technology at scale. TBR estimates more than 60% of the open RAN and vRAN segment will be vRAN through the forecast period.

 

Ultimately, CSPs will rally around an open vRAN architecture because it promises a range of benefits, including agility and greater cost efficiencies compared to the traditional RAN architecture (open vRAN is theoretically able to provide cost savings in excess of 50% versus traditional RAN, representing a major incentive for CSPs that are trying to mitigate cost pressures amid the inexorable rise in data traffic on their networks).

 

To learn more about TBR’s predictions for the telecom market in 2024, download your free copy of Top Predictions for Telecom in 2024, featuring a look at the telecom industry response to macroeconomic and industry-specific challenges.