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Hyperscalers are poised to disrupt the private cellular networks market over the next few years

Hyperscalers are poised to disrupt the private cellular networks market through their ecosystems, platforms and marketplaces

Hyperscalers (especially Amazon, Google and Microsoft) intend to standardize, modularize and verticalize private cellular networks (PCN)-related solutions inside their ecosystems, platforms and marketplaces, especially as it pertains to 5G and edge computing. Hyperscalers are focused on hiding the complexity of private networks and edge computing, enabling end users to more easily procure and consume these resources and unlock the value of data.

Enterprise and government consumption of networking resources will ultimately come to resemble how IT resources are consumed via the cloud, and solutions will be outcome-based. Early manifestations of this trend can be seen with Microsoft’s packaging of its 5G core with Azure Private Multi-Access Edge Compute (MEC) to enable and drive enterprise digital transformation with on-premises private 5G MEC. Microsoft is also building a range of vertical-specific use case solutions spanning smart factory, defense, retail transformation, and healthcare. Amazon and Google are following Microsoft’s lead in this domain.

Ultimately, TBR believes a large portion of activity in the private cellular networks and edge computing markets will be conducted inside hyperscalers’ ecosystems. CSPs and vendors will increasingly have to play inside hyperscalers’ ecosystems in some way to stay relevant in the market as it evolves.

Private 5G Network Revenue by Provider Type 2020-2025E

TBR’s Private Cellular Networks Market Landscape deep dives into the market for private cellular networks. This global report covers enterprises that are investing in private cellular networks as well as all of the major vendors and some nascent players that supply infrastructure in this space. The research includes key findings, key market developments, market sizing and forecast, regional trends, technology trends, vertical trends, use cases, and key customer deals that are occurring in the market. TBR’s Private Cellular Networks Market Forecast, which is global in scope, details private cellular network spending trends among enterprises and governments, particularly as it pertains to 5G. This research includes current-year market sizing and a five-year forecast of several private cellular networks market segments and geographies.

Top 3 Predictions for IT Services in 2022

Sustainability in talent, decarbonization and emerging tech becomes the watchword for IT services

Services is still people, even as compelling new forces like ESG and emerging technologies challenge IT services vendors

Even with a rush of emerging technologies and responses to the pandemic at the forefront of IT services vendors’ strategies and client success stories, the fundamentals of IT services remain rooted in people — in recruiting, training and deploying the right talent to solve IT-related business problems and staff enterprise IT needs. The changes TBR expects in 2022, including new competitors in the war for talent, new opportunities around decarbonization and accelerated adoption of emerging technologies, will not substantially alter IT services vendors’ business models. Differentiation among the vendors, in offerings, capabilities and financial performances, will come more through execution than strategy, at least in the near term. Vendors more adept at pivoting to new revenue streams and more patient with pressured margins will see greater success beyond 2022, provided they are able to adequately navigate talent challenges in the near term.      ​

The vendors that were ahead of the game in 2019 in portfolio and resource expansion around next-generation technology-enabled solutions are experiencing revenue growth improvement in 2021. New growth initiatives, such as around product engineering, supply chain improvement and sustainability, along with steady investments in areas such as hybrid cloud, AI, security, IoT, blockchain and industry-specialized offerings, will continue to expand vendors’ addressable market opportunities and support revenue growth acceleration into 2022. Virtual delivery enables increased productivity but pushes employee utilization to the limits and supports a surge in attrition. Managing talent to market demand, especially as macroeconomic conditions improve and digital exhaustion continues, will be key as IT services vendors strive to ensure service quality requirements are met.​

While the COVID-19 pandemic remains an external factor that can negatively affect IT services spending, subsiding pressures thanks to global vaccine rollouts indicate a potential for continued revenue growth acceleration from the 6% year-to-year revenue growth during the full year 2021 for the 30 vendors in TBR’s IT Services Vendor Benchmark. Moving into 2022, revenues will be driven by a mix of three activities: short-term projects around operational resilience and running businesses; larger transformational engagements that enable clients to improve their business models; and innovation engagements that allow clients to do something completely different — all supported through technology solutions and services.​

2022 IT services predictions

  • Focus on talent management, refined during the pandemic, will recede in a post-pandemic environment
  • The decarbonization shift from promises to actual results opens a massive opportunity for IT services
  • Blockchain winter ends and 5G & edge bloom in 2022, bringing new enhanced revenue streams to IT services

Send me a free copy of TBR’s Top 3 Predictions for IT Services in 2022

Telecom Business Research’s 2022 Predictions is a special series examining market trends and business changes in key markets. Covered segments include cloud, telecom, devices, data center, and services & digital.

Top 3 Predictions for Telecom in 2022

Telecom industry faces new challenges in the post-pandemic era

2022 will be a transition year for the telecom industry

After emerging from the COVID-19 pandemic relatively unscathed, the telecom industry is entering a new phase and faces a new set of challenges. These challenges include navigating a supply chain left in shambles due to the impact of the pandemic and, representing a separate concern, the inexorable rise and encroachment of hyperscalers in the telecom domain, which threatens to completely disrupt the status quo in the industry.​

Incumbent communication service providers (CSPs) and their vendors are navigating these issues, but there is an increased urgency to digitally transform and align with structural changes occurring in the industry, such as the pressure to work with hyperscalers on network transformation and business model co-creation in the cloud.​

2022 is poised to be a unique transition year for the telecom industry. While unprecedented government stimulus that originated in the wake of the COVID-19 outbreak continues to be pumped into the global economy, lifting all players in some way across the market landscape, CSPs and their vendors must transition to the fundamentally new network architecture, which is software-based, fully virtualized and cloud-centric. CSPs must also determine where they will play in the new value chains that are being created in the digital economy, most notably in hyperscalers’ marketplaces, and in conjunction with new players that are entering the scene in domains such as private networks and satellites.​

Meanwhile, supply chain challenges are expected to persist through 2022, with continuing semiconductor and component shortages as well as ongoing skilled labor deficiencies and shipping delays, all of which threaten to delay market development and hinder vendors’ ability to recognize revenue and pursue new growth opportunities. Inflation (potentially stagflation) and rising interest rates also pose risks, portending margin pressure and debt refinancing challenges.​

Taken together, these circumstances indicate 2022 will be an unusual year for the telecom industry. While government-induced stimulus will provide various benefits to players across the industry, giving off a sense that the industry is functioning normally and is healthy, an acceleration in competitive and technological changes poses a risk to the long-term performance of incumbents. Amid the uncertainty 2022 will bring, one thing is certain: Major changes are coming to the telecom industry in the post-pandemic world, and fast.

2022 telecom predictions

  • Supply-demand imbalance delays pace of 5G market development
  • Hyperscalers scale out edge cloud
  • Government becomes leader in 5G spend among nontelecom verticals

Send me a free copy of TBR’s Top 3 Predictions for Telecom in 2022

Telecom Business Research’s 2022 Predictions is a special series examining market trends and business changes in key markets. Covered segments include cloud, telecom, devices, data center, and services & digital.

5G market update: Insights from TBR’s Telecom team

The global 5G market is entering the ramp stage. Driven by China, the U.S., South Korea and select countries that were among the early deployers of the technology, communication service providers (CSPs) in other countries will begin adopting and deploying 5G over the next five years. Unprecedented government stimulus targeted at the ICT sector and competitive pressures on CSPs to invest will ensure 5G infrastructure is deployed at scale through the middle of this decade.

Join Principal Analyst Chris Antlitz Wednesday, Nov. 17, 2021, for an in-depth, exclusive review of TBR’s 5G Telecom Market Landscape and 5G Telecom Market Forecast, during which he will cover major developments in the 5G market and gives his assessment of where the 5G market is trending over the next five years.

TBR’s 5G Telecom Market Landscape includes key findings, market size, customer adoption, operator positioning and strategies, geographic adoption, vendor positioning and strategies, and acquisition and alliance strategies and opportunities. The 5G Telecom Market Forecast details 5G trends among the most influential market players, including both suppliers and operators. This research includes current-year market sizing and a five-year forecast by multiple 5G market segments and by geographies well as examines growth drivers, top trends and leading market players.

Don’t miss:

  • How and why the 5G market is entering the ramp stage
  • Which CSPs are spending the most on 5G and why
  • What use cases CSPs are focused on for 5G

Register today to reserve your space

TBR webinars are held typically on Wednesdays at 1 p.m. ET and include a 15-minute Q&A session following the main presentation. Previous webinars can be viewed anytime on TBR’s Webinar Portal.

For additional information or to arrange a briefing with our analysts, please contact TBR at [email protected].

WEBINAR FAQS

What happened to smart cities?

COVID-19 and cloud have overrun smart cities, for now

A question from a client spurred an internal discussion among TBR’s Professional Services, IT Services and Digital Transformation Services Team around smart cities and what the vendors we cover had been doing lately to advance what had been one of the hottest topics in 2017, 2018, 2019 and right up until March 2020 — when the pandemic and cloud seemingly drowned out smart cities.

But maybe not. Maybe smart cities just splintered into component parts until municipalities and sponsoring larger government entities can get back to large-scale, transformative projects not directly tied to public health. Maybe the underpinning technologies continued to mature, in both capabilities and adoption, so that the next couple of years will see a resurgence in smart city solutions. Maybe track-and-trace programs and vaccine rollouts have provided the test beds and built the relationships needed for investments to flow again toward smart cities. Maybe. Here’s what TBR’s Services team sees as the current state of play and what may come next:

The components never went away

If the smart cities umbrella faded as the pandemic surged, the technology components and services around them did not. IT services vendors and management consultancies continued to invest in and develop capabilities around analytics, edge computing, 5G and IoT — all key components in the smart cities ecosystem. TBR’s May 2020 Digital Transformation Insights Report: Emerging Technology, 5G described investments by Accenture, Infosys, Tata Consulting Services, Capgemini, IBM and Nokia, among others, while noting that engagement “opportunities centered on speed, connectivity and reliability help elevate 5G’s position in the crowded emerging tech market, but only if vendors can demonstrate the ecosystem will remain navigable.”

A similar report, TBR’s February 2020 Digital Transformation Insights Report: Emerging Technologies, Edge Computing — built upon three separate TBR market landscape reports covering telecom edge compute, 5G telecom and commercial IoT — commented that “embracing collaborative, edge-enabled digital transformation will benefit all parties if risk and responsibilities are shared,” reinforcing the sentiment across nearly all of TBR’s research into various technologies that ecosystem plays provided the greatest opportunities. Components, in other words, remained essential, but needed other components to be truly critical to harnessing digital transformation.  

Green trends, red tape and politics

As the pandemic fades, sustainability and standardization may provide levers to bring smart cities back to the forefront for IT services vendors and management consultancies. The Brooklyn Bridge has a new bike lane. New York City has new regulations around carbon emissions and commercial real estate. Municipalities faced with renewed interests in greening their infrastructure will look for consultancies and technology companies for help. And as federal dollars flow toward all infrastructure — brown and green — cities will look to consultancies with deep expertise in risk and compliance for assistance with standardization around what is and is not permissible around emerging technologies. One substantial caution: Priorities around which initiatives to pursue, even and maybe especially ones rooted in sustainability and standardization, remain political decisions typically disconnected from technology. Smart cities require political will, not just budgets and IT architecture.

TBR’s May 2021 Digital Transformation: Blockchain Market Landscape highlighted this confluence of political will and integrating technology components: “Contributing to the muted adoption of blockchain are many factors, including but not limited to: the outbreak of COVID-19, requiring customers to reprioritize budgets to maintain business continuity; the presence of blockchain alternatives that complement, rather than replace, existing IT environments; and a general lack of knowledge in the market, given the hype surrounding cryptocurrencies today. That being said, as consultancies continue to embark on their shepherding role to lead and manage community participants, they also must consider factors that are influencing buyers’ decisions to invest and/or purchase a blockchain solution, including: 1) solution feasibility, 2) solution integrability into existing IT environment and 3) solution accuracy.”

As always, data at the center

And then there is data, an obstacle even larger than political will but also a massive opportunity for IT services vendors and management consultancies that have been honing their capabilities around data collection, orchestration, distribution and security. Here, the pandemic may have provided technology test beds and relationship building for the vendors that participated in track-and-trace and/or vaccine rollout engagements with states and federal governments, building use cases for technology deployments within the public sector — that is, gateways to smart cities.

In 2022 TBR expects to see more announcements around smart cities, beyond the high-profile greenfield opportunities of brand-new cities or untested technologies. We anticipate vendors such as Accenture, PwC, DXC Technology and Infosys will return to investing in and marketing their smart cities portfolios, pulling together capabilities around cloud, IoT, 5G and analytics while emphasizing their roles within the larger ecosystem of connectivity, cloud and software vendors.

TBR will cover those developments across multiple reports, including our digital transformation insights reports, various telecom and cloud benchmarks and market landscapes, and sustained quarterly analysis of the most dynamic IT services vendors and management consultancies.  

COVID-19 pandemic forces telecom industry to go all in on digital transformation

CSPs face brave new world; government stimulate market

The COVID-19 pandemic is expected to persist through at least 2021 as vaccines and other virus mitigation efforts take time to make their way through societies globally. In the meantime, the global economy remains in a state of suspended animation following unprecedented injections of fiscal and monetary stimulus by governments across numerous countries, which total over $20 trillion (or 23% of global GDP in 2019). The amount of stimulus is expected to continue growing steadily through 2021 and potentially beyond as governments aim to fully offset the impact of the pandemic on their economies as well as build a foundation for sustainable economic growth.

After weathering the first phase of the pandemic in 2020 relatively well, communication service providers (CSPs) will enter 2021 facing a brave new world and many tough decisions. The unrelenting virus is forcing economies and societies to fully embrace digital transformation as they adjust to the new normal, and it is forcing CSPs worldwide to take a hard, holistic look at their operational, business and growth models, and to adjust and accelerate their digital transformation road maps accordingly.

Fortunately for the telecom industry, a significant and growing portion of government stimulus is being earmarked to enable the ICT sector to accelerate infrastructure and ecosystem development. CSPs and their suppliers will be key beneficiaries of the trillions of dollars and other support mechanisms (e.g., tax breaks, low or no interest rate financing) governments will directly and indirectly inject into the ICT sector and broader economy for these purposes. This stimulus will help CSPs ease their capex and opex burdens as they migrate to the new network architecture and will ensure they have the capital necessary to keep their businesses going and their debt obligations satisfied.

2021 telecom predictions

  • Government stimulus powers ICT investment
  • Governments will increasingly democratize spectrum to ensure a vibrant 5G ecosystem
  • CSPs accelerate 5G SA road maps

Technology Business Research 2021 Predictions is a special series examining market trends and business changes in key markets. Covered segments include cloud & software, telecom, devices & commercial IoT, data center, and services & digital.

CSPs face brave new world in 2021

The COVID-19 pandemic is expected to persist through at least 2021 as vaccines and other virus mitigation efforts take time to make their way through societies globally. In the meantime, the global economy remains in a state of suspended animation following unprecedented injections of fiscal and monetary stimulus by governments across numerous countries, which when aggregated to date, amount to over $20 trillion (or 23% of global GDP in 2019). The amount of stimulus is expected to continue, growing steadily through 2021 and potentially beyond, as governments aim to fully offset the impact of the pandemic on their economies as well as build a foundation for sustainable economic growth.

After weathering the first phase of the pandemic in 2020 relatively well, communication service providers (CSPs) will enter 2021 facing a brave new world and many tough decisions to make. The unrelenting pandemic is forcing economies and societies to fully embrace digital transformation as they adjust to the new normal and forcing CSPs worldwide to take a hard, holistic look at their operational model, business model and growth model and to adjust and accelerate their digital transformation road maps accordingly.

Join Principal Analyst Chris Antlitz for an in-depth, exclusive review of TBR’s 2021 Telecom Predictions, in which he discusses how the telecom industry is adapting to the post-pandemic world.

Don’t miss:

  • How government stimulus will fuel growth in the ICT sector and support the telecom industry
  • Why spectrum democratization is happening
  • Why CSPs are accelerating their 5G SA road maps

Mark your calendars for Wednesday, Jan. 27, 2021, at 1 p.m. EST,
and REGISTER to reserve your space.

TBR webinars are held typically on Wednesdays at 1 p.m. ET and include a 15-minute Q&A session following the main presentation. Previous webinars can be viewed anytime on TBR’s Webinar Portal.

For additional information or to arrange a briefing with our analysts, please contact TBR at [email protected].

SAP and Ericsson in Egypt: Thriving in an expansive environment

Ericsson and SAP anticipate further expansion in Cairo

Ericsson has also leveraged this environment to support its global strategy, by tapping local talent in the fields of artificial intelligence, software development and digitalization. “It is the existence of the required competent engineers, with various backgrounds and capabilities, that makes it very attractive to operate in the country,” an Egypt-based Ericsson executive noted. Ericsson has been operating a digital services hub in the country to serve the Middle East and Africa region. The Ericsson executive stated, “Since we are covering the Middle East and Africa, Arabic is an advantage for working in Arab countries.

Egyptian professionals have relatively better English communication skills as well to add on top. Plus, Egypt provides reliable telecom infrastructure that can help different engineers to communicate and engage remotely with colleagues and customers.” According to Ericsson, the environment has been very encouraging to do more and serve on the global level as well. The Egyptian government has a strong focus on the ICT sector, is making more spectrum available to operators to improve mobile broadband experience, and has the aspiration to introduce 5G. In Ericsson’s estimation, Egypt is a firm believer in building a connected society and smart cities and is already executing on a solid national artificial intelligence strategy.

Notably, in October Ericsson announced the shipment of the first AI-enabled software developed at its Artificial Intelligence & Analytics Hub in Egypt to be used by Ericsson’s customers globally. According to the press release, “The AI & Analytics Hub has accelerated the execution of Ericsson’s focused strategy in Egypt by using AI and automation technologies to create data-driven, intelligent products and services.”

Looking ahead for SAP, Mansour explained that she hopes to hire more resources in digital marketing, digital sales, presales and services, and, if SAP’s management approves, to establish more partnerships with the headquarters of companies serving the region. For Mansour, a true coup would be to convince the Egyptian talent currently employed in Germany to return to Cairo and help “regain historic leadership of the region.” Potentially accelerating that effort would be SAP’s continued success with SAP Business Suite 4 SAP HANA (S/4HANA) implementations and expanded opportunities with IoT, analytics and other emerging technologies. Ericsson’s Egyptian future, according to its executives, depends on ever-increasing internet connection speeds, recruitment of local talent, and support of a wider array of Ericsson products and services.

Building on the company’s legacy in Egypt, which dates back to 1897, when the first Ericsson telephony equipment was introduced in the country, connecting Alexandria to Cairo, Ericsson believes 5G will be next significant step. Ericsson executives noted that the Egyptian government “took proactive steps in launching 4G in the country … a testimony that the country realizes the importance of technology in building economic development. From a technology point of view, [Ericsson is] ready to switch on 5G on the existing 4G networks, so it is all a matter of getting the 5G license in place. [Ericsson’s] focus area now is to offer the latest solutions and technologies to existing customers for their 4G networks while working together on paving the way to launching 5G.”

Earlier in 2020, TBR spoke with Egyptian officials about the country’s continuing efforts to build a robust alternative for companies looking to outsource their IT services operations. As part of a follow-up, TBR also connected with SAP (NYSE: SAP) and Ericsson (Nasdaq: ERIC) executives to understand why both technology vendors have chosen to expand operations in Cairo. The following reflects those exchanges and TBR’s ongoing analysis of offshore IT services centers.

Webscales will ultimately become more like competitors than partners to operators to capitalize on 5G-era opportunities

Webscales are not the telco’s friend

The Big Nine have various initiatives underway that will disrupt aspects of the telecom business model and pose a direct threat to operators’ existing connectivity businesses and their ability to capitalize on new value created from 5G.

Though webscales are posturing like they want to partner with telcos on new opportunities, they actually need to disrupt telcos’ core business (i.e., providing connectivity) to realize their digital ecosystem goals.

Webscales ultimately need to become more like competitors, rather than partners, of telcos because they need access to new types of data, and realizing their digital lifestyle goals will require them to take control over the network rather than be beholden to telcos. Both of these needs are satisfied by owning greater portions of the network.

Webscales already own significant portions of long-haul transport, cloud data centers, SD-WAN and communications platforms globally, and TBR believes the next step will be for webscales to take over the mobile core and the last mile of the network. This is already occurring in the enterprise network domain, but TBR expects webscales will increasingly delve into the consumer domain as spectrum is increasingly democratized and key technological advancements make it much easier, faster and cheaper to build and operate greenfield networks.

The webscale companies (hyperscalers or internet content providers) covered in TBR’s Webscale ICT Market Landscape invest in ICT and related digital infrastructure to drive their core businesses, which can include, but are not limited to, advertising, cloud services, e-commerce, financial services and media. In some cases, webscale companies will also invest in and provide telecommunications services, such as broadband access, to accelerate their digital businesses. This report focuses on the nine webscales (the Big Nine — Alibaba, Alphabet, Amazon, Apple, Baidu, Facebook, Microsoft, Rakuten, Tencent) that TBR believes will own the largest, most comprehensive end-to-end digital ecosystems in the digital era. Additionally, the report includes key findings, market size, customer adoption, operator positioning and strategies, geographic adoption, vendor positioning and strategies, and acquisition and alliance strategies and opportunities.

NFV and SDN are transformational technologies, and even leading CSPs are in the early stages of evolving

Despite market and complexity challenges, CSP spend on NFV/SDN will grow at a TBR-projected 32.4% CAGR from 2019 to 2024 to nearly $147B

NFV/SDN spend will increase at a CAGR of 32.4% to $146.9 billion between 2019 and 2024, compared to nearly flat overall communication service provider (CSP) spend (capex plus external opex) for the global market. NFV/SDN spend will scale through the forecast period as leading CSPs broaden their transformation initiatives and as additional CSPs begin their transformational journeys.

5G will be a key catalyst that will push more CSPs to adopt and broaden their NFV- and SDN-related initiatives. COVID-19 will serve as a catalyst for digital transformation, which implicates NFV and SDN, as operators will increase investment in the technologies to improve network cost efficiencies long term and support shifting data usage trends arising from the increased number of work-from-home employees and remote learners. Rakuten, along with China- and U.S.-based CSPs, will be key drivers of the spend increase in the early years of the forecast. TBR expects lower-tier CSPs in developed countries and key CSPs in emerging markets will ramp up NFV/SDN spend in the later years of the forecast period, driving continued spend growth in the overall market.

Most CSP spend on NFV/SDN to date has been on virtual machines, but this will increasingly transition to container-based and cloud-native, microservices-based spend through the forecast period as CSPs continue their evolutionary journeys.

TBR’s NFV/SDN Telecom Market Forecast details NFV and SDN trends among the most influential market players, including both suppliers and operators. This research includes current-year market sizing and a five-year forecast by multiple NFV and SDN market segments and by geography as well as examines growth drivers, top trends and leading market players. TBR’s NFV/SDN Telecom Market Landscape includes key findings, market size, customer and geographic adoption, operator and vendor positioning and strategies, and acquisition and alliance strategies.