There are billions of reasons why CSPs need to stop throwing good money after bad

Telecoms.com periodically invites expert third parties to share their views on the industry’s most pressing issues. In this piece Niall Norton, CEO at Openet, reflects on the billions operators are spending to maintain outdated legacy systems.

Earlier this month, BT announced its annual financial results. As part of its presentation, it updated the markets on its progress with its IT modernisation program. BT is engaged in a strategic endeavour to transform itself into a next-generation digital services provider.

A significant part of this transformation is preoccupied with removing 58 legacy IT stacks and consolidating them down to 14. This represents quite the downsize and illustrates the extent to how much existing infrastructure can be simplified.

BT’s publicly stated intention is to replace its ‘outdated architecture’ with cloud native, API-rich data services. BT estimates that by following this strategy, it will realise cost savings of more than £2 billion over the next five years.

BT are a good company, and have a good plan, and so we believe that they will be successful in their ambitions. This success will accomplish two goals: it will reduce their costs, and, it will make their businesses far more nimble and agile to deploy a much wider range of diverse services more quickly.

The legacy liability

While BT’s plans are to be applauded, these figures present a chilling reminder of the high costs associated with years of operator vendor lock-in and the inflexibility of legacy. Specifically, in the world of BSS, and in no way related to BT, it is not uncommon to find some operators trying to concurrently manage a high number of billing systems – 50, 60, 70, all at the same time. These bespoke systems were installed on a per service basis – when these services ceased to exist, these systems were simply left to exist within the network. In any established network, this process is inevitable – a kind of technology fossilisation.

This legacy liability soon builds however, in terms of the cost and complexity of supporting it, and in foregone business opportunities that these systems deny the operators ability to provide quickly and cheaply. It is a dilemma: the costs and risk levels to replace these legacy systems is high in the short term, but over time the costs of doing nothing is enormous. Industry analyst firm Analysys Mason, back in 2018, estimated that as much as 70% (around $14 billion annually) of operator global revenue management (BSS) spend goes on supporting and maintaining legacy systems. This financial relationship clearly better suited the vendor supplying the technology than the operator paying for it.

Despite all this, it’s still not uncommon for operators to keep perpetuating their pain by persisting with older systems – effectively throwing good money after bad. In the current market, as the operator community actively launches or prepares for 5G, spending billions to maintain legacy BSS is like spending money to constantly paint a condemned house. Hence we applaud the good business sense that BT have in their plan.

Transform or tank

It is precisely these reasons why operators like BT are leading such a broad program of technological modernisation. They need to find new systems that can not only manage existing revenue, but revolutionise their approach to service launching and monetisation so they can dynamically increase revenue – and slash their cost base at the same time.

The operators that succeed in the future will be those that are most adaptable to change. We live in a fully digital age and service convergence is rife, bringing a wide variety of partnership opportunities across entertainment, healthcare, insurance etc. to operators every day. We’re going to see new business models all supported by real-time AI driven systems that provide the foundation for service providers to play a central role in providing a range of digital services to their customers. Digital transformation is just starting and the rate of change is only going to increase.

A central part of operator transformation is ensuring they are awake to all opportunities and plan for the unexpected – especially when it comes to 5G. Operators must have the ability to rapidly launch, manage, monetise and analyse new services. To do this, operators need to evolve to be able to quickly accommodate and embrace change. This means using cloud-native software, designed along the lines of open digital architecture for maximum efficiency and agility.

The importance of IT modernisation and the associated financial savings to be made is a strategic C level issue. At their annual results presentation BT rightly acknowledged that efficiency and agility doesn’t come from having 58 IT stacks in its network and called out the plan to modernise IT and results this will deliver. This is a journey that many other global operators are also on. Digital transformation and 5G is acting as catalyst for operators to modernise IT and save billions in the process.  Leading operators are starting to embrace change – vendors must be ready to respond to these needs, whether in BSS or in any other part of the network.

Niall joined Openet in March 2004 as CFO before becoming CEO in 2006. A winner of the European Entrepreneur of the Year in 2012 and the Ernst and Young Entrepreneur of the Year in 2011, Niall was voted by Telecoms Business Review as one of the Top 100 most influential people in global telecoms in 2017. Prior to joining us, he served as CFO of O2 Ireland from 2001 to 2004.