Telecommunications companies are under significant pressure to discover new ways to create value. Consider these statistics: Global revenue for the telecom industry is expected to rise at a rate of just 2.9% annually until 2028—lower than projected inflation rates. In many markets, revenue growth is low thanks to a one-two punch of competitive pricing and the number of broadband and mobile customers having approached a saturation point.

Many telecom providers have responded by ramping up their digital transformation efforts. In the telecom industry, this typically takes the form of upgrading network infrastructure to 5G, transitioning core business applications to the cloud, taking advantage of AI, and finding ways to build services that support Internet of Things (IoT) devices. While this shift comes with challenges, ranging from the expense of updating equipment to the difficulty of managing change, companies that succeed are poised to automate operational processes and diversify product offerings.

What Is Digital Transformation in the Telecom Industry?

Digital transformation in telecommunications refers to the adoption of new technologies and business models to modernize infrastructure, boost operational efficiency, and create better customer experiences. For telecom companies that face financial struggles and increased competition, technology investments are widely regarded as the primary lever for creating value. Through successful digital transformation, providers are positioned to make their services more reliable and secure—and become more resilient in the process. What’s more, pulling this off allows companies to establish key competitive advantages, such as personalized product recommendations and proactive product and service troubleshooting.

Key Takeaways

  • Successful digital transformation can help telecom companies respond to strong competition, weak growth, and other business challenges.
  • Telecom companies can achieve digital transformation by adopting cloud infrastructure, AI tools, and high-performance networks.
  • Key benefits of digital transformation include operational efficiency and improved customer service.
  • Innovation isn’t without challenges; companies may have to contend with high capital costs, technical complexity, or resistance to change.
  • Transparency, agility, and continuous improvement are some of the tactics that can pave the way for successful digital transformation.

Telecom Digital Transformation Explained

As is the case with other industries, digital transformation in telecom emphasizes upgrading outdated technology infrastructure, as well as modernizing manual administrative tasks and operational models. Success depends on strategic vision: New technology alone is rarely enough to achieve business results, and commitment from executive leadership is necessary to navigate and manage the change that comes with becoming a tech-driven company.

Telecom operators that achieve digital transformation stand out from their competitors when it comes to aligning strategy with business goals, monitoring day-to-day and long-term progress, and adopting technology in a modular fashion. Furthermore, increasingly reliable networks can enable companies to create value-added services for customers that demand fast response times.

Core Technologies Enabling Telecom Digital Transformation

Several technologies are at the heart of digital transformation in the telecom industry. Some primarily impact internal business processes, while others aim to improve product offerings or customer service workflows.

Cloud Solutions and Software

Cloud-based infrastructure is generally more scalable and less costly than storage and servers hosted and maintained on-premises, which gives telecom businesses the added bonus of better flexibility when it comes to deploying resources where and when they need them. The same can be said for cloud-native applications, such as ERP systems for the telecom industry, which make it possible to create a centralized data repository at an enterprise level. From there, companies can quickly analyze data and add layers of AI and machine learning tools to generate insights and recommendations.

Artificial Intelligence (AI)

AI chatbots offer fast and personalized engagement with customers, improving customer satisfaction while also lightening the load on call center employees. Telecom providers can also apply predictive analytics to anticipate network outages, enable proactive maintenance, and identify customers with a high risk of churn so they can be targeted with retention offers. In addition, AI tools can detect fraud, monitor network performance, and automate tedious operational and administrative tasks.

Modernized Networks

Today’s 5G networks couple high bandwidth with low latency; they connect to far more devices than 4G networks could—as many as 1 million in a square kilometer, according to Ericsson—and do so without the buffering that had frustrated users of older, slower networks. 5G networks also provide different levels of performance and connectivity—smartwatches get low-energy connections, and surgical robots receive fast, stable connections, for example. Additionally, 5G networks support edge computing that takes place near the user, not the data center, resulting in faster, more reliable service.

Automation

Automation in telecom facilitates the computerization of routine and repetitive tasks, such as network monitoring, customer service, and billing, which, in turn, reduces operational costs and human error. Automation also improves network reliability and customer experience through predictive maintenance and self-healing capabilities, thereby minimizing downtime and boosting service quality. Moreover, automation supports telecom companies in scaling their operations to meet growing demand, leading to more competitive value-added services.

Internet of Things (IoT)

IoT devices provide a steady stream of real-time data on key metrics, including network performance, speed, and battery life. Applying diagnostic and predictive algorithms to this data can help telecom companies identify and fix issues before they create a bottleneck or cause an outage. IoT devices also give companies an opportunity to build creative and beneficial services; in Spain, for instance, Vodafone integrated sensors into Barcelona’s streetlight system, adjusting brightness in tune with foot and car traffic and generating an estimated 30% in energy savings.

Digital Twins

A digital twin is a virtual model of a physical product or system. In the telecom industry, digital twins of network infrastructure can provide an opportunity to simulate network performance—whether that’s a surge in traffic, an outage, or a cyberattack—without bothering the physical network itself. This helps providers predict failures and identify bottlenecks before they can disrupt service. Telecom companies may also leverage digital twins to assess the potential impact of new service offerings, increasing the likelihood of successful implementations.

Advantages of Digital Transformation in the Telecom Industry

Telecom companies that succeed with digital transformation are better prepared to do business in the modern world. They can work quickly to bring new products to market and resolve issues, and they can make better-informed decisions. Digital transformation also brings with it technology that improves the customer experience, strengthens cybersecurity, and cuts operational costs. Here are some of the key competitive advantages of digital transformation for telecom companies:

  • Heightened customer experience: AI-powered chatbots and self-service portals let customers resolve issues without speaking to a representative. Meanwhile, analyzing customer data helps companies create personalized advertising or tailored product offerings.
  • Improved operational workflows: Implementing technology leads to improved operational efficiency and productivity, as telecom companies become positioned to automate administrative tasks, simplify complex workflows, better utilize resources, and improve response times.
  • Faster time to market: The combination of integrated technology solutions and agile project management strategies allows telecom providers to develop and deploy new configurations of products and services quickly, often without requiring costly and time-consuming full-scale overhauls.
  • Data-driven decisions: With a centralized data repository in place, such as those available from cloud-based ERP solutions, telecom companies can apply predictive models that offer more support for informed decisions that positively impact both day-to-day operations and long-term business strategies.
  • Increased scalability: Cloud resources that can be deployed on demand let telecom companies rapidly launch new business applications or product offerings. Automated processes have a similar effect; by removing the need to hire and onboard staff, both new and existing workflows can be scaled swiftly.
  • Stronger security: Modern security tools continually scan networks for cybersecurity threats and other unusual activities. Automated threat mitigation and response are possible, as is the application of machine learning that adapts to emerging threats or attack techniques.
  • Lower costs: Cloud services can be deployed, operated, and maintained at a lower cost than on-premises infrastructure. Leveraging digital twins and AI models can help companies test new ideas without building and testing full prototypes, while process automation helps workers get more done in less time.
  • Competitive advantage: Altogether, the advantages of digital transformation keep telecom companies a step ahead of the competition. Leaders in the industry are more efficient, faster to market, more agile, and better positioned to meet customer needs.

Challenges of Digital Transformation in the Telecom Industry

Like any change that occurs at enterprise scale, digital transformation isn’t without its challenges. Implementing new technology can be costly, may not complement legacy systems, and could introduce the risk of downtime. Companies must also prioritize regulatory compliance and data security as they modernize. Here are some of the key concerns telecom companies may face as they begin a digital transformation initiative:

  • High up-front costs: Initial investments in modern technology can quickly add up, whether those investments are used for 5G networks and the security stacks protecting them or AI models and the servers running them. Tapping into infrastructure as a service can help companies make the transition and cut up-front costs.
  • Integration issues: McKinsey has found that most telecom companies operate three or more technology stacks, and 85% of those companies are still in the midst of consolidation. Working with multiple technologies makes data and application integration difficult, as it can require complex logic and custom coding. Consolidating on a single technology platform can ease these concerns.
  • Regulatory complexity: The EU’s General Data Protection Regulation and the California Consumer Privacy Act place pressure on telecom companies to collect and store consumer consent for sharing data and to implement comprehensive data access controls to keep that data private. Meanwhile, regulations, like the EU Green Deal, that have set emission reduction targets could heavily influence when and how telecom companies modernize infrastructure.
  • Security vulnerability: The telecom industry is especially susceptible to cyberattacks, as networks transmit essential financial, government, and healthcare data daily, and where breaches can lead to financial losses and reputational damage. Tools, such as encryption, intrusion detection, and data loss prevention, can mitigate threats, as can routine penetration testing and security audits.
  • Resistance to change: Workers and managers alike can be wary of modern technology, automated workflows, and the uncertainty associated with new ways of working. A combination of clear communication and comprehensive training can help employees realize the benefits of change and ultimately embrace digital innovation and transformation.
  • Downtime risks: Limiting downtime during infrastructure upgrades, application updates, data transfers, or moves from on-premises to cloud-based servers is critical for telecom companies that guarantee 24/7 connectivity and customer support. One mitigation strategy is keeping old and new systems separate during key transitions, as this minimizes the risk of interruptions.

Examples of Telecom Digital Transformation

Digital transformation initiatives in the telecom industry, as in other sectors, can take numerous forms. Some may focus on making operational systems more efficient or improving network performance, while others may target customer service. Below are a few real-world examples of how telecom companies have incorporated digital transformation into their business strategies:

  • Orange Group, a French telecom provider, has been shifting operations and customer service systems to cloud infrastructure. The transition helps these systems run more efficiently and makes it possible to layer on machine learning and analytics capabilities.
  • AT&T uses cloud and AI technology to monitor data traffic and network load in real time, allowing the company to avoid network congestion, improve reliability, and create predictive maintenance service offerings for large-scale customers.
  • Verizon analyzed conversations with customer service representatives, which helped it tie incoming calls to specific digital ads. As a result, the company can more effectively allocate ad spending and create targeted marketing messages.
  • Telefónica, based in Madrid, implemented a chatbot that has scaled to handle 100 million customer service interactions each month. Along with cutting call center volume (and call center wait times), the chatbot technology has improved first-contact resolution rates, a key customer satisfaction metric.

Tips for Telecom Digital Transformation Success

Digital transformation isn’t something that happens overnight. Telecom providers succeed when they take the time to develop a clear strategy, identify the right metrics to measure, communicate progress, emphasize agility and continuous improvement, and make sure workers are primed to meet the challenges that lie ahead. As leaders in the telecom industry consider where and when digital transformation will prove right for their companies, the following eight tips can keep their initiatives on the right track:

  1. Set clear goals: Providers must determine what they hope to accomplish through digital transformation. Different efforts—network modernization, workflow automation, customer service improvement, and so on—will have different technical requirements, timelines, and resource needs.
  2. Get leaders on board early: Executive buy-in is critical to the success of any large-scale change, and digital transformation in the telecom industry is no exception. When leaders recognize and effectively communicate the importance of leveraging technology to create value, they help set the stage for success.
  3. Embrace agile principles: Agile project management methodologies emphasize flexibility, collaboration, and frequent iteration—all of which are critical for evaluating and implementing new technologies to make sure they meet the business’s evolving goals and objectives.
  4. Invest in upskilling your workforce: Training employees to use cutting-edge AI and automation solutions can combat their resistance to change. Meanwhile, building expertise in-house gives a company the talent it needs to take on digital transformation without extensive (and time-consuming) recruiting efforts.
  5. Prioritize data security and governance: For both regulatory and reputational reasons, it’s critical for telecom companies to protect customer data. Prioritizing security and data governance amid digital transformation—not as an afterthought—makes it certain that innovations will provide appropriate safeguards without compromising usability or effectiveness.
  6. Measure progress: At the outset, leaders need to identify the metrics that will define the success of digital transformation, such as new customers, uptime rate, call center load, or automated tasks. Tracking these metrics over a set time frame will illustrate how innovation initiatives are progressing or indicate whether course-correction may be needed.
  7. Strive for continuous improvement: Telecom companies that adopt continuous planning and improvement initiate a cycle of formulating a business strategy, allocating capital, monitoring performance, and making real-time adjustments to strategies and operations. This contributes to a reliable and flexible planning process, which is critical for supporting digital transformation and technology adoption.
  8. Communicate consistently: Given the scale of change that digital transformation represents, it’s imperative that leaders routinely share updates on project progress, lessons learned, and relevant next steps. Transparency not only helps a company stay on track, but it also reflects the company’s ongoing commitment to innovation.

Modern Software Is the Backbone of Digital Transformation

While network infrastructure certainly plays an important role in digital transformation, the telecom industry can’t discount the importance of cloud-based business software and services. NetSuite Telecom ERP gives telecom providers an all-in-one solution for managing accounting, budgeting, production, procurement, and other core services. Companies gain greater visibility into the performance of mobile, fixed, and wireless business units; they also gain insights into where and when to deploy resources to optimize workflows, cut operating costs, and develop products that will retain customers. Plus, NetSuite’s ability to aggregate data in a centralized repository can help providers make the most of AI, including using process automation to boost efficiency, predictive analytics to drive decision-making, real-time monitoring to improve network reliability, and generative AI to drive customer service chatbots, marketing content creation, and custom reporting.

Faced with limited industry growth projections, telecom providers increasingly are under pressure to modernize product offerings and technology stacks to create value. Digital transformation can be a critical driving force behind this modernization—putting a combination of cloud infrastructure, predictive analytics, and process automation to work to make operations more efficient, customer service more personalized, and business applications more scalable. As telecom companies continue to adapt to changing market conditions, digital transformation can position them to meet the needs of the moment.

Telecom Digital Transformation FAQs

What is driving digital transformation in the telecom industry?

The telecom industry is looking for ways to improve efficiency, reduce costs, simplify operational complexity, and offer new services by adopting technology. Digital transformation enables companies to modernize the way they do business, better serve their customers, and create a competitive advantage.

What is the primary goal of digital transformation?

With growth projections for the telecom industry pacing below the rate of inflation—and with subscriber bases nearing their saturation point in many markets—adding value is the primary goal of digital transformation in telecom.

What are the four types of digital transformation?

The four main types of digital transformation are business process transformation (improving workflows); business model transformation (modernizing product and service offerings); business domain transformation (capturing a new market segment); and organizational transformation (reforming internal culture).