By: Kevin Dundon

After a decade of stagnant revenue exacerbated by rising operational costs, it’s high time for growth-deprived telco service providers to consider leveraging the cloud for their voice and unified communications services. Legacy voice infrastructure and status quo mindsets remain huge barriers to service provider transformation and monetizing massive network investments with new services and technologies.

Long-seen as mature, reliable workhorses, core communications networks are an often-overlooked service area poised for innovation and efficiencies when delivered through the cloud, according to a new report, “Reinventing Core Communications: Strategic Imperatives for Growth,” from London-based research firm Omdia.

“Telcos are already moving workloads to the cloud to achieve operational and scalability benefits,” Omdia analysts stated in the report. “Leveraging the cloud for voice and communications infrastructure offers an opportunity to both optimize the management of the services and free up resources to pursue AI-driven and operationally driven innovation.”

Service providers can no longer afford to do nothing. Global telco revenue dropped to $1.98 trillion in 2022, from $1.99 trillion in 2014. While heavy investments in fiber and 5G roll outs have enabled greater network bandwidth, they have not resulted in reduced operational expenditures (OpEx) as a percentage of top-line revenue. Service providers have failed to monetize the increased speed, service quality, and traffic volume.

Those financial pressures weigh on service providers as they also contend with a shrinking workforce with legacy voice engineering skills as long-time employees retire, and also from challenges in sourcing spare parts for their aging and siloed networks.

Making the Case for the Cloud

Service providers historically have been cautious in their approach to the cloud compared to other industries. As with most potential cloud customers, cost, control, security, and vendor lock-in are top concerns when considering a move from the on-premises environments that they have controlled for decades. While they’ve embraced the shared public cloud for some functions, including unified communications tools for large enterprises, they’ve opted to ride out their legacy voice network equipment that’s been fully paid for and depreciated.

But as the cloud market matures, some service providers realize that limited growth is the true cost of maintaining those legacy networks. Providers surveyed by Omdia cited reduced capital expenditures and OpEx, better scalability, and the ability to redirect IT resources to more strategic growth areas among the most compelling reasons for moving core communications to the cloud.

Still hesitant service providers need not go all-in on the cloud at once. They can start with migrating their communications core and using cloud APIs to connect to their existing operations/business support systems. They can then gradually deploy new IT systems as overlays to their legacy estates, and gradually migrate additional legacy system functions, instead of taking an immediate, wholesale “rip and replace” approach.

In addition to simplifying their operational environments, service providers can integrate cloud-based analytics and AI tools to optimize service delivery, improve the customer experience, and create new revenue streams.

Choosing the Right Telco Cloud Model

The delivery of core communications currently is fragmented by customer type and size between service providers, and there are typically multiple third-party vendors. But a strategic shift to the cloud allows for consolidation of services into a single platform serving all customer accounts. Service providers can recover revenue lost to vendors now delivering their residential and small business voice services over the internet, and other vendors dominating the large enterprise market for business