An EY report on telcos has been raising a lot of comments in the networking community. The main proposition is that the telcos have “failed to articulate a compelling value proposition” and that this is why 5G take-up by enterprises is low. The report is titled “EY Reimagining Industry Futures Study 2023” and it covers enterprise issues on both 5G and IoT, and it covers a lot more ground than the stories on it would suggest. I have my own enterprise data and telco views, and I’ll cover both aspects of the report here.
The first important point is that the report is really about enterprise views of technology (5G and AI in particular) and technology sources, a much broader topic. It suggests enterprises aren’t really that committed to either 5G or AI. Neither technology is reported to be adopted by even a quarter of enterprises, and 5G barely makes the 50% level current or 1-year-out investments. My own data says that only 11% of enterprises are even considering “5G” if we take that to mean either private 5G or features of public cellular services that are unique to 5G, like network slicing. For AI, the number is 9%, but AI actually has more credible “considering” interest than 5G does if we go out beyond the one-year mark, period where actual budgeting is considered. Since 1990, enterprises have tended to overstate their adoption of what they see as leading-edge technologies, and the difference between my numbers and the report may be due to this.
There’s another specific problem with the 5G stuff presented, and that’s the fact that the report mixes adoption of private 5G and the adoption of 5G and specialized 5G features like network slicing. My data says that there are relatively few verticals where private 5G makes sense, and the report does show the greatest 5G interest in the only one of those verticals (Energy) that it covers. For the rest, the fact is that “5G” is likely to mean nothing more than the adoption of public 5G services, which happens when those services are supported both by the local telco and by smartphones. Thus, consumers are the hottest 5G market of the moment, and I submit that if that definition is used the findings on enterprise use of 5G are not highly useful; enterprises use what operators and devices are set for.
AI is even more problematic, given that the technology is highly visible and thus seen by enterprise planners as a kind of test of their being up-to-date. To expand on what I’ve noted above, over the last three decades, roughly a third of enterprises have consistently reported having adopted or being committed to adopting technologies that weren’t even commercially available. Then there’s the fact that vendors have been AI-washing their products and technologies to get media attention, and in many cases this has blurred the notion of what AI actually is. Given that there are actually at least three or four different models of AI (including generative like ChatGPT and AI/ML) and you can see a bit of careful analysis is needed here and it’s not provided.
My data says that if we adopt the broad notion of AI, well over 60% of enterprises have at least some of it now. It also says that 100% of enterprises believe they will be using more AI within 3 years, and two-thirds say they’ll use a lot more. However, they’re at a loss as to what specific type of AI they’d be using, who they’d get it from, or even what they’d be doing with it. In fact, only about half of enterprises can say exactly what AI they have in play, and they’re as likely to say they have none when they use it somewhere as to say the opposite.
My conclusion here is that there is little we can draw from the data on either 5G or AI. I’ve found that enterprise planning for technology doesn’t work the way that vendors or the media would like. Enterprises don’t spent much time or money exploring technologies until they have a specific mission, and then they tend to look at technologies that are offered in some form by vendors who are currently supporting other missions for them. Abstract technology research, like “what would I do with 5G or AI” just doesn’t make sense to most enterprises. They’re mission-centric, in short, not tech-centric in planning and that makes technology surveys challenging.
What about the points in the articles on telcos? It turns out that there’s a single section in the report that talks about the types of ICT (information technology, in US terms) providers and how they rank in terms of ability to supply enterprises with solutions. What’s interesting is that while the stories on the EY report focus on the negative views enterprises have of the telcos, telcos actually rank third or fourth out of nine categories. The top two provider types in all categories are IT services providers (professional services firms) and application and platform vendors. Furthermore, telcos rank at the top in terms of trust for IoT, but low (third from the bottom) for trust in digital transformation.
One broad truth you can probably see here is that this is consistent with the way that enterprises actually review technology options, as I described above. If you need a mission to start a review, it follows that you’d be most likely to focus on mission specialists. Telcos, and in fact network vendors/providers overall, have never been seen as mission specialists. They have, however, been consistently more trusted. In fact, since 1989, my surveys have put telcos as the second-most-trusted source of technology knowledge, second only to the experiences of a known peer in the same industry.
The question is whether this trust position could or should be leveraged by telcos to establish a better ranking in digital transformation. The stories on this report come out pretty strongly on the side of “they should”. I’m not so sure that’s true, and even if it is I’m far less sure that it’s possible.
There’s a progression associated with technology support for business missions. You always start with applications. You then move to what the applications run on/with, meaning the hardware, operating systems, and middleware. You then move to connectivity, and from that to the question of a public service or private facilities. I have never talked with an enterprise who believed that the telcos or network vendors were playing a role in those early steps. Thus, the question is whether telco aspirations in 5G would justify telcos’ taking or attempting an earlier engagement in this natural flow.
The report’s “Next steps for 5G service providers” jumps to the point that they need to do just that. It offers four key actions, and IMHO none of them really provide the pathway to success. What is that pathway? Support for the mission that’s the kicking-off point for any successful technology project. How does 5G support the mission? Obviously that question has to be answered, but how do telcos do the answering? Do they build professional services organizations? That’s the conclusion that the report’s data reaches; it’s the applications that drive the bus, and you can’t talk applications without talking about what they’re intended to do for the enterprise.
What I think the report demonstrates is that telcos need to be ready to identify the mission connections for things like 5G in a credible way. The problem with that is that such a path would surely result in having little of interest to say to the media, and to investors. “I promote 5G as a faster and potentially more ubiquitous form of cellular service” isn’t going to get good ink or look good to Wall Street. The prevailing theory for telcos, I think, is to say what you need to say to make the most of early media/market interest in an emerging technology, and then presume that if there really is any substance to the stuff you’ll figure out how to use it.
Cynical as that sounds (even from me), it’s probably the right approach. Telcos will never be able to support the early pieces of that technology-to-mission connection flow. What they need to do, and have been doing, is building buzz that could encourage the participation of those who could do what’s necessary. One could argue that things like developer programs could then help to build the flow of project progression. However, that would be true only if a technology (like 5G) were promoted for a reason that actually had a real mission connection down the line. I don’t think that telcos ever established that to be the case, not because they were inept but because it wasn’t true.
As one section of the EY report says, these days everything in tech is about building a cooperative ecosystem of players. In order for 5G or AI to become what people want to believe they will become, there has to be a real natural revolution created by them. We still can’t say what that revolution is for either 5G or AI, and I don’t think that’ the fault of the telcos. It’s the fault of the environment within which we develop and validate new technologies. You don’t get realism unless you value it, and valuing realism is surely not common in the tech world today.