Networks have been commoditised over the last few years and the cost of connectivity has fallen. Value has shifted from network infrastructure to the services built on top of the network. Enterprises need scalable solutions that offer cloud-native agility, multi-cloud accessibility, and services that can dynamically fluctuate to support digital transformation.
ABI Research forecasts this new network-as-a-service (NaaS) market to expand significantly reaching over US$150 billion by 2030.
“Telcos must seize the opportunity to dominate the NaaS market, as revenue generated from connectivity provision will continue to decline. However, their investment strategy, business, operational, and ‘go-to-market’ models are not ready to deliver a competitive NaaS solution, explains Reece Hayden, distributed & edge computing analyst at ABI Research.
He acknowledged that at present the NaaS market is immature and highly fragmented. Nonetheless, the telco market revenue will exceed US$75 billion by 2030 if they act now and transform technology, culture, and structure to better align with the requirements of the NaaS market.
Currently, telcos face competition from two key players. Interconnection providers (e.g., Megaport and Packet Fabric) have built their agile solutions from the ground up, focusing energy on virtualisation and software specialisation.
At the same time, infrastructure providers (e.g., AWS, GCP, and Azure) continue to offer cloud-specific NaaS solutions. Despite these conditions, Hayden insists telecom operators remain in the best position to lead the market.
“As long as they recognise their service/innovation limitations, invest/restructure successfully, and focus their messaging appropriately,” he posited.
Where the opportunities for telco lie
Telcos must look to transform three areas. First, telcos must virtualise network infrastructure to deliver cloud-native services and continue to invest heavily to integrate automation (AIOps) throughout network services, including paying attention to 5G slice-as-a-service and other ‘value-add services’ which are critical to monetisation.
Second, telecom operators must restructure the business and operating models with a look toward openness and partnerships across the industry and reduce internal fragmentation to drive cross-business service continuity.
Third, telcos must look to develop a problem-solving culture and realign their ‘go-to-market’ strategy to better position themselves within the NaaS market. This involves developing vertical and enterprise size-specific sales strategies and establishing consultative processes that educate enterprises to bridge the ever-present gap between awareness and understanding. Telco executives should focus more on service provision and up/reskilling their workforce.
NaaS adoption will rapidly grow over the next eight years. ABI Research expects that by 2030, just under 90% of enterprises will have migrated at least 25% of their global network infrastructure to be consumed within a NaaS model.
However, this process will not be organic, suppliers will have to drive education and consultative practices, as significant scepticism within SMEs and MNCs pervades the market.
“To drive short-run sales, suppliers must educate and tailor their sales strategy to focus on first adopters (startups and SMEs) and specific verticals,” Hayden recommends.
The outlook in the NaaS market is hugely positive for telcos, especially given the rising demand from startups and SMEs.
Hayden cautions that a lot still needs to be done to bridge technological, cultural, and structural gaps.
“Although it seems like an expensive and risky uphill battle, developing NaaS will be crucial to the long-term upside. But, if telcos miss this opportunity and drop the ball, interconnection providers and hyperscalers will be waiting and willing to catch it,” he concluded.