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Network transformation could cut costs by 20%, but CTOs must transform too


Telco networks need a “makeover”, according to a new report from McKinsey, and CTOs must support business transformation.

The consulting firm says networks must undergo a “radical transformation” if they are to become a leading business function rather than a cost centre, and if telcos are to deliver the customer-centric service levels required for survival.

According to McKinsey, the network typically accounts for up to 40% of operating and capital budgets, and operators typically try to cut costs in this area while investing in commercial units.

5 characteristics of future networks

This is changing as networks become more software-centric, enabling more dynamic customisation. However, many operators are still in the planning phases of network transformation and the industry’s progress has been much slower than expected.

McKinsey calculates that holistic network transformation could help telcos cut operating costs by 20 to 30%  per year and capital costs by 15 to 20%. 

The consultancy says there are five defining characteristics of the network of the future.

They must be: modular, with a software-defined architecture; agile (in terms of the organisation between configuration and infrastructure management); automated end-to-end; hyper-personalised, based on class of service, customer segment or geography; and insight-generating, with network data delivering broader business insights.

Changing the CTO role

This network shift will also change the role of the CTO, from playing a supporting role to leading the charge on business transformation, McKinsey says.

The report notes, “The vision for this network is long term, but without concrete steps now, network teams might face an increasingly uphill task, and offering the best network to subscribers might come at a heavy price.

It adds, “To get started, network teams should define a holistic end-state idea for networks based on the five elements of the network of the future, their own guiding principles and the operating models required to achieve them.”