Introduction
Imagine a world where technology seamlessly integrates into every aspect of our lives, driving innovation and efficiency at an unprecedented scale. This vision is becoming a reality as we witness a massive surge in investments towards building and expanding technological infrastructure.
Globally, spending on technology infrastructure is forecasted to exceed $8 trillion by 2030 according to Gartner. In the telecom sector alone, which serves as the backbone of our connected world, substantial investment in infrastructure is projected to reach $342.1 billion by 2027. As we prepare for each new generation of mobile networks approximately every 10 years, we often see pressure to a higher CapEx levels before and after generation introduction then goes lower after the initial adoption phase, that is, until the middle of the decade when another “hype” cycle begins for the next generation.
To make it even more significant, the AI arms race is driving up capital spending by tech giants. In the first half of 2024, the aggregate capital spending of the “Magnificent Seven” tech companies was more than $107 billion, compared with $77 billion in the same period of 2023. Despite these vast expenditures, inefficient cloud resource and network planning often lead to significant challenges such as resource downtime, improper allocation, and inaccurate capacity or workload forecasts, which negatively impact businesses financially.
Source: TellingTechTales
Think about sectors like telecommunications, which is the digital backbone of our connected world, along with financial services, energy, healthcare, and public safety. Effective planning and evolution of this backbone have become more essential than ever. Planning activities are not just about crunching numbers and coming up with expansion or upgrade plans; it is about designing systems that make the best use of resources, ensuring everything runs efficiently while avoiding unnecessary costs. When done right, smart technology and network planning boosts infrastructure performance, reduces future operational costs, and helps maximize the return on investments.
The first part of this series of blog posts will concentrate on the connectivity layer, which requires robust networks for effective implementation. Following articles will delve into the cloud layer and discuss how the increasing demand for AI/GenAI is impacting both the cloud and connectivity layers..
The Problem at Hand
In today's fast-paced digital connected world, investing in future technologies is a daunting task for every industry and enterprise that relies on strong cloud and network infrastructures. The consequences of misaligned technology introduction, demand forecast and business objectives can be severe, leading to underutilized resources, excessive capacity, and unnecessary technologies. This can result in financial waste, underperformance, and reduced return on investment (ROI).
Network planning is the key to unlocking a techno-economic future. It involves ensuring that infrastructure investments are optimized to meet current and future demands. However, traditional network planning and optimization methods rely on manual processes, limited data, and limited visibility into future demand. This approach often leads to:
Over-Subscription: Over-subscribed networks lead to reduced performance, user dissatisfaction which can lead to churn (loss of revenue), increased downtime, and higher operational costs.
Over-provisioning: Some networks (or part of it) are over provisioned (underutilized), leading to unnecessary costs and reduced ROI.
Unnecessary technology adoption or removal: New technologies are sometimes introduced without considering the financial returns and benefits of keeping current technologies, which could equally serve demand for a few more years.
Increased operational costs: Poor design or misaligned technologies can lead to manual processes, increased complexity, and limited visibility, resulting in increased operational costs, including labor, equipment, and maintenance expenses.
Challenges with Emerging and Future Technologies: Rapid advancements in technology, such as GenAI, IIoT, NTN, ORAN and Future 6G, require continuous adaptation and integration. A holistic approach and long-term vision are essential to effectively incorporate these technologies. Relying on short-term upgrades just to follow trends or "check the box" can result in missed opportunities, competitive disadvantages, and the inability to leverage new capabilities for sustainable business growth.
Aside from the main challenges mentioned earlier, there are additional obstacles that need to be addressed. To tackle all challenges effectively, it is crucial to embrace a techno-economic strategy when planning the network. This approach should take into account the correlation between technological advancements and their economic implications on both the revenue and cost aspects in an unbiased manner. By following this method, firms can guarantee that their infrastructure investments are maximized to satisfy present and future requirements, thereby fostering business growth and minimizing financial inefficiencies.
Why Does Network Planning Need Techno-Economics? Why Now?
The urgency to reassess our approach to network planning cost management is increasingly evident, especially for building networks and the connectivity layer, as profit margins are lowered. The telecom, networking, and connectivity industry is facing significant challenges that impact its revenue top-line due to several reasons.
Increasing Demand: The demand with greater coverage requires substantial investment in infrastructure. However, this comes at a time when average revenue per user (ARPU) is declining due to market saturation and intense competition among service providers1.
Technological Advancements: The advent of technologies such as 5G and IoT (Internet of Things) necessitates costly upgrades to existing network infrastructure. These technologies promise better connectivity but also require companies to invest heavily in new equipment and spectrum licenses.
Regulatory Pressures, Compliance & HW/SW Costs: Governments around the world are imposing stricter regulations on data protection and privacy, which entail additional costs for telecom companies.
Evolving Customer Expectations: Users now expect seamless connectivity across multiple devices, which requires continuous investment in network capacity and capabilities.
Alternative Communication Platforms: Over-The-Top (OTT) services are bypassing traditional voice, roaming. SMS services and even connectivity services offered by telecom operators, leading to a loss of revenue streams.
Why Techno-Economic Planning Was Not Adopted Before
Despite the existence of techno-economic principles and methods for decades, their widespread adoption has been limited in many industries. In the context of networks, several factors have contributed to this.
Starting with lack of expertise; while individual experts in techno-economic planning exist at universities, consulting firms or even inside a company, scaling their knowledge to create a high-impact, cross-industry solution has been challenging. High implementation costs, as there is no automated solution, implementing techno-economic planning requires significant investments in personnel. This includes finding and extracting knowledge from Subject Matter Experts (SMEs) and training team members.
Other reasons like data challenges, such as lack of specific data on both technological and financial aspects has hindered the adoption of techno-economic and network planning. The short-term focus on prioritizing immediate issue resolution and avoiding short-term disruptions, such as 2 AM escalation calls. also reluctance to change stems from a preference to stick with current working models, despite their drawbacks, to avoid potential disruptions and maintain stability. Lastly, complexity and resource requirements in developing robust, financially sound plans that consider future technological evolution requires significant resources and expertise.
Source: TelcoBrain Survey
Why We Need It Now
Despite the challenges, the industry has reached a tipping point where techno-economic planning is no longer a luxury but a necessity. The reasons are clear. Competitive pressure is increasing, especially with new players entering the market and disrupting traditional business models. Organizations are under immense financial pressure as revenues stagnate, average revenue per user and profit margins decline for traditional products, efforts to address future revenue streams with healthy margins are slow, and hardware and software costs continue to rise. This financial strain makes holistic and long-term thinking imperative, considering both technical and economic factors to ensure future success and maintain a competitive edge.
Increased complexity with limited resources forces networks to become increasingly complex with the rise of 5G, IoT, and cloud computing. AI, which is hungry for computing power, relies on cloud infrastructure that depends on reliable connectivity delivered by networks. Growing demand and cost of HW/SW is another factor where the demand for reliable network services is growing, with more users and devices connecting to the internet, including machine-to-machine (M2M) communications. This growth comes with increased costs for hardware and software for network assets. Lastly, it is essential to separate hype from reality in network demands to avoid overbuilding and deploying resources that cannot be monetized.
What Are the Main Questions We Are Getting from Our Platform Early Adopters?
Our early adopters are a curious and insightful bunch. They come to us with a myriad of questions, each one reflecting their eagerness to harness the full potential of their networks. Let’s dive into some of the most pressing questions they have asked us in the past few months.
Understanding Network TCO: Maximizing Value
One of the first questions we often hear is about the current state and future evolution of their Network Total Cost of Ownership (TCO). These pioneers are keen to grasp the intricacies of both capital expenditures (CapEx) and operational expenditures (OpEx). They want to know how to optimize their network planning to squeeze every bit of value from their investments. It’s a quest for efficiency and effectiveness, ensuring that every dollar spent is a dollar well-invested.
Excelling in ESG for Sustainable Operations
Another hot topic is Environmental, Social, and Governance (ESG) considerations. Our early adopters are not just thinking about the bottom line; they’re also deeply committed to sustainability. They ask us how they can align their network operations and planning with ESG principles. It’s about more than just meeting regulatory requirements—it’s about making a positive impact on the world while running a successful business, specifically how can we reduce our CO2 footprint through better architecture choice(s)? What would be the TCO trade-off? If any!
Preparing for Future Demands
With technology evolving at breakneck speed and reliability requirement, there’s a constant concern about whether current network infrastructures can handle future demands. Our early adopters are forward-thinkers, always looking to evaluate their network’s readiness and identify potential areas for improvement. They want to be prepared, not just for today, but for the challenges and opportunities of tomorrow.
Timing Critical Technology Decisions
Timing is everything, especially when it comes to adopting new technologies. Many seeks our guidance on when and how to make these critical decisions. They understand that the right timing can make all the difference between leading the pack and playing catch-up. It’s about strategic foresight and making informed choices that drive success.
Ensuring Reliability, Security, and Compliance
Reliability, security, and compliance are non-negotiable. Our early adopters are determined to ensure that their infrastructure meets the highest standards of resiliency and reliability. They want to know how to assess their security posture and stay compliant with the evolving regulations. It’s a commitment to excellence and a promise to their users that they can trust the network they rely on.
Relevance of Using Techno-Economics in Network Planning Across Various Sectors
Technology planning (cloud and networks) is crucial not only in the telecom sector but also in various other industries, each with specific technology infrastructure needs. Efficient network planning is beneficial for many sectors outside of telecom, enabling them to optimize investments, ensure reliability, and scale effectively to support ongoing business activities. These sectors encompass Financial Services, Energy & Utilities, Transportation, Healthcare, and Manufacturing, among others, many of which oversee and maintain a minimum of 1000+ sites (in some case 10000+) ranging from small-large offices to large manufacturing facilities and industrial locations—all necessitating robust technology (Cloud and Networks) to facilitate their daily operations.
Key Benefits of Adopting Techno-Economics in Technology Planning Across Multiple Sectors
TCO Savings: Techno-economic algorithms help identify the most cost-effective architectural options, leading to significant Total Cost of Ownership (TCO) savings.
ESG Alignment: By evaluating the environmental, social, and governance (ESG) impacts of different technologies, organizations can make choices that align with their sustainability goals.
Cost Avoidance: Optimal planning can help avoiding unnecessary future costs by identifying potential issues and inefficiencies before they arise.
Better Procurement Strategies: Informed by techno-economic insights, organizations can develop more effective procurement strategies that balance cost, quality, and performance.
Optimal Architecture and Economic Alignment: Techno-economic algorithms evaluate multiple architectural options based on cost, payback, performance, and scalability. This ensures that the chosen architecture aligns with economic goals and operational needs.
Enhanced Strategic Planning: By providing clear economic impact forecasts, techno-economics informs better strategic decisions. This enables organizations to plan more effectively and align their technology investments with long-term business objectives.
Predictive Demand Forecasting: Advanced algorithms analyze both historical and real-time network data, as well as business and marketing data, to create models that predict future network demand. This helps in proactive planning and resource allocation.
Interconnected Organization & Digital Transformation: All dimensions—from demand forecasting, architecture choices, and economic analysis and planning—are interlinked. This interconnected approach ensures that technical and non-technical teams, from CxOs to senior management to specialists, are aligned and working towards common goals. This alignment is crucial for driving successful digital transformation initiatives, ensuring that technology investments are optimized and integrated across the organization.
Conclusion
The integration of technology planning across networks and cloud systems with techno-economic strategies marks a transformative leap in how firms manage their infrastructure investments. By leveraging digital twin technology and real-time data analytics, organizations can optimize network planning, reduce inefficiencies, and ensure the economic sustainability of their infrastructure.
This innovative method is suitable for a variety of sectors and enterprises beyond just the telecom industry—all of which rely on strong technology (Network and Cloud) to sustain their daily business operations. Effective development and strategic planning have become crucial aspects of modern infrastructure management, ensuring the optimal use of resources and the capacity to fulfill future requirements without compromising on performance or reliability.
As industries evolve, so too must their approach to cloud and network planning. Embracing innovation is essential to remain competitive and sustainable in a fast-paced digital world. By adopting techno-economic strategies, businesses can future-proof their operations, maintain a competitive edge, and commit to sustainable practices that support long-term growth and success.
Frequently Asked Questions
What is network planning in the context of telecom infrastructure?
Network planning refers to the process of designing, optimizing, and managing network resources to ensure that infrastructure investments are used efficiently while meeting both current and future demand, maintain level of competition and address an upcoming opportunity for monetization.
How does network planning impact CapEx and OpEx management?
Effective network planning allows organizations to balance capital and operational expenditures by optimizing resource allocation and preventing unnecessary spending on underutilized infrastructure.
Why is digital twin technology important for network planning?
Digital twin technology provides real-time insights and modelling capabilities of physical network assets, enabling proactive network planning, predictive analytics, and resource optimization.
How does network planning contribute to sustainability?
Through network planning, organizations can choose an optimal technology infrastructure plans that is scalable and adaptable to future demands— at the same time with the lowest CO2 footprint due to new platform mix, legacy technology removal and aggregation, or reducing the need for frequent upgrades that leads to minimizing environmental impact through efficient resource utilization.
Can network planning reduce network downtime?
Yes, through proper network planning and real-time prediction, network planning can significantly reduce downtime by identifying potential issues and solve them before they lead to outages.
What sectors benefit most from advanced network planning techniques?
Telecom, financial services, energy, transportation, healthcare, and manufacturing are among the sectors that benefit most from advanced network planning, as they require reliable, scalable, and secure infrastructures.
Comments