Stride towards Net5.5G, Grow as Digital Network MSPs
As new growth opportunities emerge for government and enterprise services, leading operators are looking to upgrade their government and enterprise networks and services. To realize this, they are leveraging cloud, network, digital, intelligent, and security technologies to upgrade from private lines to digital private networks, expand network connectivity services to network management services, and use industrial digital private network services to drive new growth. At the same time, the entire industry is exploring Net5.5G innovations to drive new B2B business growth.
Digitalization is the new reality for all industries, with organizations increasingly relying on digital technologies to enable hybrid offices, enhance remote collaboration, connect devices, accelerate data analytics, and achieve higher levels of automation.
As a result, the information architecture and technical architecture of enterprises are undergoing profound changes. Key applications are increasingly deployed on the cloud or provided as cloud services. Wide Area Network (WAN) traffic continues to grow, campus networks are becoming fully wireless, and network management and security operations are increasingly complex. Against this backdrop, leading operators are transforming into digital network managed services providers (MSPs) to enable industrial digitalization and boost new growth in B2B business.
Upgrading from private lines to digital private networks
The cloudification of IT architecture has entered a new phase, with up to 85% of applications today hosted on cloud. Even mission-critical applications are increasingly deployed on cloud or provided as a service. Enterprises need to not only connect headquarters, campuses, and branch offices, but connect to multiple data centers simultaneously, so they have higher requirements on WAN data protection, security, and performance, which cannot be met using only the public Internet. The path forward for software-defined WAN (SD-WAN) is going back to private lines and private networks. Operators need to help enterprises access multiple clouds more easily and reliably by offering digital private network services bundled with managed SD-WAN services. This can enable access to multiple clouds through one private network and multiple applications through one private line.
According to Gartner, global enterprises will increase spending on multi-cloud networks at a CAGR of about 24% between 2021 and 2026 to purchase agile, reliable, and high-speed cloud access services.
In China, a major operator used its industrial digital private network services to significantly improve customer satisfaction and achieve a year-on-year increase of 25% in revenue from the healthcare sector in 2022. Powered by new technologies like end-to-end network slicing, the operator's private networks enabled a range of digital healthcare services like connected hospitals, health insurance settlements, and online offices, while delivering security isolation and guaranteed performance. In Europe, an operator decided to upgrade its traditional private line offerings and launched the 'Digital private network + Managed SD-WAN' suite. The solution comes with a variety of value-added services for supermarket chains, including DIY Portal, E2E encryption, QoS enhancement, and multi-cloud access. This allowed the operator to increase its average revenue per user (ARPU) by 14%, and more importantly, the contract renewal rate of traditional private line customers.
Traditional multiprotocol label switching (MPLS) VPNs cannot meet the requirements of the cloud era. Instead, digital private networks enabled by new technologies such as SRv6, slicing, and network digital maps will better support industrial digitalization. By providing enterprises with premium private network services featuring multi-cloud and multi-application access, operators are better positioned to realize new growth from sweeping industrial digitalization.
Expansion from WAN connectivity to managed LAN/WLAN
Campus networks are increasingly wireless thanks to constant developments in wireless technologies like Wi-Fi 6. Ubiquitous gigabit Wi-Fi access in high-density office areas and service centers delivers not just productivity gains, but higher customer satisfaction. Devices that were not connected to wired networks can now be connected through Wi-Fi, bringing enterprises a step closer to digitalization. As connected devices gradually outnumber traditional office devices, we are also seeing narrowband IoT applications give way to ultra-broadband IoT applications. For example, next-generation Wi-Fi 7 technology can enable 30 Gbit/s bandwidth delivered by APs and up to over 10 Gbit/s speeds for connected devices, allowing for dense deployments of ultra-broadband IoT devices such as automatic optic inspection (AOI) machines. This new development has strategic value for the real economy, especially in the intelligent manufacturing sector.
Ubiquitous wireless networks and real-time applications are also making Wi-Fi network planning, deployment, O&M, and optimization increasingly complex, creating new challenges for enterprise IT teams. The good news is that operators can help, using their established expertise in the wireless domain. Next-generation digital network MSPs are adopting the AIOps-as-a-Service model to provide managed services, allowing users to easily manage their networks on their phones. To enable plug-and-play functionality, all they need to do is scan a QR code attached to network equipment through a mobile app. Maintenance personnel can remotely check network quality and adjust network configurations, allowing them to perform predictive maintenance to improve network reliability. These types of digital network services not only help operators improve customer satisfaction, but also enable new growth in industrial digital private network services. Unlike traditional managed services, the data analysis-based AIOps-as-a-Service model no longer needs on-premise expert services. This greatly reduces labor costs and helps achieve economies of scale. Gartner forecasts that enterprises worldwide will spend more than US$28 billion annually on managed LAN/WLAN services by 2026, which presents enormous growth opportunities for operators.
An operator in Asia, for example, doubled its ARPU with one-stop 'Private network + SD-WAN + Wi-Fi' services for gas stations.
Extension from WAN connectivity to network security service
In the past, small- and medium-sized enterprises (SMEs) and other smaller organizations did not prioritize network security due to the limited uptake of digital technology. In today's increasingly digitalized world, network security has become an imperative. The problem is that SMEs and other smaller organizations generally lack network security expertise and cannot afford on-premise expert services.
How can we solve this problem?
Some operators offer the 'Digital private network + Cloud-based security service' bundle, allowing organizations to subscribe to cloud-based network security services on demand and deploy lightweight security gateways. The cloud platforms can automatically analyze security incidents based on logs reported by security gateways, deploy protection policies, perform real-time detection, and block potential threats in a closed loop. This new service model provides strong safeguards to SMEs and other smaller organizations. It will further drive industrial digitalization and bring operators new growth opportunities in managed security services. One Chinese operator achieved a 20% ARPU increase and a significant revenue boost through its 'Digital private network + Cloud-based security service' suite. This portfolio features device-cloud synergy and allows enterprises to detect and protect against security threats in real time, significantly lowering the threshold for implementing security safeguards. According to Gartner, the global managed security service market grew by 8.3% at US$12.7 billion in 2020, creating a huge market opportunity.
Net5.5G industry outlook
Amid fast-paced industrial digitalization, leading operators are looking to achieve new growth from industrial digital private network services by comprehensively upgrading and expanding their enterprise network and service portfolios. The ICT industry is also researching and innovating nonstop to explore new technologies to underpin the upgrade to Net5.5G.
In the recent white paper The research on the trends of Data Communication Network for 2030, Omdia expounds the industry vision for Net5.5G, outlining six areas where network capability can be improved. These are green ultra-broadband (GUB), multi-domain network AI (MNA), ubiquitous trusted networks (UTN), IPv6 Enhanced, high resilience and low-latency (HRL), and heterogeneous massive IoT (HMI).
Source: The research on the trends of Data Communication Network for 2030, Omdia
The global industry is also promoting the development of standards and business practices. The IETF has already released SRv6-TE specifications and is working on multiple Ipv6 Enhanced specifications like BIER 6 and APN 6. Network equipment vendors have launched 800GE routers and Wi-Fi 7 APs, boosting network bandwidth throughput and making 10 Gbit/s ubiquitous. Major operators are transforming towards digital network MSPs to unlock new growth opportunities. In its fourth white paper on autonomous networks (AN), TM Forum describes 19 typical AN use cases, shedding light on how operators can grow B2B revenue.
As a leading provider of ICT products and solutions, Huawei continues to research cutting-edge technologies and develop innovative products and solutions. The company boasts a diverse data communication product portfolio and network management platforms powered by AI and machine learning. In the WAN domain, Huawei's full-service converged routers support 400GE/800GE metro and backbone ultra-broadband capabilities, and use new technologies such as network digital map, SRv6, and slicing to help operators provide premium private lines featuring minute-level service provisioning and superior user experience. In the wired and wireless LAN domain, Huawei has launched a simplified campus network solution featuring a central switch + remote unit architecture, third-generation smart Wi-Fi antennas, the industry's first L3 autonomous driving network for campuses, and a flexible cloud management platform model that supports flexible deployment options. All of this has made Huawei a leader in the 2022 Gartner® Magic Quadrant™.
Moving forward, Huawei will continue investing heavily in R&D, tackle technical bottlenecks, and conduct joint innovations to help operators navigate the era of industrial digitalization by transforming towards digital network MSPs, providing industrial digital private network services, and driving new growth.
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