Research: Telco spend on AI software will reach $11.2bn by 2025

A CAGR of 59.9 percent is nothing to be sniffed at

by Max Smolaks 10 September 2019

It is not a great time to be a communications service provider (CSP): customers no longer expect to pay for voice or text messages, the cost of data is being pushed down all the time, while the investment required to deploy modern technologies like 5G is liable to leave the CFO in tears.

At the same time, telecommunications networks themselves are becoming larger, more complex and more difficult to manage.

One emerging approach to optimizing existing network assets and reducing spend is being offered by AI technologies like machine learning, deep learning, and natural language processing.

Artificial intelligence tech can have a multitude of benefits for CSPs: algorithms can manage the network more efficiently than humans ever could, predictive maintenance can help reduce both equipment costs and the risk of outages, while the use of virtual assistants or chatbots for customer service and marketing can help grow subscriber numbers and increase their satisfaction.

According to research by Tractica, this market is about to explode, with CSPs projected to spend $11.2 billion annually on AI-driven software solutions across eight mainstream use cases by 2025, up from just $419 million in 2018.

Most of the money will be spent on network and IT operations monitoring and management, followed by tools for customer experience management (CEM) and service delivery, and virtual digital assistants (VDAs).

Researchers suggested that while most CSPs will continue to aggressively seek top-line growth, the most likely way they will improve profitability is through reducing costs – and this is exactly where AI technologies can help.

The North American market is anticipated to lead in software revenue generation until 2023, when the Asia Pacific region will overtake it for the top spot, representing 35 percent of all telecom AI software revenue at the time.

“5G/Internet of Things (IoT) and digital transformation are initiatives that CSPs hope will drive topline growth. While they pursue these efforts, CSPs are under equal pressure to find ways to become more efficient and cut costs as a means to increase profitability,” said Mark Beccue, principal analyst at Tractica.

“Telecom operators have begun to experiment and deploy AI-driven solutions that leverage fast, scalable interpretation, analytics, and prediction to generate revenue or reduce costs.”

Even though $11.2bn sounds impressive, it will be dwarfed by the mountain of cash that will be spent on deploying 5G, estimated to total a little under $1 trillion by 2025.