Cost-Benefit Analysis: Is Moving to Cloud BSS Worth the Investment?

If we think of a Communication Service Provider (CSP) as a busy, high-end restaurant, the kitchen staff represents the network infrastructure that prepares and delivers the actual services, like voice, data, and messaging. In this analogy, the waitstaff and front-of-house team represent the Business Support Systems (BSS). They manage customer interactions, take orders, handle billing, and ensure each customer has a satisfying experience.

Just as the success of a restaurant depends not only on the quality of the food but also on the efficiency and effectiveness of the front-of-house operations, a CSP’s success hinges on both its network infrastructure and its BSS. BSS encompasses a variety of applications and services that manage customer-facing activities, such as billing, customer relationship management, order management, and revenue management. These systems ensure that CSPs can deliver, manage, and monetize their services.

In recent years, a significant proportion of the telecom industry has been swapping out, in part or in full, their traditional BSS for cloud BSS mirroring a broader trend of cloud adoption across sectors. However, there is still hesitance. According to a recent PwC’s EMEA Cloud Business Survey, only 47% of EMEA telcos are “cloud-mature”, compared with 54% of all companies. This begs the question: How come the industry that has been one of the pioneers and the very enabler of digital transformation is now lagging?

As with so many other things telco, the answer is: It’s complicated. In addition to the fact that re-platforming legacy BSS is a daunting, behemoth undertaking, there are a number of internal and external challenges uncloudified telcos are facing: budgetary concerns, the size of their legacy stacks and workloads they carry, their dependence on technology to keep the business running and customers happy, big, often scattered data centers and data-related regulations, the necessary workforce mindset shift.

But might it still be worth it?

To simplify the dilemma of “to cloudify or not to cloudify”, we’ve conducted a cost-benefit analysis to determine if moving to cloud BSS is worth the investment.

Looking for a lightweight, standards-based BSS?

LotusFlare DNO Cloud might be the right choice for you.

Understanding Traditional vs. Cloud BSS

Continuing the analogy from the introduction, imagine the restaurant decides to expand its operations by opening new branches in different cities. With legacy BSS, this would mean replicating the entire front-of-house infrastructure for each new location. With cloud-native BSS, the restaurant can simply extend its existing service to new branches, ensuring consistency and efficiency across all locations. However, things are not black and white – traditional BSS does have several advantages, which we’ll mention in the next section.

Cloud, Cloud Based, or Cloud Native: Semantics Matter

Before we dive into a pros and cons analysis, to avoid confusion, it’s important to define what we mean by “cloud BSS”. In this article, the term “cloud BSS” is synonymous with “cloud-native BSS”, meaning it was originally designed and built for the cloud. Some vendors might use the term “cloud BSS” ambiguously, misleadingly equating it with fully cloud-native solutions. In reality, this refers only to cloud-based or cloud-hosted stacks, which do not fully leverage the advantages of cloud computing such as scalability and flexibility.

Pros of Legacy BSS

1. Proven Stability and Reliability

• Mature Technology: Traditional BSS systems have been in use for decades and have proven their stability and reliability in managing telco operations. At the same time, their maturity is their downfall since it often entails a big technical debt.

• Established Best Practices: Like a well-oiled machine, legacy stacks follow well-established industry best practices, ensuring consistency and dependability.

2. Regulatory Compliance

• Compliance-Ready: Traditional BSS solutions are designed to meet the stringent regulatory requirements of the telecommunications industry, helping CSPs maintain compliance with local and international regulations.

• Security and Privacy: They incorporate robust security measures to protect sensitive customer data and ensure privacy.

Cons of Legacy BSS

1. Complexity and Rigidity

• Traditional BSS systems are often monolithic, making them difficult to modify and adapt to new business requirements.

2. High Operational Costs

• Maintaining and upgrading traditional BSS infrastructure can be costly and resource-intensive.

3. Slow Time-to-Market

• The inflexibility of traditional systems can lead to the slow introduction of new services and features, impacting competitiveness.

4. Integration Issues

• Integrating traditional BSS with modern technologies and other systems (like cloud services) can be challenging and requires significant effort.

5. Scalability Limitations

• Traditional BSS may struggle to scale efficiently with growing customer bases and service demands.

Pros of Cloud BSS

1. Scalability and Flexibility

• Elastic Scaling: Cloud-native BSS systems can dynamically scale up or down based on demand, ensuring optimal performance and cost-efficiency.

• Microservices Architecture: A collection of loosely coupled microservices, each responsible for a specific function or feature, this architecture allows for easier scalability, maintainability, and deployment.

2. Cost Efficiency

• Reduced Capital Expenditure (CapEx): Cloud-native solutions eliminate the need for significant upfront investments in hardware and infrastructure.

• Operational Expenditure (OpEx): Pay-as-you-go pricing models allow telcos to pay only for the resources they use, leading to better cost management.

3. Rapid Deployment and Time-to-Market

• Quick Setup: Cloud-native BSS platforms can be deployed much faster than traditional on-premises systems. For example, Globe and LotusFlare successfully replatformed the entire GOMO business over just 6 months.

• Agile Development: Continuous integration and continuous deployment (CI/CD) pipelines enable fast development, testing, and deployment of new features and updates without downtime.

4. Enhanced Innovation and Agility

• Frequent Updates: Cloud providers regularly update their platforms with the latest features and security patches, ensuring telcos have access to the latest technology.

• Experimentation: Telcos can easily experiment with new services and business models without significant investment or risk.

5. Advanced Analytics and AI Integration

• Big Data Processing: Cloud platforms are well-suited for handling large volumes of data, enabling advanced analytics and insights. AWS is LotusFlare’s preferred cloud partner.

• AI and Machine Learning: Integration with cloud-based AI and machine learning services allows telcos to leverage predictive analytics, customer segmentation, and personalized services.

6. Ecosystem Integration   

• API-First Approach: Cloud BSS platforms often follow an API-first approach, making it easier to integrate with other systems and third-party applications. TM Forum’s Open API Program has become an industry standard allowing seamless interoperability. LotusFlare is Open API gold certified.

Cons of Cloud BSS

1. Latency Concerns

• Depending on the location of the cloud data centers, latency can be an issue, affecting the performance of real-time applications. 

• Public clouds are not carrier-grade. However, cloud business support systems like LotusFlare DNO™ Cloud employ techniques like redundancy, failover mechanisms, and distributed architectures to deliver carrier-grade service.

2. Data Security and Privacy

• Data Control: In a cloud environment, telcos have less direct control over their data, which is stored on servers managed by third-party providers.

• Security Risks: While cloud providers invest heavily in security, the risk of data breaches and cyber-attacks remains. Shared infrastructure can potentially expose sensitive data to unauthorized access.

3. Compliance and Regulatory Challenges

• Data Residency Requirements: Certain jurisdictions have strict data residency laws that require data to be stored within the country. Cloud-native solutions might complicate compliance with such regulations.

• Regulatory Compliance: Ensuring compliance with industry-specific regulations (e.g., GDPR, HIPAA) can be more complex in a cloud environment.

4. Customization and Control Limitations

• Customization Restrictions: Cloud-native BSS platforms may offer limited customization options compared to traditional BSS, which can be tailored extensively to meet specific needs. That being said, there are cloud BSS platforms such that have an open architecture and are self-customizable.

• Control Over Updates: Cloud providers manage updates and maintenance, which can sometimes lead to unplanned changes that telcos cannot control.

5. Integration Challenges

• Legacy System Integration: Integrating cloud-native BSS with existing legacy systems and on-premises infrastructure can be complex and may require significant effort and investment.

• Third-Party Dependencies: Relying on third-party services for integration can introduce additional points of failure and dependencies.

Initial Costs and Long-Term Savings

Initial BSS Re-Platforming Costs

Transitioning from legacy telco BSS to a cloud-native stack involves several initial costs. These can be broadly categorized into planning and assessment, migration, integration, training, and initial subscription or licensing fees.

1. Planning and Assessment Costs

• Consulting and Advisory Services: Some telcos may want to engage consultants and advisors to assess their current BSS infrastructure, develop a migration strategy, and provide guidance on best practices.

Example: Fees for cloud strategy consultants, technical advisors, and project management professionals.

2. Migration Costs

• Data Migration: Costs associated with transferring data from on-prem systems to the cloud. This includes data extraction, transformation, loading (ETL), and validation to ensure data integrity and accuracy.

Example: Data migration tools, cloud storage costs during migration, and professional services fees for data migration experts.

3. Integration Costs*

• API Development and Integration: Developing and implementing APIs to ensure seamless integration between the cloud-native BSS and existing systems (e.g., OSS, CRM, third-party applications).

Example: Development costs for API creation, middleware setup, and integration testing.

• Customizations: Adapting the cloud-native BSS to meet specific business requirements, which may involve custom development and configuration. Example: Custom software development, configuration, and testing services.

*There are ways to eliminate or at least significantly reduce these costs. LotusFlare DNO Cloud BSS, for example, is open architecture and highly configurable, making it easy to integrate with your other systems. Using code-generating  LotusFlare Petal Engine, you can rapidly generate APIs and customize even the core BSS services.

4. Training and Change Management

• Employee Training: Training programs for employees to ensure they are proficient in using the new cloud-native BSS platform.

Example: Training sessions, workshops, online courses, and training materials.

• Change Management: Costs associated with managing the organizational change, including communication plans, stakeholder management, and support services.

Example: Change management consulting fees, communication materials, and internal support teams.

5. Initial Subscription or Licensing Fees

• Cloud Service Provider Fees: Initial costs for cloud infrastructure and platform services, including compute, storage, and network resources.

Example: Initial subscription fees for services from providers like AWS, Azure, or Google Cloud Platform.

• Software Licensing: Subscription fees for cloud-native BSS software, which might be based on usage, number of users, or other metrics.

Example: Licensing fees for cloud-based BSS applications and associated services.

6. Security and Compliance

• Security Measures: Implementing security controls to protect data and applications in the cloud, including encryption, access controls, and monitoring.

Example: Costs for security software, third-party security audits, and compliance certifications.ž

• Compliance and Regulatory Costs: Ensuring the new cloud-native BSS meets regulatory requirements and industry standards.

Example: Compliance consulting, audit fees, and certification processes.

7. Infrastructure Decommissioning

• Decommissioning Legacy Systems: Costs associated with shutting down and decommissioning existing on-premises BSS infrastructure.

Example: Disposal or repurposing of hardware, termination of maintenance contracts, and potential penalties for early termination.

Operational and Maintenance Costs

For Traditional Telco BSS

1. Maintenance

• Hardware Maintenance: Regular upkeep of physical servers, storage devices, networking equipment, and data centers.

Example: Annual contracts with hardware vendors, spare parts, and repairs.

• Software Maintenance: Regular updates and patches for the BSS software, databases, operating systems, and middleware.

Example: Software maintenance agreements, patch management, and version upgrades.

2. Upgrades

• Periodic Hardware Upgrades: Replacing outdated hardware components to ensure system performance and reliability.

Example: Server upgrades, increased storage capacity, and network equipment enhancements.

• Software Upgrades: Major version upgrades for BSS applications, databases, and operating systems.

Example: Costs for new software versions, development and testing of new features, and integration work.

3. Staffing

• IT Personnel: Salaries and benefits for in-house IT staff responsible for managing and maintaining the BSS infrastructure.

Example: Network engineers, database administrators, system administrators, and support staff.

• Support and Operations Teams: Teams dedicated to monitoring the BSS, resolving issues, and ensuring smooth operation.

Example: 24/7 operations support, help desk personnel, and incident response teams.

For Cloud Telco BSS

1. Subscription Fees

• Cloud Infrastructure: Regular payments to cloud service providers for compute, storage, and network resources.

Example: Monthly or annual subscription fees based on usage (e.g., AWS, Azure, Google Cloud Platform).

• BSS Software: Subscription fees for the cloud-native BSS software and associated services.

Example: Costs based on the number of users, transactions, or other usage metrics.

2. Support Services

• Cloud Provider Support: Fees for support services provided by the cloud service provider, including technical support and service level agreement (SLA) guarantees.

Example: Different support tiers (e.g., basic, premium, enterprise) with varying levels of service.

• Vendor Support: Support and maintenance services provided by the BSS software vendor.

Example: Access to customer support, regular updates, and patches as part of the subscription.

3. Other Costs

• Data Transfer and Storage: Costs associated with data transfer between the cloud and on-prem systems, as well as data storage fees.

Example: Egress charges for data transfer, additional storage capacity, and backup storage.

• Compliance and Security: Ongoing expenses for maintaining security and compliance in the cloud environment.

Example: Costs for security monitoring, compliance audits, and maintaining certifications.

Long-Term Savings With Cloud BSS

Even though switching to cloud BSS requires initial investments, it can yield significant long-term cost savings for telecommunications companies. Here are the key areas where long-term savings can be realized:

1. Reduced Hardware and Maintenance Costs

• Elimination of On-Prem Hardware: By moving to cloud-native BSS, telcos can eliminate the need for costly on-premises servers, storage devices, and networking equipment.

Savings: Reduction in CapEx associated with purchasing, upgrading, and maintaining physical hardware.

• Lower Maintenance Expenses: Cloud service providers handle hardware maintenance, reducing the need for internal maintenance and support staff.

Savings: Decrease in OpEx for ongoing maintenance, repairs, and replacements of hardware components.

2. Scalability and Flexibility

• On-Demand Scalability: Cloud-native BSS solutions offer scalable resources that can be adjusted based on demand, allowing telcos to avoid over-provisioning and under-utilization.

Savings: Cost optimization by paying only for the resources used, preventing unnecessary expenses on idle capacity.

• Fast Deployment: The cloud environment enables faster deployment of new services and features, reducing time-to-market and associated costs.

Savings: Accelerated revenue generation from new offerings and reduced costs related to extended development and deployment timelines.

3. Enhanced Operational Efficiency

• Automated Upgrades and Patches: Cloud-native BSS providers handle software updates and security patches automatically, ensuring systems are always up-to-date without manual intervention.

Savings: Reduced downtime and labor costs associated with manual upgrades and patch management.

• Improved Reliability and Uptime: Cloud providers typically offer robust SLAs with high availability and disaster recovery capabilities.

Savings: Lower costs related to downtime, service interruptions, and disaster recovery planning.

4. Cost-Effective Innovation

• Access to Advanced Technologies: Cloud-native BSS platforms integrate with advanced technologies such as AI, machine learning, and big data analytics.

Savings: Leveraging these technologies without substantial investment in new infrastructure or expertise, leading to improved decision-making and operational efficiencies.

• Continuous Improvement: Cloud platforms enable continuous delivery and integration (CI/CD), allowing telcos to rapidly innovate and deploy new features.

Savings: Reduced costs associated with lengthy development cycles and increased agility in responding to market changes.

5. Simplified Compliance and Security

• Built-In Compliance: Cloud providers often have built-in compliance and security features that help telcos meet regulatory requirements without significant additional investment.

Savings: Lower costs related to compliance audits, certifications, and security breaches.

• Shared Responsibility Model: Security responsibilities are shared between the cloud provider and the telco, reducing the burden on internal security teams.

Savings: Reduced costs for security infrastructure and personnel.

Real-World ROI: Statistics and Success Stories

The adoption rate of cloud BSS in the telecom industry has been steadily increasing. IDC identified the adoption of cloud-based services as a megatrend for 2023, while Gartner highlights industry cloud platforms as a key trend for 2024. According to a report, the estimated value of the global Cloud OSS BSS market was USD 21.48 billion in 2022 and is expected to reach USD 53.72 billion by 2030, growing at a compound annual growth rate (CAGR) of around 12.03% from 2023 to 2030. 

Moving BSS to the cloud, CSPs are gaining significant benefits such as faster time-to-market and time-to-revenue, reduced CAPEX, and improved scalability. This shift also allows IT teams to focus on business goals rather than managing outdated infrastructure. Integrating BSS with private and public clouds reduces costs and enhances agility, with elastic deployments, microservices, and automation providing the most value to cloud BSS operations.
LotusFlare has had the pleasure of being part of a successful transformation from legacy to cloud. Globe Telecom and LotusFlare re-platformed the GOMO business in 6 months achieving simplification, speed-to-market and operational cost savings of 40%. The teams migrated 3 million GOMO subscribers in under 4.5 hours to LotusFlare DNO™ Cloud.

Transitioning to cloud BSS does include significant initial investments and is not without its risks, making some decision-makers understandably cautious. Some even think that you shouldn’t fix what’s not broken. However, in an industry based on complex, constantly evolving technology, an industry struggling to keep up with tech players and see a return on its capital investments, the status quo simply isn’t tenable. Judging by the success of companies that have already taken the leap and made the switch, the question is not whether you should cloudify or not, but when and how.

Considering the move to cloud BSS?

LotusFlare can help.

Conclusion

Even though replacing legacy stacks with cloud-native BSS comes with considerable costs and requires a well-thought-out strategy, data speaks in favor of the switch, promising innovation agility, scalability, and long-term cost savings.
It might be the right time for CSPs to assess their BSS needs and find the best cloud solution for their business.