Executive Summary

The convergence of the software-defined core network architecture with the dominance of hyperscale cloud providers in automation and artificial intelligence (AI) has forced telecommunications operators to a strategic crossroads. 

The industry faces a dilemma: operators must embrace cloud-native principles to achieve the cost-efficiency, agility, and AI-driven innovation required to compete. There are benefits that cannot be left on the table. 

However, this entails the risk of outsourcing their most critical asset – the core network – to the very hyperscaler entities that are their biggest potential competitors. This move threatens severe technological lock-in and the potential hollowing out of the strategic differentiation that has long defined their business – if done simplistically.

The solution is to avoid a full, simplistic public cloud outsourcing model. This is too risky for any incumbent operator, and perhaps for any operator. But an analysis of major industry deals reveals that most operators are not, in fact, adopting this model. Instead, the viable path forward is a sophisticated hybridisation. The big risk is not in engaging with hyperscalers, but in doing so passively and naively. 

The “hollowing out” and value capture that operators fear is not an inevitable result of partnering with hyperscalers. It is the consequence of failing to do so from a position of strategic strength, with the clear-eyed technical, commercial, and philosophical mitigation plan that is now emerging as the new industry standard.

The winning strategy is one of “co-opetitive” engagement, built on a foundation of hybrid and multi-cloud architectures, open-API-led “service freedom,” and stringent data sovereignty controls. These respectively mitigate the risks of lock-in, loss of control of innovation, and loss of national sovereignty.