Research Notes

How lack of IT engineers and system integrators challenge OpenRAN in emerging markets

The OpenRAN value proposition is the ability to mix and match different equipment suppliers in a mobile network.  It is a proffered as an alternative to turn-key, end-to-end network solutions, providing lower cost and greater flexibility to mobile operators. However the ability for OpenRAN solutions to succeed is predicated on sufficient supply of interoperable products and the human capital to put them together in a network. The OpenRAN components do not self-assemble. In fact IT engineers and system integration companies are critical to the success of OpenRAN solutions, which can be complicated.

In October 2021, Vodafone said it would hire 7,000 IT workers with the aim of becoming less dependent on system integrators. To put it very simply, the entire industrialized world is crying out for qualified IT people who are not only very expensive but also in short supply.  When it comes to emerging markets, the situation is even more constrained.  

Strand Consult’s new report The Moment of Truth: Is OpenRAN an alternative for emerging markets? examines the challenges associated with choosing technical solutions from several suppliers and putting them together into a mobile network. Indeed, the premise of the firm is that it reduces transaction costs for a given exchange. Today mobile operators hire a network equipment vendor to deliver a tailored infrastructure solution at a defined level of quality with the overall value proposition of efficient operating cost. OpenRAN represents the deconstruction of that offering back to its individual parts:  the equipment, the know-how, and trust.  However once deconstructed, these elements do not necessarily add up to a less expensive or better solution for the operator. This is particularly an issue in emerging markets where IT professionals are in short supply, as Strand Consult’s report explains.

Access to sufficient, highly-skilled workers is a challenge in the developed world, and so it is in emerging countries. There are generally more IT jobs than workers. As a result, IT workers can frequently demand a higher wage than non-IT workers. This is even more pronounced in emerging markets, as skilled individuals will migrate to countries where they can earn more. Strand Consult summarizes the OpenRAN challenge in emerging markets in its report, which includes

  • Small, immature local tech industry. Industry is already less developed is in emerging countries, as is the sophistication for next generation mobile network engineering. IT workers may be in short supply as are the IT firms and system integrators needed to build OpenRAN solutions. This benchmark of network readiness for each country offers scores for technology, people, governance and impact.
  • Brain drain. Skilled IT workers in emerging markets frequently migrate to developed countries where they can earn more money. MyBroadband’s 2019 IT Survey found that 46 percent of IT professionals in South Africa are planning to emigrate or to seek work abroad.
  • Limited IT education: With some exception, IT education is limited in emerging markets. Education is one critical element to creating a supply of IT workers, which nurtures the larger IT ecosystem. In the developed world, many IT companies partner with universities to support education. These cooperations may be limited, creating a vicious cycle of lack of IT education and lack of IT jobs.
  • Limited installed base.  There are more than 200 commercial 5G networks globally. These are classic 3GPP RAN installations that support 2G, 3G, 4G and 5G on one base station using 3GPP defined equipment. There is only one larger commercial OpenRAN installation, Japan’s Rakuten. It has few customers and limited commercial success.
  • Vendor mix complexity. Moving to an OpenRAN environment requires that mobile operators have the skills and resources to evolve from managing a small handful of equipment vendors to dozens of OpenRAN suppliers with no local or limited regional presence.
  • Small vendors have limited local presence. When working in a market, customers often require that you have local experiences and local employees or employees in the region. When operating the vital infrastructure of a mobile network, a mobile operator needs to know that he has a well-functioning network. Uptime is an important parameter and if technical problems arise, they must be solved quickly.
  • Limited product portfolio. Small vendors lack the volume to gain scale economy in their emerging market business. This means that given the limited products and services available, the generated revenue is also limited. Telecommunication is a business in which volume is the prerequisite for success. This is also the reason why mobile operators’ procurement policies has driven massive consolidation in the equipment industry after the year 2000.
  • Limited-service development.  5G service development is nascent with some services focused in the core network, others in the cloud. Given limitation for product portfolio, installed base, and standardization, it is not yet clear how and where OpenRAN can make a commercial success.
  • Nascent system integration.  OpenRAN also requires system integration and staff, professionals whose job is to piece together functions and equipment, in lieu of integrated solutions. The labour pool for these individuals in limited in emerging markets, and many of those with the needed skills migrate to industrialized countries.
  • Limited access to clouds. Developed countries have multiple, redundant, and competitive clouds. This is not necessarily the case in emerging markets. Presently China dominates cloud provision in emerging markets, as Strand Consult’s research note details.  Google is setting up its first cloud in Africa. Google has only one cloud in all of Latin America. Microsoft Azure has just one cloud in Africa and one in Latin America. It’s the same for Amazon AWS. Huawei and China Telecom, however, have multiple clouds and datacenters in Africa and Latin America.  
  • Limited regulatory resources and experience.  In general, telecom markets and providers are highlight regulated on security, privacy, competition, roaming, data transfer, and so on. Small vendors have limited local regulatory knowledge, resources and experience. Mobile operators may prefer vendors with local knowledge and experiences.
  • Classic Competitors such as Huawei, Nokia and Ericsson have local and regional presence. In addition, they often have many years of experience working in these markets. We are talking about companies that not only have experience working in emerging markets but also companies that often have close customer relationships with the operator who is considering investing in OpenRAN.

Aside from the economic and financial challenges of emerging markets, OpenRAN providers also have the challenge of building trust. This requires a relationship, time, and reputation. Any upstart new vendor has a challenge to win a contract with a mobile operator, which can’t afford for its network not to work. Trust cannot be bought; it has to be earned.

Moreover, when a mobile operator switched a network vendor because of dissatisfaction with the current vendor, the mobile operator has a higher expectation of the replacement. Hence the new firm must perform at an even higher level. Hence the OpenRAN provider must overcome an even higher bar than competitors.

The report “The Moment of Truth: Is OpenRAN an alternative for emerging markets?”  provides the objectivity and transparency needed by decision makers, information which is not readily available in most mainstream outlets. For more than 25 years, Strand Consult has debunked the many myths of mobile industry hype. It has published a many research notes and reports on OpenRAN. See the library at “Understanding OpenRAN

With its new and free report “The Moment of Truth: Is OpenRAN an alternative for emerging markets?”  Strand Consult provides valuable information to mobile operators, executives, investors, and other mobile industry stakeholders.

Contact Strand Consult to get your free copy.