Digital transformation: still relevant after all these years?

The term “digital transformation” barely gets referenced by telecoms executives any more. Rather, the focus is on AI and AI transformation, even though a roadmap for this and more all-encompassing AI-native enterprise architectures is still emerging.

So, why is the term digital transformation disappearing from the telecoms lexicon?

Is it because:

• “Digital” is now table-stakes and, as such, the idea that it represents transformation has run its course?
• CSPs have achieved all that was possible in digital transformation, so it is no longer relevant? Many, for example, have already transitioned to a catalog-driven, API-first architecture.
• Digital transformation was largely unsuccessful and CSPs have decided to move on?
• AI is in the process of making the rationale for digital transformation irrelevant because it is moving the goalposts in terms of what can, and will, be achievable?

For most CSPs it’s a combination of all these factors. However, there is a strong case for arguing that digital transformation is still hugely relevant in the AI era – not least because so many of the goals have still to be met. Indeed, digital transformation can be seen as a precursor to, and a foundation for, AI transformation. Without digital transformation it will be difficult for any operator to deploy AI at scale.

AI is also a tool that can help CSPs overcome some of the previous obstacles to digital transformation. Swisscom CTIO, Mark Düsener, believes that the principles around transformation are as valid now as they have ever been, but that the term business transformation may be more appropriate than digital transformation. “It’s all about enabling business opportunities and innovation capabilities that today’s IT ecosystem doesn’t provide,” he told us in an edition of TM Forum’s Inside Out podcast.

New tools to unblock transformation

For many CSPs digital transformation ran its course because they could not identify a clear enough return on investment to replace or modernize all existing business and operational support systems (BSS/OSS) with the technologies and vendor solutions which, at that time, were available to them.

Vodafone has invested heavily in recent years in transforming its customer-facing functions and creating cloud-based digital experiences for its customers. But it continues to use legacy vendor systems for functions such as customer management, billing and service assurance. These have been too hard to transform until now because they are monolithic systems supplied by large vendors. To modernize them, according to Vodafone’s Head of New Technologies and Innovation, Lester Thomas, “was like undertaking a heart and lungs transplant”. As such there has been little appetite to transform these core IT systems, many of which have been in place for 15-20 years or longer.

However, in recent months Vodafone has started looking at the feasibility of using agentic AI to transform these core IT systems. This involves reinventing the software developer experience and building APIs natively into their tooling. The ultimate goal of transforming these core IT systems using AI is to create more reusable components which ultimately helps to save costs and time, says Thomas.

Cloud transformation: still a journey

For many CSPs, IT transformation was built around cloud transformation. While the migration from onpremises to cloud continues apace, attitudes towards the merits of private and public cloud have shifted backwards and forwards in recent years.

Many of the world’s largest CSPs have a clearly stated preference for public cloud. They have built deep relationships with two or more of the world’s largest hyperscalers which they see as partners rather than merely vendors. They have come to be as influential as the leading network equipment providers in terms of shaping operator roadmaps. But other CSPs have not necessarily had the same positive experience of public cloud.

Viewed purely through a cost lens, many CSPs have found that their spending on public cloud for specific functions has far exceeded expectations. At the same time they have not been able to clearly identify non-cost benefits of migrating to public cloud such as agility and customer experience improvements.

Swedish operator Telia is one company that has taken a pragmatic approach towards cloud transformation. “We were never able to make a strong business case for a cloud-native transformation,” says the operator’s CIO, Ida La Spisa. But Telia ended up moving some of its main applications to the cloud anyway because its vendors discontinued their roadmaps for evolving them on bare metal.

Geopolitical instability has also added a new dimension to the public versus private cloud debate. As a result, public sector and large corporate customers are, increasingly, seeking sovereign solutions.

And when it comes to AI inferencing, again a hybrid public-private cloud approach is emerging. Many of the larger operators are using open-source large language models (LLMs) in a private cloud environment, particularly for network functions where latency and cost issues are key drivers.

Assessing strategic priorities

In our recent survey we identified 12 strategic focus initiatives for IT organizations and asked our respondents whether they viewed these as high, medium or low priority (see chart). Eight were identified as high priority for a majority of respondents.

The three initiatives identified by most respondents as being highest priority were: • Customer experience transformation

• Cybersecurity and resilience
• Faster time to market and agility.

Customer experience transformation has been a priority for CSPs for many years and will continue to be so. Nine out of ten respondents consider this to be a high priority.

Cybersecurity and resilience is seen as a high priority by eight out of ten respondents, with several factors likely to play into this from the broader telecoms, cybersecurity and geopolitical landscape:

• The volume of cyber attacks facing businesses generally has increased significantly in recent years
• There have been an increasing number of high-profile data breaches at CSPs
• Geopolitical fragmentation is forcing operators to review supply chains and vendor relationships
• AI is becoming a powerful tool for hackers / attackers to target CSP customers and employees.

However, considering an initiative to be “high priority” does not necessarily mean that it is one of the top priorities when overall strategies for the short term are taken into consideration. This is clear from responses to another of our survey questions which asked respondents to identify their top three priorities for the next 18 months. Here, just one fifth (22%) of respondents included “Cybersecurity and resilience” among their top three short-term initiatives.

A similar divergence is seen with “AI enablement across architecture”, seen as being high priority by just 59% of respondents but ranking second in terms of the top three initiatives identified by CSP respondents. This could point to a fragmentation in the CSP community between, on the one hand, those CSPs which are moving fast to embed AI within their architectures and for whom it represents a top priority and, on the other, those CSPs which are taking more of a wait and see approach.

Faster time to market and agility has also been a longstanding aspiration for every telecoms IT organization. Many telcos have made improvements in recent years, adopting agile methodologies and DevOps practices in certain functions and business processes. In doing so they can point to tangible gains – for example, bringing time to market down from months to weeks or even days.

But improvements have not been uniform across the whole architecture or across the telecoms industry as a whole. As we see in section 5 of this report, speed and agility is arguably the biggest benefit that agentic AI can bring to the IT organization.

The other categories that threw up interesting results in the question on importance of IT initiatives were “IT modernization and technical debt reduction” – with 66% of respondents identifying it as a high priority – and “Cost optimization” (70% of respondents).

Given the challenges that CSPs have had growing topline revenues in recent years it is surprising that these numbers aren’t higher. A likely explanation is that some operators that have been transforming their IT architectures to modern, composable systems for several years are now less encumbered by technical debt than others. These CSPs are also coming to view the IT function more as a strategic enabler of new capabilities than as a cost for maintaining business as usual.

Lack of vision and purpose TM Forum has been tracking the challenges that CSPs face in their transformations for almost a decade. In the chart below we can see how attitudes have changed over that period.

For our 2026 survey more respondents than in previous years identified some of the obstacles that we presented as being “major” (as opposed to medium or low obstacles). One simple explanation for this is that over time more operators surveyed were embarking on transformation projects and confronting the challenges listed. Or perhaps the deeper they became embroiled in transformation the more those challenges were magnified.

The significant increase in the percentage of respondents identifying “Lack of clear, aligned vision and goals” and “Cultural and organizational issues” as major obstacles points to significant frustration within IT organizations about the strategic direction of their companies and the changes in culture and skills required to bring about change.

The other obstacle that saw a significant increase was “Complexity of product portfolio and processes”. Despite there being a strong push by many CSPs to simplify IT systems and architectures, the survey indicates that there is still a huge amount of work to be done. Indeed, even those CSPs which have made most progress in terms of transformation continue to be frustrated by the slowness or inability of the organization – due to cost, technical barriers or sheer scale – to shut down old products, systems and networks.

Is AI accelerating transformation?

A regular theme of our conversations with CIOs has been whether AI is principally a tool to accelerate transformation or if it is it changing the very nature of what digital transformation is or will be. Vermeulen at Orange, believes it would be a “fundamental mistake” to view AI as just a tool. But our survey respondents were split on the question, with 60% viewing it as a tool to accelerate digital transformation and 40% considering it to be something that gives CSPs reason to rethink the purpose and means of transformation.

Lester Thomas at Vodafone likens the impact of AI to that of cloud transformation. It took Vodafone five or six years to come to the realization that the benefit of cloud was around agility. The same is true of AI, according to Thomas.

“No one knows what you’ll be able to do with AI in a year’s time,” he says. “But what we do know is that the companies that are the most agile and have the best way of safely experimenting are the ones which are really going to thrive.”