According to new research published by global technology intelligence firm ABI Research, professional service revenues for Private 5G enterprise networks will grow from US$58 million in 2021 to US$5.8 billion in 2026, while connectivity revenues will only amount to US$5 billion in the same timeframe. Deployments for energy generation (oil & gas, mining, and power plants), industrial manufacturing and logistics are the main drivers behind system integration revenue. These verticals are early adopters of private 5G network deployments and are characterized by a high degree of complexity and stringent performance requirements.
“These service revenues highlight the fact that providing enterprise-grade 5G will be much more than just supplying enterprises with connectivity,” says Leo Gergs, Senior Analyst, 5G Markets at ABI Research. “The true value proposition for enterprise 5G does not lie in the connectivity technology itself, but rather in the applications that in enables. After all, a small or medium sized manufacturer or warehouse owner primarily cares about things like increasing the Overall Equipment Efficiency (OEE), reducing machine downtime, or boosting production flexibility. Whether this is enabled by 4G or 5G connectivity, or even non-cellular technologies, like Bluetooth or Wi-Fi, is of much lower importance to enterprise customers.”
Enterprises’ interest in applications, rather than technology, has two important business implications. First, 5G needs to be provided as one component alongside different technologies such as Artificial Intelligence, Edge Computing, data storage, and security technologies, raising the bar for potential suppliers of a such a digitization platform. Gergs explains “Orchestrating and integrating all different components will become an important skill itself. While traditional System Integrators like IBM, Accenture, Capgemini, Tech Mahindra, or Worldwide Technologies enjoy an incumbent advantage, they must stay alert to protect their share. Hyperscalers like AWS, Google Anthos, or Microsoft Azure are extending their partnership network with their respective marketplace platforms and gain market traction.
Second, an enterprise digitization platform needs to be based on a completely different business model to be appealing to enterprises. As such, a successful business model should distinguish between the provision of the platform infrastructure alongside the provision of enterprise applications and services. “The telco industry needs to provide entire enterprise-grade applications as a Service, combining Network-as-a-Service and Software-as-a-Service business models. Key to this is a strong relationship to software developers. Hyperscalers are miles ahead of the telco industry here, so operators and infrastructure vendors will need to catch up,” Gergs concludes.
These findings are from ABI Research’s The Role of 5G for Enterprise ICT Systems application analysis report. This report is part of the company’s 5G Markets research service, which includes research, data, and analyst insights. Based on extensive primary interviews, Application Analysis reports present in-depth analysis on key market trends and factors for a specific technology.