Listen up, telcos: Embrace GenAI to join the newco era

The telecommunications industry faces an urgent challenge: speed. While change is constant, its pace is often unknown. The CIO isn’t a stranger to this, but the velocity of that change is what defines their success today. The goal is no longer just transformation or adapting to a digital era but about taking ownership to drive their firm into becoming a technology-first services provider. In today’s market, that means AI.

AI is a force multiplier for telcos, like for any industry today. It can accelerate the pivot from traditional providers toward digital-native ‘newco’ models. This requires harnessing and deploying the tech across all aspects of a telco, from core systems (BSS/OSS) to customer experience and billing functions. Harnessing data, automation, and AI is crucial for CIOs and their teams to design, build, and deliver new solutions and remain relevant.

The journey from telco to newco

For our HFS Horizons: Telecom Service Providers, 2025 report, we interviewed 20 IT services firms, 16 software and SaaS firms, and 18 telecom companies. The findings reveal how IT services firms can help telco CIOs use technology to improve business outcomes, ensure resiliency, and create new value. While the CIOs’ business partners define these, most projects require collaboration to drive sustainable and scalable improvements across people, processes, and experiences.

We also got insights into how a framework can help telcos engage IT service providers and their technology partners to accelerate transformation.

The three key points are:

1. Telecom companies must stop thinking like telco providers and act as digital-first enterprises focused on leveraging cloud, data, and AI to deliver better customer experiences.
2. The focus must shift from network optimization and service delivery to emerging technologies to drive predictive revenue. This calls for gathering intelligence across the value chain, making AI the new competitive advantage.
3. No telecom company can do this alone. The right IT services partner unlocks new revenue streams and efficiencies, bringing insights into preparing talent to use the latest technologies. They can also support business model transition, shedding the telco model of the early 2000s for the dynamic hybrid delivery models of the second half of the 2020s.

Based on this assessment framework, the Horizon 3 leaders (all in alphabetical order) are Accenture, Capgemini, EY, HCLTech, Infosys, NTT DATA, and Tech Mahindra; the Horizon 2 innovators are Cognizant, IBM, Persistent, Sutherland, TCS, Virtusa, and Zensar; and the Horizon 1 disruptors are Encora, Infinite Computer Solutions, Innova Solutions, KPMG, UST, and Wipro.

Exhibit 1: The HFS Horizons report helps telecom providers choose the right service provider for their network transformation journey

Note: All service providers within a Horizon are listed alphabetically.
Source: HFS Research, 2025

The trifecta of enterprises, service providers, and their partners should work in tandem to realize true business outcomes

Enterprises must lead their transformation by orchestrating service providers and tech partners around clearly defined business objectives. After many interactions with industry experts and thought leaders, HFS has identified three core factors shaping the future of the telecommunications industry:

1. End-to-end solutions and ecosystem orchestration
2. Compliance and emerging trends
3. Innovation and open architectures

All these factors, which HFS refers to as its strategic telecommunication services framework, impact the telecom value chain (see Exhibit 2). When these frameworks, whether entirely or partially, are applied to a telecom client’s strategy, more tactical aspects of telecommunications services can be addressed.

Exhibit 2: The telecom services value chain

Source: HFS Research, 2025

Our partner and client references substantiate the importance of ecosystem orchestration, where IT services providers help translate the technical benefits of a partner’s solution into value-creating scenarios for the telecom client’s buyer or lead advocate. Conversely, the partner leans on the service provider or advisor to capture more revenue and improve their customer experience. Our study pointed at sales and marketing, service delivery, customer relations, and loyalty as the main reasons why service providers collaborate with their respective telecom partners to deliver solutions.

Exhibit 3: The true extent of telecom transformation depends on the ecosystem orchestration among clients, service providers, and partners

Sample: N=16, 18 partner references
Source: HFS Research, 2025

Driving innovation through interconnected technologies

Telco CIOs must leverage the skills, capabilities, and partnerships of their service provider partners to address the fast-moving innovations and contextual delivery technologies such as GenAI, cybersecurity, digital twins, IoT, and 5G. These must also be contextualized into industry-centric and market-centric solutions.

The service firms covered in the report have been implementing GenAI into their solutions, especially CX transformation, fraud monitoring, product recommendation, and predictive servicing. They’re also implementing network-as-a-service (NaaS) into their offerings, delivering operational benefits such as reduced cycle times and improved customer experiences. At the same time, it’s imperative to address the growing security challenges in data and the functionality of services, equipment, and data.

The Bottom Line: Telecom clients must depend on service providers and their partners to better navigate the current complex environment.

The telecom industry is at a crossroads. If not today, companies that upgrade their infrastructure will inevitably struggle down the road. Those that rethink their business models, leverage AI, and embrace ecosystem partnerships will have a clear competitive advantage—but only if they choose the right partner for their transformation initiatives.