IBM’s new study exposes telecom’s biggest AI and cloud challenges—and how to solve them

The telecommunications industry is undergoing a profound transformation, with cloud and AI emerging as critical forces driving innovation, efficiency, and profitability. A recent global study conducted by the IBM Institute for Business Value, in partnership with GSMA Intelligence, highlights how communication service providers (CSPs) are accelerating their investments in artificial intelligence and cloud computing to modernize their networks.

The report, titled Rewiring the Telecom Mindset: How CSPs Are Gaining Network Advantage with Cloud and AI, draws insights from 750 executives across major telecom companies, including Bharti Airtel, Deutsche Telekom, Telstra, Verizon, and Vodafone. The findings suggest that companies integrating AI-powered automation and cloud-based network architectures are achieving significant competitive advantages, from enhanced performance and scalability to increased security and revenue generation.

As the telecom landscape continues to evolve, CSPs face mounting pressure to modernize their infrastructure, optimize network performance, and address growing cybersecurity threats. The study underscores the crucial role that AI-driven analytics, automation, and cloud adoption play in this transformation, revealing a clear correlation between technology adoption and business growth.

How Is Cloud and AI Integration Impacting Network Modernization Strategies?

Network modernization has become a top priority for telecom companies seeking to enhance efficiency and improve service delivery. According to the study, 79% of telecom executives rank network performance as their most critical focus area, with AI and cloud technology playing an increasingly important role in achieving these objectives.

The study reveals that CSPs embracing AI-powered automation and cloud-native network architectures experience superior performance, cost efficiency, and faster deployment of new services. Executives reported an expected 20% increase in cloud implementations, a 16% rise in traditional AI adoption, and a 19% surge in generative AI integration over the next three years. These figures highlight a fundamental industry shift toward software-defined, AI-optimized networks that enable greater agility and innovation.

Telecom providers implementing cloud and AI-driven network modernization strategies are reaping substantial benefits. By shifting key network functions to the cloud, CSPs are enhancing network flexibility, improving scalability, and reducing maintenance costs, all while leveraging AI to automate network monitoring, predictive maintenance, and real-time service optimizations.

What Are the Key Challenges Facing Telecom Companies in AI and Cloud Adoption?

Despite the numerous advantages, telecom companies face significant hurdles in adopting AI and cloud technologies. The study highlights several barriers to network modernization, including concerns about data security, regulatory compliance, interoperability between different cloud providers, and vendor lock-in risks.

Security remains a pressing issue, with 55% of network executives reporting a security breach in the past 12 months. However, only 42% of telecom leaders identified security as a top challenge, suggesting that many CSPs may be underestimating the risks associated with rapid AI and cloud adoption. The study also notes that CSPs integrating AI-powered threat detection and automation experience 45% fewer security breaches than their peers, reinforcing the importance of proactive cybersecurity strategies.

Another key challenge lies in network standardization and interoperability. The shift toward cloud-based, multi-vendor network environments introduces complexities related to integration and operational consistency. 63% of telecom executives cite a lack of standardization as a major roadblock, while 58% express concerns about vendor lock-in, which limits their flexibility in adopting new solutions.

The shortage of skilled AI professionals in the telecom industry also presents an obstacle. Executives report that only 26% of their network teams possess traditional AI skills, while generative AI expertise is even scarcer, at just 13%. Industry leaders stress the importance of investing in AI training programs and upskilling existing network engineers to maximize AI’s potential.

How Are Telecom Companies Using AI to Enhance Security and Network Resilience?

As cybersecurity threats continue to rise, telecom providers are increasingly leveraging AI to strengthen their defenses. The IBM study highlights that 59% of CSPs are using traditional AI for network security threat detection, while generative AI applications in fraud prevention and spam management are also gaining traction.

Industry experts emphasize that AI-driven security automation is critical for telecom providers managing large-scale, multi-cloud environments. By integrating machine learning algorithms, real-time anomaly detection, and automated incident response mechanisms, CSPs can proactively identify and neutralize security threats before they escalate into major breaches.

Telecom leaders stress the need for a balanced approach to network security, combining centralized threat intelligence with decentralized security protocols. While centralized security management allows for better visibility and coordination, certain applications—such as private 5G networks, edge computing, and IoT security solutions—require localized security measures to meet low-latency requirements.

How Can Cloud and AI Help Telecoms Overcome Monetization Challenges?

The IBM report underscores a paradox within the telecom industry: network monetization remains both the biggest challenge and the lowest priority for telecom executives. While CSPs recognize the revenue potential of AI-powered network services, 5G-driven innovations, and cloud-based applications, many struggle to develop sustainable business models that capitalize on these advancements.

Executives highlight several barriers to network monetization, including high investment costs associated with 5G Standalone deployment, regulatory challenges, and uncertainties around return on investment (ROI). However, the study points to emerging monetization strategies that leverage cloud and AI to create new revenue streams.

One promising avenue is the integration of AI-driven network automation services, allowing CSPs to offer Network-as-a-Service (NaaS) solutions that enable enterprises to scale connectivity on demand. Open APIs are also playing a transformative role, with telecom providers partnering with developers to build AI-powered applications that utilize 5G networks.

The market for telecom API-based services is projected to grow from $320.9 billion in 2023 to $664.9 billion by 2028, underscoring the significant revenue opportunities available to CSPs that embrace an API-driven ecosystem.

What Does the Future Hold for AI and Cloud in Telecom?

Looking ahead, telecom leaders predict that AI and cloud adoption will continue to accelerate, driving faster service innovation, greater network efficiency, and enhanced cybersecurity protections. The study forecasts a major industry shift toward AI-powered predictive analytics, 5G-Advanced capabilities, and cloud-native network architectures that redefine the role of telecom infrastructure in the digital economy.

Peter Jarich, Head of GSMA Intelligence, emphasizes that cloud and AI will be the defining technologies shaping the telecom industry over the next decade. IBM’s Rahul Kumar echoes this sentiment, stating that telecom providers must rewire their mindset and embrace cloud-native strategies to maintain a competitive edge.

As the telecom landscape continues to evolve, CSPs that invest in cloud, AI, and cybersecurity will position themselves as industry leaders, capable of delivering high-performance, scalable, and secure connectivity solutions. With AI-driven automation and cloud-native network frameworks becoming standard, telecom providers have an unprecedented opportunity to reshape their business models and unlock new growth avenues.

Why CSPs Must Act Now to Stay Competitive

The findings from IBM’s global study make it clear: cloud and AI are no longer optional for telecom providers—they are essential for survival and growth. The industry is at a turning point, where CSPs that embrace AI-powered automation, cloud-based network architectures, and cybersecurity innovation will thrive, while those that fail to adapt risk falling behind.

By overcoming barriers related to security, interoperability, and network monetization, telecom providers can future-proof their infrastructure and capitalize on emerging revenue opportunities. The telecom sector’s digital transformation is well underway, and the time for CSPs to act is now.