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Virtualizing the future : A case study of Telenor Norway

Kjetså, Stig-Jonathan Eikenaar; Pascual, Eric Scott
Master thesis
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URI
http://hdl.handle.net/11250/2443325
Date
2016
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  • Master of Science [1555]
Abstract
The telecom industry is undergoing fundamental changes. Declining revenues in

traditional services, increased competition and increasingly digitized customers is

putting pressure on the very existence of the industry. At the core of telco is its

immense infrastructure, previously considered the true source of competitive

advantage. But as market dynamics changes, the cost of running the infrastructure

is becoming un-aligned with the revenues generated. Moreover, questions of

whether the current infrastructure is suitable in the transition from a traditional

communication services provider to the digital service provider, surfaces. From

the IT industry comes the concept of virtualization, which promises not only

regained flexibility and agility in the infrastructure, but also enhanced capabilities in addressing the future needs of highly digital consumers.

This thesis sets out to understand the potential of virtualization on a mobile

operator’s transition towards becoming a digital service provider. In an effort to

provide insight on this topic, we perform a case study on Telenor Norway, a

business unit of the large Norwegian telecommunications corporation Telenor

Group. Built on in-depth interviews with key personnel in Telenor and academic

scholars, in addition to an extensive amount of industry reports, this thesis developed and found support for three propositions relating to virtualization.

We performed three analyses to gain an understanding of the thesis topic. First,

we analysed the degree of disruptive potential of virtualization to gain insight in

its potential impact on mobile operators. Second, we performed a value network

analysis to show the cost effects of virtualization. Third and final, we analysed

how virtualization can aid the mobile operator in the transition from communication service provider towards becoming a digital service provider.

Our research found partial support for our propositions. First, we found partial

support for concluding that virtualization has a high degree of disruptive potential.

Virtualization had initial inferior performance, is simpler, cheaper and preferred

by niche- and low-end segments, but the overall maturity of the technology at this

stage of development is still of great concern for the mainstream customer. Second, we found that virtualizing the infrastructure can lead to great cost savings

in value-creating activities for the mobile operator. In particular, in terms of

investments and maintenance costs which can be reduced by nearly 40 % in a

five-year scenario. We did, however, find that more research needs to be provided

into developing comprehensive use-cases involving hidden implementation costs

such as investments in data centres and organizational change. Third and final, we

found that the business model of a digital service provider is greatly aided by the

presence of virtualized technology. However, we found that the successful

transition is dependent on a series of other factors such as investments in data

centres, organizational change and timing and hence that virtualization alone

cannot ensure the success. Overall, we found that virtualization has a strong potential of aiding the transition towards becoming a digital service provider.
Description
Masteroppgave(MSc) in Master of Science in Business, Strategy - Handelshøyskolen BI, 2016
Publisher
BI Norwegian Business School

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