Material Insights · Understanding the Material World

Software and IT services and Telecommunications

Modern telecom networks run on software, from billing and network management to virtualised cores and radio, so operators are large buyers of software and IT services, while cloud and software firms depend on telecom fibre and backbone links. In India the tie is unusually close: telecom is a core client vertical for IT exporters, and TCS led the build of BSNL's homegrown 4G network.

Software and IT services (industry) and Telecommunications (industry): 6 relationships.

How they are linked

1. Buys from

Physical flow · ₹8.9 per ₹100 · Telecommunications buys from Software and IT services

Operators buy billing, customer management, network operations and outsourced IT and engineering services, and increasingly run network functions as software.

  • ₹8.9 of every ₹100 of Telecommunications output, all rounds (India 2022)
  • ₹5.8 bought directly
  • about US$ 80 billion operator spending on OSS/BSS software and services, 2028 forecast

Analysys Mason (2023) expects operator spending on operations and business support software and services to grow about 5% a year from 2022 to 2028, with publicly hosted cloud versions growing about 22% a year, which shifts spending from in-house systems to software and cloud vendors.

Sources: OECD; Analysys Mason

2. Buys from

Physical flow · ₹1.9 per ₹100 · Software and IT services buys from Telecommunications

IT firms, data centres and cloud providers buy connectivity, leased lines and international bandwidth to deliver services and serve offshore clients.

  • ₹1.9 of every ₹100 of Software and IT services output, all rounds (India 2022)
  • ₹1.2 bought directly

US producer prices for the two move together over a year (12-month correlation about 0.48, monthly about 0.09), with telecom prices leading by about five months, and a lead-lag test finds a predictive signal from telecom to software prices. Both are driven by enterprise digital spending, so the correlation reflects shared demand more than cost pass-through.

Sources: OECD; Material Insights (World Bank, FRED, IMF data)

3. Industry input

Physical flow · Criticality 5 of 5 · Software and IT services to Telecommunications

Radio, core and transport equipment vendors (rated 5 of 5) depend on network software, spectrum regulators (5 of 5) on monitoring and licensing systems, and telecom IT and managed-service providers (2 of 5) on software and services.

The top rating reflects that network equipment does not work without its software stack, which is tied to the vendor and hard to replace. General IT and managed services, by contrast, have many competing suppliers.

Enterprise types that depend on it:

  • Spectrum regulators and licensing authorities: spectrum monitoring and licensing systems (criticality 5 of 5)
  • Radio, core and transport equipment vendors: network software (criticality 5 of 5)
  • Telecom IT and managed-service providers: software and services (criticality 2 of 5)

Sources: Material Insights

4. Industry input

Physical flow · Criticality 4 of 5 · Telecommunications to Software and IT services

Hyperscale cloud providers (rated 4 of 5) depend on fibre and backbone links, and engineering R&D and business-process providers (2 of 5) on voice and data links.

Cloud regions and data centres cannot operate without diverse, high-capacity fibre routes, which few carriers can supply at a given site. Offshore service delivery needs reliable links, but several operators compete for this business.

Enterprise types that depend on it:

  • Spectrum regulators and licensing authorities: spectrum monitoring and licensing systems (criticality 5 of 5)
  • Radio, core and transport equipment vendors: network software (criticality 5 of 5)
  • Telecom IT and managed-service providers: software and services (criticality 2 of 5)

Sources: Material Insights

5. Telecom as an IT client and project

Geography and ownership · High in India · Indian IT firms serve and build telecom networks

Indian IT services companies earn a large share of revenue from telecom clients and have moved into building networks, most visibly through the TCS-led consortium for BSNL's 4G.

  • 33.4% share of Tech Mahindra revenue from communications, Q4 FY26
  • over ₹15,000 crore advance purchase order to the TCS-led consortium from BSNL, 2023
  • 100,000 4G sites in the BSNL deal

About 75% of the BSNL deal value was expected to go to TCS, including a 10-year maintenance contract, with Tejas Networks supplying radio access equipment under a ₹7,492 crore order and C-DoT as a partner. Tejas said in May 2025 that it had shipped equipment for more than 100,000 sites. Telecom clients are also a concentration risk for IT firms: Tech Mahindra's communications revenue grew only 2.6% in US dollar terms in FY26.

Sources: BOB Capital Markets; Business Standard; Outlook Business

6. Data traffic growth

Transition · Rising · More data drives network software and cloud use

Rising data use forces operators to automate and virtualise networks, and the same traffic carries the cloud, streaming and AI services sold by software firms.

  • over 31 GB average mobile data use per user per month in India, 2025 (Nokia MBiT 2026)
  • over 70% year-on-year growth in India's 5G traffic, 2025
  • about 47% 5G share of mobile broadband traffic

Monthly 5G traffic reached about 12.9 exabytes in 2025, and Nokia expects AI applications to reshape traffic further. Growth in traffic without matching growth in revenue per user pushes operators to cut operating cost with software, which supports telecom IT demand even when operator capex is flat.

Sources: The Tribune (Nokia MBiT Index 2026)

For investors

Key learnings

  1. Telecom spends about ₹9 of every ₹100 of output on software and IT, so operator budgets are a direct revenue line for IT services firms.
  2. Indian IT firms with heavy telecom exposure, such as Tech Mahindra at about a third of revenue, rise and fall with operator spending cycles.
  3. Shift of operator software to cloud-hosted and network software models moves value towards vendors with telecom-specific products.

What to track

  • Communications vertical growth at Indian IT firms: Shows whether operator IT budgets are expanding or being cut (Quarterly · company results)
  • Operator capex and opex guidance (Jio, Airtel, Vodafone Idea, BSNL): Signals network software and services demand (Quarterly · company filings)
  • Mobile data use per user: Higher traffic raises pressure to automate networks (Annual · Nokia MBiT, TRAI)

For policymakers

Key learnings

  1. BSNL's 4G network, built by a TCS-led consortium with Tejas Networks and C-DoT, shows Indian IT and telecom firms can deliver a national mobile network on domestic technology.
  2. Network equipment depends on vendor software rated at the highest criticality, so security reviews of telecom gear need to cover its software too.
  3. Indian mobile users consume over 31 GB a month, so data centre and fibre capacity are as important to digital policy as spectrum.

What to track

  • Indigenous 4G and 5G site deployment: Measures progress of the domestic telecom stack (Quarterly · DoT, BSNL)
  • Data traffic and broadband subscribers: Signals demand for networks and cloud capacity (Monthly · TRAI)

India

Telecom is a major client vertical for India's IT exporters, and the TCS-led consortium with Tejas Networks and C-DoT supplied equipment for 100,000 BSNL 4G sites under an order of over ₹15,000 crore.

Sources

  1. OECD Input-Output Tables 2025 edition, India 2022, OECD
  2. Price correlation, Material Insights, Material Insights (World Bank, FRED, IMF data)
  3. Materials and criticality: Telecommunications, Material Insights (2026)
  4. Materials and criticality: Software and IT services, Material Insights (2026)
  5. CSPs' spending on telecoms-related OSS/BSS software and services will reach USD80 billion by 2028, Analysys Mason (2023)
  6. Tech Mahindra Q4FY26 result review, BOB Capital Markets (2026)
  7. TCS-led consortium secures BSNL 4G deployment order worth Rs 15,000 crore, Business Standard (2023)
  8. Tejas completes telecom gear supply under Rs 7,492-crore BSNL deal to set up 1 lakh 4G, 5G sites, Outlook Business (2025)
  9. India's monthly data usage hits 31 GB, 5G traffic surge by 70%: report, The Tribune (Nokia MBiT Index 2026) (2026)