Are service providers going to sit back and just let cloud pass, as it’s not a place for engagement or interest? Are service providers right at the heart of it? Or is it somewhere in between?
The opportunities cloud creates for the telco player in this exploding ecosystem are significant. How does cloud extend the traditional managed service communications platforms and services that the telcos provide?
How do we get to the next stage? It is an operational nightmare to link up a VPN on existing IT infrastructure to all this virtualised stuff. How do you migrate it?
Nolan (above): We were using Salesforce.com to manage our orders, but now Salesforce manages everything in our organisation — the revenue and our costs as well. We can do an opportunity, create a service order, the locations, the bandwidths, all the costs associated with that — any capex.
When we’re looking at an opportunity where we can calculate the return on investment and generate the purchase order. That goes into service activation — customer commit dates, all the procurement are run in the cloud. All our billing runs from Salesforce.com. It feeds our inventory and GIS systems. All our GIS and OSS are in the cloud. Every email we send is accessible in the cloud. It gives us an incredible granularity in what we do.
We’re a microcosm of every organisation — the future will eventually happen. What does that mean for the enterprise and communications? It’s not a dumb pipe, it’s an extremely fast, scalable pipe.
M Lewis: How do we get people to go from kit in the basement to stuff in the cloud? Salesforce.com is a great example of a company that has taken ERP and put it in the cloud. They were so far ahead of everyone else that they didn’t really have competitors — and managed to come up with a great asset.
Nolan: We’re happy to be a profitable pipe. Microsoft are going to spend $300 million next year rolling out and promoting Office Online. The benefits you get are collaboration in the way companies communicate — for us, in five locations, it’s a phenomenal productivity tool.
Tim Marsden (above): Do you think there is any risk of internet connectivity letting you down, not being able to access your systems when you need to? If your business is deal-based, it may take a few days for a deal to close, if you lost access to your systems for five minutes to an hour, it wouldn’t be the end of the world. But if you lost access to your OSS systems, it would be.
It really depends on the risk profile of each IT service as to whether or not you can rely on the public internet — and therefore you can rely on a public cloud service. Otherwise you go for a private cloud service. This is where the telco can play a key role.
Martin Geddes: Telcos are always caught in the middle of this conundrum, between applications that require a high level of network integration — and people keep inventing new ones — and pure horizontal layers, putting all your applications in the public internet.
What is the role of the telecoms provider? In providing insulation between those layers and providing a service that glues those layers together. The service wrap is when you go to a customer and say: We can manage particular systems and business processes, and when something breaks we know which bit of the infrastructure has broken. And we can fix it. Rather than say: It’s gone wrong somewhere.
What’s difficult for telcos is a mindset that believes it’s the atoms that have a value. There’s a rebalancing going on — aggregating together this stuff. That aggregation role has a very different business model and structure to it.
C Lewis (above): The platforms that have been built, the next generation networks, can do everything — where previously there were separate networks to address separate issues.
Geddes: There’s an incoming tide, the internet tends to subsume more and more and more. But watch the second-order effects. There’s a parallel with what was going on in the 1970s with container shipping: there were some smart people who looked at what was going to happen when you packetize these boxes. They got it wrong — the winners were not the shipping lines or even the ports, but the logistics service providers, who could integrate the different modalities.
This is digital logistics — digital supply chain management.
What I see emerging is a number of global platforms aggregating together the connectivity and able to access trouble tickets and faults in the networks.
You’ll see platforms allied to particular processes such as Google for advertising, VeriSign for identity, Amazon for order fulfilment: it’s the platforms that have the power. There’s a rebalancing between distribution and platform and service that’s a fascinating dynamic.
Marsden: The public internet is the network platform. Should it be? If you take Amazon or Google, they’re pitching excess capacity on their infrastructure to large corporates — saying: Don’t size your IT environment to the maximum; size it to the mean and we can provide the overflow.
Is that viable over the public internet? Don’t you want to have control over network and the IT environment? You don’t have any control over the routing of your traffic. If your IT is providing critical apps in-house and you want to use overflow for the same apps, you need to own the end-to-end performance.
Geddes (above): The problem that was missed when containers came in was that reducing the cost had unexpected second-order effects. Some smart consultants wondered what would happen to the New York apparel trade — they thought trade would move to Newark, across the river. What they didn’t see was that the clothes would now come from the Philippines and be sold at Wal-Mart for a third the price.
In return the cycle has turned around — companies are making high-end apparel in Los Angeles, because if something is shown on TV on Saturday night you can have it in the stores on Thursday, which you can’t do from the Philippines. The cost crash creates a platform for new business opportunities.
Alan Burkitt-Gray: What will those new business opportunities be in telecoms?
Nolan: If you look at iPhone, this is a platform with tons of apps. In the future can I say that I want my VoIP from one guy, my storage with Amazon and my database on Amazon, my email from Google Wave. This is the world of enterprise apps — an “enterpriseTunes” instead of iTunes.
We do it today very simply, but a service provider could reverse the role model, giving free connectivity and high performance, but making the money selling the apps.
Geddes: I can’t speak for BT Business or BT Retail, but that’s very close to the business model they’re heading towards. We have customers and we have propositions — just like retailers do.
You do not carry the inventory risk. eBay does not have warehouses full of junk: that’s what makes them very profitable.
I think the interesting battle is not on the media side, but is as the $700 billion telephony market crashes into the IT industry, as telephony becomes an entirely software-driven product, not requiring any telephony protocols and dedicated networks. That will be the ringside seat to have.
M Lewis: We have a close relationship with Microsoft, which has a disruptive platform, Office Communications Suite. All our Fortune 500 customers, every single one of them, has rolled out OCS, and they are using it internally, on long-term trials. They’re smashing their costs. It can go out to the PSTN, and you can trunk it into the back of Avaya. If you make all your money out of telephony, you’ve got to be worried.
Now that it’s all running across IP networks, that you’re already paying for, why on earth would you want to pay telephone bills to some other guy who’s going to run a cable into your office.
Geddes: There’s so much inefficiency in using the channels we have, such as voicemail and SMS. It’s often basic things that go wrong. If I leave someone a voicemail message, saying please pay the bill, but before they hear the message they go to the website and pay their bill. A day later, they listen to the voicemail — but they’ve already paid. You should be able to expire that message.
There are whole new businesses to be built, even rescuing stuff from the wreckage of the existing minute business. You have to think differently: think globally, think software platforms.
Marsden: Do you think the move to IP will drive telco revenue by upgrades in connectivity?
Geddes: There are fortunes to be made by people who time investment cycles well. At the moment everyone thinks there is money to be made in data centres — because data centres today are really profitable because there is a shortage of them. Two years from now there will be a flood of capacity. Business goes in cycles. For a telco it’s a dangerous place to go if you’re not fast and agile enough.
C Lewis: Telcos have to manage the decline of their legacy networks, because they haven’t gone away. I can see a time — five years or ten years away — when the revenue for a telco will basically be a broadband connection multiplied by the number of households, a mobile connection multiplied by the number of people, plus a supplement for mobile broadband, plus connectivity per business location.
M Lewis: What we’re really selling is managed SIP connectivity across a connection we’ve already sold. The customer needs to know we’re near enough to connect whatever software it is. The secondary value is that we take that SIP trunk and take it to the PSTN world as it is — and that will become more and more SIP-based and will look a lot like VoIP peering.
Scott Stevens (above): There is a shift in the business model for telcos from acquiring customers to delivering something new to existing customers. This is a fundamental shift from the land-grab of the last 10 years.
What does the telco do to differentiate? The telco has one thing that is unique — the network. Having control of the last 10 miles is important — Google or Akamai or anybody else can’t control the last 10 miles. There’s value there, in terms of security, in terms of experience.
Geddes: What will eventually emerge is, there will be compute storage and capability at street cabinet, or exchange, or centrally. There will be an evolving cost structure that drives certain types of applications. The cloud isn’t data centres.
Stevens: Instead of one business model, where you focus on customers, you get the other, where you focus on the thing the customer cares about. Who does that? Sit in a room with CTOs from a telco and they’ll stare at each other.
M Lewis: Google has bought an awful lot of dark fibre from people like us but we’ve yet to put a lot of money into software development. It has been a long hard road to get people to believe this is the way we should be moving. People cling to traditional models. Telecoms is an industry that moves slowly — I’ve seen icebergs move faster. A software company would start, make a profit, take it to market and IPO, and this is just to convince a handful of managers that doing things as we are won’t work in 10 years. It might work in five, but the question is, what are we going to do in the next two to three. GTB
Global Telecoms Business thanks Juniper Networks for sponsoring the roundtable