Blog: Just transforming the technology won’t cut it
Nov 9, 2017
- This blog is the fruit of a discussion between Ian Scales, Managing Editor, TelecomTV and Tord Nilsson, Director of Global Marketing at Dell EMC
Today CSPs feel themselves to be in an existential ‘costs going up as prices come down’ dilemma. The trouble is that their customers are demanding more bandwidth for the same money. In highly competitive markets that’s what they’ll get because bandwidth scarcity, even for mobile services, is no more. Instead network connections increasingly offer unlimited data. So operators must pursue two options. One is to find ways to slash costs, the other is to find new sources of value against which to charge. And they need to do this while ensuring that they win their share of new services such as IoT as they deploy their next generation infrastructure and services.
That’s the well-understood challenge in a nutshell. So how are telcos responding? They are preparing to transform using software defined networks and network functions virtualisation (SDNFV) and they are readying themselves for 5G mobile which is designed to both lower the cost per mobile bit by unleashing huge amounts of usable bandwidth and to deliver highly differentiated services designed to push up overall margins. SDNFV will enable the 5G differentiated services.
Changing the tech won’t do it
But transforming the technology simply won’t cut it. It should be obvious by now that cultures must change, new modes of working and thinking must be adopted and new - we think sharing - business models and industry roles must emerge to take advantage of the technology change.
The prime benefit of the new virtualisation framework is to enable ‘agility’ so that services can be created, tested and deployed (by software rather than by men in vans) in days and weeks rather than months. We think agility is going to be key, not primarily to ‘compete with OTTs’ as is often cited, but to enable new business models which can help CSPs rejig roles and relationships (both internal and external) to both reduce costs and find those new points of value.
Enabled by the technology CSPs can build new, compelling sources of value because the demise of the old source - bandwidth scarcity - will surface new problems to do with network complexity and management. If you and your competitors have overwhelming amounts of bandwidth to deploy, the value moves to ways to employ it the most effectively and efficiently before you and your customers are overwhelmed. As a result the telco attributes defining value today are not bandwidth or spectrum, but the ability to perform Network automation, Orchestration, Reporting and Analytics, or NORA (everyone likes a four letter acronym). NORA gives CSPs the ability to offer customers and partners new relationships and sharing business models that were simply too complex and expensive to arrange and integrate on the existing technology platform.
What sort of sharing?
The move to open source software in telecoms is an obvious means of cost (and risk) sharing when it comes to network technology. Big telcos such as AT&T, Verizon and Telefónica have been keen to set the pace here. AT&T in particular is ‘open sourcing’ its ECOMP (Enhanced Control, Orchestration, Management and Policy) automation platform through The Linux Foundation. For AT&T the more inter workable infrastructure and services are, the greater its ability to efficiently partner and build new services and business models. So open source software should provide a basis for easier integration of NORA capabilities once transformation is well developed. It’s possible to envisage CSPs developing particular skills which could then be offered to partners across their partner networks - security and analytics, for instance. This sort of sharing is already being employed in the ‘analogue’ world and for similar reasons.
Lessons from on-high?
The airline industry, for instance, exhibits some fascinating parallels. Airlines operate in a deregulated environment and the name of the game today is to cut costs to try to stay ahead of ever lowering per passenger ticket prices. Sound familiar?
To illustrate its problems the last couple of months has seen insolvency threaten Italy’s Alitalia and has put the UK’s Monarch Airlines out of business. For Monarch the market has moved on and its business model, developed for an earlier time, just can’t cope; while Alitalia has been unable to restructure to get a grip on its costs (amongst other things) by shedding employees. Its latest proposal for an across-the-board cut in wages in return for more investment was rejected. Administration followed by a complete break-up looks possible. In the airline business the short- and long-haul markets have diverged and what works in one doesn’t work so well in the other - different planes, different customer expectations, different cost structures.
Essentially low cost airlines, the category that Monarch found itself in, do short haul best because passengers - even relatively wealthy ones - care less about levels of service on a short flight. They are in the air for less time, so don’t demand feeding and watering and can put up with less comfort on the journey.
This is not so different from the telecoms market where low cost Web-scale or ‘digital’ approaches to delivering services are on the rise because users are prepared to sacrifice the high-touch customer relationship and ‘5 nines’ reliability on offer if it means big savings. But with this approach there is always the danger that customers, while enjoying the low prices, quietly suffer a “user experience deficit” and yearn for more provider contact.
As always, there’s a balance to be struck. Naturally, the long-haul airline players, such as Alitalia, have a harder time stripping out costs because of customer expectations. So one proven way forward for them when it comes to costs is to be careful not to cut service quality, but to actually try to make the customer experience better while at the same time reducing costs where possible.
On with the sharing
One effective way to do that for the airlines has been through ‘sharing’. A good example is the Star Alliance. Twenty eight airlines share a growing range of facilities at the airports and, according to the alliance, all the members get to retain their distinctive culture and style of service, but where they can they develop co-locations at airports so they can share infrastructure for ticketing and check-in, executive lounges, baggage facilities and parking.
This approach is already being applied in telecoms with the ‘Next Generation Enterprise Network Alliance’, ngena, being an example. This alliance, which was created with Cisco, SK Telecom and others just over a year ago and recently bolstered by Deutsche Telekom, offers a wholesale model to partner telcos who want to deploy SDNFV-based services to their enterprise customers, but would prefer not to build the necessary infrastructure themselves. So it’s essentially another way to get to scale, reach and lower costs by sharing facilities, in a similar way to that deployed for the Airline industry by the Star Alliance.
The ngena example shows how partner relationships which would have been unwieldy in the extreme on a legacy architecture can enable individual carrier members to build their own particular customer network services across the other members’ infrastructure to create near global network reach for each individual member - hopefully without the technical and business model complications that have bedeviled telecom carrier alliance attempts in the past. We think arrangements like ngena will proliferate as network transformation really begins to bite.
The key ingredients are not just SDNFV and the ‘agility’ it brings, but large doses of entrepreneurial imagination and a willingness to take risks. And all this must be done, at the retail end at least, without the customer experience being sabotaged by the complexity of the offering. All this has been the urged on the industry for many years. Maybe this time.
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