Are Cloud Services a Market for Telcos to Lose?

Posted: October 13th, 2010 | Author: Bob Machin | Filed under: Events | Tags: , , , , | 1 Comment »

At the Comptel User Group last week, a number of the communications industry’s issues du jour were offered to the delegates for roundtable discussion. Amongst the most popular was the topic of cloud services.

It’s a subject which has not exactly suffered from neglect this year, but nonetheless, it was interesting to hear it discussed between communications service providers (CSPs) and network specialists (such as Comptel partners IBM, Cisco and Alcatel Lucent)—people who have a real and pressing interest in how cloud will play out as a credible service for CSPs as well as a possible new revenue source for equipment and software suppliers.

The attention of the group was quickly caught by the question of how big an opportunity cloud could be for telcos.

There is little doubt that cloud services are going to be big and in great demand—the business case is easy to make, in terms of both cost savings and business flexibility. Furthermore network and virtualisation technologies are making cloud increasingly viable. This will continue with the roll out of 4G, which will make access to cloud-based services ubiquitous across fixed and mobile networks.

And no one questions that carriers have some real competitive advantages to exploit in the cloud services market, particularly through their command of the communications network and their influence and control over the quality of delivery.

So cloud services for telcos—it’s all good? Well maybe.

Our delegates raised an issue which we don’t believe has been widely discussed—exactly how evident are telco advantages to the addressable market? Telcos know the value of their technology, but to what extent is it a differentiator for the average customer? After all, it’s hard to value what you don’t understand. Are SMEs aware of the difference between ‘smart pipe’ and ‘dumb pipe’? Do they know (or care) how little influence the IT- or Internet-based provider can have over the quality of service (QoS)? Do they understand the difference that QoS will make to the reliability of their connection?

Telcos undoubtedly have great advantages in the provision of cloud services, but there’s still a lot of education to be done to sell those advantages to the market. Now, as we move out of the early-adopter phase, telcos must grab that all-important mindshare.

GTB 40 under 40 Summit: Is the Way Forward Dumb or Smart?

Posted: October 1st, 2010 | Author: Bob Machin | Filed under: Events | Tags: , , , , , , | No Comments »

London, September 27-28, 2010

Global Telecoms Business (GTB) hosted an invitation-only summit for 40 leading telecoms entrepreneurs under the age of 40 in 2010, drawn from operators and network, software and services suppliers (including Gareth Senior, Comptel’s CTO). Most nominees presented or participated in discussion panels. Around 35 of the 40 nominated executives attended; discussions were wide-ranging and provided an interesting barometer on the state of the industry.

The forty foresee a significantly changing role for telecoms, which unsurprisingly finds itself at yet another crossroads. What’s perhaps different—and encouraging—is that the industry is starting to look outwards rather than inward for its strategic direction, recognizing that telecoms will be less an ‘endpoint service’ but will increasingly play an enabling role inside other industries and in broader service eco-systems. Telecommunications could, for example:

–      provide monitoring and metering for advanced utilities, smart grids, fleets, road congestion management and so on;

–      be built into devices, or bundled with services (Amazon’s Kindle was often cited as a disruptive device), which could point to a similar approach with gaming and other single-or limited-use Internet devices; and

–      be at the heart of ‘vertical’ applications for business, government, public services and more.

Much was made of device connections overtaking person-to-person as a point of focus. ‘Fifty billion devices’ currently seems to be the industry’s most quoted statistic, projecting the number of devices which will be Internet-connected by 2020. By comparison, the industry has just crossed the five billion mark for connected humans. No one is prepared to make confident predictions about exactly what will result from all of this connectivity (and in particular, where the new revenue will come from), but it seems fair to say that some interesting business-to-business dynamics are likely to emerge over the next few years. The outlook for telecoms may be cloudy, but it’s far from dull.

At the same time as looking for innovation, there is evidence of real focus on ‘the plumbing’, or optimising networks for the most efficient use per subscriber, service or device, largely to disconnect ever-growing traffic volumes from the costs to which they are very closely aligned today. Nominees expressed confidence in the power of more adaptable, resilient, software-driven networks to make the network more cost-effective and scalable for future services. This was reinforced by the GSMA, which believes the capacity crunch can be overcome through a combination of:

–      Effective, variable pricing—particularly tiered- and QoS-based,

–      Spectral efficiencies,

–      New 200 and 800 MHz spectrum—and the refarmed 900 and 1800 MHz range,

–      General expansion and greater sharing of networks,

–      Traffic offload through Wi-Fi and femtocells, and

–      Better traffic management—using caching and compression techniques at the network edge.

If there was a single recurring theme, it was the question of ‘smart pipe vs. dumb pipe’. Most of the 40 are predicting some flavour of smart pipe—exploiting the capabilities of advanced networks to create sophisticated and differentiated communications services—but shading into a more enlightened approach to content than just ‘becoming a media company’. This could perhaps be best described as ‘smart business’, founded on network capabilities but selling content where real advantages exist (e.g. in location services or QoS dependency). A significant number still argue for a much closer focus on the network, however, tending towards a highly efficient ‘dumb pipe’, focusing on the wholesale provision of network services to other service providers and industries.

In the end, the most compelling analysis for me is one that looks at the argument in a less ‘polar’ way than ‘dumb vs smart’ would suggest, instead considering networks-into-content as a spectrum of value, with opportunities to capture varying lengths of the value chain depending on market position, market context and technology or business advantages.  Nothing new here? To judge from this conference, what’s new is a much more realistic weighing up of those factors than we’ve seen in recent years, which should help the market open up realistic new business and resist some very real challenges from rising Internet competitors.

These are themes that will no doubt be explored further at Comptel’s upcoming Comptel User Group (CUG) next week—watch this space.