Beating the OTTs at their own game

Phil Marshall/Tolaga Research
03 Sep 2014
00:00

A few years ago, many telecom executives regarded cloud as ‘vaporware’. Today this couldn’t be further from the truth. Cloud infiltrates application and service environments, and has become the basis for next-generation network evolution, under the guise of telco cloud.

Many service providers offer cloud-based infrastructure, platform services, and standardized environments for federating and brokering innovative third party applications. And an increasing number of service providers are trialing network function virtualization (NFV) and software defined networking (SDN) technologies.

The touted value proposition for NFV and SDN is to increase the versatility and economics of network functions using standards-based hardware platforms and leveraging open-source software initiatives like OpenStack, OpenFlow, and OpenDaylight. Currently NFV and SDN solutions are targeted at specific applications and require a great deal of technical and commercial innovation for mass-market adoption.

The infiltration of cloud into the telecom industry is disruptive and requires industry executives to work closely with technologists for successful adoption. The proliferation of cloud-based application environments (such as Amazon’s EC2 and Microsoft’s Azure) has lowered the barriers for service innovation and enabled over-the-top (OTT) players to thrive. Most telecom service providers recognize that they cannot compete with the pace of OTT innovation. Instead they are developing solutions that meld OTT innovations with their own capabilities to create differentiated value. For example:

  • Telecom business support systems and network environments offer transaction management and service distribution capabilities of great value to OTT services. However, since these environments are complicated, new services traditionally required many months for implementation. More recently, service providers and their technology vendors have been developing open APIs. These open APIs expose key business support system functionality for use with third party OTT applications. We believe that open APIs, which commonly use basic RESTful or SOAP interfaces, are needed for telecom service providers to succeed in the cloud services arena.
  • Cloud infrastructure environments have differing security, performance, and reliability demands, depending on the workloads they support. In particular, there are many workloads unsuitable for public cloud infrastructure and some that will remain within on-premise equipment for the foreseeable future. These varying demands are driving the need for hybrid cloud environments that blend workflows across public, private, and on-premise environments. Traditionally OTT cloud service providers like Amazon and Microsoft have primarily operated public cloud infrastructure. This creates opportunities for others, like telecom service providers, to offer premium hybrid cloud solutions. To achieve success with hybrid cloud offers, service providers need to take a page from Amazon’s book by developing easy-to-use self-service portals for their customers to provision cloud resources.
  • As SDN and NFV implementations mature, telecom service providers will have the ability to effectively orchestrate network resources for specific services in real-time. This might apply to premium offerings and to services with particular requirements, such as machine-to-machine (M2M). When this is realized, we believe that the market for network resources will fragment and aid the emergence of new providers. For example, OTT players like Facebook and Google might take a more active role in key network functions such as packet forwarding.

Service providers must anticipate the significant commercial and operational transformations needed as telco cloud takes hold. Since these transformations are complicated and have protracted timelines, service providers cannot afford to wait for telco cloud technologies to mature, but instead must transform in anticipation.

Phil Marshall is chief research officer at Tolaga Research

This article first appeared on Telecom Asia Cloud Insights Supplement August issue

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