The Lure of the Cloud
Capitalizing on market opportunity, new apps and projects, cloud can create a range of revenue streams for the telcos without waiting for capex
Name a technology which is synonymous with optimization of resources, reduced TCO, cost-effective, that brings flexibility, agility, scalability and speed-to-market benefits to all verticals of businesses, isn’t it the Cloud Computing?
As known, cloud is normally adopted to reduce the bottomline spent because by using cloud companies are optimizing the capacity and also the management required to manage IT. It reduces the spend on bottomline and topline. They can have a new revenue channel and increase topline revenues by offering qualitative services. Cloud can dramatically reduce time-to-market for an enterprise, it allows for scaling the organization to capitalize on market opportunity, launch new application and projects without waiting for capex.
Cloud computing technology provides immense opportunities to telecommunication industry, the other verticals could either avail cloud computing services or host cloud computing services at different levels such as Infrastructure-as-aService (Iaas), Platform-as-a-service or Software-as-a-service (Saas). But the telecommunications sector is poised at a different level as it can extract both the revenue streams. Cloud can create a range of revenue streams for the operator; from the base level compute and storage, the creation of platforms to enable new markets and on to actual end user applications. Additionally, providing cloud services as part of a bundle to enterprises would increase the stickiness of the entire bundle of services.
Cloud in Telecom
Cloud is gaining more significance in telecommunications these days. Industry predictions has said that there would be 15 bn devices by 2015. And there are around 2 bn plus people access internet; they primarily use traditional PCS, laptops and netbooks, now the trend has changed to smartphones, tablets. Hence all of us are consuming content and services from internet which will be be further accelerated going forward as smartphones, smart TV and embedded devices are also connected to internet. Vikram Sharma, VP, sales, service provider, Cisco India & Saarc observes, “The rate of cloud adoption in telecommunications currently is around 4 to 5 on a scale of 1-10, but within next couple of years it would rise to 8 as majority of customers are planning to adopt cloud technology in some way or other. Several other SPS are targetting to offer cloud services as well due to the advantage it brings.” Cloud provides a great opportunity to telecom, it enables them to transform from being an Iaas provider to data pipe provider to VAS provider.
R Ravichandran, director, sales, Intel South Asia rightly points out, “Now consumers’ interest is not limited to information, it has moved towards the utility phase ie, about online transactions, e-commerce. Suddenly there is a huge exponential growth of devices which are having impact on internet perception. This means that back-end infrastructure also needs to scale, so that people can get information whenever and wherever they want. So the server infrastructure which is riding on the back-end should also scale up.” He added, “For every 120-150 people who connect on internet should be supported with a new server and for every 600 people who connect over smartphone to the internet, it needs a new server. Hence mammoth infrastructure needs to be created. There are challenges in doing this in the traditional form in terms of power, cooling because they need to build these data centers and each of them should be empowered by lot of things. We need to create infrastructure that delivers what the consumers need.” Therefore cloud adoption could ease the process to a large extent.
Vamsicharan Mudiam, strategy leader, cloud computing service, IBM India/ South Asia explains about the cloud approaches that a telco could opt for, “Telcos are approaching cloud from 3 modes, first is, as a consumer of cloud from internal perspective. Second is, using the cloud to enhance revenue by offering services on cloud platform. Third is, to use the combination of the above two in order to increase the customer stickiness and offer something deeper than voice and data, as the true angle of mobility is coming into picture. And thereby enhance customer experience.”
On being a cloud user, Indian telcos have slowly but steadily increased the adoption of cloud based services as they look to cut costs and improve agility. “We expect to see wider adoption from an applications development platform in 2012. As cloud platforms mature, more and more applications are getting built in a manner that leverages the cloud model. Enterprise applications, both of the commercial off-the-shelf kind and the bespoke type, are now being designed to work seamlessly on a variety of cloud platforms including private, public and hybrid,” mentions Samvit Raina, SVP, IGATE Patni.
Cloud in telecom is very complementary. Cloud inherently is a network based solutions and enables to add more capabilities to network to provide more value added services for customers.
Being a Subscriber of Cloud
In the initial days of telecom industry, it catered only to the needs of voice services, slowly it moved to data services as technologies evolved. But now telcom is at a transitional phase. The industry is becoming instrumental in empowering the people through technological advancements. Voice and data services are playing a crucial role in the overall socio-economic development as well. Cloud computing enables telecom companies to tap new business areas by leveraging on cloud based offering of services beyond traditional customer base. Telcos could deploy some of the services on standard, large scale computing environments. Cloud also enables larger scale outsourcing of business process and network management tasks. It also improves the efficiency and flexibility of traditional service delivery. Telcos can differentiate themselves and offer a better service to their customers. Cloud services will commoditize and they can add more value to the services which are already deployed.
“Cloud also gives them an opportunity to leverage 3G bandwidth from mobility perspective. They can get more and more people to use these services from different devices and voice model, they can also accelerate the usage of the bandwidth they have acquired,” states Vamsicharan Mudiam. Operators can harness cloud technology to access new customers and markets, enhance their deployment time, lower cost and develop new revenue streams.
Being an Enabler of Cloud
Cloud gives an advantage to telecom companies to host cloud services. As it is already infrastructure heavy industry, they can make the best of existing infrastructure and also the existing customers. Service providers are primarily offering Infrastructure-as-a-service which offers customers the ability to purchase compute power based on consumption. They use virtualization technologies and support a variety of operating systems and applications. Virtual servers could be allocated dynamically and assigned to cloud subscribers.
Quite a few telcos are offering cloud computing services to their enterprise and private customers. “Telecom companies who have data center business have been addressing one major segment that
Service providers are primarily offering Infrastructure-as-aService which offers customers the ability to purchase compute power based on consumption
is enterprise segment, either they are doing co-location services or they are hosting some service for both financial and other flexibility services. They are offering services on a shared model,” says Vamsicharan Mudiam. They can reach out to SMBS which is a huge market in India. Telcos can leverage on their existing connectivity or existing relationship in the market. They can sell some small and medium relevant applications or ERP or collaboration platform to SMBS initially. It is a wise move for telcos to focus on SME segment. Because it is very huge and also they do not have enough investments but are in dire need of infrastructure, bandwidth, applications and platform. And the huge advantage is that they are already servicing the SME market; it is much easier to sell to the existing clients to bring them on these services.
“Service providers not only host data centers and virtualization assets but also host network. As they have huge strengths in both network and bandwidth, if they embark on offering services diligently they could go far ahead of traditional cloud service provider,” mentions Vikram Sharma, VP, sales, service provider, Cisco India and Saarc. The advantages of cloud computing/hosting include speed for implementation, economies of scale, elasticity, scalability and cost efficacy. Service providers have the opportunity to integrate with the macro-economic evolving ecosystem, and become a key player in the new world of computing and communications.
The growing competition and depleting ARPUS has pushed the telecom players to constantly expand their portfolio of services to cater to the needs of diverse consumer segments. The operators are required to balance investments in new innovation with potential revenue generation opportunities in order to address the consumer demands.
In an highly competitive communications sector, one ought to consider all potential revenue generating strategies for cloud computing business. Currently, the market’s pricing models and associated service level agreements (SLA) are fairly uniform. However, companies could provide differentiated services and SLAS and bag additional revenue streams by integrating performance and capacity management technologies into cloud operations.
Telecom companies can optimize ROI on both communication and application space. They could quantify some of these services in enterprises, says Vikram Sharma. “Iaas is very capital intensive. ROI will depend on capital investment and it could be generated in 3 to 5 yrs. In Platform-as-a-service, it is much more complex as they need to provide development environment. And ROI will be much higher in platform. On Saas ROI depends on scale as they move up the value chain. They will have to partner with application service provider to en-
cash on the Saas model,” shares Rakesh Aerath, director, telecom and innovation, Logica India.
Although cloud computing brings with it umpteen opportunities, yet some ifs and buts need to be addressed effectively. The fundamental issues are networking, security and real-time characteristics. Until recently, networking has witnessed ignorance both from usage and virtualization point of view which actually exacerbated the impact of network latency and bandwidth on the performance of cloud-based applications. Telecom is an infrastructure savvy industry. Though the industry is infrastructure ready, the cost of networking is the single most important cost factor for cloud computing infrastructure compared to the cost of computation and storage. This, at times or at least in the initial days, eats away the economical benefits of cloud computing. Besides, telecom networks have to ensure multiple quality of service requirements and it needs to supported and resolved in the context of cloud computing infrastructure. Networks should focus on QOS, placement of computation and interaction between computational instances. Network performance is a top concern.
It is needless to say the importance of security. And it is identified as one the biggest hindrance for the adoption of cloud computing. Security, which is pivotal, would be inherently weakened due to the malware attacks, malicious employees and denial of service attacks. It is paramount to resolve security issues through technology rather than contractually; and provide the level of security in telecom networks. It is important to build secure-by-design infrastructure. Security threats need to be mitigated else multi-tenancy could lead to new attack opportunities and also unauthorized access. “Good policies around business continuity plan around data loss and security should be ensured. There are mechanisms in cloud to overcome some of the security challenges in private and public cloud. From the architecture
Cloud in telecom is very complementary. Cloud inherently is a network based solution and enables to add more capabilities to network to provide more value added services for customers
perspective, they can look at hybrid cloud—how well it can be designed to use the benefits of public cloud,” advises Rakesh Aerath, director, telecom and innovation, Logica India.
In addition, cloud computing has to be usable for telecom and real time services. In this context, there should be standardization efforts in the area of cloud computing. In this regard, cloud computing segment must have a common goal in the direction of increased openness of architecture alongside reducing the platform costs; while the usage of inter-cloud architecture, private, public or hybrid solutions for real-time and telecom services. Telcos should be aware of the complexities of interoperability, for instance some apps are apt only for Google engine and it cannot be accessed on other browser. They have to focus on App portfolio and they have to be ready for cloud.
According to Samvit Raina, SVP, igate Patni, “The other prominent challenge arises because typically all of an organization’s computing tasks will not move into the cloud—certainly not all at one time and most probably some will always remain in house for one reason or the other. It is also likely that those tasks that move into the cloud and those that remain behind interact very closely, exchange data or transactions
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frequently, share common databases, depend on each other’s successful execution because they represent discreet steps in a single continuous business process etc. Therefore integrating the two—tasks that have moved into the cloud and tasks that remain behind—it is a non-trivial issue that must be resolved diligently, that requires significant efforts, that may require alterations or re-engineering of applications and their interfaces, that may even require redesign of the underlying business processes in some cases.”
Cloud Offerings— Telecommunications
Cloud Service Provider Platform was launched by IBM in last year November for telcos specifically. This platform is basically to enable them to be a service provider. This is more focused towards telcos but some of the system integrators and non-telco data center provider can also utilize this. IBM offers nearly 14 cloud offerings from Iaas to managing the cloud which could be either resold or hosted by telcos themselves apart from the cloud services offered to any industry. IBM also partners with telcos and offers 3 basic services— firstly, helping them to create content to offer on the cloud. Secondly, offering its cloud architecture and enable them to re-sell the offerings. Thirdly, to help them monetize through huge sales engine in the country by helping to leverage on salesforce.
Cisco’s core offering is to provide essential building blocks to set up a cloud model. Building blocks can be divided into 3 different areas—visioning the cloud services, building the cloud structure, and selling the cloud infrastructure. Logica India mainly offers applicationas-a-service.
Indeed, cloud technology has a high potential of being an ubiquitous and beneficial technology in the near future but the cloud adoption is relatively low at present; the ecosystem ought to address real issues, challenges, and potential problems for it to deliver technical and profitable business value.