|Asia-Pacific II 2009
|Collaboration – the catalyst for growth
|Chief Technology Officer
Wilfred Kwan, Pacnet’s Chief Technology Officer, is responsible for Network Operations, Engineering, IT, and Product Management. Mr Kwan previously served as Chief Technology Officer at Asia Netcom, and earlier as Senior Vice President of Network Operations in Asia for Global Crossing. Mr Kwan’s two decades of experience in the telecom industry ranges from software development and integrated circuit design to product development, network planning and operations. Mr Kwan joined ANC from WorldCom Asia Pacific, where he was the Director of Operations. Mr Kwan has also held various management positions with Global One, Lucent Technologies, Motorola and Nortel. Mr Kwan is currently a member of OFTA’s advisory committee in Hong Kong. Wilfred Kwan earned both his BS and MS degrees in Electrical Engineering from Cornell University and has an MS in Financial Management from the University of London.
Few expect a network service provider to cover the world alone. Carriers are tuning to collaborative strategies in order to drive continued growth of the industry through challenges of the global economy. Recent studies show strategic partnerships are considered the best way to finance big projects and bring needed expertise onboard. During the telecom boom earlier this decade, many collaborative projects were driven by investors, not users; today, partners with a vested interest in the services provided are sought.
A quick glance at the current telecommunications landscape reveals that the age where one global service provider can do it all is clearly history. It is evident that the new business paradigm embraced by the telecommunications industry is that of partnership and collaboration. Collaboration for growth David Reed, the American computer scientist, who was involved in the early development of the fundamental TCP/IP networking protocol, captured this shifting business paradigm in what is now known as Reed’s Law. By allowing users to form groups, the utility of large networks can scale exponentially with the size of the network. The benefits of Reed’s Law have been embraced by today’s business leaders, including those involved in telecommunications and technology. Findings from Frost & Sullivan’s recent CEO survey show that 58 per cent of respondents acknowledged that forming ‘strategic partnerships’ is a key strategy for success. Yet beyond simply acknowledging and recognizing this strategy, 54 per cent of respondents noted that it was one of their top three strategies for future growth. These CEOs were certainly not alone in their views on collaborating for growth. According to an article entitled, “Which kind of collaboration is right for you?”, in the December 2008 edition of the Harvard Business Review, the authors, Gary P. Pisano and Roberto Verganti, said “no companies innovate alone” and acknowledged how a variety of companies have worked with partners to create new technologies, products and services. For example, they cited how technology giant IBM has successfully set up a number of consortia with other companies to develop next-generation semiconductor technologies. Against the backdrop of the current economic crisis, strategic partnerships are even more important to a company’s growth strategy. Subsea collaboration The idea of partnership and collaboration to roll out new infrastructure might not be an entirely new concept in the telecommunications industry; in the past many international projects have been collaborative. Yet, in the subsea cable industry, many of the cables built at the start of the decade were owned by standalone companies. If you look back at subsea cable investments during the heady days of telecoms from 1998 to 2001, you could easily find more than ten cable projects that cost more than US$1 billion each, which were funded by single, standalone companies. Nevertheless, there is a stark difference in today’s subsea cable investments. Subsea cable projects today are definitely more collaborative and rational. Just look at the US$7 billion or so that is being spent on new cable projects in the coming three years and you will see that almost all of them are being built by consortia with three or more partners. Earlier in 2008, Bharti Airtel, Global Transit Ltd, Google, KDDI, Pacnet and SingTel, announced that we were partnering to build Unity, a new US$300 million trans-Pacific subsea cable connecting Chikura, Japan to the west coast of US. John Hibbard, a telecommunications industry consultant, pointed out that comparing consortia subsea cable projects back then and now, a key difference is in the constituents of the consortia. He noted that at the start of this decade, prompted by enormous technological developments in photonics, many entrepreneurs, leveraging the buoyancy of Wall Street, initiated submarine cable projects. More often than not, cables were then owned by parties who were not in the telecommunications sector but, frequently, from the finance industry. This meant that they were not a source of traffic, and these projects were seen as a potential for profit rather than the provision of infrastructure. Today, there are very few cables owned by parties who are not carriers or service providers who use the cable for their own traffic as well as that of others. As a consequence, there is now less fragility as the cables are effectively infrastructure investments. The rise of digital content is also bringing about collaboration with new parties in subsea infrastructure rollouts. With the amount of digital content that we are seeing on our networks growing, it is no surprise that the digital content giants are looking for bigger, faster pipes. The Unity cable project, for example, has Google as a partner. This is just the beginning; we expect to see greater interest from digital content providers, especially those which deliver a lot of digital video content, in collaborative infrastructure projects. Diversity and reach Natural disasters, such as the earthquakes in January 2008 that caused damage to subsea cables and interrupted Internet connectivity in the Middle East and India, highlight the need for network diversity and redundancy. The Taiwan earthquake at the end of 2006 which damaged most of the region’s subsea cables, was another incident that led carriers to shift their focus towards the need for network redundancy to minimize the business and economic impact of such disasters in the region. The increasing reliance of modern-day commerce upon subsea infrastructure, is forcing enterprises to take into account the huge impact that network incidents may have on their returns. According to a Gartner study, each hour of network downtime costs large corporations an estimated US$42,000. Since a typical business experiences an average of 87 hours of downtime a year, this results in a total loss exceeding US$3.6 million a year. As a result, carriers have been busy carving out collaborative partnerships through Network to Network Interface (NNI) interconnections to extend the reach and reliability of their networks. For example, the EAC-C2C subsea cable infrastructure that provides connectivity to major cities in South-east and East Asia connects users almost anywhere in the world – from Paris to South Africa to New York – by collaborating with carrier partners globally and delivering traffic through NNI interconnections. Likewise, carriers from other parts of the world partner to leverage EAC-C2C in reaching key countries across Asia. Beyond infrastructure Beyond building new subsea cable infrastructure, carriers and service providers are taking partnerships to a whole new level by rolling out new services made possible by collaboration. Few carriers now try to do it all on their own. They realize that by collaborating with technology partners, they are able to roll out new services with state-of-the-art technology and bring them to market faster than they would be able to do alone. By collaborating with industry partners to rapidly roll out industry-leading services and by deploying application acceleration devices in high-speed network, customers can immediately enjoy the advantages of state-of-the-art application acceleration appliances on the network, without worrying about compatibility and configuration issues. Looking ahead As pointed out by Mr Hibbard, collaboration is certainly not a strategy that can be force fed. Collaboration only works effectively when there is win-win outcome for the collaborators. Unless fairness and equity exist, more energy will be spent on managing relationships to the detriment of the project. Collaborators must want to join willingly rather than have them join grudgingly because they see no other alternative. However, given the frequent announcements of new partnerships in telecommunications and technology, collaboration continues unabated despite the economic climate. The possibilities for collaboration are truly limitless and we certainly expect to see new partnerships within the carrier industry, as well as new collaborative efforts beyond this space in the coming year.