Home Asia-Pacific III 2011 The merits of cloud-based service environment for Mobile operators

The merits of cloud-based service environment for Mobile operators

by david.nunes
Bob DrummondIssue:Asia-Pacific III 2011
Article no.:9
Topic:The merits of cloud-based service environment for Mobile operators
Author:Bob Drummond
Title:Vice-President, Asia-Pacific
PDF size:263KB

About author

Bob Drummond is VP of Asia-Pacific at OpenCloud. As VP of the Asia Pacific, Mr Drummond has overall responsibility for OpenCloud’s sales team and fast-growing business across the region.

Mr Drummond has over 20 years’ experience in the Telecommunications industry, first in technical and management roles at Deutsche Telekom in Germany, developing data communications applications and services. He later joined German telco billing and prepaid solutions vendor LHS, where he was VP Marketing & Business Development. Mr Drummond subsequently worked for UK billing start-up Geneva Technology, and following its takeover by Convergys Inc. went on to manage the eastern EMEA region. He joined OpenCloud in 2006 and now divides his time between OpenCloud’s offices in UK, Indonesia and New Zealand.

Bob Drummond has been a regular speaker at industry conferences over many years. He holds a bachelor degree in Engineering from Auckland University and an MBA from London Business School.

Article abstract

The need for fast response to market trends is even more urgent today than ever before. Two solutions for operators’ service environment are compared: one that is a proprietary ‘box’ solution from a vendor, and another that is a standards-based network framework for service creation and execution. This article shows how operators, who increasingly need service creation agility, benefit from the open cloud based framework in terms of decreasing integration time, lowering development complexity, eliminating functional duplication and reducing costs and time to market.

Full Article

Mobile operators in the Asia-Pacific region have long been recognised for innovation in service development and delivery. Their now well-refined approach enables them to move faster than many of their European and US counterparts.
The industry has experienced declining revenues from traditional voice and messaging services, whilst demand for mobile broadband and data services is increasing. Operators in the Asia-Pacific region have responded to this transformation with an agile approach, providing value added services to cater for subscriber demand, thereby generating new revenue streams for voice, messaging and data.
Informa forecast that global mobile telecom revenues will rise to US$1.1tn by 2015. It is estimated that 40 per cent of this revenue (US$440bn) will be generated by data services. These figures demonstrate a growing appetite among the subscriber base for new applications and services, which agile over-the-top (OTT) service providers are intent on satisfying.
This ever-growing demand for mobile applications, and the competition from OTT players, however, is forcing carriers to become more service-driven. Operators must leverage this demand to regain control from the OTT service providers, who are effectively diluting the operator’s brands. There is a pressing need for operators to enhance their own service portfolios in order to generate new revenue streams. Innovation is critical, especially in the emerging markets, due to carrier goals of managing churn, enhancing margins and improving the end-user experience.
Carriers worldwide are clearly aware of the situation. One of the hot topics at Management World Forum in Dublin earlier this year was the need for operators to introduce greater agility into their processes, if they are to increase the pace of development.
Since operators in Asia-Pacific are more aware of the need to innovate, they appear to be more adept at driving their business through innovation. In response to the shift in emphasis of subscriber needs, they bring services to market quickly and efficiently, keeping up with demand and staying one step ahead of the competition.
In order to illustrate how operators achieve high levels of service innovation, we explore and compare two different approaches: the ‘boxed solution’ method established in the Asia-Pacific market, and the open service layer framework – an alternative rapidly gaining traction. Our scenario is based on two operators: Operator A deploying a proprietary boxed solution and Operator B with an open service layer framework.
Operator A has chosen to adopt the established model of deploying new services as largely self-contained ‘boxed’ solutions, developed by independent third-parties and requiring a limited amount of integration. This model defers the time, effort and cost of service development to third-parties who are keen to see their innovation installed in the network and generating a healthy revenue-share in return.
Reduced integration requirements lower any implementation barriers for operators. In order to maximise uptake, developers include as much of the service functionality as possible within the ‘box’. Some functionality already available in the network is actually replicated within the solution, to relieve operators of the integration burden. It is almost a ‘plug-and-play’ option for operators, shifting most of the risk often associated with any new service, over to the third-party developer. With less at stake, Operator A can afford a more adventurous approach to developing service delivery propositions. New services can be integrated quickly and cost-effectively. If the service fails, the third-party developer takes the hit, but if it succeeds, it can be scaled up.
Despite the developmental flexibility of this approach, there are three issues to consider:

(1) Integration costs – although reduced by the ‘boxed’ solution, such costs still exist and can still be significant. Also of note is the fact that proliferation of boxes on the network, as successive innovations are deployed, can be complex.

(2) The development cost conundrum – by replicating functionality rather than re-using it, third-party development is more costly than it needs to be. Although payment of the third-party is deferred until the service is generating revenue to be shared, the operator will ultimately be paying a higher price.

(3) Third-party dependency – innovation occurs at a rate determined by third-parties. New ideas that may be conceived in-house risk being watered down to meet the third party’s agenda.
The ability to be agile, implementing innovative new services to meet demand is critical. A recent study by research firm Vanson Bourne revealed that 54 per cent of network executives ranked architectural agility as one of their top three priorities and 67 per cent stated that agreed industry standards would provide them with a flexible service layer framework. Ensuring operational efficiency in the provision of new services was also a key focus, with 56 per cent estimating that the adoption of existing standards would free up 1-16 per cent of their annual budget, and 75 per cent stating that current ‘systems integration’ costs were higher because of inconsistent standards adoption.
Operator A’s approach, based on the non-standardised, closed and proprietary third-party ‘boxed’ solution goes some way to addressing these issues, allowing flexibility in the development of new services.
Now to Operator B – the approach here follows the same two principles of leaving third-party developers to carry the cost of development and minimising integration costs. Operator B, however, has chosen to adopt a service layer framework based on open standards. This approach takes both principles a step further and addresses the issues encountered by Operator A. In this case, the service layer framework is integrated into the network that provides the execution environment for innovative services, as developed by the third-parties.
Integrating new systems into the network is a time-consuming and costly exercise. With Operator A’s boxed solution, this exercise would need to be repeated with each new system added to the network. Operator B’s service layer framework also has to be integrated into the network, but this is a one-time need. Once it is integrated, each new service deployed represents a cost saving for Operator B compared with Operator A, since no further integration is required. Consequently, Operator B can also bring new innovation to market much faster.
The problem of increasing network complexity which was noted with Operator A (each new ‘box’ is adding more interconnections) is not an issue when only one ‘box’ (the service layer) is added. It entails just one set of interconnections. The integration of a service layer framework is also simple and straightforward since the application server is network agnostic. It can be applied to an operator’s core network, whatever the design or scale, whether next-generation or legacy.
Because the service layer itself is already integrated, the duplication of functionality within a self-contained solution is unnecessary. Using the service layer approach enables developers to re-use existing network capabilities within their own innovative services without increasing integration costs. This method also reduces the amount of development required and it ultimately saves costs for the operator.
A service layer framework allows re-use of existing services to extend others or create new services quickly. It permits new Instant Messaging Services, for example, to be used by legacy network services. Application server functionality allows entirely new applications to be scripted quickly and easily by providing access to core voice, messaging, data and charging functions as well as location and presence servers. Operator B can also take advantage of subscriber and market data, as developers harness this business intelligence to create bespoke applications.
An open, standards-based, service layer framework, for example one based on JAIN (Java APIs for Integrated Networks) SLEE (Service Logic Execution Environment), further simplifies service development and provides operators with greater independence to innovate freely. Using open APIs and the widely used JAVA language makes development accessible to developers without them needing deep telecoms expertise. As skill levels are reduced, the supply of suitable developers increases, which brings development costs down. Operators can also undertake development in-house at significantly reduced cost, enabling them to fully own their innovation roadmap.
Mobile Operators in Asia-Pacific already have strategies in place to differentiate themselves through the creation of new services. Adoption of an open and integrated service framework, however, will further enhance existing models, drive innovation and reduce costs.
The snapshot view of two different approaches outlined in this article shows that Operator B has distinct advantages over Operator A, with the service layer framework trumping the boxed proprietary solution. The service layer framework enables quicker service development and delivery through re-using functionality, rather than duplicating it. The creation or improvement of applications becomes cheaper, faster and less complex. This speed and ease of innovation allows Operator B to respond quickly to market demand and build new or improved services as and when the opportunities arise, or trends open up new avenues for service provision or tactical opportunities are identified. Operator B can respond to opportunities more effectively than Operator A, monetising new services quickly to generate incremental revenue, and minimising customer churn by improving the customer experience.

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