|Issue:||Europe II 2010|
|Topic:||Why CSPs should embrace the cloud|
|Title:||Senior Marketing Director, EMEA Business Development|
Gordon Rawling is Senior Marketing Director for the EMEA region at Oracle Communications. Prior to Oracle Mr Rawling worked for Amdocs where he was instrumental in the development of the company’s Integrated Customer Management vision. Gordon Rawling has more than 17 years of experience in IT service delivery and marketing.
The hype surrounding ‘cloud computing’ has steadily increased, but corporate customers on the whole have yet to be convinced of its merits. Communication service providers have much to gain from cloud computing through the generation of new untapped revenue streams. However, the business issues surrounding the cloud and its relevance for communication service providers raise many questions that still need answering.
The last few years have seen some radical changes occur for communication service providers (CSPs), both in terms of technology deployments and business approaches. For many CSPs, cloud computing represents the next leap forward in delivering new and innovative services to business customers, and presents an opportunity to generate new revenue streams. However, there are still many unanswered questions from businesses about how the cloud will service their needs. Cloud classification: telling a cumulus from a nimbus Cloud computing encompasses a number of different enterprise deployment models, including: the public, private and hybrid clouds. The definitions of cloud are massively complex, and the industry as a whole has come to no real agreement; so for the purpose of this article the terms have been defined as follows: • Private cloud: An in-house cloud deployed by an enterprise to service a certain number of people behind a firewall. • Public cloud: Available to the general public or a large industry group, and owned by an organisation selling cloud services. • Hybrid cloud: A cloud computing environment in which an organisation provides and manages some resources in-house and has others provided externally. Before deciding which model to implement, businesses need to audit and understand their IT infrastructure requirements to ensure that they make an informed and correct decision. How CSPs can generate revenue from the cloud For CSPs, the cloud represents a great opportunity to open up new revenue streams. Getting business end-users to operate though the cloud will greatly increase their network traffic and transport revenues. CSPs provide the connection fabric that links to the ‘cloud’ element of cloud computing. It is this capability that puts them in a unique position to take advantage of the cloud, and sets them apart from other cloud vendors. The first two revenue-generating opportunities open to CSPs are derived from the same function. By selling networking capabilities as a service to enterprises, CSPs can charge for a given level of connection quality to a cloud provider. Similarly, CSPs can also charge cloud-based providers for delivering agreed levels of network service quality. The third revenue generating stream is more complicated; however the return on investment is much greater. This involves CSPs becoming providers of the cloud themselves, offering customers IT resources directly. Verizon and Orange Business Services are both examples of global operators who have recently launched their own cloud offerings to businesses. Private versus public clouds On paper, the cloud is the ultimate in hardware consolidation for the enterprise, meaning a private cloud can seem quite appealing to a customer. Many people are arguing that CSPs have been too slow to respond to market demand for cloud services, and this has prompted businesses to ask what the benefits of public clouds are against establishing private cloud capability. Each model has its own benefits, with the public cloud providing lower upfront costs and enhanced economies of scale, compared to the private cloud offering greater control over security, compliance and quality of service. Ultimately however, the capital expenditure (CapEx) associated with deploying a private cloud would effectively eliminate any potential cost savings it might deliver through elasticity of service and economies of scale. The power of the public cloud Economies of scale, elasticity and low cost of ownership are among some of the benefits presented to businesses by public clouds. However, there are also some more practical benefits provided by the public cloud in terms of the physical cost of storage that should not be underestimated. Real estate and utility costs, such as electricity and air conditioning, can be very expensive. By supplying storage services to customers en masse, public cloud providers can take advantage of the cost savings in utilities expenditure through economies of scale. The CSP-powered cloud For CSPs to truly capitalise on the opportunity presented by cloud computing, they need to become cloud providers themselves. Given the history CSPs have in service innovation, their public cloud offerings have the potential to significantly increase the value of their networks and generate new revenue streams. As CSPs begin advancing their cloud technology endeavours, they will undoubtedly evolve and incorporate next generation technologies and services. This means that CSP-powered clouds will not only outperform, but overshadow, traditional cloud vendor providers who will find it tough to match their level of network innovation and connectivity. Both the public and private cloud models provided by third parties could still generate revenue for CSPs. However the level of revenue will be restricted, with a risk of simply fulfilling a dumb-pipe function, providing the connectivity between enterprises and cloud providers. There will be an ability to up-sell new innovative services, but CSPs will be missing out on the true revenue-generating potential that offering their own IT infrastructures to power customers’ clouds could generate. Customer concerns with the cloud Although the cloud is very appealing and the cost savings generated significant, there are a number of customer concerns CSPs need to understand and address before businesses will trust them enough to hand over control of some or all of their IT. The main concerns are around governance, security and regulation. Governance It is essential to understand that when using the cloud, customers become part of a distributed environment. This means that certain applications will be moved off the business’s architecture and on to the cloud. This can cause latency as millions of users vie to use thousands of services. If not governed correctly, this can affect the quality of service delivered to the customer. As a result, controls need to be enforced to protect the quality of service for authorised users. By managing the number of users accessing certain services, service level agreements can be met. Furthermore, using access controls to establish authorisation levels, records can be kept of who has accessed what data and when. Security Security is a prime concern as information and intellectual property are the lifeblood of all businesses. Security is one of the largest barriers to uptake of the cloud, as well as one of the largest drivers for those willing to make the move to the cloud to go for the private model. The reason being because they lack trust in public cloud providers, where security is essentially in the hands of an external organisation. For example, some businesses are concerned that in the case of a segment of cloud storage becoming re-allocated to a new client, previously deleted information might be restored. Businesses want reassurances from CSPs and other cloud vendors that measures are in place to ensure that this will not be an issue before they commit. However, by outsourcing to a managed public cloud business customers can actually see security benefits from having experts managing their security 24/7. This is a significant advantage for customers who might not be able to afford to do this for themselves, and for companies whose IT departments may not have the capacity. Regulation Regulation is another important area of concern where CSPs must act to reassure potential customers. Depending on the business, this will affect the compliance measures required from cloud providers. Every CSP needs to ensure it is able to address all local compliance issues, but again CSPs are in the ideal position to offer this because of similar issues faced with mobile networks and existing services. The advantage of a CSP-powered cloud for enterprise As well as providing new revenue streams for CSPs, the CSP-powered cloud will also benefit customers. The CSPs’ track record for innovation over the last ten years is showing no signs of letting up. If anything, due to increased market competition, it is gaining momentum. CSP-powered public clouds will benefit from service innovation upgrades at source, capable of automatically being rolled out in real time to benefit customers. Not only will customers benefit from the speed of delivery of new services and products, but they will also shift great CapEx costs across to operating expenditure (OpEx); receiving a predictable monthly bill for services. Businesses that opt for private clouds, however, will not benefit from these incremental upgrades, at least not without incurring significant upgrade costs. Similarly, those who are serviced by traditional cloud providers will not be able to benefit from the innovative heritage of CSPs. Conclusion Hype surrounding the cloud is at its peak, and the advantages for CSPs of becoming cloud providers to business customers are compelling. Cloud computing can provide customers with greater elasticity, deliver economies of scale, and provide access to enhanced network and service capabilities, previously not possible. For CSPs to take full advantage of the cloud however, they need to be able to provision their own managed services through it. Although the cloud offers an exciting new opportunity for CSPs, it is important to remember that deployment is not about chasing a technical dream, but delivering a quantifiable business benefit for customers. This should go a long way to fulfilling the requirements when overcoming businesses’ concerns about the cloud, and adding to the CSPs’ revenue streams.