When the first television shows were made they used one camera to record a theatre play. It was only after some time that the real potential of the television became clear.
Virtualization and IaaS is like a one-camera-theatre-play-broadcast
Yes it is great to be able to put software on virtual hardware and as such save some money in hardware costs. But it will not change anybody’s life because renting a virtual server full-time is more expensive than renting a physical hosting server. Companies that focus too much on virtualization and IaaS are not seeing the full potential of Cloud Computing.
Multi-tenancy – a game changer
Cloud Computing without mult-tenant solutions is like a race car without an engine. Making one solution that fits many and installing it once and managing it in one place is the real game changer.
How much time and money is lost in a per customer install? Ordering and installing hardware (4-6 weeks); paying for base software (OS, Cluster, Database, etc.); installing the total software stack; integration with back-up, fault management, single sign-on, performance management, third-party systems, etc.; upgrading and bug fixing; data migrations; etc.
All this can be drastically reduced if the software is installed once and designed for multiple companies and customers.
Best-In-Class solutions used to be those solutions with most features from market-leading companies like SAP, Oracle, Microsoft, etc. However most of these solutions are unnecessarily complex. There is a simple rule to check if you will be overpaying for unnecessary features: Do my business users need training? The more, the worst.
Apple has demonstrated that simplicity and easy-of-use are real demand creators. The real revolution of Cloud Computing is starting now. The real revolution is that business users can ignore the legacy corporate IT systems and use alternative solutions to get things done faster and more efficiently. The Appstore concept of “There is an app for everything”, will now be translated into “There is a SaaS for everything”.
Project managers will stop asking the IT department to install a shared project management server to synchronize their MS-Projects. Instead they will simply use a SaaS solution for project management. The same will be happening for other disciplines.
IT departments can fight this trend, just like they can try to stop people from bringing smartphones and tablets to work. However smart IT departments see a clear opportunity. Corporate systems are very expensive and often their implementation fails. This wastes a lot of time and money. By letting business users choose the SaaS solutions they want to use, IT departments will see the risk of project failures due to change management issues almost disappear. Using SaaS solutions however does not mean that IT departments are no longer necessary. Once users are over their honeymoon period they will want these SaaS solutions to use Single Sign-on and be integrated with corporate systems and other SaaS solutions.
The next steps in the Cloud Revolution
The next step in the Cloud revolution will be solutions that make easy integration between on-site systems and between different SaaS solutions possible. Project managers will love to manage projects via a best-in-class project management SaaS. However they will still need to get time reporting info, travel expenses, resource allocation, etc. The reality will be that some of these systems can be offered via other SaaS solutions and some will be local. All of them will need to be integrated if the enterprise wants to get real benefits. History has a tendency to repeat itself. Middleware and EAIs are not death because of the Cloud. They just will become EAIaaS.
The other Cloud revolution is likely to give business users tools to create their own applications in the Cloud. This does not mean programming tools but instead drag-and-drop wizards and dynamic data storage solutions. There are millions of business critical applications stored in Excel and Access files. It is time that business users get the proper Cloud tools to convert these into social corporate solutions. Google Apps and Force.com are ahead of the rest but they are far from being the winner yet. The war has just started…
What if you had a gigabit Internet connection at home and you could connect a simple device to it and start to offer mobile broadband services without paying for the spectrum?
Four disruptive technologies and the support from a large disruptive player like Apple, Amazon or Google could make it possible in 2013. You could make money from instead of paying money for your fiber to the home connection.
Disruption 1: white spaces
FCC, the US telecom watchdog, is opening the US spectrum to unlicensed communications. The term is called white spaces. It basically means that unused spectrum can be used as long as you consult the FCC database and use an FCC approved device.
Disruption 2: Vanu
Vanu Bose is the son of the famous sound systems Bose. Vanu’s venture is about software-defined radio. It basically disconnects your mobile phone from the underlying radio technology.
Disruption 3: Openflow
I discussed Openflow before. It is one of the major standards for software defined networks.
Disruption 4: Cloud Computing
No further introduction necessary.
Bringing it all together
A white spaces compatible “mini base station” at your home that connects to the FCC database to get some local spectrum. Via the cloud and Openflow your nano operator network is linked to hundreds of other networks. A disruptive player offers Vanu enabled phones, e.g. iPhone 6 or Android Nexus Vanu as well as a monthly broadband subscription, e.g. €10 for 100gb. You download a database of “mini base stations”, their location and spectrum onto your phone. You are ready to go. Each time a phone connects to a “mini base station” a virtual network slice is setup (flowvisor / Openflow) and the owner receives money per Mb (nano payments). At the end of the month your Fiber to the Home subscription is paid for or you are even able to make money if you have enough traffic…
Not so many years ago, Europe was the leader in telecom. Nokia was the dominant phone maker. Symbian the dominant operating system. GSM/GPRS/3G driven from within Europe. Ericsson the dominant network solution provider.
Fast forward 2011/2012
Only Ericsson is still leading the network solution market. Their mobile arm is being absorbed by Sony however. Symbian is dead. Nokia is in coma, let’s hope its doctor from the Microsoft hospital is able to revive them. LTE is being deployed widely, except for Europe.
The new rulers are Apple, Google and Huawei. Countries like South-Korea and Japan have gigabit fiber to the home. Something no European country can match.
What should Europe do?
First of all there is a legal problem in Europe that blocks a lot of innovations from reaching Europeans. Europe does not exist in telecom world. Instead there is a collection of small and medium countries that each have their own incumbant operator and legal framework.
The first thing should be to move the telecom legal framework to European level and stimulate the creation of one open market. It can not be that in Germany or France it is not possible to get a virtual phone number [DID] without having an address of residence. Services like Twilio have a hard time to deploy in Europe because of this.
The European Union should drastically reduce its help to farmers, especially industrial farming, and instead use the funds to build gigabit fiber-to-the-home. The UK model whereby the fixed infrastructure is separated from the go-to-market entities should be a good model to follow. If we want to have more Internet companies in Europe, we should start by having fast Internet in all mid to large cities. As well as LTE access for all Europeans in 2013.
European Silicon Valleys
The next step is to create European Silicon Valleys in which startups and universities get easy access to venture capital. Without European innovation, it is hard to see how the European telecom industry will blossom again. Large telecom operators have shown few success-stories when it comes to telecom innovation. They are better at buying successful startups, then starting new innovations themselves. But before you can buy, you must have them first.
What is the alternative of not doing anything?
European employment will suffer. Telecom hardware and software development will be moved permanently to China and India. With only some small design shops in Europe at best.
Operators will become bitpipes which means that only a fraction of the current employees are needed.
American dotcoms and large corporations will attract all investments.
If there ever was a time to feel European, now is the time…
The last player to join the attack on the telecom operator’s business is Apple: How to bypass carriers, Apple-style? (Special thanks to Dinesh Vadhia).
Apple never played according to the telecom rules in the first place. They have been the only mobile hardware vendor that could set the rules instead of negotiate them.
Who is attacking my assets?
So which telecom assets are currently under threat:
- SMS – instant messaging has been attacking SMS for years but now with the next generation of smart phones the number of SMS killer apps has exploded.
- Voice – Skype and VoIP providers have been attacking voice calls for years. However also here smart phones are accelerating decline.
- Roaming – Apple’s independent SIMs could easily attack the roaming segment. Also VoIP on Smart Phones will.
- Billing – Micropayment solutions from Paypal and Google Checkout are trying to enter this domain. Squared from a former Twitter-employee is attacking the mobile payment terminals in shops.
- Spectrum – Google’s CEO is the chairman of the New American Foundation that is trying to convince the American government to open medium-distance spectrum for free. Sort of WiFi but with kilometers reach.
- High-speed interconnect networks – Google is paying part of some of the under-sea links that connect multiple Asian countries.
- Fiber to the home – Google is rolling out fiber to the home.
- VAS – mobile apps are taking over from the value-added services.
- PBX like Business solutions – on-site premise equipment is being substituted by virtualized Cloud-based solutions.
- The telecom network – telecom operators are becoming bit pipes. New bit-pipe-only companies however are trying to specialize in this domain, making it hard for communication service-oriented operators to keep on making the same profits.
What should operators do?
If there was one simple answer, I would not be writing this post but living on my own private island ;-)
However if history can be a teacher, let us look at an industry that has been facing similar threats: Hollywood. Prices of distributing digital content have fallen close to zero. However the industry has been trying to keep on charging €12-€30 for CDs and DVDs. They have hardly embraced digital distribution and are now in a negative spiral of demise.
Telecom operators can easily get stuck in this same vicious circle. History has been cruel in the past: extremely lucrative postal monopolies were destroyed by email. There is no rule that states that economic wealth from one business model is substituted by a similar lucrative business model afterwards. Often analogue dollars are traded for digital pennies.
Accept digital pennies but collect them all
The first survival strategy is to embrace change and to go for digital pennies. This is often hard to do within existing companies. As such the proposed strategy is to set-up a parallel organization whose objective is to focus on these new business models and how to make money with them. Let the main company focus on the telecom hits (Voice, SMS, etc.) and the other company on the long-tail telco services.
Long-tail telco services are all about enabling communities of developers and companies to create new and innovative telecom solutions that they can sell to others. The focus should be on enabling others. Not on building them yourself. Being an App Store for telecom network-assets-based applications and not a builder of telecom services.
This parallel organization should be in close collaboration with partners and even dotcoms. If you can´t beat them, join them. Find ways of enabling startups to become successful with your network and other assets, not on building a parallel solution around your assets.
The music industry never understood this message but hopefully the telecom industry does.
Go IP and forget Circuit
Accelerate IP solutions and forget about circuit networks. The speeds at which services are rolled out in a circuit-based network are too slow to fight off competition. Isolate the circuit-based network elements and put an IP-based front-end.
Use the Cloud to quickly launch beta services.
Avoid building infrastructure and use the Cloud to innovate. In the telecom world services are often not launched until they are perfect. But perfect for who? It is better to launch beta services quickly and get real customer feedback instead of marketing-surrogate feedback. Launch multiple services. Check which are the successful ones. Kill the others and heavily invest in the successful ones. Cloud computing and open source can dramatically reduce innovation costs.
Build long-tail services and a common innovation-ready architecture
If you are going to work with hundreds of partners to quickly innovate then the way to interact with them is via self-provisioning. Build billing, telco network app stores, customer care, monitoring, etc. solutions that allow a third-party to automatically provision and test their solutions. Be open with interfaces and light on approval. Let them approve a web-based contract instead of sign a physical paper.
Also enable innovation via the right infrastructure. Let teams focus on the business and services. Not on storing data, managing users, billing, monitoring, etc. Common service APIs to interact with assets and common ways of building new services should accelerate time to market and avoid reinventing the wheel.
This is a time for innovation together with smart partners. Not a time to focus only on CAPEX reduction. Too many effort is spend on operating as cheap as possible and not on generating new revenues. At the end the best CAPEX reduction is to shutdown a telecom company that does not innovate at market speed and became obsolete :-(
When the words “technology and innovation” come to mind, most people think about Google, Apple, Amazon, Facebook, Salesforce, etc. Just a few think about telecom operators. The biggest telecom innovation has been mobile voice. SMS was never a technological innovation but an unplanned surprise success. MMS never got close to SMS. The iPhone and Android did not come from any telecom operator or provider.
Why is it that five people with a limited budget in months are able to stun the world whereas massive multinationals with deep pockets are not?
The reason is simple: “To innovate you have to try often and kill quickly”.
Google launched Wave in the beginning of this year. Google “killed” Wave about 6 months later. Every day Google makes a change to their search algorithm.
The current process
The cost for a telecom operator to innovate is massive. A simplified process would be the following:
- The marketing department receives calls and visits from every possible telecom provider on a daily basis. New ideas are thrown on the table to see if they stick.
- The marketing department selects the best ideas.
- These ideas are scanned by the different other departments, e.g. operations, finance, legal, IT, etc.
- A multi-disciplinary team is assembled to write the requirements for the new service, a.k.a. RFI.
- Several possible telecom providers receive the RFI and provide a response.
- A budget is allocated based on the responses and an RFQ, request for quotation, is organized.
- Several telecom providers respond to the RFQ.
- A bidding war is started and one or two winners are selected. If there are no clear winners then a proof of concept is requested.
- The winner develops the solution. Operations, IT, marketing, legal, accounting, etc. all work together to launch the new service.
- The service is launched.
The whole process easily can take a year or more and costs multiple millions. If this would be your money, you would be very careful how you would spend it as well. The end result is that only a handful of new services are launched. Only those that are expected to be immediate successes.
This process is a very “useful” process for driving down large integration and network equipment costs. However it is not an innovation stimulating process.
How can you bring innovation back to telecom?
The first step is to avoid a small set of marketing people to take decisions on what is a good service or not. The only person that can legitimately decide if a service is good is the end-user.
The dotcoms therefore launch very often incremental and new services. They monitor in detail which ones, users like. It is even possible that different alternatives are launched in parallel to see which of them the users prefer. Direct feedback is critical. If a service is not picking up or users complain about it, it gets killed quickly. Services that get good feedback are continuously improved, based on user´s feedback.
How to apply “try often, kill quickly” to the telecom world?
The major show-stopper is the telecom architectural complexity. Although a marketing person has a good idea, it often takes months to update all the systems. The reason is that network operations, business logic and user data are scattered over multiple systems and departments.
To solve this problem, services and data should be separated from the network. Google´s technological differentiator is their generic data store a.k.a. Bigtable. Bigtable is an in-house developed generic high-volume, always-available data store. More than 60 services are reported to be using this common data store. Services as different as docs, maps, app engine, etc.
Google has over a million servers. Maintenance and operations are fully automated. Software is written in such a way that failure of hardware is assumed. Hardware are not top-end but instead commodity rather low-end servers. Software can easily extend over hundreds of servers.
Applications are isolated and use the servers and data through standard interfaces.
I can´t throw away my legacy
Of course an established operator can not throw away their legacy systems. So until we have a common data store and isolation between software and hardware what can we do?
The trick is to start small, move quickly and use asset exposure. Isolate the legacy systems and expose simple APIs to the telecom assets. Via asset exposure a lot of the “hard-coded” SS7 services can be substituted with network intelligence in the cloud. Mini applications can be written by anybody from a large multinational to an individual developer. As long as users can pick their preferred services and applications from the “net app store”.
Data should also be transitioned to a common data store. In the beginning this might mean nightly synchronization of different silos. However little by little the common data store should become the master of the data. Dotcoms are no longer using sql database as a one-size fits all solution. Google, Yahoo, Facebook, Twitter, etc. all developed their in-house solutions and some even open sourced them.
Applications should be running on public or private clouds hence scaling up demand for the top applications during the day and well as scaling down during the night. This should control CAPEX of the hardware. Too much logic is packed into proprietary hardware. Software should be separated from hardware and written in such a way that it can scale to hundreds of servers.
Development teams should not have a contract of 12 months with a waterfall of requirements. Teams should be small (5-6) and have short iterations to deliver small incremental innovations. The dotcoms have a tendency to release new features multiple times a week. Even some multiple times a day. Get immediate feedback and kill if not successful. For telecom innovation teams to do the same, they should be multi-disciplinary. Ideally a mix of people from the operator and strategic partners. It pays off to have a common architecture to deploy the individual services quickly. It pays off even better to have an open API so the innovation team works on the infrastructure for others to innovate.
The small teams should have at least one person that is business and marketing focused and that has the commercial responsibility to make the service a success. Different small teams that have high pressure of time, innovate quickly. Pressure of time is also important. If there is no external pressure of time, then it has to be build internal. A simple technique is to allow people from all over the organization to take a break of their day job and to take part in an innovation team. They should have clear milestones. One month to come up with an idea. Two months for a prototype. Three months to launch the first beta. Two months to get user traction. Any milestone missed means the project is stopped or at least potentially stopped. Failure is not a shame. Quite the opposite. People will go back to their day to their day to day job with new ideas and new energy. After a while they might try again and have success. Innovation and failure go hand in hand. If you can not afford failure, you can not get innovation…