Building a Foundation for Transformation
Network virtualization coupled with automated management is rapidly evolving into a game changer for next-generation communications service providers due to growing market demand for flexible, agile and cost-efficient multi-service support.
However, the possible gains are being eroded by existing management information silos, hampering flexibility and resulting in operational inefficiency. One estimate by Wipro and Orchestral Networks derived from telcos' annual reports, outsourcing contracts and a financial model developed with a telco, shows that even small telcos could be paying upwards of a $400 million operations and integration tax every year.
For larger telcos, such as one large U.S. telco with over 200 different inventory management systems, the costs could range in the billions of dollars. The risk is that, if the silo problem is not addressed first, network virtualization can add to the silo problem and make things worse rather than better.
Currently, these network inefficiencies have slowed deployment of new services by telco’s creating an opportunity for new entrants to provide innovative new services Over The Top (OTT) of traditional telco services, and thus diverting new revenue away to others. At the same time, regulators are encouraging competition resulting in pricing pressures. All this is happening as the cell phone industry has reached saturation,.and thus taking the growth dividend off the table. Now there are new competitors on the horizon that can challenge telco’s traditional revenue sources. All of this is turning up the heat.
Against this background, some telcos have adopted a strategy of “transformation”. Transformation has many definitions, but for most includes converting existing appliance based telco data centers to virtualized data centers (NFV - Network Function Virtualization, and SDN - Software Defined Network). Traditionally, telcos bought data center functions such as EMS’s (Element Management Systems), OSS’s (Operations Support Systems), BSS’s (Business Support Systems), etc. as hardware “boxes” called appliances. That is, as special purpose hardware running software that performed the function. NFV seeks to abstract these functions and run them on general purpose hardware platforms. Similarly, traditional TCP/IP routers and switches were delivered as special purpose hardware running software that performed the function. SDN seeks to abstract these functions and run them on general purpose hardware platforms. This essentially means adopting the Cloud Computing technology paradigm that has been developed in other parts of the information industry and adapting it to the needs of Telco’s.
The problem is that, if the underlying silos of operational data are not addressed, this transformation may not achieve its desired benefits. It is like remodeling a house that is built on a foundation full of cracks. In September of 2015 the Economist magazine released a study funded by Wipro, Inc. It was based on interviews by the Economist with a broad cross section of telco CTO’s and CEO’s. The findings were that telco CTO’s uniformly said that their organizations understood the new technology, were prepared to implement it, and that doing so would save money. While, the CEO’s uniformly said that their organizations did not understand the new technology, were not prepared to implement it, and that doing so would not save money, but rather increase costs. It appears that the CEO’s can feel the floor swaying underneath their feet because of the cracked foundation.
The resulting financial problems can be seen documented in telcos' financial reports going so far in some cases as 25% to 50% reductions in dividends. Events on the horizon may turn up the heat. Recent activities of companies like Apple, Google, and Xiaomi may make the effects of operations silos even more serious, compressing the time available to fix the problem.The operations data silo problem has many sources, but the most fundamental and sticky source is the desire of existing vendors to differentiate their products, innovate, maintain margins, and lock in customers. Thus, conventional technology from traditional vendors has had difficulty responding to the operations silo problem.
While small, innovative companies are starting to emerge, telcos have not had a lot of experience dealing with small, innovative companies. Therefore, with the prospect of increasing challenges on the horizon, partnerships between small innovative technology companies and large service organizations present a possible path to a solution.
Telcos, by their very nature, have long-life system elements spread over large geographies with fragmented management and information systems. At the user information level, data flows. But at the operational level, there are a profusion of non-compatible interfaces.
Although Telco’s push for standards, vendors seek to have proprietary interfaces to let them differentiate their products, innovate, and maintain margins. This is highlighted in the results of standards organizations. For example, 3GPP SA5 has developed a standard for the interface between EMS’s and OSS’s. In three or four meetings per year over more than 100 meetings, this interface currently standardizes 30 to 40% of that interface leaving 60 to 70% vendor proprietary. The situation with other standards in the operations environment is similar. So, if telcos simply virtualize the existing non-compatible interfaces the problem will only get worse. Some hope that new standards developed for NFV and SDN will create combatable interfaces. But so far, it appears that 60 to 70% proprietary interfaces will likely prevail in the new standards.
