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SucceSSful StrategieS for providing services

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MAY 23-26, 2011 | THE CONVENTION CENTER DUBLIN, IRELAND

Industry heavy-hitters to speak at Management World 2011

Join them and other key players as they unwrap the who, what and how of communications enabling digital life. Speakers include:

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Olivier Baujard, CTO, Deutsche Telekom David Gurle, GM & VP Skype Enterprise, Skype Erik Hoving, CEO, NetCo Member of the Board, KPN International

Steffen Roehn, CIO, Deutsche Telekom Kevin Peters, CMO, AT&T Rajeev Suri, CEO, NSN

Ben Verwaayen, CEO, Alcatel-Lucent Stephen Shurrock, CEO, O2 Ireland

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cloud: Successful strategies for providing services

this publication is free to tM forum members

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Report author: Annie turner Publications Managing Editor aturner@tmforum.org Managing Director, TM Forum Insights Research: Rob Rich rrich@tmforum.org Creative Director: David Andrews dandrews@tmforum.org Commercial Sales Consultant: Mark Bradbury mbradbury@tmforum.org Publisher: Katy gambino kgambino@tmforum.org Client Services: Caroline taylor ctaylor@tmforum.org Marketing: Corporate Marketing Director, Lacey Caldwell Senko lsenko@tmforum.org Report Design: the Page Design Consultancy Ltd Head of Research and Publications: Rebecca henderson rhenderson@tmforum.org Advisors: Keith Willetts, Chairman and Chief Executive Officer, tM Forum Martin Creaner, President and Chief Operating Officer, tM Forum nik Willetts, Senior Vice President of Communications Published by: tM Forum 240 headquarters Plaza East tower, 10th Floor Morristown, nJ 07960-6628 USA www.tmforum.org Phone: +1 973-944-5100 Fax: +1 973-944-5110

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Page 4 Executive summary Page 6 Section 1 Is cloud game-changing and fundamentally disruptive? Page 10 Section 2 Following the leaders: Are service providers in trouble? Page 13 Section 3 What advantages do communications service providers have? Page 16 Section 4 how can service providers make money from cloud services? Page 18 Sponsor huawei

teleManagement Forum 2011. the entire contents of this publication are protected by copyright. All rights reserved. no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means: electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, tM Forum. the views and opinions expressed by independent authors and contributors in this publication are provided in the writers personal capacities and are their sole responsibility. their publication does not imply that they represent the views or opinions of tM Forum and must neither be regarded as constituting advice on any matter whatsoever, nor be interpreted as such. the reproduction of advertisements and sponsored features in this publication does not in any way imply endorsement by tM Forum or of products or services referred to therein. While every effort has been made to ensure that articles, sponsored features, logos, and trademarks appear correctly, tM Forum cannot accept responsibility for any loss or damage caused directly or indirectly by the contents of this publication.

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executive summary
the promise of cloud computing is creating great excitement, but also considerable confusion and concern in the communications industry. Many communications service providers (CSPs) are wondering how that promise can be fulfilled when there are so many barriers? Others are anxious that CSPs are making what looks like slow progress while newer, more agile players, such as Amazon, are taking huge steps. Are they really rivals to the CSPs anyway, or should operators be addressing different market sectors? this Quick Insights report is based on the executive roundtable discussion called Strategic approach for implementing a successful cloud business model, held at Management World Americas in Orlando, Florida in november 2010. Randy Bias, CEO, Cloudscaling, chaired the session and got the participants to break into very small groups to discuss the following questions, then report back. Be prepared for some strong opinions, a hot debate and unusual perspectives. Section 1 deals with the first question: Is cloud game-changing and fundamentally disruptive or not? Is it just another business model rather than a new paradigm? turns out there is considerable disagreement about the very nature of cloud services and whether or not they are the biggest disruptive force to hit communications for 20 years or simply an extension of what operators do already. this has big implications about how operators see themselves and what they perceive they need to do to succeed. Some argue that Amazon Web Services (AWS) success demonstrates a new use case, while others feel cloud is just a different name for what CSPs do already. Lisa Pierce, president, Strategic networks group, says recent primary research conducted by Saugatuck technology found that potential business users of cloud services ranked CSPs 13th overall out of 15 as potential providers, and
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suggests they should look at monetizing their assets in the short term by offering Platform as a Service to cloud service providers while they consider their longer term cloud options, some of which are outlined here. Cloud is also viewed as part of a wider phenomenon, whereby small and medium-sized businesses (SMBs) in emerging economies will, for the first time, be able to attack the large through connectivity and cloud, but cloud is just one aspect of this revolution, rather than driving the whole thing. Section 2 tackles the question that if new players are leading the likes of salesforce.com and Amazon are service providers as a group in trouble? how do CSPs compete against them? how do operators add value that they cant? What can carriers learn from what the pioneers have achieved and take it forward? Again it is argued that small companies in emerging markets are the most likely to outinnovate and under cut the cloud pioneers prices, not CSPs. their role is more likely to be offering a shopping mall for those offering solutions at the transportation layer. An attendee from a software solutions and enterprise cloud computing provider says, We believe multi-tenancy is a fundamental requirement to achieve economies of scale, yet the vast majority of solutions I see It vendors bringing to operators are a repackaging of virtualization and hosting technologies. Some point out that operators simply havent got the necessary It resources and skills necessary to compete with the cloud pioneers, and that the assumption that CSPs are somehow automatically going to become cloud service providers is dangerous. there appears to be general agreement that the biggest hurdle operators face in the short term is finding and working with partners so they can offer value added services themselves, and
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it must all begin with an understanding of the customer

Unless CSPs are willing to make that commitment and able to embrace change, they will have no chance of succeeding in the cloud services market.
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that the biggest opportunities for them are in emerging markets in the SMB sector. Section 3 sets out to look at what CSPs natural assets and strengths are and how they can be best exploited to provide cloud services. In the wake of the World Economic Forum, held the week before Management World Americas, it was apparent that some of the worlds most senior executives and several governments see network operators as having the most important attributes needed to provide cloud services to public and private enterprises control of data and its traceability. however, a senior architect from a large financial institution states that so far they have seen and heard nothing from any operator to encourage the company to take that step. they are very clear about what they want to hear and see to get things moving and it all has to begin with an understanding of the customer, and a willingness to invest sufficient money and effort. Several delegates feel that unless CSPs are willing to make that commitment and able to embrace change, they have no chance at all of succeeding in the cloud services market. Perhaps the best way to make this cultural change would be through a small subsidiary that is not constrained by the corporate way of doing things, which is how Amazon started off its Web Services division. Section 4 looks at possible ways that operators can monetize their assets and strengths through the provision of cloud services. Again, there was considerable disagreement about how this might be done and what would be needed to make it possible, and whether or not radical action was required. Partnerships with the likes of google are mooted, whereby the operators make money by sharing subscribers data with the search engine company under a different brand name (such as Verizon-google one delegate playfully

suggests) to ensure that the main brand remains separate and keeps its integrity. At the same time, everyone understands the nature of the partnership and that if you agree to let the joint venture use your data, you get services free of charge. this did not meet with general approval, however, with many variations on the sorts of services that CSPs offer now obviously being far more acceptable to the majority. the group tends to prefer, for example, treating mobile phones like PBX extensions, providing a one-stop services shop for SMBs and exposing network and other assets to third parties. Opinion on how to do this varied from just doing what CSPs do now under a marketing banner of cloud, to the need for radical, widespread change in the way operators work. Infrastructure as a Service is commonly seen as a race to the bottom, with Platform as a Service offering far more lucrative and sustainable opportunities. this demands that CSPs have a far better understanding of how they are perceived by their target groups of customers so that they can better address their needs and concerns. Although the debate outlined in this report reaches few, if any, firm conclusions, it does indeed provide a quick guide and insights into the variety, complexity, potential, and challenges of the collection of possible products and services that we refer to as cloud. It is also an interesting window onto what key players in the industry are thinking. tM Forum would like to thank all the senior executives who participated for their time and input. In particular we would like to thank Randy Bias for moderating the session and Robert Minnear, VP, Engineering, Internap network Services, and Jim Matthews, VP, Enterprise Architecture and Strategy, Charter Communications, for acting as provocateurs.
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section 1

is cloud game-changing and fundamentally disruptive?

the question of whether cloud is a new paradigm or just a new business model turned out to be one on which people could not agree, and whether is it disruptive or not has some big implications for communications service providers (CSPs). Moderator Randy Bias of Cloudscaling set the ball rolling by suggesting that the arrival of cloud computing was similar to the move from mainframe computing to enterprise computing. he argues, We are at the beginning of another 20-year transition and we are just seeing the very beginnings of how things are changing, by looking at how salesforce.com and Amazon operate they are true cloud pioneers. the last point is widely agreed upon, with one participant noting, Amazon [Web Services AWS] went from zero to 80,000 servers in four years and is growing at 100 percent a year. It will double up again next year, to a million virtual machines, 160,000 servers and theres no sign of it stopping. there are many enterprise customers on AWS, but its almost all new use cases, not outsourcing. Cloud isnt about enterprises getting rid of infrastructure, lock stock and barrel, to shove it onto someone elses infrastructure and get an immediate return on investment. Amazon is proven, its about looking at top line revenue opportunities and new apps. how does this all play to core carrier strengths? [Enterprise cloud offerings] looks more like a defensive move for operators to keep hold of their customers to me.
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Provocateur Jim Matthews of Charter Communications has little personal sympathy with this view, saying, [Cloud is a] distraction, not a disruption, [CSPs] could always provide the on/off ramp to a backbone service, and the Internet is a backbone service. he continues, When people talk of cloud services they are talking about leveraging the relatively free Internet that backbone. I have two data centers, one is in St. Louis and the other is in South Carolina. We have a strong backbone in place and believe we need it to assure our customer service, but I am seriously thinking of dumping my online backups onto the Internet rather than burning up my own bandwidth, if I can figure out how to do it to our reliability and security standards. Everybodys doing it and no one wants to pay for it. I have my drain at each end, but that virtual backbone that lives in the Internet, I dont pay for it, I dont know who pays for it, so why not use it? thats the whole business case. Many of these cloud service providers are no more than service bureaus large CRM service providers to me are service bureaus, most dont outsource, they do their own stuff. Its interesting to me that vendors of such services will promote and provide Software as a Service (SaaS), Infrastructure as a Service (IaaS) and all the rest, but then dont use it themselves internally. the question for me is, Why not?. Lisa Pierce, president, Strategic networks group, thinks CSPs advantages stretch
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Business customers put operators 13th out of 15 potential cloud service providers

beyond IaaS and she is also concerned that, traditional carriers are only looking at the cloud opportunity through the retail lens. Ive just finished analyzing primary research* and the data shows that if you look at the top 15 choices business customers are looking to use as their cloud service provider in north America, Europe, and Asia, carriers came 13th out of 15. While carriers are thinking about what they need to do to take advantage of the retail opportunity, they should monetize their strengths in terms of Platform as a Service (PaaS) to offer it to their cloud service providers of choice. It is very important that carriers grasp this. Some recognize this and are taking action, others do not. this is underlined by the findings shown in Figure 1-1 below.

Cloud service models As defined by the U.S. national Institute of Standards and technology (nISt): Software as a Service (SaaS). the capability provided to the consumer is to use the providers applications running on a cloud infrastructure. the applications are accessible from various client devices through a thin client interface such as a web browser (e.g., web-based email). the consumer does not manage or control the underlying cloud infrastructure, including network, servers, operating systems, storage, or even individual application capabilities, with the possible exception of limited user-specific application configuration settings. Platform as a Service (PaaS). the capability provided to the consumer is to deploy onto the cloud infrastructure consumercreated or acquired applications created using programming languages and tools supported by the provider. the consumer does not manage or control the underlying cloud infrastructure, including network, servers, operating systems, or storage, but has control over the deployed applications, and possibly application hosting environment configurations. Infrastructure as a Service (IaaS). the capability provided to the consumer is to provision processing, storage, networks, and other fundamental computing resources where the consumer is able to deploy and run arbitrary software, which can include operating systems and applications. the consumer does not manage or control the underlying cloud infrastructure, but has control over operating systems, storage, deployed applications, and possibly limited control of select networking components (e.g., host firewalls).

figure 1-1: if your company is deploying cloud services already please indicate in which area.
70% 60% 50% 40% 30% 20% 10% 0%

Business as a service (cloud-enabled business process outsourcing)

Software as a Service

Platform as a Service

*http://saugatucktechnology.com/ Browse-Research/798MKt-to-Competetelcos-need-to-Shape-Cloud-It-SalesStrategies-643/View-details.html

Source: TM Forum executive roundtable survey, Nov. 2010

Infrastructure as a Service

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Why are telcos so low on the list of potential cloud service providers for business customers? Is it an issue of trust? Pierce says, Ultimately yes, and its partially the fact that when you look at who the buyers of cloud services are in most companies, its not the people who buy networks. Sometimes its the data center director who will go, of course, with whom he knows and trusts. Sometimes its the VP of sales, and so on, so carriers dont have the sorts of relationships they need to move into the top four potential suppliers, even for overtly network-centric applications, like managed wide area or local area networks, or managed mobility. typically for those sorts of services, they get up to [the top] five or six out of 15. She adds, Carriers do have a lot of strengths that are important to becoming successful cloud providers, but Ive been doing enterprise marketing and product development for a long time, and fighting customers perception is a really difficult thing. taking advantage of it is a much better avenue to growth. how can operators do this? Applications could be the answer. While so far the amazing proliferation of mobile apps has seen the network operators playing the role of dumb pipes, it doesnt have to be this way. It depends on how the carrier involves itself in the application and the service provider offering it. Mobile apps are not the only game in town. If a CSP makes its network assets available through a service delivery platform-type (SDP) solution that application builders can use to offer their apps as a service, then the CSP can benefit from sharing the revenue stream the application generates, as well as providing the pipe. For instance, it might be that the CSP builds in guaranteed connectivity and priority to an app provided by, say, a healthcare monitoring service provider.
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this means the CSP is playing the role of an applications broker, exploiting the power of the network in terms of its attributes, such as redundancy, location, and security. Cloud is having another potentially disruptive effect on applications too, according to one delegate, on the grounds that previously, if you used Salesforce for Customer X you customized it because you could. now the customer consumes it as a service and either uses it as it is or until it eventually becomes economically unviable because it doesnt meet their needs. So cloud could cause a serious disconnect through enforced standardization, impacting the way a company runs its business. Yet another type of disruption this could pave the way towards another level of disruption too, in terms of It. Once the technology is outside the customers domain and managed by someone else, internal competence diminishes. there is no more home-grown expertise, rather the core competence resides with the managed services provider. this is a fundamental shift from a system administration, standardization, and control competency to a governance environment. So cloud will bring about a massive shift in the It domain, too. Another delegates agrees, saying, We think cloud is disruptive if the vast majority of what used to be on-premises, stack It management is being moved from your data center to an Amazon data center. If you can fulfill 70 to 85 percent of most enterprises functional demands with SaaS or PaaS, it makes the conversation about shifting the stacks kind of pointless. Put another way, SaaS is a workflow or transaction-based service where service level agreements are crucial, and availability key. they define the relationship between user
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the ciO didnt know about 200 cloud apps in use within an operator

and supplier a relationship that could usurp internal arrangements and discipline. It is a sobering thought that one delegate reported a conversation they had had with a CSP earlier in the year in which the CSP admitted to finding 200 cloud-based apps within the organization that the CIO didnt know about. It turns out that employees had been using their credit cards to pay for three or five or ten licenses, just to do a small segment of business processing. As that delegate comments, to me, if Im the CIO of a big company, thats massively disruptive. the barrier to entry into these cloud apps is very low; in the past, at the beginning of business-enabling infrastructures roads, rail, air travel and their adoption rates, it was the mighty that had the power to buy, but this is not the case here. Ubiquity is the next stop, then well get specialized service providers whose competence is to run that monetized resource, whether its electricity or communications. In conclusion About half the delegates thought cloud is a disruptive force, and half disagreed. there seemed to be some consensus that how disruptive it is and will be depends where you start from. For example, it greatly changes the game for software companies regarding their software licensing and maintenance, whereas it was felt that hardware vendors

havent been able to penetrate this low cost, monetized hardware market. there are different degrees of disruption, depending on where a company sits in the value chain and which segment you want to operate in lots of nuance, rather than cloud will sweep all before it. For a telco it was seen by some as a fundamental change in how they do things, but not a radical move away from their core activities, core revenues, and core customers. Perhaps, this line ran, every five years theres a major change in the technology they deploy, and they adjust to it, whether its programming languages or programming paradigms or compute paradigms this is a natural process and doesnt unseat them. Marc Monnard, VP CtO, Large Projects, Orange Business Services, thought this was looking at the issue from far too narrow a perspective. he argues, there are massive changes underway beyond the scope of cloud, cloud is only an aspect of it, it is not driving it all. there are huge changes to how we work; an SMB suddenly can access services that would have been way beyond it, but not just through cloud. now small is in a position to attack large, to compete in a way it could never have done at all. there are huge opportunities for SMBs in emerging economies, for example, through access and innovation. the world is changing.

The barrier to entry into these cloud apps is very low; in the past, at the beginning of a business-enabling infrastructure roads, rail and air travel and their adoption rates, it was the mighty that had the power to buy, but this is not the case here.
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section 2

following the leaders: are service providers in trouble?

If the new players are leading salesforce.com and Amazon and so on are communications service providers (CSPs) as a group in trouble? how can they compete against new players? how do CSPs add value that they cant? What can operators learn from what the cloud pioneers have achieved and take it forward? the world is changing at a dizzying pace. In October 2010 Facebook signed a deal with Skype through which Skype will make VoIP calls easily available to Facebook users, and suddenly Facebook is providing phone calls. google is doing googleVoice and googleApps, while Apple is disintermediating operators through its handsets. then theres Amazon Web Services (AWS). Figure 2-1, provided by Cloudscalings Randy Bias, shows how many product releases its had since it started. Bias observes,Its pace of innovation is increasing, not decreasing, because of the culture its built. At the same time, its ruthlessly reducing its prices it has probably had more since we put this together. Its a kind of a race to the bottom, but its always been a low margin retailer, thats its model. It does it best, first, and at the lowest price and thats hard to compete against. the major question is should a tier 1 carrier be trying to compete with salesforce.com or Amazon or google in cloud services? As one attendee states, It shouldnt always just be about cheap, cheap, cheap, [cloud is] a value proposition and customers expect values from a CSP. Another participant agrees, saying, If anyone
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figure 2-1: amazon Web Services pace of innovation is increasing

60 50 40 30 20 10 0 2004 2005 2006 2007 2008 2009 2010 Product feature releases of note

Amazon Web Services major price announcements

EC2 Price Reduced Oct. 26, 2010 Data transfer Feb. 1, 2010 Free tier and Increased SQS Limits Jun. 30, 2010 CloudFront Price Reduction Jun. 7, 2010 Combined Bandwidth Mar. 25, 2010 high Memory Price Reduced Sept. 1, 2010

Spot Instances Dec. 13, 2009 Reserve Instances Mar. 12, 2009 Lower S3 & EU Windows Dec. 12, 2009

Lower Reserve Instance Price Aug. 19, 2009

March 2009

January 2010

September 2010

Source: Graph and schematic provided by Cloudscaling, Jan. 2011

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there is no point trying to duplicate what specialists excel at already

is to compete, it will be a younger, slicker pioneer from the street. now emerging countries suddenly have access to all this stuff through mobile and this will lead to a massive disruption they could then compete with established players in terms of price, speed, and so on. there was general agreement that it is no use trying to duplicate what others do when the others specialize in a particular area; service providers need to focus on what they can do. It was suggested that the opportunity is for CSPs to provide a shopping mall for those offering solutions at the transportation layer on the grounds that no one was, as yet, challenging their dominance in network provision. the big question remains how to avoid being a dumb pipe provider? Charter Communications Jim Matthews states that in his view there are more fundamental questions than that: generally speaking we always assume you can get access to some available Internet capacity and that your customers can reach it to use it everyone takes the network for granted. the wild card is in who maintains the Internet backbone, and how will it sustain the anticipated, but unforecasted demand? Indeed, and as we all know, access is neither ubiquitous nor guaranteed, even in built-up areas in developed economies. this argument was countered by the assertion that, If you put everything in the cloud, you dont have that big transport expense and although you still have to access it, the trick is to get the user as close as
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possible to the app and only ship data you need as you need it. Matthews raises another difficulty operators face if they are to attempt to compete against the pioneers in cloud services: Carriers dont have the specialist It and programming people that google has because we generally speaking in terms of my prior telco, and current multi-service operator experience outsourced all that stuff in the 1980s and 1990s, so lost much of the core talent. For instance, I wont use raw Open Source within Charter, although some of our partners do, but our It department does not: I dont have the guys who can build it, fix it, keep it intact [since] we swallowed the outsourcing pill in the form of packaged software and service providers for many of our key systems. the CSP challenge is to be able to serve, stimulate, and monetize the demand being generated, in many cases, by others. The importance of multi-tenancy An attendee from a software solutions and enterprise cloud computing provider comments, theres a philosophical approach thats inherent look at all those leading companies, they are all multi-tenant. We believe multi-tenancy is a fundamental requirement to achieve economies of scale, yet the vast majority of solutions I see It vendors bringing to operators are a repackaging of virtualization and hosting technologies. they bring tremendous advantages in relation to things like provisioning, operational improvements, better utilization of the cluster

We believe multitenancy is a fundamental requirement to achieve economies of scale, yet the vast majority of solutions I see IT vendors bringing to operators are repackaging of virtualization and hosting technologies.
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and whether I go from 10 to 15 percent utilization to 60 or 70 percent. All these things are good, but radically different from what we are doing with multi-tenancy. It seems that people are in very different places regarding the threats they perceive and opportunities they face, and wonder if they are different in the infrastructure layer, from the platform and software layers. Marc Monnard of Orange Business Services says, there are two different models, although they are complementary and use the same approach. Amazon offers high-scale, high-volume, low-cost services like storage or a virtual machine-type environment. there will be few people playing in that space. those that do will be very powerful in their domain. then there is the vertical model where a service provider can say, We are very very good in retail and we want to make it possible for other companies to become part of our value chain. In this vertical segmentation, there are a high number of possibilities, from the emerging remote company somewhere in Africa with very limited means, right up to very large companies. these are two very different dimensions. Service providers can sit between the users

and software companies as a broker, handling thousands of software applications over time. In conclusion CSPs are not direct competitors to the likes of Amazon and salesforce.com right now, although against whom they are competing depends what sector youre talking about. A number of delegates felt there are a lot more opportunities for CSPs in emerging economies. In all circumstances there seemed to be general agreement that the key to success is figuring out what are core competencies, and a number of delegates argued that, in the short term at least, the CSPs biggest challenge is not trying to compete with the leading cloud service providers, but interworking with partners to offer services themselves. Disruptive or not, the idea that network operators will naturally progress to become cloud service providers is a dangerous one. there is nothing automatic or guaranteed about it, rather there are a lot of assumptions that have, as one observer suggests, something of the herd mentality about them. nothing has yet been proven.

Disruptive or not, the idea that network operators will naturally progress to become cloud service providers is a dangerous one. There is nothing automatic or guaranteed about it, rather there are lots of assumptions that have, as one observer suggests, something of the herd mentality about them.
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Operators challenges are not technical so much as about where data resides

section 3

What advantages do communications service providers have?

What are the opportunities? Are service providers big advantages in the networks? And if we are moving towards a standardized, commoditized, utility model for It, do telcos have some natural advantages due to their attributes being standardized, carrier-grade, and scalable, for example? Marc Monnard of Orange Business Services had attended a Cloud Computing Workshop organized by the World Economic Forum the week before Management World Americas and says, this was a group of senior industry and government representatives at CEO level who gathered to discuss the worldwide cloud computing opportunity. the wake up call is that the problems discussed are not technical, they are about where the data resides. Do I allow data to cross borders? Who owns the data?

TM Forum Enabling Cloud Services Initiative the primary objective of tM Forums Enabling Cloud Services Initiative is to help industries overcome barriers to adoption and encourage a vibrant, commercial marketplace for cloudbased services. the centerpiece of this initiative is an ecosystem of enterprise customers, cloud service providers, and technology suppliers that collaborate to define a range of common approaches, processes, metrics, and other key service enablers. the Enterprise Cloud Leadership Council (ECLC) represents the users of cloud services within the Initiative. It consists of a group of enterprise customers and serves as the anchor for this ecosystem. Members of the Enabling Cloud Services Initiative include some of the worlds biggest technology companies, including Boeing, CA, Cisco, Dassault Systems, Dell, hP, IBM, Intel, Microsoft and northrop-grumman; leading service providers such as At&t, Bt, and telstra; and large enterprise users such as Deutsche Bank, Defense Information Services Agency (DISA) of the U.S. Department of Defense, the Commonwealth Bank of Australia, Ing, McCann Worldgroup, SWIFt, and State Street Financial. tM Forum corporate members are welcome to join the Initiative and take an active role by contacting Matthew Edwards, director, Enabling Cloud Services Initiative at medwards@ tmforum.org. If your company is not a member, please contact Apostolos Kallis, SVP, Account Management and Sales, akallis@tmforum.org. For more about the Initiative, please go to http://www.tmforum.org/EnablingCloudServices/8006/home.html

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how can I ensure the traceability of data? he says, traceability and control of data are key one of the assets of telecoms providers is tracing when there are problems and redirecting traffic. Also, the secure and reliable treatment of data by telecom service providers [is well understood]. Furthermore, they have access to a lot of data about their users and in the past they didnt disclose it or use it for revenue. So service providers can be realistically considered as cloud providers in the minds of governments and large enterprises. these assets were very clear in the discussion we had and I think there is a good way for us to partner at this level. A senior architect from a large financial institution agrees that network operators have huge advantages in terms of owning the switching nodes on the Internet, having a high degree of integration already with all large corporate data centers (as providers of local area, wide area and metropolitan area networks), and the proven ability to execute in complex environments that handle millions of transactions every single day. A formidable array of assets on the face of it. Theres more to it than assets Yet they comment, this is not the only way of looking at it. I dont see much discussion of who the customer is and what their needs are, and you arent going to make a single penny unless you are delivering a service that the customer is prepared to pay for. Who is that customer? What are you trying to compete for? they continue, It takes the same level of [It] skill [within the financial institution] as it does to run an organization like google to give you an example, 10 billion transactions are coming in from the market every day and every single one of those has to be held forever.
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Were making tens of millions of trades in those markets every single day, and every single one of those marked forever against all kinds of demands out there the regulatory demands means you have to do a huge number of risk calculations and were operating in 72 countries around the world, so meeting the rules of about 130 regulators, each of which wants multiple reports a day and we get X million dollar transaction fines if you dont deliver them. these are big things and on top of that, we had 210,000 changes in our operating environment last year. the level of skill in our shops is unbelievable. The big piece is the value add they add, You start to think, why would an enterprise have 10 times the cost of an external solution? Because 9.999 times that cost is specific to the business case and the 0.001 percent difference is the thing at the bottom. the big piece is where the value add is, not the other way round. I think there is the case for high-end customers to use external public cloud solutions, but it is a difficult transition to make to go from fully internal to an external public solution. What Im saying is, rather than having that debate, lets agree that cloud itself is good and lets work out where the value is for and from all those players inside that space, and then lets see where this thing moves, because there are different opportunities for software vendors, hardware suppliers, telcos, service integrators, and all cloud customers too we all want to bring value to our own corporations. We have to be able to assert, formally, that the critical systems we are running are safe and secure, regardless of what the supply chain is. that is a big concern. Physical location. Physical security of the premises. Control of the pipes to
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resilience could be provided at the edge, rather than the core, at less cost

get in and out of that space. the challenge is, if you want to be a world leader in this space, you have to be good and willing to put money and effort into it, and attack it. the problem I see is telcos are good at being telcos and, by definition, have built large-scale pipes and understand how to do tens of millions of connections. Cloud is a different thing. In the same way that cloud challenges the enterprise, it also challenges the telco you have to think about how you use what youve got differently if youre going to make money out of it. It is suggested that resilience at the edge of the network could be provided by having flexibility and being able to move applications around, rather than going for the expensive 99.999 reliability of the core network. this could be a situation where silos are a good thing, coupled with agility of the transport infrastructure. there are changes that may make sense in the transport infrastructure, which should be a massive advantage for CSPs, with lots of ducts, lots of air con, and lots of buildings where you can put computing resources in place. In conclusion Clearly CSPs need to become much more customer-centric if they are to succeed in the enterprise market. One service provider participant puts it bluntly, If carriers continue to behave like they do today, there are no opportunities for them. the real questions

are Are you ready for a change? Are you ready to offer infrastructure in a more flexible way, to offer it as a test bed, to put up tens of new services in the next two years? this is a tremendous change in the culture. Do you really want to change? there are so many ideas for new business, but they need change and how can we change? Amazon Web Service was developed as an almost external project by a dedicated team in South Africa, according to another attendee, who suggests that to implement change or big new ideas in a large organization, You often need to get away from the mother ship to be successful. You need to isolate a team and let them behave like a start-up. I dont know if telcos can do it, but they should consider a joint venture or subsidiary or something, because if youre going to create something from your culture, it wont be from within. What is the new ingredient that service providers could bring to create a new culture? One delegate says, What services can you add that make sense for your customers and for you? For instance, could you add email services via cloud on top of your broadband? that would be a natural progression, perhaps. On the other hand, would I see a lot of consternated faces on my customers if I offer them infrastructure on demand from us? What qualifies us to offer that, to provide new blades for your servers? Which led us to the final question monetization.

What services can you add that make sense for your customers and for you? For instance, could you add email services via cloud on top of your broadband? That would be a natural progression, perhaps.
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cLoUd SerViceS

section 4

How can service providers make money from cloud services?

One delegate suggests, Maybe its better to separate the transport from the services and to develop 100 percent owned subsidiaries called Verizon-google, say, to compete. the idea behind this was that it would allow communications service providers (CSPs) to use subscriber data to make money in partnership with google, for example, via search, location-based services, and so on, while maintaining the integrity of the carriers brand yet making it clear to consumers that their data is being used in exchange for a lot of services provided to them free of charge, via the well-understood, ad-funded google model. Yet such radical action seemed out of tune with the group overall. A delegate from a tier 1 service provider says, Most companies have PBXs today. Can we extend that to include the mobile network so your handset is your extension? Who else can do it apart from service providers? What about location-based services accuracy within 200 meters is normal, what if we could sell you 50 meters accuracy to enable a third party to sell a service over it? Who else can do that? Where should we invest our money? Russell Wurth, VP, Product Management, Verecloud, says, We need to get CSPs in the value chain to figure out how to extend your assets on your network to your customer base, such as for small and medium-sized businesses. they need to provide offers that are simple and easy to use, offering onestop brokerage. In the U.S. the past model was, you provide my Yellow Books [business
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directories, known in some other countries as Yellow Pages] for my advertising, provide me with voice lines and help me with my business processes. It could be the same thing today give me all of the information, communication, and technology solutions that I need to run my business. Select them for me, operate them for me, and keep it simple. Jim Matthews of Charter Communications says, I agree, personally, I just hate the term cloud. Its the network we have already, the network can do all that today, its just a question of deciding to do it. Its an interoperability issue from a physical perspective. Cloud is a marketing term, thats all. Not rocket science Others agree: Monetization isnt rocket science. [CSPs] have lots of models to look at from Amazon, google, and so on, and they could add to that, in bundles, the access, and premium value added services. they already do premium security, and PBX services, its not a problem to commercialize them. they have the flexibility to do that already with their systems. A B2B [business-to-business] interface is something they are already familiar with. this is underlined by Joseph Martin, director, Solutions Engineering, Sprint Business Systems. he says, Disruption is just an extremely accelerated form of change and we need to embrace that rather than try to slow it down. Weve just announced Sprint Services Framework for our wireless network [in October 2010] and we want everybody to be
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Opinions vary radically concerning how to monetize cloud services

empowered to use our network. the approach is first to developers, but we think that enterprises, any of them, can benefit from Sprints OPEn application program with interfaces to location-based services for example, SMS, MMS, call control, billing, and so on. Sprints OPEn-ecosystem approach is all about helping developers and enterprises rapidly develop, certify, and launch new devices and applications. We do have to apply a certain level of governance. Well work with developers and customers to build the application layer that protects how the network works. When we provide value-added network services, well monetize as appropriate. In our view, we are acting as a cloud utility, among other things. In conclusion there is a huge spectrum of opinion about what service providers need to do to make money from cloud services, from those who think that they simply need to continue what they are doing already, but market it under the cloud banner, to those who think radical change is needed.

From the debate, it seems that Infrastructure as a Service (IaaS) is seen as a race to the bottom, and that Platform as a Service (PaaS) offers far greater opportunities. It is probable that CSPs could enjoy success through a whole range of approaches to meet different business needs in different sectors. A vibrant market in cloud services is not going to be achieved overnight, given the scale, scope, and complexity of the many issues surrounding them, but service providers do need to develop a better understanding of their actual strengths and, just as importantly, how they and their assets are perceived in the market by customers if they want to progress.

Service providers do need to develop a better understanding of their actual strengths and, just as importantly, how they and their assets are perceived in the market by customers if they want to progress.
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