Network provider benefits and options in providing cloud computing services


Recently, we’ve written about cloud network infrastructure and the need for a UNI and (multiple) NNIs.  For more on that topic, please visit:

In this article we look at telco benefits (both internal and external) of deploying cloud services as well as a cloud computing services model.  We believe that cloud computing offers great potential for telcos to participate in the growth of the enterprise, government, and consumer ICT markets, which are currently dominated by IT vendors (IBM, Cisco, Oracle, etc) and Internet software companies (i.e. Google, Amazon, Facebook, Yahoo, etc).  With a cloud computing services model, service providers can insert themselves into the value chain by redefining their roles to expand beyond connectivity and provide Web-based application delivery services.

Benefits of Cloud Computing to Network Provider:

A.  ITU-T FG Cloud Position

The benefits of cloud computing could  be considered from several different perspectives, including network/ service providers, partners and users.  The ITU-T FG-Cloud sees three potential benefits of cloud computing from a telecom/ICT provider perspective: 

  1. To consider the cloud delivery model as a converged platform to deliver IT and communication services over any network (fixed, mobile and worldwide coverage) and used by any end user connected devices (PC, TV, Smart Phone, M2M, etc).
  2. To deliver a rich set of communication services (voice & video call, audio, video & web conf, messaging, unified communication, content creation, workspace, broadcasting…) according to cloud multi-tenant consumption based usage model and creating mashups with Web 2.0 collaborative services for “Communication and Collaboration as Services” CaaS.
  3. To consider network services (L2-L3 connectivity , VPN and L4-L7 network services) as smart pipes “high-grade network” for cloud services transport and cloud interconnection (inter-cloud) in order to guarantee secure and high performance end-to-end quality of service QoS for end users (considered as an important key differentiator for telecommunication players.

In addition to these main three benefits , some other benefits can be also considered from Service Provider and user perspectives:

  • Cost saving: Cloud providers can host software at a much lower cost than enterprise customers can themselves. Virtualization and provisioning software lets them efficiently allocate computing resources, lowering their cost of hardware. Cloud computing service providers can locate facilities at low cost locations, provisioning which cannot be duplicated by most enterprises. There are low up-front costs. In fact, other than the costs for a user terminal (personal computer or smart phone), web browser and network capacity for each end-user, there are no software or hardware costs that customers need to pay.
  • Improve Total Cost of Ownership & De-Risk: Investments are shifted from the upfront Capital Expense (CAPEX) to Operational expense (OPEX) for consuming IT resources. Increases capacity utilization of IT assets. User terminals, servers, or software, which is not needed in-house (Onsite), can be offered up for outsourcing (Online), and equipment not fully utilized can be used jointly with third parties to reduce idle time. Costs can also be reduced by short lead times, and by paying for just what is needed.

  • Highly scalable and flexible infrastructure: Massively scalable engine allows building highly scalable services for customers and partners. Infrastructure scale with the demand for peak loads and seasonal variations.

  • Efficiency & flexibility of resource management: Service providers can use more flexible and efficient resources (IT resources, server, storage and network resources) using virtualization technology in cloud computing.

  • Business agility with rapid service deployment: Service provision with lower cost by efficient use and management of resources. The easier and faster a provider can perform an administrative task the more expedient the business moves, reducing costs or driving revenue. Easier to get IT operations established and less need for IT expertise at the company level. Provider also finds their speed of deployment is much quicker than if they were to build applications, or worse, a whole data center, from scratch.

  • Reliability of service with high availability: Since the workloads can be spread across many facilities, and even across clouds, redundant instances of applications can be used to avoid downtime and increase the availability. In addition, data distribution strategies can help address disaster recovery and business continuity issues.

  • Highly support of 3rd party business: Intermediate service provider, utilize marketplace which allows multiple input from Independent Software Vendors among ISV, developers, cloud service (SaaS) providers, integrators, business customers, end users

  • Energy efficiency: In principle, cloud computing can be an inherently energy-efficient technology for ICT provided that its potential for significant energy savings that have so far focused on hardware aspects, can be fully explored with respect to system operation and networking aspects.

ITU-T FG-Cloud home page:

B. Alcatel-Lucent strategic whitepaper: Assessing Cloud Computing- Challenges and opportunities for network providers, by Jane Anderson

Ms Anderson suggested cloud benefits for network providers:

• New revenue opportunities – network providers can benefit by switching enterprise-hosted services to private or virtual private clouds. This approach offers better margins, along with decreased management demands. A number of leading network providers have already introduced their own cloud services, and they will soon be followed by an array of other operators who have new services in development now.

• Exposure of capabilities – network providers can add new revenues through partnerships with application and content providers. As ACPs look for ways to enrich their services, control delivery and ensure quality, network providers can gain a better position in the cloud computing value chain by contributing their unique capabilities.

Ms Anderson concludes:  “The growth of cloud services has important implications for network providers. Like Internet video, cloud services currently add to today’s increasing demands for bandwidth, while delivering revenues primarily to application and content providers, rather than to network providers.”

“In addition, as consumers and businesses become increasingly aware of the limitations of existing cloud services, network providers have a key opportunity to promote themselves as the “safe” cloud services provider.”

C.. Independent Expert Opinion

Ray Mota, Managing Partner of ACG Research. identified five reasons on how network/ service providers could capitalize on cloud computing for their own business and for their customers:

1.  The value proposition of cloud computing
Cloud computing has the potential to affect service providers’ total operational costs by reducing the hardware and software requirements of their current networks and platforms. Network architectures that build on optimization and consolidation are a key interest — also, increasingly, a requirement — for all service providers. Cloud computing platforms also enable enterprises to provision an infrastructure and add computing capacity on demand. This elasticity promotes rapid deployment of solutions and allows service providers to scale their infrastructure based on demand and consequently to improve time to market for new services.

2. Web-based applications promote IT independence
With more employees scattered in global offices or telecommuting, Web-based services and applications are perfect for the rapidly changing enterprise workplace. Service providers can increase their revenue and market share and capitalize on Web-based application services by communicating and promoting the tangible business benefits to their customers.

Mobile communication, accelerated developments in broadband networking, open source technologies, and Web 2.0 have made on-demand services more reliable and affordable. Using cloud-based services, businesses can store more data than on private computer systems, allowing them to save on the processing power and hard disk space required for desktop software while giving them access to an unlimited number of applications. Additional benefits for businesses — and selling points for service providers — include lower costs, improved system performance, reduced software cost, instant software updates, data reliability, universal data access, and hardware/device independence.

3. Growing cloud-based managed services market produces revenue
The managed services market is one of the fastest growing segments in the IT industry, and service providers are uniquely positioned to capitalize on it. Cloud computing offers service providers an ideal model for developing managed services because they already have the scalable engine to build scalable services. By assuming an end-to-end position (application to end user) in the cloud computing value chain, the service provider can improve and add significant quality of service to user-to-application experiences. This network-based approach to service assurance can position service providers to capitalize on the software revenue market related to the use of the applications — a market that network providers have yet to fully explore and utilize.

4. Increasing carriers’ data center efficiency and operations
With typical data center costs running approximately 25% of total IT budgets, service providers are under pressure to find cost-efficient business solutions and models to operate their data centers. A cloud computing data center model enables rapid innovation, scalability and support of core enterprise functions, resulting in significant economies of scale. OpEx and CapEx savings are realized through the standardization of systems and software components. A cloud computing data center reduces the need for additional hardware, software and facilities, as well as automation of server, network, storage, operating systems and middleware provisioning, and security issues, all of which are costly and time-consuming functions.

A cloud computing platform also increases the utilization of servers, which can range from 20% to 70%, resulting in a decrease in required infrastructure. This hardware reduction translates to a dramatic drop in some associated operations expenditures: rack space, real estate, power and cooling. And let’s not forget the cost savings associated with continuity and data center longevity. The average life expectancy of a large data center is 12 years. With the cost of developing a data center at approximately $500 million, cloud computing becomes both a business and operational value.

Author’s note: We believe this internal use of cloud – for telco data centers – will yield an immediate payback on investment for telcos.  Especially, because of mergers, acquisitions, and industry consolidation, telcos own many geographically dispersed data centers where Operation Support Systems and Back End Network Management are done.  By outsourcing those data centers to the cloud (Infrastructure as a Service model), the many benefits stated above can be realized, with savings in cost, energy and a dramatic increase in productivity.

5. Differentiating service providers from the pack
The current economic climate has forced service providers to take a hard look at their business models and how they differentiate themselves from their competitors. The old business model was about cost-per-bit, but in the new paradigm, service providers realize they have to focus on what makes them stand out. Delivering cloud-based consumer and business-critical applications with solid service-level agreements (SLAs) will not only allow service providers to differentiate themselves but will maximize the value of the network while promoting a new business model.

Moving to a cloud-based platform poses challenges and concerns for service providers. Dealing with standards, security, performance, data compliance aligned with procedures and operations, and availability issues are just a few of the organizational and technical challenges they’ll have to address to make cloud computing a true value proposition. Service providers can leverage their reputations and solid performances to offer reliable, comprehensive and secure cloud services. Most importantly, service providers can show value by strongly emphasizing that cloud computing allows enterprises to focus on other aspects of their businesses without having to concentrate resources on IT, server updates, and maintenance issues — a win-win service offering for both service providers and their customers. And last but certainly not least, by ensuring the value of services delivered via cloud computing, service providers not only deliver business value to their users but increase and extend their sustainability.

For further information, please see:

Five telecom provider benefits of offering cloud computing services


Follow up request: We welcome any comments, suggestions, or even differences of opinion – especially from the telcos. Let’s make this an interactive vs uni-directional web site!