Large scale transformations inevitable for regional service providers
The challenge that service providers are facing at present is beyond the likes of what they have faced before. Service providers by default leverage the latest communication and networking technologies to generate growing services for their consumption target markets. However, the challenges of today require large scale business and organisational changes in addition to adopting the latest digital technologies.
Service providers are competing in a landscape that is now increasingly driven by a modern digital consumer, requiring highly personalised and rich user experience delivery, increasing competition from peers for the same markets, increasing competition from global digital businesses, a never-ending requirement to grow new and incremental business, and finally the legacy of a mature business and sales model. The choice for service providers to change is therefore not optional but essential.
Software driven technologies facilitate new ways of working across an organisation, enable new business models, and support enhanced and innovative user experiences. However, such new technologies including network function virtualisation, artificial intelligence, cloud based frameworks, also require suitable skilled resources. This talent must also be well adapted to the new digital business models to fit into new service provider organisational structures and to be able to drive the new business.
Competitors with more agile and transformed networks are increasingly being seen to make headway against these disruptive forces. Service providers now need to rethink their networks and technologies, their organisations, and their business models. Existing structures inside service providers are increasingly unable to interoperate with new digital technologies, unable to support newly aligned revenue and business streams, and unable to compete with competitors built from the ground up on digital technologies.
The required transformation of service providers is far reaching, deep, complex, and attached to a high probability of failure. It is not a technology upgrade but a fundamental shift away from how service providers have operated traditionally.
Service providers are finding themselves pitted against global digital natives such as Facebook, Amazon, Google, Alibaba, Netflix, Tencent, amongst others with overlapping consumer segments, common delivery channels, but lack of access to content ownership and digital communities, being a significant weakness. In developed markets, mobile network operators face hyper-competitive prevailing conditions leading to rapid erosion of price points, consolidation and selective exit from these markets.
“Service providers are finding themselves pitted against global digital natives such as Facebook, Amazon, Google, Alibaba, Netflix, Tencent”
Automation is one of the ways for service providers to keep up with endless technology changes and disruptions. Large networks are increasingly being challenged to incorporate network function virtualisation, software defined networking, artificial intelligence, to drive down costs and enhance productivity, and enable possibilities and use cases for richer user experience. Digitisation is driving the current wave of business and process disruption and availability of broadband growing at 50%+, made available by service providers, is the principal enabler.
However, on the flip side, the revenues associated by the consumption of broadband by consumers and businesses are not necessarily being reflected in the top line of service providers. This draws attention to their now far overdue need to innovate and align better with their transforming target markets. All the technology tools exist for service providers to make the switch over including extended clouds, software defined networks, virtualisation, programmability, certification, open source, standards and so on.
These tools need to be used to simplify networks and help service providers have an increasingly holistic view of their sprawling networks and the target markets they are servicing. The move is away from isolated boxes and towards the edge of the network, with end to end management of the network sprawl, and with distributed technologies working in cohesion and collaboration. Simplification and unification of networks can help drive innovation for service providers.
This contrast is all the more-stark when you compare hyper-scalar web companies with service providers. Hyper-scalar web companies have built their services horizontally across their globally distributed networks. While service providers have built their core strengths of redundancies and fault tolerance vertically around isolated network boxes that are stretched to deliver the same horizontal capabilities of hyper-scalar web companies. Hyper-scalar web companies rely on automation for cost and operational efficiency across their horizontal network layers, while service providers rely on box-heavy networks as a core strength.
In order to drive automation, service providers need to increasingly embrace orchestration and relook at their distribution of computing resources. With the exponential growth of end points from Internet of Things and rapid growth of broadband enabled connected mobile users, many of the future compute requirements will need to managed at the edge of the network. This implies an immediate and overdue overhaul of how service providers will need to deploy their compute resources to manage these user requirements. Service providers will need to relook at how to optimise and balance mobile-edge resources with deep-edge computing resources in order to meet future requirements, drive down costs and increase productivity.
In another area of transformation, most service providers by now recognise the need for network function virtualisation. But the reality is also that most service providers are still at a very early stage of its adoption. Service providers expect network function virtualisation to deliver cost savings and bring agility into their business. Amongst the early inhibitors are the inability to build an internal business case for adoption of virtualisation, lack of ownership on who will drive the project, lack of software skills to provide sustainability, inability to build an agile organisational structure to justify the migration to an SDN, NFV, DevOps environment, amongst others.
By focusing on rolling out orchestration across their networks, service providers are taking early steps towards building automation. Additionally, orchestration is the primary foundation for launching new digital services, administering them and generating significant returns across an automated, software enabled, optimally distributed compute, open standards based layered network.
“By focusing on rolling out orchestration across their networks, service providers are taking early steps towards building automation”
Significant new business opportunities exist for those services providers that begin their transformation journey. This includes Internet of Things, video on demand, mobile based video consumption, and mobile based virtual and augmented reality, amongst others.
Service providers because of their geographical and operational scale are well placed to begin to start offering IoT based services. This would be a new revenue source with expected double-digit growth. However, while this opportunity is well established and can be forecasted it does come with its share of significant challenges.
By offering IoT related services, service providers would inherit vast volumes of continuous data flows. These would need to be aggregated, managed, secured, and analysed, often in real-time and on the edge of the network. Suitable network architectures would need to be designed with significant computing resources on the edge to avoid latency from back and forth traffic. These would also need to support real-time analytics applications mostly hosted in the cloud.
Another challenge for service providers, used to only delivering connectivity and related services, is the need to work in much larger IoT ecosystems, involving multiple vendors, regulators, other service providers, end users and their end users. This would be possible in the initial stages where service providers have deep business relationships with end users and in select verticals at a time.
Another opportunity is video on demand where the software and hardware interface units are going through large scale changes and are being adapted to give customers the choice of on-demand and other flexible selection options. Moreover, current trends indicate that the preferred device for video consumption is moving away from the home to the connected mobile device. Virtual and augmented reality is another that promises to increase in demand for mobile consumption. Services providers only need to begin their transformation journey before market forces can make it self-generating proposition.
As service providers adopt next generation software defined and cloud enabled technologies, the need for large scale change within the organisation looms ahead, writes Ali Amer at Cisco.