Management World 2010, the main annual conference of the TeleManagement Forum, took place last week in Nice. This year’s headline act was cloud computing, with a number of round-table discussions and presentations focused on how to enable telcos to become profitable cloud service providers.
Numerous obstacles to enterprise adoption were proffered during the sessions, but it was those telco cloud service examples that generated the most excitement among delegates.
The conference’s cloud keynote discussion, “Cloud: the new business model for tomorrow’s world”, highlighted the particular concerns of large enterprises in relation to cloud services. Sean Kelley, CIO of asset management for Deutsche Bank, noted that data security and a perceived lack of control were two of the main stumbling blocks with CIOs.
Being able to monitor and control data in the cloud is one of the key reassurances that enterprises seek, particularly where regulation demands that data should be stored within country boundaries. Vendors are facilitating this control, offering solutions with dashboards that offer management the level of information they need to feel in control.
Reliability is another key stumbling block in the adoption of cloud services, which has not been helped by a number of high-profile data center service outages. The latest incident took place earlier this month when, following a car crashing into a nearby utility pole, Amazon’s EC2 was down for around an hour, having failed to transfer from utility power to its own generators.
For an enterprise such as Deutsche Bank, which processes millions of transactions daily, this scenario would prove disastrous, losing it “millions within minutes” and also impacting its fiduciary relationship with its customers.
Providing the degree of resilience in cloud services – combined with the promise of end-to-end service SLAs – that larger enterprises demand is an area where telcos can offer differentiation over providers such as Amazon.
However, overcoming the perceived and actual risks associated with this will take time to achieve, with implementation proof points needed to dispel the perceived risk of enterprises placing mission-critical systems in the cloud.
Seizing on the opportunities that cloud services offer, BT, Telefonica, and Telecom Italia detailed their cloud service offerings, which are predominantly focused on serving the SME sector. In Telecom Italia’s case, its cloud service is a commercialization of its own internal IT infrastructure transformation program, which began in 2008 and was targeted with reducing capex and opex, moving from dedicated hardware to shared servers, increasing computing utilization, and speeding up time to delivery.
Having created an internal cloud service, Telecom Italia decided to leverage its capabilities by offering excess capacity on its own servers to the SME segment, under the brand “Ospita Virtuale” (Virtual Host).
Work needed to define the service provider business model and end-user requirements
Defining the business model for cloud services is one of the critical next steps for telcos looking to move into this domain. The move from selling physical goods to cloud services requires different pricing models, which itself requires collaboration from operators, content owners, and other participants in the value chain in order to incentivize participation.
Alongside developing the business model to support cloud services, cloud service providers need to understand the requirements of end users (for which the Enterprise Cloud Buyers Council (ECBC) was set up late last year).
As with many next-generation services, customers expect them to emulate their legacy predecessors. For cloud, this means providing the same level of control and reliability in virtual data centers as a company currently experiences with its existing data centers. In addition, another important area that needs development is standardization, in order to abstract the underlying technologies, thereby avoiding service lock-in.
The potential for cloud services in driving cost savings and efficiencies is clear to see, while the ability to upsell capacity and additional services, and target previously underserved markets (particularly the SME segment) can provide a boost to telcos’ top lines. It is this potential that is driving so much interest in the industry.