Cloud Strategy Face Off

IBM, HP and Cisco discuss their cloud strategies with ACG Research’s analysts. How do they measure up?

Service provider (SP) companies have three choices for cloud enablement for their infrastructures: 1) Use vendors that support them with full end-to-end management of their networks; 2) base their own networks on vendors’ technologies; 3) or use a combination of both. However, before deciding on which option best supports their business models, SPs need to consider:

• Which companies offer services for cloud enablement that target SPs who may already have NOC investments?
• Which companies offer full cloud offers SPs can leverage in end-to-end support on their Cloud offers?
• What do providers need to know to migrate to cloud?
  

ACG Research reviewed the cloud enablement strategies of IBM, HP and Cisco and details what these companies offer, the benefits and challenges of their products/services and what service providers can do to ensure successful migration to cloud.

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Lauren Robinette
lrobinette@acgresearch.net
www.acgresearch.net

Value-Add or Value-Absent, What’s Your Network?

As we wind down the year, and get ready to kick off 2102, now is a good time to set up some thoughts for 2012. My predictions will be published by Fierce Telecom in January, but let me discuss one theme that will be the basis of my research in 2012: For the mobile operators, the network is still one of the best differentiators.

Verizon has long positioned its network as the “largest, most reliable network” and with its launch of LTE has amended that statement to be the “fastest, most reliable 4G network” (despite outages in April and December in the LTE network). Both messages underpin my key point: if you don’t have network coverage where you are, it doesn’t matter what your device, apps or services are. But the value-add aspect doesn’t stop simply with ample coverage and performance. Each operator has its own spin on its value proposition to consumers.

Sprint leverages its unique unlimited smartphone data plans, new iPhone franchise, as well as its industry leading customer purchasing experience satisfaction scores to offset an aging WiMAX 4G network with limited coverage area.

T-Mobile it taking the largest 4G network and pairing it with low-cost plans and a killer range of devices. T-Mobile is looking to simplify the complexity of the smartphones with its myTouch phones even as it pushes the top end with the Samsung Galaxy S II and its huge screen, fast processor and HSPA+42 network.

AT&T comes in a little late to the LTE party, but early indications are that it is very quickly taking over the “fastest 4G” mantel even at it touts the speed advantage of its 3G network for its iPhone users. Speed, coverage and the next-generation network is right around the corner, not to mention a triple-play option for its customers.

Not surprisingly, not everyone agrees with the idea that networks need to get smarter. Satellite-LTE carrier LightSquared will be "the dumbest broadband wireless pipe," CEO Sanjiv Ahuja told a conference, as reported in a Nov 2011 PC World article. "I want no intelligence in our network. None. Zero. We are an absolute utility.” (http://www.pcworld.com/article/243021/lightsquared_will_be_a_dumb_pipe_ceo_says.html).

As we focus on the connected lifestyle or the gigabit lifestyle the role of the operator and the network infrastructure remains a critical element. Mobile operators are not all the same. Differences resulting from spectrum positions, network design, device portfolio, pricing plans, backhaul, network architecture and even the organizational structure of the operator all come to play in affecting the user’s experience. The situation is dynamic, but when it comes down to making a purchase decision, most buyers are looking at the near term, not the end of their two-year contracts.

Chris Nicoll
cnicoll@acgresearch.net
www.acgresearch.net

2011 Reflections and 2012 Predictions

Gazettabyte asked industry analysts, CEOs, executives and commentators to reflect on 2011 and comment on developments they most anticipate for 2012. ACG Research's Eve Griliches shared her thoughts on market trends, vendors, optical equipment providers and other related topics.

Here's a sample:

"I'm amazed at how optical equipment content providers [the Googles, Facebooks, MSNs of this world] are deploying and how few folks at the vendor level are doing anything about getting into their networks."

Click here to read more predictions on Gazettbyte.

Eve Griliches
egriliches@acgresearch.net

www.acgresearch

Managed Services and Cloud: Where Is Your Organization?

Does your organization have a cloud or virtualization strategy, a “green” program? Best practices indicate that if you do not, your company will ultimately lose ground because chances are that your customers are trying to gain more productivity, decrease costs and gain value through cloud, virtualization or green strategies. How you support them will either keep them as your customers or force them to evaluate other alternatives.

Most providers are focused on keeping their subscribers by delivering connectivity and other offers that focus on increasing value to keep their customers. To create a sticky environment providers must invest in technology, establish new price per usage rates or entice with subscriptions that deliver value-added services or risk becoming a commodity and being priced out by another provider.

ACG has identified some emerging and evolving trends in business, network, devices and applications likely to affect providers in 2012.

• Build, acquire or partner to gain the missing elements of service provider connectivity, system integration capability, data center management and virtualization and the last mile reach to business customers.

• Acquisitions to gain missing virtualization and data center cloud investment will continue (Saavis/CenturyLink, Terramark/Verizon, and NTT/OpSource).

• Building is less likely to be a primary strategy as the time to return is too significant.

• Partnering will be another way providers can plan cloud migration, designing and implementing cloud or virtualized solutions for their customers.

• Vendor provided risk protection and IT service outsourcing are ways for service providers to partner with their vendors for end-to-end IT management. This partnership supports a risk sharing service and allows service providers to take on new technology with support of the vendors. New services can include LTE, IPV6, IP NGN migration, video, and CDN.

• VARs and resellers provide another opportunity for service providers to develop agent, reselling and white label programs to reach new customers. As more businesses move away from owning, maintaining or staffing their capital investments and migrate to cloud, some of these traditional resellers will have to change business models, partner to resell services from service providers or face the threat of going out of business.

ACG has several success stories that outline the various models offered in the market today:

Cisco: Advanced technology migration services to reduce risk and increase customer value for service providers looking to stay ahead of the technology curve.

NSN: End-to-end outsourcing for service provider infrastructure on network and customer e-mail and broadband service management.

France Telecom: Takes virtualization, power reduction and system integration to new levels in their cloud initiative.

Presidio Networked Solution: Partnerships to new levels, creating a new business in managed service with no NOC.

Click here for more business deep dives.

For more information on our cloud services, click here.

Lauren Robinette
lrobinette@acgresearch.net
www.acgresearch.net

U.S. Broadband Outlook: Not What Was Expected

Recent FCC statistical reports suggest that U.S. broadband development is headed in some surprising directions. Wireline-based broadband may become an adjunct to subscription TV services while wireless broadband should become the dominant Internet access vehicle but with lower than expected data rates.

The FCC National Broadband Plan provides a benchmark for modern broadband. It observes that legacy web browsing, e-mail, and YouTube quality video streaming require a 1 Mbps download data rate, while these applications plus “near-real-time” media require a 4 Mbps data rate. Near-real-time media generally refers to video embedded in web sites and the current generation of video streaming services. Using these requirements the FCC sets broadband service with at least 3 Mbps download and 768 Kbps upload speeds as a modern U.S. broadband baseline.

Read the entire article at FierceTelecom.


Michael Kennedy
mkennedy@acgresearch.net
www.acgresearch

Steps to Building a Secure Cloud

Customers may be willing to negotiate and compromise with a cloud provider on cloud pricing or performance guarantees, but evidence of a secure cloud will always be non-negotiable. In the first part of SearchCloudProvider's two-part series, security expert Neils Johnson outlines how and why cloud providers must address customers' cloud security concerns and addresses cloud computing security risks.

Building a secure cloud: What customers want from providers

Cheat sheet: Talking to clients about cloud computing security risks

Click here for more information on cloud computing.


Neils Johnson
Security@acgresearch.net
www.acgresearch.net

Monetize Your Cloud: Embrane’s Virtual Network Services Platform for Service Providers Offering Cloud Infrastructure as a Service

Today, providers have limited options to enable virtual network services for the cloud: traditional hardware devices or software-based virtual appliances. These choices are inadequate for delivering the benefits of the cloud – cost savings, elastic scalability and rapid provisioning and procurement. Customers of the cloud also expect a “pay for use” approach and until recently, service providers (SP) had few or no options to deliver this kind of model for network service functionality in the cloud.

Embrane offers service providers Layer 4–7 network services, which are designed for monetization of cloud installations for SPs’ enterprise and small-medium business customers. Embrane addresses three main issues: 1) delivery of new services such as site-to-site VPN for cloud; 2) revenue growth for profitability with minimal up-front investment such as paying for services after service providers sell it; and 3) customer satisfaction because they are paying for only what they use. Embrane helps SPs answer the following questions:

• How can you offer virtual network service functionality as a service in the cloud?
• How do you de-risk investments for you and your customers?
• How do you migrate your customers to cloud without the upfront investment?
  

Embrane's Strategy
Embrane has created heleos, a distributed software platform that delivers virtual Layer 4–7 network services on demand. The platform comprises two key elements: heleos Distributed Virtual Appliances (DVAs), logical containers for deploying network services; and heleos Elastic Services Manager (ESM), the control engine for deploying and managing DVAs. With the initial launch of the platform, Embrane offers two additional services:

• heleos-powered load balancer: Delivers server load balancing functionality optimized for web applications and the cloud
• heleos-powered firewall/VPN: DVAs for firewall and site-to-site IPsec VPN
  

Embrane’s keyless licensing structure, which offers both usage-based and subscription-based pricing, delivers true differentiation.

Want to Know More?
Download ACG Research’s business deep dive, Embrane: Virtual Network Services for Cloud Infrastructures. Request more information directly from Embrane (info@embrane.com) to begin a profitable revenue generating service based on flexible purpose-built services that are enabled for service providers’ cloud deployments.

Lauren Robinette
lrobinette@acgresearch.net
www.acgresearch.net

Dave’s Top 10!

Content delivery was a consistent and persistent driver underlying telecom services in 2011. Operators struggled (and continue to do so) to meet the quality demands of consumers streaming videos, music and games on all of those new mobile devices (iPad) in the market in 2011. This trend promises to intensify in 2012. What else will the New Year bring to the video market?

1. Pay TV operators (cable companies and telco TV companies) will finally recognize that OTT is creating a real cord cutting and cord shaving threat. Various studies have shown that only a small percentage (less than 1%) of people are dropping service and using OTT only. This realization that OTT is not going away and is a threat will drive pay TV operators on several fronts:

2. Pay TV operators will embrace providing their own OTT services. This has already started, with Verizon announcing in early December 2011 that it is starting its own service. However, despite this:

3. Pay TV operators will stumble with these OTT offerings as they figure out which availability of programming, format (live vs. on demand), which screens it will support, locations (in home or out) and what pricing and bundling will be attractive to consumers.

4. A corollary, pay TV operators will continue to roll out their multiscreen TV viewing programs. Again, we expect several attempts before they get it right.

5. Consumers’ demands will drive MSOs to continue their DOCSIS 3.0 rollout plans. Many are reluctant to spend for the upgrade in areas where the old plant is not fully depreciated.

6. The fight over distribution rights between the content owners and distributors will continue during the early part of 2012, but the stakes are so high that we expect that both sides will eventually agree and move forward.

7. Netflix, YouTube and other OTT vendors will continue to grow their library of content with deals for exclusive content.

8. Service providers will continue to experiment with offering a CDN service to compete with global CDNs such as Akamai. Expect to see several announcements but no significant traction.

9. Service providers have no real experience with selling CDN services; the large content owners do not want to have CDN arrangements with many of the providers. They lack a global foot print and will need CDN federations to make it fully competitive. CDN federations will not be a major factor this year. Agreeing on and implementing standards, network management/analytics, revenue sharing, troubleshooting and customer service will be harder than the service providers realize.

10. Advanced advertising platforms and analytics will become the key technology for service providers in their strategy for dealing with next-gen video.

Finally, the most important development in 2012 (as in 2011) will be the focus on business models. Operators will become more aggressive as they look for technology to service innovation and focus on delivering stronger customer value to increase their profitability and longevity of service.

David Dines
ddines@acgresearch.net
www.acgresearch.net

The US Mobile Consumer Deserves a Reset

The AT&T and T-Mobile merger raises serious issues as to how the FCC is conducting its regulatory oversight responsibility. Clearly, it’s time for real reform.

Whether you are for or against the merger between AT&T and T-Mobile, you have to be very concerned at how the process is playing out (refer to Roger Entner’s well documented FierceWireless’ article (http://www.fiercewireless.com/story/where-due-process-fcc-releases-report-attt-mobile/2011-11-30).

It is convenient to lay the broken process at the feet of the current administration; however, this is not a new failing of just Obama's FCC. Dating back to 2006 Former Chairman Reed Hundt observed that the FCC has the “reputation for … capture by special interests, mind-boggling delay, internal strife, lack of competence, and a dreadful record on judicial review.” The low opinion of the FCC’s reform process continues today (fcc-reform.org): “Rather, because the agency operates with limited imagination, almost no strategic thinking or planning, and with an absence of well-developed sources of data to guide its decisions, it often misses opportunities to chart independent courses of action…to be sure, the agency also has an uncomfortable track record of conducting its proceedings…without engaging in careful data-driven decision-making… (http://fcc-reform.org/paper/fcc-reform-and-future-telecommunications-policy/i-background/fcc-historical-perspective). This unfortunately sounds all too familiar in the AT&T/T-Mobile’s application.

The FCC also broke with tradition and before having a full vote, had already signaled its intentions. Actually, the entire process has been broken, raising serious doubt as to how the FCC is conducting its regulatory oversight responsibility.

What this means is that a reset is needed and that is just what AT&T and T-Mobile have done by withdrawing their application. Their message: let’s start the process over and get it right this time. But there is a dilemma: How will it be possible to get an unbiased review, using the established criteria, in which that the market can be confident for this and future transactions?

Sticking with precedent would be a great start. Mobile competition has always been measured on a local level (for example, Denver is different from the competition in Washington, DC), and that should not change. Considering ALL of the competitive options is the next step. MetroPCS, Cricket, Leap, C-Spire and others deserve to be recognized for their important roles in the market, not cast aside. Let’s at least start there. After that, are we going to regulate users and/or spectrum holdings? That also needs to be addressed especially in light of the Verizon/CableCo spectrum deal (refer to Phil Goldstein’s article: http://www.fiercewireless.com/story/verizon-buy-spectrumcos-aws-spectrum-36b/2011-12-02?utm_campaign=TwitterEditor-FierceWireless). They may look like separate transactions, but the impact on the user and the markets are definitely linked.

The US market is widely regarded as the most competitive 4G market in the world. As pointed out by the FCC, Americans enjoy unprecedented choice when it comes to their mobile services. While the US has the most mobile operator choice, other countries such as Sweden show faster service by using larger spectrum allocations. However, the FCC continues to be mute on how to solve the near-term problem at hand: spectrum availability. Their actions on AT&T/T-Mobile and VZW/CableCo will speak volumes. The mobile broadband market is too important to America’s growth, competitiveness and economy to be saddled with such an opaque and inconsistent regulatory oversight process as exhibited during the AT&T/T-Mobile review. It may turn out that this merger will not receive government approval, but let’s complete the entire process to determine the outcome. American mobile consumers deserve nothing less.

For more on T-Mobile read Chris' article When it comes to 4G, T-Mobile has the advantage on FierceWireless.

Chris Nicoll
cnicoll@acgresearch.net
www.acgresearch.net

Mobility Winners Will Bridge Cellular and WiFi

But at what cost to the backhaul networks?

On the heels of 4GWorld in Chicago this year, it is rapidly becoming apparent that users’ behaviors are slanting more toward the nomadic than being truly mobile users. According to a 2011 Deloitte study, traffic on WiFi networks is expected to increase must faster – up to 50% - than data on cellular networks. This aligns well with common wisdom that says about 70% of a user’s traffic is from home or at work and only about 30% is when the user is truly mobile. This puts WiFi square in the sights of the cellular operators so that they can help alleviate cell congestion, but it raises a host of issues:

• Backhaul is the #1 problem for many WiFi networks and is typically in the megabit range for many businesses, not nearly enough to support even a handful of 4G users on smartphones or laptops
• Unlicensed spectrum is just that, unlicensed, and carries the possibility of interference and congestion from other networks
• Security is not standardized with the carrier networks and is often nonexistent in many facilities, something the 802.11/HotSpot 2.0 standards are working to address
• Quality of service is a high demand (and becoming more so) at sites where the users are more stationary and hitting the networks harder with larger downloads, streaming audio and video and two-way conferencing.

A number of equipment vendors (for example, Cisco with its Service Provider WiFi solutions) are stepping up to address these issues. Small players include BelAir Networks, Ruckus Wireless and Alvarion, companies working on a seamless combination of small cell and WiFi infrastructure.

The hardest problem or perhaps the most expensive problem to solve is that of backhaul. As the cellular operators found out with the 4G upgrades, sufficient backhaul has a huge, positive impact on users’ experiences; insufficient backhaul creates poor experiences.

According to BelAir Networks, a combination of small cell/WiFi service can increase capacity by 100x. Those are the kinds of numbers that get the operators’ attention (if the operators can address the many issues important to their users).

Chris Nicoll
cnicoll@acgresearch.net
www.acgresearch.net