Summing Up the Vendorscape For NGN

We’ve now looked at all of the classes of players who might be transformative influences on the road to NGN.  I hope that the exploration brought out some critical points, but in case they didn’t this is a good time to sum them up.  We’re heading into 2015, the year that just might be the most critical in network evolution since the ‘90s.  We won’t get to our NGN destination in 2015, but we’ll almost certainly set the path we’ll take.

Operators have told me many times that while they’re interested in evolutionary visions from people like me, they’re dependent on evolutionary visions from people with real products to change the shape of their networks.  This creates an almost-love-hate relationship between vendors and operators, a relationship you see at work in standards groups.  Operators think vendors are trying to drive them to a future model of dependency, and vendors think operators are mired in useless intellectual debates when there’s a need to do something—either advance or stop trying and make do.

All of this is taking place in the climate of steady erosion in revenue per bit.  The Internet and its all-you-can-eat pricing model has created a rich growth medium for businesses that rely on bits for delivery.  There is no question that consumers have benefitted from the result, and no question that startups and VCs have benefitted even more.  We’ve paid a price in loss of control of personal information, security problems, and so forth.  Who lost, though?  Mostly the operators, who have historically sold bits and watched that process become less profitable over time.

As I said in introducing this NGN series, things can’t go on this way and they won’t.  We have two possible ways to mitigate falling returns on infrastructure investment besides the obvious one of curtailing that investment.  One is to find a better way to reduce costs, so the revenue/cost curves don’t converge as fast, or at all.  The other is to find new services whose revenues aren’t explicitly generated by bit-pushing, services that offer a better ROI.

I think that both these two remedies are going to be explored.  The question is the extent to which we’d rely on them, and how the differences between the approaches would impact the network, now and in the future.

If we were to find a magic service touchstone that could add billions and billions to the carrier pie, we could delay or even eliminate the crossover between revenue and cost.  Had this been considered and supported properly ten years ago, it’s very possible that there would be little pressure on capex even with the current network equipment model.  Operators had “transformation” projects back then, but they were 100% dissatisfied with vendor support of them.  The “Why” is important because it’s still influencing things today.

The fact is that network equipment vendors don’t want transformation from a bit-driven revenue model to something else.  They believe the “something else”, which even then was known to be about software and servers, would simply dilute their influence.  It’s my view that we’re past the point where an “integrated” strategy would work.  We are now committed to having layered infrastructure, with a cloud layer, a grooming layer, and an optical layer.

This structure is important from a cost management perspective.  Cost management changes, of course, are easiest to make at the point where you’re making incremental investment or where you’re able to produce savings to cover the cost of the changes.  Were we to try to control network costs entirely with bits, we’d have to build upward from the optical to create a very efficient grooming layer that could then marry with the service layer.  Optical players would have to push SDN strategies far above optics to create that marriage, and vendors like Alcatel-Lucent who had both optical products and strong SDN positions would be favored.

It’s easier to see the transformation happening at the top, and moving downward.  Comparatively, we’re under-invested in the cloud layer today.  Most of the services we have today can be visualized as application- or service-specific subnetworks that unite cloud-hosted features with cloud-hosted application and service segments.  This model could create not only a more efficient service network, it could also be more secure and more agile in producing new revenues.  And all the agility everyone wants generates more variability in the mapping of features to resources.  We’ve proven with both NFV and SDN that we don’t even have the current level of resource-mapping agility properly operationalized.

The challenge that has to be faced here, no matter where you start, is that of operations efficiency.  Hosted assembled stuff is more complex than boxes, and that means more costly to run.  The difficulty you run into starting at the bottom is that you’re exposed to operational burdens of complexity slowly (which is good) but you’re also exposed to the benefits slowly (which is bad).  Evolving upward from optics is hard for operators.  They need to see benefits to offset any major changes in infrastructure.  It’s difficult for optical vendors, who have to promote a skyscraper-sized change from the basement of the building.  A requirement to support too much buyer education to make a sale makes salespeople unproductive.

So what this says, IMHO, is that operations changes really have to start with vendors in the cloud or service layer, which in the language of modern technology trends means “SDN” or “NFV.”  There’s been little progress in the details of SDN operations, and no indication that SDN operations practices could grow to envelop cloud elements.  This is why I put so much emphasis on an NFV strategy for vendors who aspire to NGN success.  However, NFV has focused so far only on the deployment differences between virtual and real infrastructure, when the real problem is that we’re not managing even real infrastructure optimally, and when ongoing management is more important than deployment.

Operations changes that start at the top can develop not only improved costs for current services and infrastructure, they can improve agility and thus theoretically improve revenues over time.  The ideal situation is that you come up with an operations approach that spreads over everything and immediately improves operations efficiency.  That would generate quick relief from the revenue/cost convergence, so much so it could fund some of your evolutionary infrastructure and service steps.

For 2015, we need to look at the higher layers of the network—the cloud and the virtual binding between the cloud and “the network” in its legacy sense.  All of the vendors I’ve mentioned could do something here, but obviously the ones to watch the most are those who either have a natural position in that critical juncture (IT giants) or who have some elements of the solution at hand and are simply searching for a business model to promote them.  I think we’ll see progress, perhaps as early as the end of Q1.