Myths, Marketing, and How To Make Money on Network Services

There is absolutely nothing as important to a business as profits.  For large public companies in particular, profits are what drive stock prices and for the last decade they’ve also driven executive compensation.  If we want to understand businesses as a group, we need to understand how they profit.  Which is why some of the discussions about “new services” really frost me.  They presume buyers will work against profits, and so against their own interests.

The engine that drives enterprise technology purchasing is productivity.  I just saw a clip on LinkedIn that was talking about the high revenue per employee for tech companies like Microsoft and Facebook.  The baseline opportunity for high revenue per employee is set by industry (what you sell) but by making workers more productive you can raise the number, and that improves your profits.  Since the dawn of the computer age, we have had three waves of productivity revolution (clearly visible in the US in Bureau of Economic Analysis data) and these three waves coincide with periods when IT spending growth was high relative to GDP growth.  That’s what we’d like to see for our industry now, but that’s not the point here.

There are a lot of network services we can hypothesize, but the problem is that they still provide the same properties of connecting things as the old services.  Thus, they have the same benefits, and thus they can be beneficial only to the extent that they lower costs overall.  So when Cisco, for example, says that on-demand services are the future, they’re really saying that users would consume ad hoc bandwidth because it would save them money.  That, of course, means it would cost the service providers revenue.

The fact is that there is nothing that can be done to improve revenue from connection services.  Five, ten, twenty years from now the revenue per bit will be lower and that’s inevitable.  If we want new revenue we have to look somewhere else for it.  If we want new revenue from enterprises, we have to look to our productivity story.

Productivity isn’t helped by bandwidth on demand—cost is.  Productivity isn’t helped by hosting features in the network when the features are already available in the form of CPE, either.  We can’t toss around simplistic crap like “higher OSI layers”.  Earth to marketers—there are no “higher OSI layers” in the network above the IP layer.  The other layers are on the network meaning they reside with the endpoints.

So what do we do?  In all of the past productivity waves, IT improved productivity by a single, simple, paradigm.  It got IT closer to work.  We used to punch cards and process them after the transaction had long been completed in the real world.  We moved toward transaction processing, minicomputers, and PCs and these have let us put computing power directly in a worker’s hands.  So one thing that’s clear is that the next wave (if the industry gets off its duff and manages to do something logical) will be based on mobile empowerment.

Mobile empowerment means projecting IT through a worker’s mobile device.  If we presume that projection is going back to the simple issue of connecting workers and pushing bits to them, we’ve simply held back the sea at the dike for a bit longer.  What has to happen is that we create new services that live in the network.

Mobile networks already have live-in services.  IMS and EPC form the basis for mobility and subscriber management and so they’re essential to mobile networks.  They are also “services” in that they rely on network-resident intelligence that is used to enhance value to the service user.  Content delivery networks have the same thing; you enter a URL for a video (or click on it) and you’re directed not to the content source somewhere on the Internet, but to a cache point that’s selected based on your location.

What are the services of the future?  They’re the IMS/EPC and CDN facilitators to mobile empowerment and mobile-device-driven life.  That much we can infer from the financial and social trends, but in technology terms what are they?

A mobile worker is different from a fixed worker because they’re mobile.  They’re mobile-working because their task at hand can’t be done at a desk, or presents itself to be done at an arbitrary point where the worker might not be at the desk to handle it.  That says two things about our worker—they are contextual in consuming IT resources and they are event-driven.

Contextual behavior means reacting to conditions.  Your actions are determined by your context, and context means where you are, what you observe, what your perceived mission is, how you’re interacting with others, and so forth.  Every one of these contextual elements is a service, or at least a potential one.  Yes, you can use a phone GPS to figure out where you are in a geographic sense, and yes that can also provide you with some understanding of the real question, which is where you are relative to things that are important to you.  But suppose that you could find those things by simply relating your “receptivity” to a network service, and have that service now feed you the necessary information?

This model also works for events.  If you’re walking from mid-town to downtown Manhattan (a nice walk if you want some exercise), and if you’re in a hurry, you might try to time out the lights so that you don’t have to wait.  Suppose your phone could tell you when to speed up, when to cross, etc.  OK, some are saying that IoT would let this all happen by providing sensors to read, but who deploys the sensors if everyone gets to read them for nothing?  Anyway, how would you know what sensors to query for your stroll downtown, and how to interpret results?

Social context presents the same situations.  You have a set of interests, for example, that might be prioritized.  You’re heading to a meeting—the work mission that has priority.  You are also looking for some coffee—next-highest priority.  You might have an interest in cameras or shoes.  You might also receive calls or texts, either relating to your mission or introducing other interests (“If you see a nice bottle of wine…”) and you need to field these events too.

This is where the money is, both for enterprises who want to enhance productivity and for network operators or others who want to get some additional revenue.  Make a worker’s day more efficient and you improve productivity.  Make sales processes more efficient and you can improve sales.

Network transformation isn’t going to happen to support on-demand connectivity.  If there’s a value to on-demand connectivity it’s not going to come from applying it to today’s applications, but to supporting one of these contextual/event applications that we’re still groping to accept.  NFV isn’t going to happen because of cloud firewalls or vCPE, it’s going to happen because somebody uses it to deploy contextual/event services.

We don’t know anything about these services today because we’re focused too much on myth-building.  None of the new things we’re talking about are going to transform worker productivity or save telco profit per bit.  Myths are nice for entertainment, but they can really hurt if you let them color your perception so much that the truth can’t get through.  Fearing the Big Bad Wolf can make you vulnerable to alligators, and waiting to win the lottery can blind you to the need for an investment strategy.

Telcos and vendors are equally at fault here.  It’s easier to sell somebody a modest evolution in capability because it’s easier for the buyer to understand and easier for the seller to promote.  But modest evolutions offer, at best, modest benefits.  We should be aiming higher.