In a blog I did last month, I talked about three feature categories that could represent reasonable targets for operators interested in promoting higher-level service partnerships. Recall that AT&T indicated this was one of their strategies for improving their bottom line. Since then, I’ve gotten a lot of comment from operators, vendors, and enterprises, and I wanted to share what I’ve learned (except the comments I got from people at AT&T). Hint: They don’t always agree with my view!
My feature categories were connectivity extensions designed to frame connection services in a slightly different light, connection-integrated features, and features that exploit service opportunities not yet realized. Views on all three were interesting, to say the least.
Connectivity extension features include things like elastic bandwidth, on-demand networking. On this topic, enterprises were highly interested, but their interest was focused totally on cost management. What their view boiled down to was that they’d buy such features if they lowered their overall cost. Obviously, that goal is totally incompatible with the notion of improving revenues.
Apparently neither vendors nor operators really get that distinction, despite the fact that by now it should have become clear. Within the network operators there was a minority of strategists who did realize that there were no non-cost-management benefits for this class of feature, but even this group indicated that their companies (specifically “the executives”) tended to believe in them. A small majority of operators said that establishing things like a “bandwidth exchange” where “spot pricing” could help them sell unused capacity could work. The strategists disagreed.
Among vendors, this class of feature gets even more support. Again, a small group of strategists in nearly every vendor organization saw this feature group as useless in the long run, but again “the executives” were said to hold out hope. Unlike operators, who actually had some specific view of what the features in this group might be, vendors were pretty vague.
My view here is that we’re seeing inertia in action. Networking has been about pushing bits for connectivity from the outset, and everyone has gotten comfortable with the technology associated with that. Yes, the CFOs in operator organizations are complaining about revenue and profits, but hey, CFOs always complain about something. Yes, vendors are being pushed by operators to suggest paths for operators to improve return on infrastructure, but hey, buyers always complain. What choice do they have?
The second feature group gets way more complicated in terms of the attitudes of the players. First, my distinction of the group as “connection-integrated” wasn’t well understood without the examples I offered in the blog. Include those examples and operators immediately said that there was no opportunity for them; the content piece was already addressed by established players and operators couldn’t hope to compete there. As far as security is concerned, I got a lot of pushback.
The majority of my operator comments put security in the same class as content services—too much established competition. A decent minority of operators thought that offering security in any form was a legal and PR risk they didn’t want to take. “Imagine a big TV story on how [my secure service] had a major breach,” one operator contact suggested. “It could hurt my business overall, and I’m not sure it can really be prevented.”
The point that they’re making is that security service might pose risks to the seller that security products do not. To sell a security service, you have to talk about what it protects you from. To sell a product, you can talk about the specific features. This same group of operators also rejected my characterization of their managed service opportunity, for much the same reason.
Network vendors took a very similar view. The majority really saw no clear opportunity for them in the content space. They’d love to sell data center switches to operators for “carrier cloud” but promoting the concept to prospective buyers was something they believed was simply too difficult. “You can’t educate a telco into an opportunity,” one said. “You’re wrong, there’s nothing here,” was another view.
On the security side, vendors were even more negative. Every major network vendor also has a security portfolio, and it’s usually more profitable than their network business. Why risk messing it up by either introducing new security features or by promoting operators to offer security services that would undermine enterprise sale of security technology?
Nobody liked my second feature category, in other words. You can take this comment as defensive, but I think that what the negativity proves is that there would be a considerable educational effort associated with promoting this second feature category. That point is important because I got some vendor comments from non-network players, and they were significant.
Server and software vendors, who didn’t comment on my first feature category, weighed in on the second and third. Not surprisingly, they see both these feature sets in a much more positive light. Roughly two of every three people in that space think that the third category of features is the most critical and that the second feature class is more of a stepping stone. A slight majority will admit that operators they talk to need “some education” to accept and realize either opportunity.
That, I think, encapsulates what I’ve learned from all these comments. There is an almost-universal view that operators are just not ready to move beyond basic connectivity. They’re hopeful that cost management can handle their profit-per-bit and return on infrastructure problems while somebody thinks up a new connection service. Some will add managed services and SD-WAN or virtual networking to that list. That leaves the question of how those operators would get that education.
The facile answer is that software/server vendors would provide it, but that answer is just how I characterized it—facile. Vendors have enormous influence on operators, but not software/server vendors but network vendors. Those vendors have no interest in promoting a new host-and-software model for infrastructure, and in fact have every reason to try to tamp that sort of thing down. Despite efforts, the software/server vendors haven’t been able to step up and promote their strategies for new features, for two reasons.
Reason One is that those software/server vendors haven’t paid their dues. They don’t understand the network operators’ issues, constraints, and processes. This has led them to blindly chase NFV, for example, on the theory that simply adhering to it would fulfill operator requirements and make sales. That’s obviously not true.
Reason Two is a point I’ve made before; new open-model hosting of features has to be platform-independent, meaning it has to work on containers, VMs, bare metal servers, and white-box switches. Absent that scope, there are too many missions it can’t fulfill, which means that operators can’t really fully depend on it.
I’m surprised and a little disappointed by the lack of interest in the feature groups, frankly. I think that it means that only a very few operators (like AT&T) are really facing the issues that all operators will face eventually. That suggests that the industry may transform way more slowly than I thought, and way more slowly than it must.