Service Providers (SPs) have found themselves at a crossroads. Many are turning to Software Defined Networking (SDN) and Network Functions Virtualization (NFV) to fundamentally transform the economics of their business.
As these transformations take place, there are three things SPs need to know about the changing market and what they can do to adapt.
Agility Is Key
Over-the-Top (OTT) providers and other more nimble SPs are leading the way in this new era of immediacy with cloud and virtualization technologies that give them more agility and a better way to address the market’s demands for instant fulfillment. These providers are striving to, first, rapidly roll out new and customized services almost instantaneously to address anticipated—or in some cases, unanticipated— customer needs. When done in an environment where they can leverage automation, this can be accomplished in such a way to keep a tight lid on operational costs. Finally, leveraging an open environment with strong partners is critical to ensuring the flexibility to manage their risks and options in this multi-year evolution.
These technologies are very “forgiving.” Since the service investment is more closely aligned with the expected revenue, if a new service doesn’t take off, providers can “fail fast,” rapidly scaling down and redeploying assets without missing a beat. But if the new service is a success, they can “scale fast” to quickly capture maximum value.
As a result, “value” migrates to rapid service innovation with plain old network connectivity increasingly becoming a commodity. Providers who follow this new approach will meet the needs of their existing customers quickly and efficiently, reduce operational costs and reduce the financial and operational risk on their organization.
The simple truth is that SPs need to adopt this new mindset, and for many, the right technology partner will power their ability to do so.
The Automation Imperative
While quickly harnessing the capabilities mentioned above to capitalize on innovative ideas is the future, successfully implementing them is another story. SPs are burdened by costly planning and development cycles that don’t match the pace of today’s escalating requirements. Most service and network infrastructures are designed and deployed in a rigid, manual, step-change fashion that can take from 12 to 18 months to roll out, require large upfront investments, and are difficult to modify midcourse or after completion.
It’s no surprise, then, that service providers take a risk-averse approach to service development—these large investments of time and money aren’t recoverable if the market changes or demand does not materialize.
But, market demands combined with this approach has created an innovation gap between customer expectations and what network providers can realistically deliver. Many application vendors have eagerly filled this void, ironically by using existing SP networks for connectivity to deploy their services.
There are a few systemic reasons behind this innovation gap, including legacy environments based on complex manual workflows, which limit speed and increase cost; and the use of a fixed physical infrastructure that requires stringent testing and time-consuming modifications. Finally, SPs have limited network intelligence and visibility, precluding them from fully leveraging the information running through their networks.
More nimble SPs are automating and virtualizing their environments not just to reduce operational expenses but to rapidly iterate and test new services; then, depending on the success of the service, these providers decide whether to scale or “fast-fail.” The contrast is striking.
While network providers—constrained by a lack of experience with new technologies, as well as an operational structure and culture that evolved for a different marketplace—take months or years to identify a new service and source the technology to address it, companies that grew up on the web embrace DevOps environments, resulting in more agile service creation.
Again, partnering with a technology provider who already possesses these capabilities can jumpstart or augment an SP initiative.
Future Proof with a Physical-Virtual Infrastructure
For SPs that remain mired in the old approach, the gap will only widen; they will be further marginalized and, as pricing pressures intensify, their already dwindling profits will continue to erode. At the same time, they must continue to invest in connectivity to deliver existing services or risk getting blamed for poor customer experience. It is truly a quandary.
Network providers need to take a different approach. The current network investment cycle is
slow, with investments made in advance of demand; the new network model, on the other hand, is responsive to demand and keeps its options open. In order to advance with agility in today’s market, network providers need to adopt a carrier-grade, open network platform—one that accelerates delivery cycles and reduces operational and upfront expenses while minimizing risk.
This evolution requires software-driven workflow automation that strengthens and streamlines service delivery. Workflow and systems automation not only reduces operational expenses, it allows customized services to iterate quickly—moving from concept to testing in a matter of days rather than months, and with a smaller cost footprint designed to match expected revenue.
Such an approach requires a mix of physical and virtual infrastructure that optimizes investments while dynamically changing the network to meet service needs. Virtualization enables variable cost business models, which means lower up-front costs and lower risk. While dedicated boxes can deliver better price-performance and higher potential margins, they also come at a premium; the higher fixed-cost model means higher risk—especially when demand is uncertain and customer needs are dynamic. Smart providers follow a simple rule of thumb: virtual for flexibility and options; physical for efficient scalability.
The bottom line is that today’s SPs can compete and win when they pivot their businesses to quickly develop new services, implement greater efficiencies and reduce risk. Strong technology partnerships that allow SPs to take advantage of breakthroughs such as SDN and NFV to run across and build upon legacy systems are key for rapidly adapting to customers’ changing demands.
And ultimately, the answers to ongoing questions about which direction to take in a changing market will come from data. Indeed, network analytics can be used to predict where the market is going and anticipate what your customers need before they even know it themselves. This unique and direct connection to customers is a distinct competitive advantage that allows innovative SPs to eclipse what their competitors are delivering and thrive in our changing economy.
