CSPs Shift SMB Mindset From Capex to Opex
This week in Huntsville, Ala., at Adtran's annual media and analyst event, many sessions focused on how the cloud is changing the way CSPs provide services to SMB customers. Rather than selling services that rely heavily on capex, CSPs are shifting the model to opex through network-as-a-service models and some are even taking it one step further into network-as-a-utility.
Network-as-a-service (NaaS) is certainly not a new topic, but what is new is the shift to cloud-based technology that is making NaaS a more powerful business-case, coupled with the boom of Millennials moving into the workplace that think about their network and services in a completely different way, noted Meggin Sawyer, VP of business solutions and cloud services at Adtran Inc. (Nasdaq: ADTN).
By 2020, 50% of the workforce will be Millennials -- a group that is even larger than the Baby Boomer generation, said Sawyer. "They are used to changing technology. They have the Oculus Rift and 3D printers in their schools. They are doing things in school that can't be done over an old-school network... They are used to making purchases [via their devices] without even thinking about it -- they think about the network as a utility," she said, adding that subscription fees for video and other services are an everyday occurrence for Millennials today. "They bring all this into the business."
This Millennial mindset shift is beginning to impacting the way communications service providers (CSPs) serve customers, and Sawyer said Adtran had all of these factors in mind when expanding its ProCloud Subscription Services to include Gigabit routers, IP business gateways and session border controllers. (See Adtran Boosts Cloud-Managed Services Portfolio.)
"We said, what if we were to build this solution as a network as a utility? What if we were to provide customers with a solution that is a utility in their network that they pay for once a month?" said Sawyer. "Thousands and thousands of CSPs and MSPs have been used to buying cash-intensive hardware. We want to move that business away from that model into the monthly recurring charge."
This mindset change means CSPs can shift SMBs capex to opex, and also do upgrades and add on additional services without swapping out expensive hardware like routers and switches.
Todd Lattanzi, director of cloud services portfolio, Adtran, said that the company's CSP and MSP customers were shifting away from selling a box to wanting to sell a service. "We developed this subscription service for carrier customers to enable them to provide to their SMB customers with a product that combines equipment, and access points and a managed service," he said.
The ProCloud Subscription Service launch initially focused on wireless LAN and Ethernet switches but the expansion this week now includes wireless business gateways. "MSPs can have a complete offering for customer -- LAN and WAN infrastructure that can be refreshed every 24 months," he said. "They can go in to their customer and allow that customer to refresh their network without a capex-intensive model, and then in the future layer on other services to sell."
Keith Fletcher, COO of Speros, a CSP out of Savannah, Ga., who spoke at the event this week, said that his company has been moving its SMB customers from the capex to opex model for infrastructure security appliances and switches at an amazing pace -- ten customers over the past two months. "We found that this model is working spectacularly."
Of course, SMBs can buy hosted VoIP systems for a monthly charge today, noted Sawyer, "But the problem is that those SMBs probably have Linksys switches, they may have wireless access points that they bought at Best Buy for all we know -- you really can't run these advanced applications in a scenario where your infrastructure is really ugly. You'd need to upgrade that infrastructure for $12,000," she said. "Today, SMBs want to take every resource they have -- time, talent and money -- and put it into growing my business, not spending it on a huge capital expenditure."
— Elizabeth Miller Coyne, Managing Editor, Light Reading