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Business Transformation

Kevin Lo's Move to Facebook: Sign of Things to Come?

I don't often get hot under the collar about executive chair-swapping. Tell me that "Fred's left so-and-so's optics division to head up so-and-someone-else's routing division," and I'm unlikely to offer up much by way of fevered speculation.

For one thing, I might not know Fred. Even if I do, I know that the "Nice Fred" persona he projects to me could be totally at odds with "Fred the Terrible" who presents himself behind closed company doors. Sure, he may have this or that reputation; but he may not want or need to go by the same playbook at his new company. Maybe Fred's new team or his new bosses will hate him. Hell, maybe his wife is just about to leave him, and he hasn't seen it coming. There are so many variables, who knows?

In short, "Let's see," tends to be my take on most personnel scuttlebutt.

For once, though, I think I've spotted an executive move that really is significant beyond any reasonable doubt. At the end of last month, Google Fiber's Founder and General Manager, Kevin Lo, announced in a blog post that he is upping sticks to join Facebook as Director of Infrastructure Connectivity and Investments.

Why does this matter? Is Mr. Lo (who I've never met, by the way) great at the big picture, but not so good on the details? Does he live by Six Sigma or loathe it? Is he the missing piece of the jigsaw that will ensure the success of Facebook's new Open Compute Project (OCP) Telco Project and Telecom Infrastructure Project (TIP)? Or does one of his personal failings mean that he's bound to preside over a slow-motion trainwreck?

Frankly, I haven't the faintest idea. For me, Lo's move to Facebook matters for reasons extending far beyond his own strengths and weaknesses (whatever they might be). To me, it looks highly symbolic of a wider industry shift taking place in the relationships between what I call the web-scale Internet companies (WICs), such as Google and Facebook, and the communications service providers (CSPs).

In the last ten years, we have essentially seen this relationship evolve in three phases. Phase 1 consisted of the CSPs complaining about how the unregulated "over the top" (OTT) providers were cream-skimming and reducing them to mere bit pipes.

Over the last couple of years, a Phase 2 has emerged in which a lot of that early hostility has died down. CSPs have somehow reluctantly acknowledged that without the WICs, users wouldn't be consuming their services on anything like the same scale. And (whisper it) CSPs have acknowledged that, frankly, there's a lot -- actually an almost embarrassing amount -- that they can gain from leveraging the WICs' business and technology practices, not to mention some of their technology assets.

Phase 2 thinking is becoming increasingly well entrenched in the CSP community now, although Phase 1 sentiment is still alive and kicking. (Ask Verizon or Time Warner Cable how much they appreciate having to compete with Mr. Lo's former love, Google Fiber, for example.)

In my view, a new Phase 3 is emerging that will be characterized by much closer collaboration between the WICs and the CSPs. And that's why Kevin Lo's crossing the network infrastructure Rubicon from Mountain View to Menlo Park is so symbolic.

"I'm thrilled about the opportunity to work with like-minded colleagues in leveraging Facebook's open and collaborative approach to innovation" wrote Lo in his blog. Read that again; it's right there. With the OCP Telco Project and the TIP, Facebook is reaching out to the CSP community through a far more collaborative, partnership-based model than anything that could have been brought to market two or three years ago.

It's not just Facebook that's going down this road of partnering with the CSPs, either. Another important deal concluded in recent months is the February 2016 announcement that Amazon Web Services (AWS), Ericsson and Telstra are partnering to form a new joint cloud innovation center. A couple of years ago, CSPs were too suspicious of the WICs, too different and too determined to remain different to want such a partnership. Come to that, Ericsson wouldn't have known how to bridge the two and participate as a partner, without getting split down the middle, either.

It may take several years, but I suspect this collaborative Phase 3 approach will come to redefine the relationship between the WICs and the CSPs. Facebook and Amazon appear to me to be firmly on this page already. Amazon might be much less openly communicative than Facebook on this, but the truth is that Facebook was no better just a couple of years ago.

Kevin Lo and Facebook, his new employer, are clear not just that they believe in a more collaborative Phase 3, but that they want to lead it. And make no mistake, there are a lot of benefits that can come to Facebook in terms of enhanced business relationships with the CSPs. Many leading CSPs are interested in this more collaborative model. They like it -- a lot. Hence the long list of CSP participants in the Open Compute Project (OCP) Telco Project, as well as a list comprising Telefonica, SK Telecom, EE (now part of BT), MTN, Indosat, Globe and Deutsche Telekom among those that are participating in TIP.

So what perspective will CSPs have on Google -- or Alphabet -- two years from now? I don't expect the folks running Google Fiber or Project Fi to pull their horns in any time soon, or indeed perhaps ever. I don't expect Google's investment momentum in its own new wireless access technologies or new wireless service business models to dry up, either. On the contrary, there's every reason to expect that Google will want to accelerate some or all of that over the medium term, at the very least.

If nothing else, Google's ongoing efforts at competing with the CSPs will ensure that the Phase 1 flame of distrust borne of disruptive competition will continue flickering robustly in some CSP quarters for a long time yet. What may change over time, however, is the way in which Google harnesses these capabilities -- and the business model with which the company brings them to market.

The sight of all those Tier 1 CSPs signing up to partner with Facebook in joint product development is bound to be provoking a lot of thinking in Mountain View. Kevin Lo certainly thought about it -- and came up with a conclusion that will resound well beyond his new workplace.

— Patrick Donegan, Chief Analyst, Heavy Reading


Heavy Reading has a new report, "The Webscale Companies: New Drivers of the Network Equipment Market," coming out in August. To participate in a survey whose results will be used in the report, please follow this link to the survey.

Mitch Wagner 7/21/2016 | 9:10:12 PM
Re: Collaboration Phase The enemy of my enemy is my friend. Or something like that. 
pdonegan67 7/21/2016 | 2:46:24 PM
Re: This Phase 3 Relationship Not sure they're different/separable, Carol. Most/all I would think.
pdonegan67 7/21/2016 | 2:44:38 PM
Re: Tapestry of partnerships Good points, Steve.

"It is unlikely that consensus based corporate strategies on either side are going to fundamentally shake this landscape" is a very key point, I agree.

Day to day, sales driven, 'whatever we have, get as much of it on the truck as you can and ship it' mindsets (my quote not yours), operating in multiple different pockets of these organizations, will continue to dictate much of how these relationships evolve.

But, as I suspect you'll agree, there is another level as well.

When WIC CEO meets CSP CEO, each will go into that meeting having asked their sales or strategy folks to come up with a two-pager that details their incomings and outgoings with respect to their counterpart – and where each of those tallies appear to be headed and why.

Each CEO will take these briefings into those meetings, and will be looking to come out of them with a view of how they want the totals – and the balance between them – to evolve over time.

The outcome of this tension between the top-down and the bottom-up will duly impact the balance that is struck  – or the balance as it organically transpires – between competition and collaboration. 

In that sense consensus based corporate strategies may well shape this landscape. But, to your point, they're less likely to shake it.
cnwedit 7/21/2016 | 2:42:37 PM
This Phase 3 Relationship We are already seeing Facebook leading a lot of the collaboration efforts between what Patrick calls WICs and what he calls CSPs. But we are also seeing Facebook become more actively involved in finding new ways to extend Internet access of many different types. I'll be intrigued to see which of these efforts involve Kevin Lo. 
Steve Bell 7/21/2016 | 2:09:46 PM
Tapestry of partnerships Patrick, a great article, you certainly provide significant food for thought.

 Most strategies are in response to a shifting landscape rather than designed to radically define the landscape. There are notable exceptions such as what the iPhone did to mobile devices and Android did to mobile operating systems. In these rare examples there is usually a powerful individual or passionate group that is shaping and driving the change. It is not apparent to me that there is a clear and coordinated strategy on either side nor is there an emergence of a significant individual to act as a catalyst of change and accelerator. Is Kevin Lo this individual or is there someone else? Only time will tell, but it is unlikely that consensus based corporate strategies on either side are going to fundamentally shake this landscape. The convergence of multiple evolving technologies chasing diverse opportunities will ensure that the landscape will constantly morph and evolve and companies will have to respond on an almost continuous basis. So yes the new status quo is probably a complex web of rapidly changing bi-lateral partnerships.

Another factor that will drive this tapestry of partnerships is the focus market that each WIP is targeting. Facebook is clearly consumer, while AWS is enterprise and the parent Amazon and Google is both. This market focus will drive different business models and routes to market resulting in complex multilayer relationships, which will evolve over time or even be abandoned. The world of coopetition is definitely here and will become more evident with the emergence of IoT where both the WIPs and CSPs will compete, cooperate and be a part of other broader ecosystems of IT and network vendors as well as large scale systems integrators and incubated startups.
Gabriel Brown 7/21/2016 | 12:26:30 PM
Re: Collaboration Phase A new era of collaboration... yes, for sure. This is a good thing. 

One reason to participate, especially from the vendor side, is to "keep your enemies close". It's never quite articulated like that, but I think its an important driver of "collaboration". 

Like you say, there are lots of criss-crossing relationships.
pdonegan67 7/21/2016 | 12:04:28 PM
Re: Collaboration Phase I can only agree with you "ish", Mitch.

So Google Fiber competes with the CSPs, I grant you.

What about Google FI, though?

That competes with Verizon Wireless and AT&T, right?

But it also leverages partnerships with Sprint, T-Mobile and US Cellular.

Lots of shades of gray in this.
Mitch Wagner 7/21/2016 | 12:00:22 PM
Re: Collaboration Phase Google seems likely to be a holdout in the collaboration movement. They seem to be moving into the CSP business themselves, competing directly with traditional CSPs. 
pdonegan67 7/21/2016 | 11:28:51 AM
Re: Collaboration Phase

Yes, I agree, good balance.

 

This also raises the point that each of these companies can have multiple different supplier/customer relationships criss-crossing one another simultaneously. They already compete as well as cooperate at various different levels and I'd expect that will continue.

 

The interesting thing will be to watch how, and in which cases, the overall balance between competition and collaboration alters over time.

 

I think we're agreed that the high level trend is now towards greater collaboration but there will continue to be plenty of push-back in the opposite direction as well.

 

How the balance evolves will have a big effect on how the overall size of the market evolves, market structure, and the market shares of different players in the ecosystem.

Sterling Perrin 7/21/2016 | 11:09:17 AM
Collaboration Phase Nice piece Patrick!

I agree we are coming to a new era of collaboration among the webscales (WICs) and the CSPs. It has been building slowly for a couple of years, and as you indicate, appears to be really opening up in 2016.

The CSPs clearly need the webscales' ideas and expertise. As some telecom execs have observed: the best way to address the challenges of OTT and cloud is to adopt those technologies and practices themselves. The webscales developed those technologies and practices.

But it is definitely a two-way street in terms of need. I remember being struck by Google's keynote at Light Reading's inaugural Big Telecom Event in 2014, when Bikash Koley made an audience appeal to collaborate with them on standardized models for network management in SDN. That audience was a telecom audience, and Google (at least at that time) was asking for their help.

We (in the telecom industry) tend to put the webscales on a pedestal of perfection, but I think the reality is that both sides (WIC and CSP) have a lot to contribute toward the future of the Internet and communications.

Sterling
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