NICE -- Digital World Transformation 2018 -- Telus CTO Ibrahim Gedeon has delivered a troubling assessment of telco virtualization, warning industry executives gathered here in Nice that operators will face a "crippling" spike in costs if trends persist.
Speaking on a panel at today's Digital Transformation World event, Gedeon said network functions virtualization (NFV) had yet to live up to the original expectations and that exorbitant software maintenance costs are undermining the NFV business case. (See SDN Is Hype & NFV a Faux Pas – Telecom Panel.)
A concept that now dates back five or six years, NFV was supposed to revolutionize the telecom business, allowing operators to separate hardware from software and become more efficient companies. Some operators have seen it as a way of speeding up service development, while for others it is about reducing cost.
One of Canada's "big three" national players, Telus Corp. (NYSE: TU; Toronto: T) has some of the most ambitious cost-saving targets in the industry. Through NFV and digital transformation, it aims to reduce spending by a factor of ten, Gedeon tells Light Reading. "We've realized a third of the savings," he says.
The operator is lagging targets partly, it seems, because high software licensing and maintenance charges have wiped out savings on the hardware side. "We've dropped the price of hardware to a seventh but if you are adding to the price of software licenses you are not where you need to be," he says.
The other problem for Telus has been the increase in complexity that NFV has initially brought. Instead of allowing it to reduce employee numbers through automation, virtualization has led to an increase in the size of the operations team at the Canadian operator.
"We may cripple ourselves with NFV because we have double the teams now," says Gedeon. "We have the NFV teams as well."
The situation is pressing because costs per bit are not dropping as fast as revenues per bit, says Gedeon, who delivers a scathing verdict on some of the mainstream vendors that serve his business. (See Nolle: In 2017, Cost Per Bit Exceeds Revenues.)
"Even if I went to bed with one of them completely they would fail to empathize with me and give me their own silo viewpoint. That is why I am not anti-ONAP," he says, referring to the Linux Foundation's "open source" platform for management and network orchestration.
Like other operators frustrated with traditional vendors, Telus sees the attractions in turning to smaller players touting innovative new technologies. But Gedeon says Telus is too small on the international stage to be a "kingmaker" and would only use startups that have already secured business with the industry giants.
That turns the spotlight on the likes of US-based AT&T Inc. (NYSE: T), the driving force behind ONAP, and France's Orange, which is nurturing a handful of network startups in partnership with social networking giant Facebook. (See Orange, VCs Commit $113M to Network Startups as 'Black Box' Frustration Mounts.)
He slams Cisco Systems Inc. (Nasdaq: CSCO), the world's biggest vendor of Internet routers and switches, for "gouging us on pricing and maintenance" but has warm words for China's Huawei, which is currently under investigation by US authorities for allegedly violating sanctions against Iran. (See US Ban on Huawei Would Trigger Turmoil in Telecom Industry.)
"One of the great things about Huawei being in the market is they have dropped prices by 15% at least," he says. "They forced the Ericssons and Nokias to follow suit."
Telus is one of a small number of Tier 1 operators in North America and Western Europe whose workforce numbers have risen in the last year. According to filings with the US Securities and Exchange Commission, the operator had 53,600 employees on its books at the end of last year, up from 51,300 in 2016.
However, Gedeon blames that increase on the recruitment of staff outside the core telco business. Employee numbers at the telco operation have seen little overall change, he says.
With more progress on virtualization, Telus would be able to reduce the size of its workforce, says Gedeon. "Vendors have given us stuff that keeps job security for my 14 teams. How do you make them one team?"
— Iain Morris, International Editor, Light Reading