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5 Must-Have Tech Partnerships for Carriers

Derek Kerton
8/24/2015

You could hardly be blamed for seeing telecom network operators as dinosaurs. Historically, they avoided innovation as costly and risky. They moved slowly -- so slowly that, like dinosaurs, they may have lost the foot race against the glaciers. But if you're still hanging on to that perception, you too may be living in the past.

Telcos have responded to changes in the marketplace: new competitors, wireless competition, VoIP, cable companies, IPTV, the Internet, Over the Top (OTT) assaults and more. In response, network operators have accelerated plans to go digital, IP-based, low-latency, standards-based and now virtualized with NFV. It's time to hang the paleontology back on the wall.

The modern competitive pressures have also ended the era of "not invented here" at the network operators. Any carrier that tried to invent all their own technology would rapidly fall woefully behind the competition. There is tremendous pressure to leverage the latest best-of-breed solutions. Telecom carriers need to build, buy or partner for many of the technology enhancements they put into the networks or customer solutions each year, and that creates a $5.6 trillion market for companies that sell into telecoms each year.

With those dollars on the line, determining the solutions carriers need is well worth the effort.

So what are the five hot areas carriers have identified as gaps they need to fill with partnerships? The Telecom Council of Silicon Valley asks dozens of network operators that exact question each fall at TC3: "What technologies, innovations and partnerships do you want from entrepreneurs over the next year?"

While this year's meeting hasn't taken place yet, early feedback from the carriers is that they will be asking for innovations in:

More cloudification
Cloud has become big business for enterprises, and carriers play a big role in cloud services, data centers and raw connectivity. But CIOs are concerned about security, prying government eyes and control of their data.

This year, carriers want to build more hybrid clouds, where enterprises can blend on-premises private clouds with public cloud services. Appropriate firewalls and security solutions are essential. Any data center performance ideas are welcome, as well as energy conservation.

XaaS
Outsourced infrastructure has evolved over the decade, moving up the OSI stack. Starting as humble rackspace leasing at peering points, evolving to IaaS where customers could rent virtual machines but take responsibility for OS, software, storage, etc. IaaS was truly revolutionary, and services like Amazon Web Services Inc. revolutionized the costs for being a technology startup.

PaaS was the next evolution, and although it is less used as a public service, it offers customers an OS-level on which they can build. SaaS is the next phase, and is tremendously popular, with cases such as Salesforce.com Inc.

In SaaS, users are provided the full software solution which they can access from any computer using just a browser or mobile app. This innovation wipes out billions in sales of boxed software, entire HR departments (for example), and shifts it to a monthly service. And that's where we are today.

But now carriers are also interested in XaaS, which essentially means anything-as-a-service. This could mean Communications aaS, Networks aaS, Disaster Recovery aaS, Security aaS, even Healthcare aaS, Music aaS, IoT aaS, Home Video Monitoring aaS, Smarthome aaS... you get the picture. Carriers see themselves as naturally well-positioned vendors of many of these XaaSs, and are looking for partners to bring them turnkey offerings.

Virtualization
Enterprise IT departments have used virtualization to lower costs, increase reliability and become more agile in their corporate networks. Now, the telcos are borrowing those great ideas, and virtualizing the telecom network. Solutions that once were provided in standalone, dedicated, function-specific boxes from Tier 1 vendors, are now being shifted onto Virtual Machines (VMs) running in software on more generic hardware.

NFV will allow the carriers to become more agile, reduce vendor lock-in, try more services and win or fail more quickly. The cost of trying things out will be lowered both financially and in the time dimension and in risk. The net result will be more partnerships with more diverse vendors, large and small.

Virtualization will give the carriers the flexibility they need to partner with best-of-breed solutions, and launch quickly. These are not dinosaurs. Dinosaurs are not virtual... well, OK, I've seen some virtual dinosaurs in VR goggles, but these carriers are not them. I'm starting to wish I hadn't brought up dinosaurs.

SDN is a later stage after NFV. SDN allows carriers to manage their virtualized networks with software, so that the network is responsive in real time, spinning up virtual VNF machines to meet spikes in demand for various functions, or geographically -- say, for example, a spike in MMS during a sports match or messaging during a street protest.

4.5G & 5G
Carriers are very interested in feeling-out the shape of upcoming 5G standards, and making sure their future needs (SDN) are figured into the standards bodies. That's challenging when SDN isn't even a firm concept yet, and NFV is barely making inroads.

Meanwhile, wireless network operators are concerned with both the technology that brings 4.5G solutions, like IoT-readiness, low power radios, low-latency, MIMO, CA, LTE-U, VoLTE, etc. But the carriers are MOST curious about what kinds of new money-making opportunities those features will offer them, and which will get scooped up by the OTT's first. The carrier question here is: "How do WE make money from our 4.5G network investments?"

Entrepreneurs with answers to that question should expect a warm welcome.

Internet of Things
Not long ago, Asian then European countries surpassed the 100% cellular penetration number. But that number was never a limit. Once the people are connected, the next opportunity is connecting their stuff! IoT has some challenges -- such as devices, battery life, signal power, meshing, device management, OSS/BSS, business models and more -- but there are ample opportunities for entrepreneurs with answers for the telcos. Carriers want solutions that help them in connecting cars, equipment, sensors, the body and industrial kit to the Wide-Area wireless network.

Carriers are more nimble than ever. You may not call the biz dev experience "swift and pleasant," but let's at least concede that these large companies control an impressive purse, and have greatly improved their willingness and ability to partner with smaller firms. Necessity requires it. For entrepreneurs and vendors, the question now is will they partner with your small firm? Well, that's going to be up to you! But you'll do far better if you are targeting one of the top five technology gap areas we've identified above.

— Derek Kerton, Managing Partner, Kerton Group

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kq4ym
kq4ym
9/7/2015 | 9:56:54 AM
Re: IoT
It will be interesting to see the role of data, and how it may be transferred from one business to another with IoT, and just how the value will be assigned and who gets what from whom. Will that end up with more open "ownership" as the individual entities use what they need and the competiveness issue become less as each niche business become even more narrow?
Founder,95876
Founder,95876
8/25/2015 | 3:21:11 PM
Re: IoT
Kruz,

Good question. I've got some thoughts posted in response to Ray, above. But here are some roles carriers should play in IoT:

- Offer connectivity at flexible pricing and rates that make sense for the type of device being connected.

- Mobile Device Mangement solutions for IoT.

- Monitoring, alerts, security (as in surveillance)

- Security (as in securing the network). See the problem Sprint had with Chrysler cars, since they didn't yet offer security? Carriers need to make that table stakes.

- Connected Home services, portal, and app. Comcast now has 500,000 homes using security cameras as the tip of the connected home spear. This positions them to offer a smarthome portal, and additional services like HVAC control, lighting, door locks, etc.

- Connected car. But in this case, the carmaker will own the relatioship, and carriers will take a pipe role. Still, in the B2B deal, cost, security, and coverage will dominate the discussion.

- Reseller and SI. Many companies may sell their B2B and enterprise IoT solutions through a carrier's enterprise sales group.

Regards,

@derekkerton
Founder,95876
Founder,95876
8/25/2015 | 3:13:22 PM
Re: IoT business case
Ray,

For sure, the biz case for IoT is tricky for carriers.

Many devices will be connected via wifi, zigbee, Zwave, or other "free" wireless protocols that are gathered up by a hub. This eats into their share of the IoT pie.

Obviously, those IoT use cases that are mobile are a much better fit for cellular connections, which are the best networks that blanket populated areas.

In order to compete for fixed IoT devices, carriers will need to do a few things:

- Lower the price, in terms of monthly charges per device, and it per kilobyte fees. Offer new packages for multiple IoT devices. Have flexible billing for low-data devices to pay much less.

- To do the above, they need to lower the cost of supporting IoT devices. Lower provisioning costs, software SIMs, cheaper OSS/BSS, 5G technology that makes IoT devices "less chatty" on the network.

- Deploy IoT MDM systems and services. They need to manage billions of devices themselves, but also offer tools for corporations and end-users to manage IoT.

- Offer built-in security layers as an integral part of the connectivity sale, differentiating from wifi, and allowing the user to focus on the functionality.

Because, I'll tell you what: Trying to treat a connected bicycle or water sensor as if it were an iPad, and pricing it at $10/mo just will not fly with the customer.

We saw the same problem in connected tablets. The first wave of tablets had a heavy emphasis on connecting via cellular, but since carriers wanted a full $50/mo subscription, cellular tablets were not attached, and customers just used the wifi. Nobody wanted to pay the carrier another full subscription, when they were just using a different device to do the same thing they could also do on their phone. So, customers of course chose wifi-only tablets. Customers sacrificed mobility for savings, and carriers lost the deal. It wasn't until years later that carriers figured out the "family of devices" plans, and made it about ~$10 a month to add your tablet. This was a weakness in carrier agility, driven in part by lack of flexibility in their provisioning, OSS/BSS, and part by a culture of thinking of every device as "just another cellphone". Now, more tablets are subscribed to cellular, but the carriers basically lost the lion's share of this IoT opportunity by having a bad biz model. Now, we run the risk of repeating history, and treating every IoT device like an iPad.
Ray@LR
[email protected]
8/25/2015 | 10:48:20 AM
IoT business case
Maybe the biggest IoT challenge for the telcos is the business case?

Or does that come by finding the right partners/apps developers? 
Kruz
Kruz
8/25/2015 | 9:50:55 AM
IoT
As data will evolve to become a commodity, what role will Operators have to play in the IoT field? What will be the added value: billing, E2E solution, customer relationship?
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