The Virtual Business Process: A Dilemma

The entire telecom industry is coming to terms with the reality that existing business models are changing dramatically in the virtualization era, but there are strong indications lately that this process is proving problematic for network operators and their vendors alike.

For example, John Isch, director of the Network and Voice practice for Orange Business Services in North America, mentioned in a radio show with our sister site Telco Transformation you can hear in its entirety here, that one of the challenges to the Orange network-as-a-service initiative is getting vendors to accept an on-demand pricing scheme for software licenses of the virtual network functions (VNFs) it delivers to customers.

Orange rolled out its first network-as-a-service offering in the form of a Fortinet Inc. firewall that can be turned up and down via a web portal, once a zero-touch CPE is shipped and installed at the customer premises. Other VNFs can be installed on that box going forward.

But the critical piece is how the VNF software is being billed, Isch explained.

"In this new environment, I don't want the VNF provider to start charging me -- Orange -- for the use of that VNF until a customer turns it up," he said. "When the customer pushes the button, that's when the VNF provider starts charging us and we start charging the customer. If the customer turns it off, all that stops."

That means integration with the Orange BSS, something it has done for its first NaaS offering, but it also means coordination with the vendor and agreement on how the VNF is billed. Finding VNF vendors willing to work in that manner has been a challenge, Isch said.

The 'L' word
Earlier in the month, BT Chief Architect Neil McRae has used his speaker status at Light Reading's OSS in the Era of SDN & NFV event in London to specifically call out issues around licensing, including managing and maintaining large blocks of licenses, worrying about license key expirations, and sorting billing issues. McRae is among many service provider executives chiding the industry's vendors for seemingly replacing the revenues from hardware sales with corresponding software revenue. (See BT: Virtualization Must Include Legacy.)

Travis Ewert, senior vice president of Global Network Software Development at Level 3 Communications Inc. (NYSE: LVLT), admitted in an interview with Light Reading that it's "a little bit wild West right now" where VNF management is concerned, as network operators and vendors alike try to sort out pricing models for licenses, but also how to handle software updates and develop a standard VNF onboarding approach.

"The pure-play software guys use models that are essentially leases -- we don't own the software, we have a right to use it," Ewert says. That means software isn't accounted for in capex, "though there is a crossover point where the cost of a lease is compelling enough to include it in capex."

Want to know more about managing and orchestrating virtualized networks? Check out our orchestration section in the Light Reading NFV channel.

Tying software licensing models to on-demand or usage-sensitive pricing requires a different financial analysis, he notes, and that's a complication for both parties. But there are also issues around lifecycle management of the software, particularly as update cycles get shorter. Telecom's traditional FCAPS model -- the standard approach that includes fault-management, configuration, accounting, performance, and security -- doesn't fit neatly into the VNF realm.

"If you look at those things that are FCAPS in nature, what do you need by way of hooks, day two assurance and more?" Ewert asks. "There are always going to be native capabilities from those VNFs to support that and we might have a VNF manager on top of that. There's a whole certification process us carriers have had to go through historically for network elements that includes things like alarm configuration and performance -- does that change with a VNF? Does it come from the VNF natively or does it sit on top in the management layer? Then we have to have certification with VNF management -- that's all happening under the hood."

Get on board
Those are reasons why a standard VNF on-boarding process was a hot topic at the London OSS event earlier this month with multiple operators and at MEF16 a week later in Baltimore. Standardizing VNF on-boarding was one of three goals AT&T Inc. (NYSE: T)'s Josh Goodell mentioned in his MEF16 keynote address. And it was a significant part of why David Amzallag, head of network virtualization and SDN/NFV of Vodafone, called on telecom vendors to move their software to a cloud native state, from the current cloud-ready position many of them occupy. (See AT&T: MEF Could Catalyze Key Specs and Vodafone: Desperately Seeking Cloud-Centric Tech.)

But as Antonio Elizondo, senior technology expert at Telefónica , noted in a panel at the OSS event, telecom operators are just starting to think about what they need from VNF vendors in the way of information that feeds into systems that provide service assurance, meaning there is still a lot of uncertainty on the network operator side.

"We want to have a model-driven operation," he said. "But that is easy to say, not easy to do. Every VNF has a different requirement." Operators need to have a clear picture of how this comes together to share with vendors -- and their customers, as well, who have their own ideas.

Coming next week: The vendor view

— Carol Wilson, Editor-at-Large, Light Reading