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Might SDN & NFV Help Telcos Crack Open the SMB Market?

Ray Le Maistre
3/16/2015

For the past 20 years I have been reading and editing articles about how, at last, traditional telcos have been on the cusp of cracking the small and midsized business (SMB) market and at last being able to develop a viable strategy for a sector that has for so long promised so much but ultimately been a resources black hole.

The same problems have come up time and time again though. For most telcos, it takes too much time, money and effort, and too many people, to sign up, service and retain SMBs, which invariably end up turning to local communications services integrators to help them source what they need.

Now, though, it's just possible that service provider virtualization and cloud capabilities might be the key that, at last, unlocks the SMB market for traditional communications service providers.

That thought occurred to me as I reached the concluding pages of our recent epic report, Validating Cisco's Service Provider Virtualization & Cloud Portfolio.

That report tells the story of how a team from the European Advanced Networking Test Center AG (EANTC) validated some of Cisco Systems Inc. (Nasdaq: CSCO)'s key service provider virtualization systems in a test funded by Light Reading. (See In the Lab: Cisco Service Provider SDN Test.)

As part of the process, the EANTC team took on the role of a small business -- a café with two locations -- and went through the process of selecting, ordering and provisioning a VPN service that included a firewall, URL filter, remote access and cloud VPN with Internet access.

The EANTC team was able to do this from start to finish (that is, from order to service activation) using a web interface that interacted with the two main applications that were being validated (Cisco's WAN Automation Engine and its Network Service Orchestrator).

"Without calling any support or ordering line, using a web interface only, we created a service that included not only connectivity, but also services... From a service provider perspective, a customer created a rather complex service without involving an operations team," noted the EANTC team in the report (see pages 19 – 21).

So this wasn't just a portal for placing an order. This was an automated service configuration and provisioning system that, if deployed and marketed efficiently, could open the doors to an SMB pot of gold. Virtualization might just be about to knock down those long-standing barriers.

What makes the EANTC team's experience even more encouraging for those communications service providers (CSPs) looking for a virtualization business case is that the validation process was undertaken using a system designed for (and branded by) one of Cisco's Tier 1 operator customers: This was a virtual experience that is already very real.

Challenges remain, of course. Virtualization is not a silver bullet. The introduction of software-defined networking and virtual network functions into existing networks will be hard, but it will happen. And maybe, just maybe, in a few years' time Light Reading might be able to report that, at last, the SMB communications services market has well and truly been cracked open by the telcos.

— Ray Le Maistre, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, Editor-in-Chief, Light Reading

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mendyk
mendyk
3/18/2015 | 10:58:07 AM
Re: Not a coincidence
Good point -- the services principle of verticality. This makes the SMB play a bit more challenging because operators will also need to bring in some very specific expertise or find the right partners to do that.
brooks7
brooks7
3/18/2015 | 10:50:59 AM
Re: Not a coincidence
Dennis,

I have yet another point as I spend a LOT of time with small businesses.  All the carriers are focused on the rather broad brush applications that people need.  And yet nobody focuses on what say all Law Offices need.  If you want to be different, you can not be broad brushed.  On top of that those comm services that we all focus on are very interchangeable.

 

seven

 
mendyk
mendyk
3/18/2015 | 10:18:49 AM
Re: Not a coincidence
The key points raised in this thread by seven are (1) SMB is not a single market, but an aggregation of at least thousands of types of businesses, many if not most of which are able to run on rudimentary communications technologies and (2) the amount of money that even tech-needy SMBs are able to spend on said technologies is pretty limited (which typically translates into lower margins for the provider). There certainly is some opportunity for "telcos [to] crack open the SMB market," but the prize inside the SMB pinata may be disappointing without setting realistic expectations.
Mitch Wagner
Mitch Wagner
3/17/2015 | 9:17:41 PM
Not a coincidence
Cisco is explicitly going after the SMB market -- or, more precisely, going after carriers going after the SMB market -- as seen in recent NFV deals with DT, Telstra, and Telecom Italia. 
amir.elbaz
amir.elbaz
3/17/2015 | 8:30:25 PM
Re: Faster pace
You are right about the crowded market but you have to consider two things: 1. those carriers are professional bundles, and they have the a better access to the customer than 8X8 or others; 2. Other products came in the past to a crowded market, but with a better delivery/strategy like the iPod, iPhone, etc (just continuing my App Store example from before).

Your comment on the third party apps and using what is out there is a great point, and we indeed just provide a "management and orchestration" platform. We, like Apple, have no desire to write the apps themselves, but to have the easiest way to deploy them. We will continue and add new apps to the platform, as new things come to the market, and offer the full package you described.  

 Thanks, Amir 
brooks7
brooks7
3/17/2015 | 8:10:35 PM
Re: Faster pace
Okay, but if I am a SMB I can go to say Ring Central or 8x8.

One of the problems I see the large telcos having is that these basic functions that you describe are already in crowded markets.  And that is the problem.  You can't afford to call on these customers and spend a lot of time with them for very thin margins.

I think the issue is not NFV but margin.  I would suggest strongly that you think about that as you bring your products to market.  Don't wait for the apps.  They already exist.  What can you integrate yourself and bring as a full package.

seven

 
amir.elbaz
amir.elbaz
3/17/2015 | 8:04:56 PM
Re: Faster pace
Hey Seven, 

i think we are talking about two different things... 

When I was referreing to NFV I always had in mind applications and managed services that are "fully baked" and are ready for use. Same as the SaaS model that you mentioned, or like the Apple App Store, where you get the apps without the need to write any code. My mechanic is using iMessage and texing me instead of calling because he knows I am busy. He is sending me outlook invites for services, and use docusign for documents. This is the type of technology I am looking, which is not too much to ask in 2015. i am not expecting any SMB to have DevOps to deal with AWS, etc.

We have an NFV platform with this type of applications (vPBX, VPN, wifi controller, etc.) and we see a lot of interest from Tier 1's but also from the Tier 3's. Some of those tier 3's are in less developed areas, but still want to add this offering. Our goal is to keep adding more of these 3rd party applications to the platform and grow it. For these carriers the deployment of services is super fast and super easy, and the same goes for customer experience. 

Amir 
brooks7
brooks7
3/17/2015 | 7:38:27 PM
Re: Faster pace
Just to make it clear I am in the SF Bay Area...not exactly a tech backwater.

Do you really want your Carpenter to know how to turn up an AWS instance or is his ability to frame more important?

I think we greatly assume that SMBs are going to be tech savvy at all.  They struggle with basic business knowledge (go ask your mechanic what his net margin percentage is).  To think they are going to spend time on figuring out how to run Linux is not something I think is going to happen.

What I do see them wanting is integrated SaaS offerings.  Something that provides not just basic functions but a suite of services that encompass a lot of what they need.

seven

 
amir.elbaz
amir.elbaz
3/17/2015 | 6:50:51 PM
Re: Faster pace
In one aspect, this is exactly my point... You offer them a complete package of everything they need/want, where they have to do little or nothing (assuming they pay their bill) - send them a box, plug-and-play, with all the NFV goodies.

On the other hand, SMBs are becoming (or have to) more sophisticated, adapting to current technologies, which is mainly derived by their customers, especially the millennial generation. The US is not one homogeneous market, and it differs geographically. Some areas will move faster than others, while some are still in the "browser bookmark" age. In the faster areas I am guessing the ARPU is far greater than in areas where technology adaption rate is slow, and this is where the business case for carries makes sense.

As a customer I am always making sure that my service providers (realtors, car mechanics, etc.) are tech savvy, as it helps with the communication and the experience. 

Thanks for the comment, found it funny.

Amir 

  
brooks7
brooks7
3/17/2015 | 6:13:15 PM
Re: Faster pace
I am going to try to put things in a bit of perspective with SMBs.  I was at a local Realator meeting and they had an IT expert talk to the group.  The discussion was on how to bookmark sites in a browser.  The group asked for written instructions for the different browsers used.  If you think that the IT capabilities of SMBs is good, then you really need to rethink things.

When you talk about AWS and small businesses.  Think small technology development companies.  A very small portion of the SMB market.

seven

 
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