Home > Blogs > VMware Telco NFV Blog

Collaboration in the new NFV-driven economy

Today’s new subscription economy allows both business and consumer customers to pay as they go, which is great for them, but the impacts for the service provider are both obvious and seismic. This fundamental change in revenue and operating models means that Communications Service Providers (CSPs) now look and behave very differently from only five years ago.

Software-defined Networking (SDN) and Network Functions Virtualization (NFV) are primary drivers of this on-demand approach to core infrastructure. Leading CSPs are collaborating with their technology vendors, looking closely at their offerings to realign their services and more firmly secure their relationships with business customers. In doing so, CSPs become more valued as strategic go-to partners to their customers, delivering capabilities that make agility and innovation possible.

If CSPs are being forced to rethink their revenue models in response to evolving customer demands, then it’s only natural that they’ll be reviewing their commercial relationships with technology vendors. I believe that to meet the demands of the customer, a new perspective on the commercial model between the vendor and the CSP is needed. It’s time to move the conversation on and start looking at the options.

The investment challenge of the modern network

CSPs are shifting away from traditional CAPEX infrastructure renewal projects; because they can. One leading analyst firm reports that CSPs anticipate CAPEX reductions of 40% and also expect OPEX reductions to be in the region of 60%.

A downward spiraling equation seems to be in play. As CSP revenue streams reduce, market demand for new services, delivered to and paid for by their customers in new ways, is escalating. To optimize the commercial opportunities CSPs need to invest relatively heavily in infrastructure. Spending more and making less in the short term, against the expectation of greater long term gains, is a tenuously sustainable business model. Something has to give. So, what is it?

A recent IHS Markit report lists a number of common consumption model approaches. These include the stalwarts such as term and perpetual licensing, and SaaS, but also two particular models that promote relationships far more intertwined than age-old seller/buyer arrangements. These are:

  • Risk and Revenue Sharing: Where vendors assume the risk and expense of integrating hardware and software for a specific service in return for pay-back in revenue sharing.
  • Co-Development projects: An approach which is beginning to characterize the development of SDN and NFV orchestration in a style not dissimilar to DevOps.

These two models are of interest as CSPs increasingly look to vendors to share the risk involved in delivering a modernized infrastructure while responding to the natural laws of the new subscription-based world. The time has come to drop the supplier/customer confines and stuffiness of traditional vendor/CSP relationships and look to capture the spirit and practice of mutuality, creating a vibrant commercial model that turns on the light at the end of the tunnel for all involved.

Paving the way for a new commercial relationship

In my conversations with our CSP customers I often encounter a focus on the use of technical criteria to justify investment in network modernization. I suggest that the commercial business case is as, if not more important, where decisions are driven by the desired business outcomes, rather than simply the perceived requirement to update technology.

One way around dealing with initially unquantifiable factors is to move an existing service over to the NFV approach and compare the associated P&L to that which would apply with traditional networking.

To pave the way for mutually beneficial partnerships a number of changes need to take place, not least the creation of a commercial agreement for a new type of relationship that will in many cases contradict pre-existing contracts. Of interest here is that 96% of virtualization contracts are managed by the IT team – which could be a challenge when NFV contract owners will sit across IT, Network and Data teams

Many vendors who are prepared to take on this partnership role will also require a higher level of transparency into CSP revenues and it is not unreasonable for any organization to be hesitant about opening the books to a third party. It’s not an insurmountable hurdle but it is a high one to jump especially when opening negotiations with the procurement teams.

Many hands, light work

To allay fears and also to bring in the skills and contributions, not just from vendors but also the diversity of internal specialists, the most instantly workable and amicable scenario lies in the area of co-development. This is an approach that allows vendors to identify projects that they could co-develop with CSPs that can showcase the potential for innovative revenue generating services that help CSPs fast-track NFV implementation.

CSPs prefer the freedom and flexibility of an ‘a la carte’ menu – what they want, when they want it. Vendors need the security of revenue potential. Co-development seems to address everybody’s strategic goals.

At VMware, we are working with CSPs proactively and collaboratively to reach outcomes that work well for both parties. When they do, the relationship gets stronger as it becomes mutually beneficial. Together with many of our customers we are getting creative about commercial models, sharing risks and anticipating shared rewards for effort. This approach is based on respect between partners and will, I believe, deliver solutions that work for all.

What do you think? Is a new era of working together going to work for all of us? I’d welcome your views about new styles of relationships and whether or not they’re the way forward.

 

 

MNOs come out fighting: the great industry come-back

Doing nothing is not an option

There’s a groundswell of chatter and opinion-sharing about the pressures swirling around the network; perfect storm formations of connected things, smarter devices, and 5th generation mobile networks. For a long time, we’ve been able to feel 5G in the air.

It would be a mistake to do nothing in the light of these trends. MNOs cannot take refuge in established mainstream subscriber services, and simply offer more competitive rates. Analysis Mason’s predictions for the telecoms, media and technology sectors 2017 features digital experience as the third big thing in its top ten predictions: “Network operators will increasingly use digital experience initiatives to appeal to digital natives.”

Fourth on the same list is a suggestion that “an increase in the volume of mobile video traffic will lead network operators to invest in virtualized video delivery and traffic management solutions.”

In a recent blog – Monetizing the network: operators’ new models – my colleague addressed the ‘dumb pipe’ syndrome. He suggested that only by meeting new subscriber demand for more sophisticated services could operators expect to retain and build business. Meeting this demand requires an honest reassessment of how fit the business is, in its current format, to accommodate new demands subscribers are making on their service providers.

It can be done. All is far from doom and gloom. Focus is important; leaving the past behind and turning the business on its axis. Everything is getting smart. Once upon a time it was just the mobile phone. Now connected cars are well on their way and wearables are gaining pace of adoption and consumer popularity. Deloitte’s 2017 Telecommunications Industry Outlook observes:

…”wearables such as smart watches and fitness bands have seen tremendous percentage growth. Smartwatch penetration doubled from 2014 to 2015 and tripled in 2016; smartwatches have now penetrated roughly 12 percent of the mobile consumer market in the US.”

Market dynamics

One is tempted to wonder which type of organization stands most to benefit from network-dependent new technologies, such as the Digital Assistant. Will disruptors continue to cannibalize the market? History suggests that they will, unless market dynamics change.

Past incursions such as Skype, WhatsApp, and Facebook have established an evolutionary pattern – the fittest are surviving and thriving. These OTT service providers are delivering exciting and relevant services that customers are finding to be more useful and engaging than traditional services. What’s more, they are delivering these services through the pipes built by the MNOs.

Look no further than this year’s CES, where Amazon’s Alexa stole the show and is already being incorporated in products from LG, Lenovo, GE and even Ford, the latter putting it into cars.

If these significant recent trends are anything to go by it is easy to imagine that these organizations, and others like them, are already planning their service propositions to meet IoT and its potentially limitless manifestations.

Claim your share

Here’s some advice that has stood the test of time ever since Fleetwood Mac released Rumours, back in 1977:

Don’t stop, thinking about tomorrow, Don’t stop, it’ll soon be here,

It’ll be, better than before, Yesterday’s gone, yesterday’s gone.

Tomorrow will only be better than before for MNOs if they take such advice and start obsessing about tomorrow. Any five-years out view, based on offering network services as they are today, is simply not realistic. ‘Better than before’ is not a right. It has to be claimed.

Here’s what KPMG had to say last year about tomorrow for the ‘traditional telco’:“(it) will struggle to survive beyond the next decade …unless it embraces the opportunity presented by digital.” [1]

A need to adapt is clearly emerging as a theme in just about every blog and pronouncement you read nowadays. Everybody agrees that the fittest will survive and I was delighted to note another observation from KPMG that largely concurred with my own long-held views:

“Their (Telcos’) first challenge must be to shift the prevailing business mind-set from one focused on engineering to one focused on the customer. There remains a legacy culture in some Telcos in which the customer is a secondary consideration to engineering.” [2]

The new battleground

My colleague talked about the need for agility in provisioning new services in a blog ‘MNOs might never be the same again’. Legacy network infrastructures, or – more to the point – the legacy style of thinking that goes with them, are highly suspect as foundations for competitive agility in the future. Customer focus will be the new battleground – requiring new thinking and a new, agile approach to network technologies that permit speed of response and dynamic services provision.

Video, picked out in Analysis Mason’s predictions, is but one area to prepare for. IoT will be soon upon us. MNOs need to be ready to meet the demands of the modern customer. Providing digital services and great customer experiences is necessary to win. The most important thing is to recognize the need for change now. It will all soon be here. A transition to software-driven architecture, providing the agility and flexibility that a changing world craves, can be made in such a way as to retain many of the robust and still valuable capabilities derived from existing investments.

How realistic is it to move swiftly to a customer-centric business mind-set? I’d welcome your views on the great MNO come-back, particularly with regards to the people skills you think are most likely to make it possible and how those skills can be deployed.

Industry’s first Open VNF Onboarding Hackathon a great success!

MWC 2017 was the venue chosen by VMware, Intel and Cloudify to kick off a co-innovation project to address one of the biggest challenges to the rapid deployment of NFV-based services: VNF onboarding. Continue reading

MWC 2017: Mobile Network Operators might never be the same again

This article was first posted by Constantine Polychronopoulos on LinkedIn

imagec1

On every front – from content and media, to consumer and enterprise IoT, the Fourth Industrial Revolution, 5G and soft-radio transmitters, sustainable development, and network virtualization (the core themes framing events at MWC2017) – operators face intense competition to deliver relevance and value to subscribers. The key consideration in all of these areas is in knowing where to begin. It’s also about knowing where to end what has gone before.

Continue reading

Three steps to customer centric strategy in the IoT era

image h1

This article was first published by Honore’ Labourdette, VP Global Market Development, Telco Business Group on LinkedIn

MNOs have billions of opportunities for growth

The pressure is on for many Communications service providers. Their enterprise customers expect them to provide a more streamlined environment capable of delivering new services faster. Driving this demand are factors such as the changing workplace, mobile, cloud and – gathering significant momentum – the Internet of Things.

Continue reading

Announcing VMware vCloud NFV 2.0 – Getting There Faster

With more than 80 production deployments across more than 45 communication service providers (CSPs), you can safely say that we have gained significant real-world experience in deploying and supporting our customers in rolling out NFV platforms, creating new services, and operating these services.  Today we announce the new version of our VMware vCloud NFV platform, which represents the culmination of this experience and our ongoing commitment to supporting our service provider customers in reaching their business goals. Continue reading

Don’t miss the VMware NFV activities at Mobile World Congress 2017!

MWC-bannerVisit VMware at Stand K10, Hall 3.

VMware will be hosting a range of activities and things to do at this year’s Mobile World Congress; from an experiential demonstration of a 5G world, through to IoT and the connected car . See how VMware is not only helping service providers generate value today, but is shaping the future of NFV!

Below is a summary of the main activities for your event planner…

Continue reading

VMware, Intel and Cloudify to sponsor the first VNF On-Boarding Hackathon at Mobile World Congress

VMware, Intel and Cloudify to sponsor the first VNF On-Boarding Hackathon at Mobile World Congress; a critical new initiative to accelerate the adoption of telecom services over virtualized infrastructure.

Continue reading

The three top habits of tomorrow’s successful service provider

This blog was first posted by Gabriele Di Piazza on LinkedIn here

MBA Blog 2 Banner

Fit for purpose

There will be two types of Communication Service Provider (CSP) in the next few years: those who will have embraced transformation and championed change within the organisation, and those who have adopted a follower approach. Success is most likely to lie with those embracing transformation and change. Within these organisations, preparations underway now will see the gap widen between them and those following as they begin to realise the power of a software-defined service capability and deploy different strategies and tactics to the CSP of todayThey’ll have different teams, skills, and services. Continue reading

Inside the Telco camp on the eve of the revolution

This blog was first posted by Honore’ Labourdette on LinkedIn heremba blog 1 header

The past is behind us

Telcos have been through an exhausting time in recent years. Nerves and profits have become a little frayed. As MWC17 approaches, however, there is every sign that things are about to change. To put it another way, there is overwhelming pressure to make sure they do. Continue reading