This blog is part of our ‘Telco Cloud experts talk’ series by Stefan Kindt from the Networks business of Nokia.
Cost savings may have served as the initial attraction to all things cloud in the telco environment, but according to recent surveys and discussions, not any more…
Telco cloud, including Network Functions Virtualization (NFV) and Software Defined Networking (SDN), promises various benefits to operators such as cost reduction, service innovation and better customer experience. While cost reduction is an expected benefit of standardized and commoditized hardware and software, it is the indirect benefits of automated operational processes such as service agility and innovation potential that are driving the telco cloud transformation. In this context, it’s interesting to follow the industry thought process with respect to these main drivers and objectives.
Discussions held during the last 12 months have proven that operators are at very different stages in the transformation. Several operators have not yet started or are at a very early stage and seeking single business cases, typically based on cost saving, to convince their Boards to start with initial trials. In contrast, many advanced operators have recognized that costs may initially be at least on the same level (if not higher), while the gain in user experience and service agility – two aspects that are hard to credibly quantify in a business case – clearly compensate by enabling future services offerings and increasing mid-to-long-term competitiveness.
This shift towards service innovation was also supported by survey results from our two last webinars on telco cloud. We asked the audience what the main drivers are for operators to move towards telco cloud, and ‘cost reduction’ was chosen by only every forth participant – well behind ‘shorter innovation cycles for deploying new services’ and followed by ‘new revenue from cloud services’ and ‘coping with fluctuating demand’.
Further evidence was provided in a global operator survey commissioned at the end of 2013, where the answers were clearly market driven. For emerging markets, cost reduction was still the main appeal of the telco cloud transformation: ‘both the cost of new hardware and the costs associated with managing the network’. However, for operators in mature markets, service flexibility has been much more important: ‘Having the agility to scale up and down instantly will allow us to be more flexible towards our customers’ needs.’
So, does it really help to calculate cost-driven business cases when moving towards telco cloud? Probably not!
As John Donovan, senior executive VP at AT&T so eloquently stated at the Open Network Summit in March 2014 when asked why AT&T is moving to SDN: “Because there’s no army that can hold back an economic principle whose time has come.”
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