Smart pipe strategy puts new telecom services in business value chain

New TM Forum initiatives focus on new telecom services that bring in revenue while making 'smart pipe' networks essential to value chain partners. Whether through cloud computing services or network outsourcing, it is ushering in a new -- possibly virtual -- business model with lower barriers to entry.

Communications service providers are forced to spend thousands or millions of dollars to upgrade their bandwidth

and network infrastructure, with no certainty that customers will actually pay for it.

One strategy is to continually develop new telecom services, many of which are no longer strictly coming out of the network.

Keith Willetts
Chairman and CEO
TM Forum

This disparity is leading to a serious revenue crunch across the board. But even as providers shell out the money for bandwidth and severely cut back their operating costs, they are still keeping a close watch on opportunities that might lead to new telecom services revenue trickling in.

One strategy is to continually develop new services, many of which are no longer strictly coming out of the network. Instead, service providers are working closely with different suppliers and partners to insert themselves into the value chain as more of a smart pipe to ensure that they are not left out of the latest and greatest ideas.

A lot of these new telecom services, whether high-quality voice, IPTV, mobile money or others, may not turn around the fortunes of service providers overnight, but if they help the providers hang onto existing customers and maybe bring in a small amount of new business, they are worth the time and effort.

To help providers and their partners facilitate the creation of new services, TM Forum has created a project specifically to address the management of these new services by looking at the standards that are needed in this area. We've been working closely with service delivery platforms and value chains for a while, so by bringing them together in a more structured way, we're much better able to make this business-to-business (B2B) trading environment successful.

Cloudy with a chance of new cloud computing services

Not far from the concept of new services is the industry buzzword of the year, cloud computing services. But rather than just being about hype and what's hot, a cloud environment is a method for one party to provide a capability to another. This is what we're dealing with on the new services side, where many pieces of the service exist in the cloud and are brought together to create something that customers will happily pay for.

Because of these intrinsic synergies, TM Forum is working hard to ensure that our new program on managing services and the initiative on managing cloud computing services don't stray too far from each other. If you look at the whole cloud concept -- or what the techies would call a service-oriented architecture -- it's really this whole area of reusable capabilities that are exposed through a standard set of interfaces.

We're seeing software giants like Microsoft and Oracle spend serious bucks in the cloud space, and an increasing number of service providers are getting on the bandwagon. While many people think cloud computing services are a flash in the pan, I think they're here to stay because of the business freedom they afford companies that embrace the concept.

Cloud computing is really a fancy term for outsourcing, where companies decide what they are able to do in-house and what they are willing to pay someone else to do, whether it's handling billing, customer care, content and apps or something else. It allows the provider to have much more freedom over how it organizes and sets up its business.

The ultimate example of a provider that has embraced this concept is Bharti Airtel, the largest mobile provider in India, with more than 124 million subscribers. Bharti is generally recognized as the first mobile phone company in the world to essentially outsource everything except for its marketing and sales. You heard right. Bharti has no network -- it is supplied and managed by Ericsson. It has no IT -- that's managed by IBM, along with its billing. In essence, Bharti Airtel is a virtual business.

This concept is nothing new. People run entire businesses on eBay without any real infrastructure of their own. But this idea of a cloud-based virtual business means providers are no longer under pressure to have expertise in all parts of their business under their own roof.

Revolutionary cloud computing services can create virtual value chain

The idea of a highly integrated, interconnected world where the barriers to entry are very low is not a new concept, but it's still pretty revolutionary when you think about it. You can come in and set up your business with services you purchase or outsource to other partners, put your own brand on it, and away you go.

And yes, this has been done before with the whole mobile virtual network operator (MVNO) idea. But the reason that MVNOs largely failed was that there simply wasn't enough margin between what companies were paying for network capabilities and how much they charged their customers for them.

But in a cloud computing services world, the idea of a virtual value chain actually allows for a bigger margin through economies of scale, which is absolutely critical. Only then will you be able to find someone who can provide you with particular new services of lower price and higher quality than you could achieve yourself -- not because they are smarter, but because they run a much larger operation or they specialize in a particular area.

This whole concept could revolutionize the way we do business. It will allow smaller entrants into the market and allow traditional telecom service providers to broaden their reach into areas they couldn't get into on their own. As I've said before, in today's global economy, your partner's success directly affects your own good fortune.

TM Forum's Management World 2010 in Nice, France, in May offered a one-stop shop for information and resources to give providers and other players in the value chain a leg-up on new services in general and cloud computing services in particular. Its Enabling Profitable Cloud Services summit covered service provider and enterprise opportunities and case studies from BT, Telecom Italia and others, and it looked at standards and technical issues surrounding the cloud. The Growth Through New Content & Innovative Services summit addressed mobile advertising, location-based services and social media services, IP and Telco 2.0 business models, the changing value chain, and content over broadband.

About the author: Keith Willetts is recognized as one of the world's leading authorities on communications management. As co-founder and chairman of the TM Forum, he has been the driving force behind its continuous evolution. Currently managing partner at Mandarin Associates Ltd. in the U.K., Willetts consults with companies on a wide variety of business development issues. He previously held executive positions at BT and TCSI. A regular presenter and writer, he co-authored the highly influential book The Lean Communications Provider.

This was first published in May 2010

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