For decades, the strength of the world's technology industry has come in large part from its ability to satisfy people's natural yearning for order, logic and organization. Even though the average user of a network service or a personal computer has no hope of understanding how it all works, they are comfortable with the value proposition that led to the purchase. After all, you don't have to be an automotive engineer to drive a car.
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The telecom industry now faces a challenge that is part of a larger technology challenge: The basic value proposition of networking is not as well understood as it has been in the past, which means that those buying technology in general, and network equipment in particular, are having more of a problem proving the benefits. Network operators call this a "monetization problem," and the macro-problem of network benefits for all and the micro-problem of benefits to equipment buyers that justify the investment will be key to the recovery of telecom.
We all depend on voice communications, but despite all the hype to the contrary, building the same level of dependence on something beyond voice has proved difficult. Dependence on the Internet is the best that has been achieved, but so far that has been possible only through precipitous drops in price-per-bit, which have contaminated the usual access/transport network business case.
At the service level, where profits have always been strongest, nothing has replaced voice, and voice is in decline.
What you don't "need," you have to be "sold," and the need to merchandize communications has created the current network operator fixation on third-party access and over-the-top partnerships. It's a good response, but it doesn't provide a concrete roadmap to link whatever opportunity these relationships create with investment in the network.
Vendor efforts to explain network investment value
Three vendors are apparently trying to take on the challenge. Alcatel-Lucent announced in early December that it would refocus its strategy on dynamic service partnerships between the Web and telecom worlds. Cisco's chairman and CEO John Chambers alluded to much the same thing with his Cscape™ event speech around the same time, and Juniper now has Web 2.0 and monetization featured prominently on its homepage. The question now is whether recognition of the need will translate into solutions to the problem.
Creating services that can be merchandized more than needed is an exercise in dynamism at all levels, starting of course with the "storefront" that over-the-top partnerships and Web 2.0 can create. But to create flexible services, you need composable service architectures that can mix and match feature components as needed to meet current market needs and opportunities. Efforts to create that sort of architecture go back four years and have borne little fruit so far.
You also need a whole new vision of network operations. OSS/BSS processes have historically been focused on fairly long-cycle activities. The way to make them work for something like voice calls was to manage the stuff in aggregate. Will that work for thousands of unique services created through possibly tens of thousands of partnerships involving billions of customers? Nobody seems to think so, but again, efforts to bring some order to operations chaos have fallen short.
The year of network operators' discontent
Network operators in 2009 want to make money building networks, and since building networks is the provenance of network equipment, operators naturally look to equipment vendors. Service providers aren't liking what they find. Every major operator we at CIMI Corp. surveyed put equipment vendor support for their monetization paradigms in the "unsatisfactory" or "very unsatisfactory" categories. All this was before the current wave of vendor interest, to be sure, but that wave has still not produced a tangible result.
Cisco's Chambers had the vision in his speech, and Cisco's Active Network Abstraction (ANA) is the most developed of all the frameworks that could reasonably promise to link the pieces together. But the company seems to view ANA as a "network management" offering, and as such, nothing but a tick on an RFP. There's no indication that anyone at Cisco sees ANA as a path to meeting Chambers' challenge of mashing up services in the future, which would make a connection a hard sell to buyers.
Juniper has the longest history with the problem set, perhaps; its "Infranet Initiative" posed the right questions four years ago and (as the IPsphere Forum, now part of TMF) has made progress toward defining some of the pieces of the solution. But no standards process in the world has ever been able to keep up with the market, and certainly this one isn't doing that. There is no hope that a useful result can be achieved in 2009, when it will be needed the most. Operators tell me that they don't expect standards to solve their problem anyway.
That would seem to leave things up to Alcatel-Lucent. But while it has the broadest product portfolio and the most direct linkage to service-layer technology of any vendor (with IMS and IPTV), the company hasn't said anything yet to indicate what it will do with those assets to meet its stated new strategic goals. Unlike the other two players, Alcatel-Lucent doesn't seem to have a specific product foundation on which it could build, but it does have the largest number of total pieces should it be able to create such a foundation. But Alcatel-Lucent, like the other traditional telecom equipment vendors, is facing a broad set of market challenges. Can it meet this strategic one with so many tactical issues creating diversions?
All the while, network operators are grappling with questions about what to invest in to secure revenue and profit growth for themselves when, or even if, world economic conditions improve. Whether they get that from their network vendors will probably depend on whether one or more of this group of three are prepared to step beyond the standards, move faster than the market and take some risks. If that doesn't happen, I believe that the whole of public networking will be transformed by a shift to metro-centric spending and bandwidth-commoditizing equipment choices.
If that happens, ad spend couldn't supply more than a quarter of the capital budget of networks today. We have to provide services that people will pay for if we want to fund the future of networking.
About the author: Tom Nolle is president of CIMI Corporation, a strategic consulting firm specializing in telecommunications and data communications since 1982. He is a member of the IEEE, ACM and the IPsphere Forum, and the publisher of Netwatcher, a journal in advanced telecommunications strategy issues. Tom is actively involved in LAN, MAN and WAN issues for both enterprises and service providers and also provides technical consultation to equipment vendors on standards, markets and emerging technologies. Check out his complete networking blog.