I’ve been following the news releases and other storylines that have emerged from the ongoing proceedings at the OpenStack Summit in Paris, France. Some key themes have surfaced. In my first editorial, I shared reasons why the market has matured. In my second story, I observed how simplification via automation would broaden the addressable market for hybrid cloud services.
The other key theme that has emerged is the increased focus on telecom network operator needs and wants – specifically, the primary telco strategies that are evolving as they continue to build-out their hyperscale cloud infrastructures.
This is my domain. I’ve invested most of my professional life working for, or consulting with, domestic and international communication service providers. I’ve been actively involved in the business development of numerous wireline and wireless services, within both the consumer and commercial side of the marketplace. During more than two decades of experience, it’s been an amazing journey.
The closely related Technology, Media and Telecommunications (TMT) industries are already undergoing a transformation, as innovative products or services are developed by collaborative teams of creative contributors and brought to market at an accelerated rate.
The combined Technology, Media and Telecommunications market size is currently estimated at $5.1 trillion -- with the communications sector consisting of about a quarter of that total.
Exploring the Software-Defined Landscape
As I mentioned in my observations from the Atlanta Summit, the role for open source software as an essential catalyst for progress has already been acknowledged by telecom service providers. In particular, growing interest in the OpenStack project has truly blossomed during the course of this year. It’s a huge upside market opportunity for all vendors and suppliers.
A case in point: according to the latest global market study by 451 Research, the OpenStack technology market will grow from $883 million in revenue during 2014 to $3.3 billion in 2018. I anticipate that a significant portion of that growth will come from service providers – either for their own internal infrastructure requirements or for the delivery of customer-facing public, private and hybrid cloud offerings.
The historical emphasis on systems and associated hardware components has shifted to software. Initially driven by the move towards data-center virtualization -- the next frontier is the network.
I have a good overall feeling about the transformation that’s possible from the movement towards Software Defined Networking (SDN). I strongly believe that Network Functions Virtualization (NFV) is one of the most exciting and promising areas of current research and development (R&D) within the telecom sector.
Radhesh Balakrishnan has provided a thoughtful overview of the Red Hat technology and partner-centric perspective. I’ll now complement that with the following exploration of some key business drivers that are motivating the executive leadership at service providers to pursue a software-defined future.
Progressive Digital Business Model Execution
Similar to the enterprise market, the early momentum in the service provider sector focused on the potential for reduced costs and infrastructure investment optimization, made possible by open source solutions. I believe that the apparent need is most evident in the mobile communications realm, where infrastructure investment has increased throughout the industry during the last decade.
As an example, the 4G Americas organization says SDN and NFV technologies each offer an opportunity for expanded network flexibility and capacity, while also enabling the reduction of operating and capital expenses. By utilizing more off-the-shelf bare metal hardware and open source-based software solutions, they believe that telcos are going to be in a much better position to revolutionize mobile networking infrastructure optimization.
But beyond the cost-savings and optimization benefits is a burning desire to become more agile – to move quickly from new service concepts or pilot project experiments to full-blown commercial deployments. Adapting to changes, as the market evolves, is of paramount importance.
A case in point: just as the Mobile Internet phenomenon has been a revenue boon for service providers, it also enabled the threat of Over-the-Top (OTT) delivery modalities that strike at the core of legacy high-margin services, such as SMS (also known as “texting”). Worldwide, around 10 trillion SMS/MMS messages are generated annually. It was estimated to be a $120 billion revenue stream at the end of 2013 that’s already under attack.
Now part of the growing adoption of Mobile Cloud related smartphone apps, the bigger OTT communication trend is very troubling for service providers. Juniper Research claims that voice and messaging traffic lost to OTT mobile internet application providers -- such as WhatsApp, Facebook and Skype -- will cost mobile network operators $14 billion in lost revenues globally this year, that's up by 26 percent since 2013.
Keep in mind; I’ve just highlighted one segment of the telecom service provider business. As you would expect, these current market developments have the attention of service provider CEOs and their entire leadership team. Behind the scenes, they have been busy preparing their plans to address these and other challenges.
If you need further validation of the new digital business model charter that’s already in motion at service providers, enabled by open source technologies and an agile DevOps methodology, then I suggest viewing the insightful keynote presentation at the “Open Networking Summit” earlier this year by John Donovan, Senior EVP, AT&T Technology & Network Operations. As you’ll see, the theme of his talk is about “openness” in our industry – summed-up in two words, transformation and innovation. He refers to the AT&T Domain 2.0 vision that was intentionally shared publically and openly, so other service providers could benefit from their research and development efforts.
In 2015, I intend to share more pragmatic insights about what OpenStack cloud infrastructure, SDN and NFV actually makes possible – achieving those much-needed meaningful and substantive business outcomes. I welcome the opportunity to explore the service provider backstories; how they’ve applied these technologies to meet their unique requirements. These are exciting times. Let’s collaborate.