Lean operator

The world of telecommunications is evolving, and fast. From wireline losses to wireless gains to the short- and long-term outlook for voice and data, two things are certain: this is an industry bursting with potential, and the competition is fierce. Who is walking upright (and how)? Adam Burns went to Nice, home to one of Europe’s largest telco events, TM Forum’s Management World, to discover the missing links in next generation services.

“We are trying to ensure that we’re measuring things right, that we’re reacting when there’s problems. We’re starting to form that foundation”
-Kevin Peters, EVP for global network operations at AT&T

The telecommunications industry holds the title of 'world's most fascinating'. It elevated Carlos Slim Helú, an engineer from Mexico, to 'world's richest man' status. It is widely held as one of the building blocks for a developed economy. And it has pervaded every area of modern life - not being able to get a signal is the way we run out of road.

No surprise, then, that telecommunications companies have to adapt quickly: the industry serving as the 20th Century in microcosm. Competition between traditional carriers, cable companies, and mobile services providers was only the first dramatic change of a new, deregulated era. More recently, non-traditional players - such as Internet Service Providers - entered the fray, and then convergence shifted the ground still further. All in the last two decades.

How can communications service providers (CSPs) deliver new services to pervasive devices faster? How should they best deal with the growing complexity of these new services? And the ultimate question: how to become a lean operator?

To find out, I visited the year's largest European telco event, TM Forum's Management World, to speak with an analyst, Patrick Kelly, Global Telecom Software Research Director for Analysys Mason; an operator, Kevin Peters, EVP for Global Network Operations at AT&T; and the man behind this tribal gathering, Martin Creaner, President of the TM Forum.

More, with less
Telecommunications is a competitive industry. To make up for falling voice revenues, raise average revenue per user (ARPU), and reduce customer churn, communications service providers are rolling out next generation IP-based services across different platforms and devices, and quickly. These services are not based on traditional proprietary carrier-grade technology, but on commodity low-cost hardware, public networks, and IT-like software and hardware platforms. Vitally, these new business and technology trends promise real, tangible benefits to CSPs, but they also bring new management challenges...

"The telecommunications industry is changing because you have media companies, content companies, and Internet companies coming into this space," says Patrick Kelly, global telecom software research director for Analysys Mason. "And that requires a change in how the service provider supports new services - they are moving from supporting business or consumers or, for example, pre-paid versus post-paid, to supporting some of these micro-segments in real time."

Kelly believes this means operators will be working more closely with third-party application providers, which may create disruption in the marketplace, both for the service provider and for new entrants coming in, but it gives users "much more flexibility" and a better overall experience.

"In the past, you could actually plan, develop, and deploy a product that may last for two or three years in the marketplace," says Kelly. "Today, those types of services may only last a few months. And in doing that you need flexibility, both in the operational support systems that you have - your billing systems and your customer systems - and that's going to require moving to a next-gen operational support system."

Service assurance
The key, of course, is to not take your eyes off the customer - and that means a high quality of service all of the time. I asked Kelly if these new revenue models require heavy investment?

"We see three areas of investment in the marketplace. The first one is in the service assurance area, which really focuses on end-to-end quality assurance. The second area is in the fulfillment space, around the whole order-to-activation process - how do service providers capture new subscribers in the marketplace, and then turn that into revenue quickly.

"The third area is self-care, which effectively looks at ways in which you can support the subscriber in the context of channels of interfaces into the service provider. That really offloads some of the cost to the service provider... there's less cost through a self-care web interaction than there would be through a live agent."

Theory into practice
That's the analyst's view, but what of practical reality? Kevin Peters, executive vice president for global network operations at AT&T, knows all about the challenges around managing this new IP-based paradigm, and quality of service.

Peters believes the evolving computing and communications ecosystem is something that needs to be watched. "I come at it from an operational perspective," he says. "And this ecosystem is going to require collaboration to levels that we haven't had to do traditionally."

He believes it is going to increase the demands on the performance of the network, and increase the demands for reliability across the network, while admitting that "not everybody" will necessarily agree.

"But here's the argument I would make. I work a lot with business customers. Business customers expect parity of performance across the entire network, the IP/MPLS network, as well as the endpoints. And once it becomes engrained in their business processes, failure is not an option.

"I believe as the value or the utility of the end device, with intelligent devices working across an IP/MPLS network, starts to heighten, that expectations by consumers are going to be that much higher... That set of users is going to drive reliability and performance expectations that are higher even than today."

The demand, then, is very much on the telco. How do they manage an end-to-end experience and ensure parity of performance at any of billions of endpoints worldwide? 

Key strategies
Peters believes the first step is acknowledgement: to recognize the challenges and translate them into opportunities. There are instances of end-to-end management today. For example, in the mobile environment a consumer will have an iPhone, and the iPhone will have an application on top of that. "And if that application doesn't perform well, they're going to be unhappy with their experience," states Peters. "Today we are trying to ensure that we're measuring things right, that we're reacting when there's problems, and that we're starting to form that foundation."

What about as the industry moves forwards? What does Peters feel is going to be the major stumbling block? "The real-time nature of service assurance," he says, not missing a beat. "If I see evidence of congestion, I'm going to have to manage that in real time. Things like latency, which are more engineering characteristics, become operational measures. The [user] experience will actually be dependent on immediate response to the issue." To his credit, Peters is unfazed by the size of the issue. "This is challenging, but this is what we do. This is what excites us."

Cutting operational costs
The size of the issue does concern the money people, however, and there is an ever-increasing pressure to go lean.

Cost cutting is the nature of business, and telecommunications is no different. Process management and automation techniques can be used to drive down expenditure in mature business areas. But what about the evolving stuff?

"Don't scale at the same rate as you're putting technology in," says Peters. "When you have true technologists and deep operational folks working on future-oriented things, innovation thrives. And you can never sit back and just say, 'well, it's new; therefore I don't have to worry about the structure.' You must always drive the cost structure down.

"We actually have to change our model somewhat to recognize the cost structure has to go down drastically, because complexity could drive it up. How? You take domains that didn't used to be integrated and you integrate them. You take the IT domains, you take the network domains, you put them together and you create people and tooling that can look at both of those things in a much more systematic way."

Alternative revenue streams
The good news is, despite a rising tide of complexity and transformation; years of investment could help keep the telcos dry. Many see strong potential in new lines of business, such as management services to offer outsourced IT and cloud services to other enterprises.

This was a hot topic at Management World. Martin Creaner, current president and CTO of the TeleManagement Forum, explains: "There's been a lot of discussion about cloud services and how service providers can somehow expose their crown jewels. You can imagine BT in the UK allowing third parties to charge services to the BT billing system so the cost comes on your particular phone bill. Domino's Pizza might plug into those billing systems, and might plug into your location systems as well. So when you order a pizza, you don't have to do a credit card transaction. The cost just goes on your phone bill. And you don't have to tell them where you are because they've plugged into a location database and know the exact location. "That sort of integration means that BT, instead of being cut out of the transaction entirely, maybe gets 10 percent."

This makes sense: so why isn't every service provider doing it? The answer is disarmingly simple - they were not built that way. "They were built to run their own business; they weren't built to run your business or Domino's Pizza's business," says Creaner. "And so the big challenge they have is how do they restructure in order to allow that to happen and do it in a cost effective fashion?"

Of course, cost. No other industry has the potential audience of telecommunications. The question is how do the big players marry the development necessary to reach that audience - and to reach them with a valuable, stable service offering - while holding a good bottom line. Because if they don't sort it out, somebody else will.

"Companies like Amazon and IBM and so on are offering big cloud capabilities for data center virtualization and so on," says Creaner. "Service providers in the telco space and the cable space should really go after that because it's potentially low-hanging fruit. As long as they can unpeel the boundaries that they put around their own capabilities."

The solution provider

Who is helping the service providers deliver, and how?

At over US$4 billion in revenues, CA is the world's largest independent IT management software provider; service providers of all types are among its customers.

According to Roger Pilc, corporate senior vice president and general manager for CA's Infrastructure Management and Automation Business Unit, the company has over 225 service provider customers worldwide and is "very, very passionate" about bringing a broad set of integrated management solutions to this very important market segment.

"We help service providers launch revenue-creating services more quickly; optimize service assurance, delivery and quality of experience; and reduce costs, which is particularly important in this economy," says Pilc. "We do that through a very broad set of management solutions. First, we're a leading provider of network management offerings (data and voice), as well as physical and virtual systems management, database management, and business-driven automation solutions. We're also a leader in application performance management, security management, project and portfolio management, and service management."

CA offers a comprehensive solution for integrated infrastructure availability and performance management across physical and virtualized IT domains. "We go well beyond traditional network management," says Pilc. "Customers today tell us they need four things. First is proactive performance of their end-to-end infrastructure, alerting them before customers are affected. Second is root cause analysis; when they have a very complicated dynamic infrastructure they can find out the exact source of a problem. Third is management solutions that are easy to use, have very fast time to value, and have reasonable total cost of ownership. Finally, and equally important, they need to understand how everything in their infrastructure affects the services they deliver. CA service management solutions focus on the actual services being delivered to their customers."

In addition to the infrastructure and its effective management, communications service providers are adding software. "Software is critical in this next generation environment," says Rick Schmaltz, vice president of business development for CA.. "Our application performance management solution provides visibility into the performance of that software. If there's an issue, we can identify it before a customer is affected. And we can drill down and identify where the problem is so that the problem can be resolved quickly, efficiently, and at low cost. On top of that, we also provide a full end-to-end capability on customer experience management to give a view of the true customer experience."

Head in the cloud
CA sees tremendous opportunities for service providers to offer cloud services, and has various products and customers in this space. "Many of our service providers customers use CA to offer managed services for the network cloud," says Pilc. "We are now working with these customers to help them understand that they are fully capable of offering a much broader set of offerings to their enterprise customers. The key ingredient to offering broader cloud services is management. A holistic solution that provides security management, infrastructure management, application performance management, compliance management, etc., helps enterprises feel more comfortable using both internal, private clouds and public service provider clouds to meet their business objectives."

Is it worth it?

All of this technology, all of this investment, all of this hassle...

Google CEO Eric Schmidt said: "the arrival of a truly mobile web, offering a new generation of location-based advertising, is set to unleash a huge revolution. It's the recreation of the Internet. It's the recreation of the PC story. And it is before us." Martin Creaner, current president and CTO of the TeleManagement Forum, has over

20 years of telecommunications experience. Does he agree with Schmidt?

Do I agree? Yes, I suppose I do. A truly mobile web is an enormous opportunity, an enormous paradigm change for the world. Do I believe it's actually here and it's coming? I spend a lot of my day talking to people about the social psychology implications, because technology brings you so far, but if you don't understand what people want or if you don't understand how people actually want to interact with the world, then you can never join the dots between the technology capability - which we undoubtedly have - and the sort of benefits that Eric Schmidt talked about.

There is a lot of learning we have to do before the mobile web will have the same impact as the PC-based World Wide Web, in terms of how people want to use it, how they want to interact with the world, how they want to change their lives, and the economics of it.

None of the challenges are technology, because technology is easy if the demand is there, and we're talking scale beyond what anybody can believe - three billion mobile users across the world. What we have to get right, is how do people want to use that technology?

The best example I've ever come across is ten years old. Text messaging existed for years and years, and nobody used it. It used to be free within service providers. It was never seen as a business opportunity. Now it's a US$250 billion business, and it appeared not because the telcos decided it should happen, but because the 16-year old kids decided it should happen. We are just the happy recipients of that change of mindset.

What we are not able to do, I think, is to predict how the next breed of ten year olds will actually want to use the mobile environment. We are too old. We are too set in our ways and we don't understand. They are going to decide how the world uses mobile web, and what real paradigm change happens.

What is... The TM Forum?

Originally the industry association for the telecoms industry, TM Forum has broadened out to the communications industry, including media, cable and entertainment. It is responsible for setting standards; defining, developing, and giving guidance; training; creating networking opportunities for its members, and; solving problems of common interests.