Cloud Services Become All-In Game for NSPs

David Frattura, senior director, cloud solutions, Alcatel-Lucent

David Frattura, senior director, cloud solutions, Alcatel-Lucent

March 6, 2012 – Recent advances aimed at tooling network service providers for full immersion in cloud-based operations signal big opportunities are at hand for operators who are willing to undertake the strategic transformation essential to competing effectively in the cloud services market.
It’s true that, as Infonetics analyst Sam Barnett puts it, “service providers around the world have embraced the cloud concept in earnest and are heavily investing in new services and service delivery platforms based on their particular areas of expertise.” Not surprisingly, in a recently completed survey of cloud strategies at service providers representing 20 percent of the world’s telecom revenues, Infonetics found the top operator strategies entail bundling cloud services with network Ethernet or IP VPN services

But amid a flood of glowing research reports touting the market potential intrinsic to the three cornerstones of cloud service, namely, infrastructure as a service (IaaS), software as a service (SaaS) and platform as a service (PaaS), it’s clear that what’s in play goes far beyond bundling some services in a new silo. For network operators, success depends on an all-in pan-organizational strategic embrace of cloud-based operations as the new norm across all service categories.

“For carriers, the cloud is both a driver of internal transformation and an external revenue resource,” says David Frattura, senior director of cloud solutions at Alcatel-Lucent. Frattura says Alcatel-Lucent’s recently launched CloudBand solution is designed to help carriers create the robust framework combining computing power and high-performance networks that will allow them to bring the benefits of the cloud to their own operations while putting them in a strong position to offer cloud services to their customers.

Differentiating Performance

There’s no denying telcos and cable operators have got the message that cloud services will be big business. “Service providers’ cloud investments exceeded $11 billion in 2011,” says Informa telecommunications analyst Camille Mendler. AT&T, for example, said it spent $1 billion on cloud service development last year.

Not only are NSPs pushing specific service packages that bundle network access with applications as a normal course of business; they are investing heavily in acquisitions aimed at putting more muscle behind their offerings. For example, last year Verizon committed $1.4 billion to acquire cloud infrastructure provider Terremark; Time Warner Cable acquired cloud provider Navisite for $220 million, and CenturyLink paid $2.5 billion to buy Savvis.

However, echoing Frattura, Mendler says the key to effectively competing for cloud service business is an orchestrated approach that achieves efficient control of diverse digital resources. “Financial rewards will only come if [service providers’] computing and network assets are tightly integrated,” she says. “Better control means better performance, and that’s absolutely critical to differentiate and win customers.”

Alcatel-Lucent confirmed this point in a recent survey of over 3,700 IT decision makers from SMBs to Fortune 1000 companies, Frattura notes. “CIOs would definitely like to take advantage of the cloud as long as they have versatility and agility,” he says. “But they’re not willing to risk their business on something they can’t trust. Security is first and foremost the most important individual attribute, and they want consistent, reliable performance in terms of application performance, storage performance and the end-to-end aggregate experience.”

There are no surprises here. The issue is whether service providers can win that trust. In the view of Adolfo Hernandez, president of Alcatel-Lucent’s software, services and solutions group, network operators are better positioned than over-the-top or smaller solution-specific cloud providers to win that trust.

“From our research we know that IT decision makers believe communications service providers are in the best position to deliver the quality and security they expect, making them the cloud provider of choice for the enterprise world,” Hernandez says. “The network makes the cloud, and communications service providers own the networks. That’s a very powerful combination.”

Alcatel-Lucent’s CloudBand Solution

As described by Alcatel-Lucent officials, CloudBand helps operators exploit the network advantage by creating a new level of cloud service that offers lower latency, better control of bandwidth and the ability to provide a guaranteed quality of service. At the same time, utilizing algorithms developed by Bell Labs, CloudBand orchestrates the network, computing and data storage elements distributed throughout the network to create a single, extremely powerful and flexible service delivery and computing platform, Frattura says.

A holistic approach to cloud operations that employs software to virtualize critical network elements provides multi-purpose support for a wide range of services, eliminating the need for dedicated hardware platforms for each individual service. “For service providers the cloud value proposition from an internal perspective occurs when you can move away from having to define a product space and then figure out how much capital you’ll need to install a bunch of machines dedicated to that service,” Fraturra says.

“In this new model maybe IMS is sitting next to virtualized RAN (radio access network) and enhanced packet core all on the same computers,” he continues. “Now I can more effectively maximize assets. I can scale apps running on these assets, and I don’t have to spend 12 to 24 months preparing to roll out a new service.”

Operating at scale efficiencies also allows operators to price their cloud services more competitively, which is a vital part of the strategy, given how important cost savings are to the general cloud migration. “If you ask IT guys would they be willing to pay more for IaaS than they are charged by over-the-top co-lo vendors, the answer is no,” Frattura says. “But if you ask them would they be willing to pay for a higher level of availability, the ability to say where an app resides in that server cluster or a carrier-grade SLA (service level agreement), they’re willing to pay for those things. And the fact you can offer them these value-adds makes a much stronger case for the cloud than they can make when it’s about choosing an OTT provider.”

Moreover, by having an IT-responsive network in operation NSPs can deliver customers precisely what they need in the way of latency performance, raw throughput and other parameters, whatever the particular service requirement might be, he adds. “Because you as an operator have this fine grain understanding of how all this interacts you can be very agile in responding to customer needs,” he says. “If someone wants to virtualize the RNC (radio network controller), you can respond accordingly with sub-millisecond latency.”

The creation of a fully integrated network-wide cloud operating system also affords service providers the flexibility to tap third-party private and public cloud solutions as they see fit, including components from the suite of Alcatel-Lucent cloud solutions, Frattura notes. “Things like the digital media store, media asset management and media catalog management can be delivered to service providers from the Alcatel-Lucent cloud,” he says.

This cloud-of-cloud flexibility opens possibilities for new partnerships as well, he adds. “Basically, with CloudBand you have the tools to compete in multiple dimensions,” he says.

Cisco’s Attack on Cloud Silos

Where Alcatel-Lucent’s new cloud system is targeted specifically to service providers, Cisco Systems, which recently launched its own comprehensive cloud solution CloudVerse, is targeting enterprises of all descriptions. But, where service providers are concerned, it is sounding a similar theme about the need for a comprehensive transformation to compete in the cloud service era.

“Until now cloud technology resided in silos, making it harder to build and manage clouds, and to interconnect multiple clouds, posing critical challenges for many organizations,” says Padmasree Warrior, senior vice president of engineering and CTO at Cisco. “Cisco enables the world of many clouds, connecting people, communities and organizations with a business-class cloud user experience for the next-generation Internet.”

By integrating the three foundational cloud elements – the Cisco Unified Data Center with the Cisco Intelligent Network to enable Cloud Applications and Services – CloudVerse delivers a business-class cloud experience within the cloud, between clouds, and beyond the cloud to the end user, Warrior says.

Among announced customers for CloudVerse, the telecom players include Orange Business Services, Telecom Italia, Telefónica S.A., Telstra and Verizon’s Terremark. The scale of these efforts is typified by developments underway at Telecom Italia, which is bundling private, public and hybrid cloud solutions in a system-wide initiative it calls “Nuvola Italiana.” “Our Nuvola Italiana strategy, centered on ‘the Cloud with the Network inside,’ and Cisco’s CloudVerse strategy are perfect aligned,” says Stefano Nocentini, the carrier’s vice president of marketing.

Judging from the scale of industrial migration to the cloud, service providers have no choice but to undergo such transformations. Cisco, in a recently released global report on cloud-related trends, predicts that, by 2014, 50 percent of all data center workloads, defined as the amount of processing a server employs to execute an application, will be processed in the cloud. By 2015, Cisco says, global cloud IP traffic, growing at a compound annual rate of 66 percent between now and then, will account for 34 percent of total data center IP traffic.

Indeed, use of the cloud has reached a point of inevitability even though many enterprises are a long way from embracing the idea, says Andy Bart, vice president of the new cloud business unit at consulting services supplier TMNG Global. “Historic shifts in industrial methodologies always reach a point where not adapting to the new methods is no longer an option if you want to remain competitive,” Bart says. “That’s where we are today with cloud services.”

Cloud Drivers and Challenges

The scale efficiencies driving this phenomenon are dramatically summarized in one global metric from Cisco’s survey: the number of workloads per installed traditional server, tracked at 1.4 in 2010, is destined to go to 2.0 per server in 2015, whereas the number of workloads per installed cloud server, already more than twice the traditional level at 3.5 per server in 2010, will jump to 7.8 per server in 2015.

“There are many forces driving this sea change, probably none greater than the surge in the amount and complexity of information we have to manage and the inefficiencies of trying to use in-house computing resources to keep up,” Bart says. Over the past four years alone the amount of data the average business has to manage has increased tenfold, he says. At the same time, research shows that, on average, 85 percent of computing resources are going unused at any given time, owing to how those resources are allocated among myriad applications with extra capacity to accommodate peak usage periods.

Adding to the data management challenge, Bart notes, is the complexity and scope of the information required for running applications. “Business intelligence; financial analytics; security management; enabling intelligent searches – the needs are boundless,” he says. “And, for larger organizations especially, all the data supporting these processes must be ingested, managed and disseminated on a global scale.”

He points to a recent study performed by Hfs Research and the London School of Economics that shows just how engrained the notion of cloud support has become. Sixty-five percent of surveyed executives believe the cloud will drive down the cost of running business applications. Even when compared with traditional outsourcing, they see the cloud generating 30 percent or greater cost savings in infrastructure, testing and software-as-a-service.

But it’s not just about saving money, Bart adds. “Sixty percent of the people in the London School of Economics survey said they believe cloud service delivery cycles can accelerate the implementation of applications,” he says. “Fifty-five percent said the cloud allows them to put more focus into transforming their businesses with use of faster, more agile processes that improve their responsiveness to changing market conditions. “

Ironically, the sheer magnitude of the historic changes underway poses a major challenge for service providers who want to dominate in the cloud market. As Scott Bils, a partner in the consulting firm Everest Group, notes, IT executives at every level are under siege with offers from cloud service purveyors, many of which have jumped on the bandwagon without bothering to acquire the knowhow to do it right.

“One of the biggest emerging obstacles to enterprise cloud adoption is actually the market confusion being created around what cloud is and isn’t,” says Bils. “Every enterprise IT vendor, including hardware, software or services, is pitching a cloud story, whether it actually has capabilities or not. The vendor marketing onslaught is making it extremely difficult for CIOs to separate truth from fiction, and in many cases is slowing down efforts to drive migration.”

While things will get saner over time, he adds, “in the short term some CIOs are starting to tune out, or at least [becoming] very skeptical in engaging in yet another vendor discussion around cloud.” Adding to the resistance is the fact that “cloud security is often more about job security,” as in IT personnel concerns over whether they’ll survive the staff cuts envisioned with transition to the cloud.

This factor shouldn’t be overlooked in service providers’ efforts to help IT departments assess the value of their cloud services. “Assessing personnel cost savings is one of the most sensitive aspects of executing a cloud strategy,” Bart notes. “There’s a reason why senior executives who are inclined to exploit the cloud sometimes get feedback from IT offering a variety of reasons why it won’t work.”

Providing a different perspective that emphasizes opportunity over threat can go a long way toward winning over resistant customers, he suggests. “A major goal in personnel analysis should be to identify how expertise can be used more productively once many of the mundane IT tasks, such as managing software and hardware upgrades, are outsourced to the cloud service supplier,” he says. “A strategic perspective that recognizes there can be a net gain to the bottom line by putting IT experts together with personnel from marketing, sales, product development and other departments is superior to one that assumes bottom-line benefits are all about cutting staff.”