By now, the terms "commodity players," "bit pipe" and "dumb pipe" with reference to traditional communications service providers (CSPs) have become tired and overused. CSPs know full well that the writing is on the wall - and has been for years - and if they don't continuously reinvent themselves, they will get left behind as new upstart players start to fill their role.
Nowhere is this more evident than with cloud services, a phenomenon that's much more than a flash in the pan and is really engraining itself in the business and residential worlds. True, most home users aren't thinking of the cloud when they are able to call up a movie from any devices they own without actually having to put a disc anywhere, but those capabilities are starting to make serious in-roads.
Also, we've seen huge uptake of cloud services by small and medium businesses (SMBs) who are happy to use applications hosted by Google or have someone else--like Amazon for example--handle their data storage and processing needs.
I've specifically mentioned two of the Internet era's biggest names in relation to cloud services because so far, it's been companies like Google and Amazon that have captured a good segment of mindshare surrounding the cloud. They clearly saw the opportunity, grabbed it and haven't looked back.
Grabbing the cloud opportunity
But what about CSPs? With the exception of AT&T (NYSE: T) and BT (NYSE: BT) and a handful of other telcos, it's been fairly quiet on the service provider front with respect to cloud services. CSPs that have been accustomed to delivering voice, video and data services to homes and businesses may be perfectly content to continue down their current path. And actually, contrary to the fears of being just a dumb pipe, I do think that providers who choose not to widen their horizons aren't necessarily doomed to failure.
After all, they own the infrastructure, which is saying a lot in today's world of virtual services and virtual operators who may not own any physical components at all. So CSPs can certainly remain as bit providers, or they can decide to shake things up by moving up the value chain and make a play in the Software as a Service (SaaS) or Platform as a Service (PaaS) space.
But in order to make such a move, they are going to need to forge relationships with partners, something that has not been a strong suit among providers accustomed to having a monopoly environment. But if CSPs are to play further up the stack from where they are today, they really don't have a choice.
If they choose the status quo, CSPs can still be profitable if they do it right, but they do have to wake up and realize a few things if they want to keep things as they are.
The reality is that so far, "all-you-can-eat" services haven't been the game changer everyone thought they would be. Yes, from a consumer point of view, flat-rate pricing keeps things simple and predictable, but from a provider point of view it has been nothing short of a disaster. Just look at AT&T in the U.S. for proof. With millions of iPhones on AT&T's network, and probably millions more to come as the iPhone 4 launches, AT&T's network has been stretched to the breaking point; so much so that the telco has overhauled its data pricing plans for new customers.
Instead of this kind of reactionary move, and continuing to perpetuate an unsustainable business model, CSPs can turn to higher value services--such as cloud offerings. Specifically, providers have historically been really good at billing for telecom services. So a logical place to start would be to offer billing services to other players in the value chain who are either unable or unwilling to create the infrastructure needed for this.
From there, CSPs can look at their other core competencies and evaluate what could be offered to partners and customers in a cloud model.
The opportunity is definitely there for providers that want to take the next step. Whether they do or not could affect how they fare in the future in a world of constantly changing business models.
At TM Forum, our Cloud Services Initiative is bringing enterprise customers together with their cloud service provider suppliers to create the environment where standards can be agreed and developed. We've established the ecosystem to ensure enterprise cloud services become a reality.
We have an ambitious lineup of activities within the initiative; our goal is to break down the many barriers that stand in the way of adoption of cloud services in the enterprise. We're tackling areas such as the management and operations of cloud services; how to apply the Forum's highly successful Business Process Framework (eTOM) and ITIL in the context of the cloud; client billing and partner revenue sharing for cloud services; defining and maintaining a set of standardized definitions of common cloud computing services as commercial products; as well as services such as desktop as a service, database as a service and Virtual Private Clouds.
TM Forum will also be enlisting the aid of other industry organizations with expertise in specific areas that will help bring all of this together. They include the ITU, itSMF, OMG, DMTF and others.
All of this is certainly a tall order, but the interest and demand for cloud-based services is undeniably there. By involving all stakeholders in the value chain, we hope to make real progress, which will lead to real service offerings and real benefits for everyone from the service provider to the end consumer.
Matthew Edwards is the Director Cloud Services Initiative, TM Forum, and regular FierceTelecom columnist.