Opportunities for telecom operators in cloud computing business

Naida Katica i Ajla Tahirović Ericsson, Sarajevo, Bosna i Hercegovina

naida.katica@ericsson.com ajla.tahirovic©ericsson.com

Abstract - Evolution of the internet has resulted with the evolution of the new kind of business model called cloud computing. Advantages of cloud computing are widely recognized as a viable way to reduce operational costs. It gives companies and individuals access to different kind of services without the need for the investment in traditional way, they pay only for the infrastructure and applications they use, for the time they use them. In this work, we will try to discuss what telecom operators, as leaders in providing telecommunication services, can do to be competitive with other companies on the market as cloud service providers. As they already have the infrastructure, it gives them head start in this field, which they should use. Also, we will try to explain what is the role of Ericsson, as a vendor, in helping telecom operators to launch cloud services. Key words: cloud computing, cloud provider, telecom operator, Ericsson

I. CLOUD OVERVIEW

Cloud computing is at the same time an emerging technology and a new business model. Beyond the traditional benefits for improving internal efficiency, cloud computing technologies facilitate the shift from a product based to a service based model. It provides significant benefits in time to delivery, flexibility in deployment and reduced operational costs.

There are many definitions for cloud computing, but the following one from the National Institute of Standards has gained broad support from the industry:

“Cloud computing is a model for enabling convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction. “

There are five essential characteristics of cloud computing: 1. On-demand self service –users are able to

provision, monitor and manage computing resources as needed without the help of human administrators

2. Broad network access – computing services are delivered over standard networks and heterogeneous devices

3. Rapid elasticity – IT resources are able to scale out and in quickly and on as needed basis

4. Resource pooling – IT resources are shared across multiple applications and tenants in a non-dedicated manner

5. Measured service – IT resource utilization is tracked for each application and tenant, typically for public cloud billing or private cloud chargeback

Cloud Computing is commonly divided into three layers: 1. Software as a Service (SaaS), 2. Platform as a Service (PaaS) 3. Infrastructure as a Service (IaaS)

On the bottom layer is IaaS, which includes computing and data storage. The next layer up is PaaS, which enables developers (including enterprises) to write web applications quickly without the complexity of buying and maintaining the software and infrastructure underneath it. Sitting on top of the cloud computing stack is SaaS, where applications such as email, Customer Relationship Management (CRM), Enterprise Resource Planning (ERP), Unified Communications (UC) and device management are sold on a pay-as-you use basis.

The cloud model is composed of four deployment models: 1. Private Cloud – for exclusive use by a single

organization and typically controlled, managed and hosted in private data centers. The hosting and operation of private clouds may also be outsourced to a third party service provider, but a private cloud remains for the exclusive use of one organization.

2. Public Cloud – for use by multiple organizations (tenants) on a shared basis and hosted and managed by a third party service provider.

3. Community Cloud – for use by a group of related organizations who wish to make use of a common cloud computing environment. For example, a community might consist of the different branches of the military, all the universities in a given region, or all the suppliers to a large manufacturer.

4. Hybrid Cloud – when a single organization adopts both private and public clouds for a single application in order to take advantage of the benefits of both.

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Figure 1. Cloud computing characteristics and models

II. POSITION OF TELECOM OPERATOR AS A CLOUD

PROVIDER

Telecom operators have long been in the business of offering highly reliable network connectivity to their customers. Many of them have also been strong players in the internet service provider (ISP) business. But now they must extend their strengths to other areas. Cloud computing has become a major topic within the telecommunications industry as operators begin to position themselves as a service and application providers. There is no reason why operators can’t act like some existing cloud service provider.

Telecom operators are spending lot of money to maintain and enhance their network, while others cloud providers are monetizing the networks, at the expense of telecoms. After all, Amazon, Google and other similar cloud providers are delivering their services over the internet, which is provided and maintained mostly by telecom operators. Network investment can be dangerous if not accompanied by investment in services, as internet companies might be the one capturing the value. Operators have to avoid the possibility of becoming just a bit pipe for other cloud service providers.

Telecommunication operators are uniquely positioned to take advantage of cloud business opportunity. They have comprehensive network capabilities (broadband and mobile), long experience with integrating information technologies (IT) and other services into their network and delivering those services to the customers. They can provide managed connectivity between cloud users and third-party providers, offering flexibility in network resources both in real-time and on-demand. Cloud services depend on network performance and would suffer without good connectivity within and between them. Operators can offer connectivity services according to pre-determined agreements and choose to employ network-based techniques, including caching, optimization and data acceleration, to enhance the user experience of cloud applications.

Telecom operators can also partner and resell third-party service offerings, bundled with their own services, or they can invest in the infrastructure and deliver both third-party and their own offerings on that infrastructure more efficiently. By having in-house data centers, not only can operators offer own and third-party cloud-based applications, but more significantly, they can also provide IaaS in the form of on-demand hardware and computing platforms.

Operators already have existing billing and mediation platforms which enable them to charge customers based on usage. Also they made significant investments in their business support systems (BSS) and operations support systems (OSS) that are required to scale cloud services. Most important, telecom operators have a lot of intelligence about their subscribers: their preferences, the services they use, how and when they use them. They can embed these attributes with third-party cloud offerings, enhancing their value by making them more relevant and meaningful to users. For the business enterprises they can offer cloud services under a simple pricing structure that includes connectivity and devices, self-service provisioning, on-demand infrastructure hardware, as well as front- and back-office applications. They can also provide value-added services, including analytics and reporting, predictive capacity planning, and managed services. Target segments can be based on enterprise size, for horizontal applications, such as unified communications (UC) and enterprise resource planning (ERP), or it can be vertical market-based for industry-specific applications such as meter data management for utilities companies.

III. TELECOM AS CLOUD USER

Telecom service providers operate in a very complex operational environment, consisting of technologies which run their networks and support the delivery of their services. Just as telecom operators are promoting cloud as a new change opportunity for business enterprises, they can also benefit from its adoption.

With operators seeking to transform themselves from their legacy environments, adoption of cloud services can lead to efficiency gains, operational flexibility, and cost savings. Cloud-based services are also highly suitable for product prototyping and trialing ahead of large-scale market launches.

Telecom operators can simply transfer selected business functions to cloud, just as any large enterprise would. In the case of building cloud infrastructure, operators can become their own customers by migrating their existing services and support functions onto the shared infrastructure. The other way they can go is to simultaneously commercialize those cloud-based applications, becoming both user and provider at the same time.

Some operators already have internal systems, such as consolidate internal database for all services they provide, which are cloud based. In this way operator achieves significant savings in different ways and one of them are licenses. By building their own private cloud they can increase their flexibility, improve efficiency and support greener telecommunications by saving power, cooling and space, as well as money. In this way they can be an example for other business users in cloud consuming.

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IV. CLOUD BENEFITS FOR DIFFERENT USERS

Among the first companies to adopt cloud computing are small and medium enterprises (SMEs). Cloud computing allows these companies to use IT infrastructure without the need of purchasing hardware, software and maintaining large support teams. They can focus on their core business. Pay per use model divide expenditure into smaller periodic payments to the cloud provider and allows SMEs access to software that would otherwise be too expensive to purchase. Also they don’t have to worry about software updates, licenses, backup or other maintenance of the system. The solution is fully scalable and if the company or business grows there is no need to expend the internal IT resources (hardware, software or human resources). This model is especially interesting for start-up companies, because these usually don’t want to make big upfront investments.

Governments are also adopting cloud computing concept for various reasons. In today’s economic environment, many public institutions are trying to find a way to reduce costs. Cloud computing can provide significant savings, especially when governments build shared cloud environments, which can be used by many public institutions.

Companies in the education sector (schools, universities, and others) are also using cloud computing to solve some of the challenges faced by these organizations. One of them is personal computers (PCs). Organizations, especially primary schools, spend a lot of money in hardware and software fixes, because their students do not treat PCs carefully. By using a desktop cloud environment, each student can have a fully managed virtual PC and access it through a thin client, which is less prone to hardware failures than a standard computer. Another possibility is the creation and maintenance of class labs. The use of cloud computing allows dynamically provisioning and de-provisioning resources which are necessary.

For private users cloud computing presents a new and easier form of accessing data (applications, documents, music, video files, pictures) from anyplace, using simple web browser on different devices. By hosting everything on a “cloud”, users no longer have to carry their data on memory cards or hard drives. The primary advantage of such technology is that it frees individuals from their desktop and makes it possible for them to access their information anywhere and anytime as long as they have internet access, through a cable connection, over WI-FI or 3G mobile internet. Users don’t have to know or care where the servers are located or where the programs they are utilizing are running.

V. CLOUD CHALLENGES

While the opportunities associated with cloud computing appear to be very attractive, there are challenges that need to be considered.

The main challenges are the availability and security. Companies and consumers often do not want to store their data in the cloud due to a lack of trust and the risk of exposing their data in an un-trusted environment. If a problem occurs and cloud infrastructure becomes unavailable to them it can cause a large business losses. Further the service may contain confidential information on a cloud, which then must be appropriate insured. Providers of cloud must therefore establish a relationship with customers based on confidence and ensure the privacy and data protection. If it comes to security violation and losing customer data that can destroy the provider. Provider must be ready to invest in providing the best digital security including securing data redundancy, support and backup. Transitioning existing software and data to the cloud may be too expensive and technically challenging to undertake. This is particularly true in situations that involve legacy or non-standard software systems and data stores. In order to avoid the risks, proper planning and enhanced service management policies are an absolute necessity. Without good plans and proactive service management, significant business and technical problems will occur.

VI. ERICSSON AND THE CLOUD

Ericsson has a vision of the world with 50 billion connected devices by the end of 2020. Three main forces are rapidly shaping the fundamental digital infrastructure in our world and leading to what we call the Networked Society, where everything that benefits from a connection will have one. Those three forces are: mobility, broadband and cloud.

Figure 2. The new ICT industry

To realize its vision of the Networked Society, Ericsson is working with telecom operators, solution partners, and industry verticals across the cloud computing value chain

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to create world-leading, innovative technology and sustainable business solutions.

As a strategic partner, Ericsson advises operators on strategies to leverage the benefits of the cloud as well as to expand their business opportunities through the cloud. Ericsson also works with operators to implement their cloud strategies by leveraging their network and operational assets and establishing cloud capabilities. In addition, Ericsson offers solutions-as-a-service, allowing operators to provide cloud-based offerings to their users.

So, it is possible to say that Ericsson’s cloud value proposition is build on three pillars:

Cloud services (revenue opportunity) Ericsson provides cloud services/apps to grow operator business. Examples for this are Ericsson Device Connection Platform, Novatium – PC as a Service, and Mobile Cloud Accelerator. Building clouds (cost efficiencies) Ericsson can help operators to build clouds, consolidating data centers and building private clouds. It has already been done for customers in Turkey, Spain and Italy resulting in OPEX and CAPEX reductions and savings on software licenses for the operators. Connecting clouds Ericsson’s most important contribution is connecting clouds. It means connecting both enterprise clouds and public clouds, via both fixed and mobile access, with quality of service, speed, reliability, security and a variety of business models.

In the context of providing cloud services for telecom operators, we will emphasis Ericsson Device Connection Platform, Akamai-Ericsson Mobile Cloud Accelerator, Novatium – PC as a Service.

Figure 3. Ericsson’s role in the cloud

A. M2M Platform: The Ericsson device connection platform

The service will be offered to telecom operators around the world, which in turn will set up M2M services tailored towards their enterprise customers. The platform is brought to market in a Software as a Service business model, offering operators benefits such as a low initial investment in technology and a fast time to market.

Figure 4. Ericsson Device Connection Platform as part of the total capability and eco-system

Ericsson's Device Connection Platform primarily makes it possible to create tailored connectivity and price plans for M2M services. Ericsson provides a complete service that the operator can adjust to serve its enterprise customers' needs, including a self-service interface, flexible billing, charging and connectivity plans for all devices connected to the network. Since M2M applications can communicate using any existing IP protocol they can be accessed and share data via internet. In addition, the operator's customer will be able to manage their subscriptions and devices in real time.

Figure 5. Ericsson Device Connection Platform architecture

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B. Ericsson mobile cloud accelerator The Ericsson and Akamai solution combines two parts:

1) Acceleration of content over Internet and

2) QoS prioritization over mobile networks, into a worlds-first true end-to-end Mobile Cloud Accelerator.

MCA is a unique Ericsson and Akamai proprietary solution that will be deployed in mobile networks, and offered as a service towards operators and content providers. It gives significant performance delivery improvements for all kind of web content such as e-commerce sites, portal pages or business critical applications all the way from web server to mobile end user devices. The solution will also work in multi-vendor networks including both RAN and packet core. The mobile prioritization part of the solution builds on and reuses the already existing QoS solution of the mobile operator. In addition to the existing opportunity to monetize the subscriber base it creates a new opportunity for mobile operators to monetize the network for over-the-top content. In addition the total solution also reduces TCO by reducing e.g. transit transport costs.

Figure 6. MCA overview

Key benefits:

Addresses explosive growth in mobile data traffic, devices and cloud based applications Enables mobile operators to play bigger part in the mobile Internet value chain Jointly developed, end-to-end solutions to provide high-quality delivery of content and applications through mobile networks

C. Novatium- PC as a service PC as a Service is a first-of-its-kind concept and a natural evolution of telecom and computing. PC as a Service offers telecom operators new ways to expand their broadband business. This helps drive mobile broadband penetration in emerging as well as developed markets as

it motivates investments in rural as well as urban infrastructure.

Key Benefits: PC as a Service brings together the power of mobile broadband and cloud computing to reach out to the next billion users Transforms personal computing to the level of simplicity of a household appliance Dramatically reduces battery consumption and allows PC to start in 5 seconds To be available to telecom operators across Asia, Africa, Americas and Europe.

VII. CONCLUSION

The cloud opportunity, combined with telecom networks, is providing a synergistic platform for operators to add new revenues and make a new productive business models.

As providers of cloud services, telecom operators can manage connectivity, deliver cloud capabilities, and leverage network assets to enhance cloud offerings. Given their core competency, managing cloud connectivity appears to be the most natural value-adding activity. In delivering cloud capabilities, operators can deliver on-demand applications and computing capacity. By leveraging their network assets, operators add value by exploiting user attributes such as profiles and activities, making cloud services relevant and meaningful to users.

Telecom operators also benefit from cloud computing as users by transferring selected business functions to the cloud just as any large enterprise would. For operators building cloud infrastructure, they can become their own customers for cost efficiency and speed to market.

Operator must ensure cloud computing is an integral part of their strategies – either as providers, users or both. Their networks must have the capacity and intelligence while their business processes and support systems must be optimized for cloud services. An understanding of the evolving cloud ecosystem, partnerships and business models will be vital, as they enter the emerging cloud market.

Ericsson is actively researching different aspects of cloud computing and will help telecom operators to realize and use these opportunities.

REFERENCES

[1] “The telecom cloud opportunity”, Ericsson discussion paper,

november 2011

[2] Intouch, “Cloud Story: Series 2”, May 2011

[3] Helena Norrman, „The Cloud story“, February 2011, unpublished

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[4] MCA Technical product description, Ericsson documentation

[5] Peter Mell and Tim Grance, “The NIST definition of cloud computing, , Version 15, July 2009.

[6] Total Telecom, ”Cloud special“, January 2012.

[7] Arpit Joshipura, “The cloud: what operators stand to gain – or lose”, February 2010

[8] Keith Jeffery, Burkhard Neidecker-Lutz, “The future of cloud computing, opportunities for european cloud computing beyond 2010”, 2010

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