1111 symsoft cloud_messaging_white_paper

White paperOctober 2011

www.symsoft.com

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MeSSaGiNG iN the CLOUD

Ground breaking operator opportunity or fad?

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Messaging In The Cloud

October 2011

exeCUtive SUMMary

Cloud-based solutions have been a talking point in the telecommunications industry during the past few

years with many mobile service providers evaluating the advantages of the new approach to service delivery.

One strong reason for an increased interest in ”the cloud” is a focus on finding more efficient and scalable

ways to offer messaging services to an existing market. Another reason is a constant drive to identify and

address new market opportunities such as Application-to-Person (A2P) messaging services in flexible and

cost-efficient ways.

To reach full benefit from cloud-based messaging solutions, operators should review the opportunity from

five perspectives.

•Deployment model – Operators considering cloud-based messaging services must decide whether they

want to own and operate a private cloud or if a third-party cloud provider is a better choice. This decision

should be informed by the size of the operator and the amount of traffic to manage.

• Market selection – Operators must choose which traffic to handle using a cloud solution. Through the

cloud, resources can be shared between different networks with different traffic patterns. This presents an

attractive possibility for operators managing traffic with high peaks or large seasonal variations in one or

more markets.

•Infrastructure architecture – To avoid that extreme traffic patterns in one location have a negative impact

on other sites, the solution should also allow for a separation of different markets.

• Reliability – For a successful launch of new cloud-based services, it will be vital for operators to select a

cloud provider that has the experience and tools necessary to provide a reliable service.

•Service capabilities – It is important to ensure that solutions are fit to address the requirements and

demands of different customer groups and market segments, for example enterprise messaging.

Properly deployed, cloud solutions can improve time-to-market for new services and decrease capital

expenditure and total costs for delivering messaging services. In this way the cloud presents a new paradigm

for continued operator business growth.

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October 2011

the MObiLe MeSSaGiNG OppOrtUNity reaChiNG five biLLiON pOCketS Text messaging is an essential part of the operator service portfolio representing up to 20% of all operator

revenues. With 200,000 text messages sent every second by over 5 billion mobile users, SMS is by far the most

frequently used messaging technology. Total revenues from text messaging worldwide exceed revenues from

video gaming, the Hollywood movie industry and the music industry combined.

Due to a number of valuable qualities, the SMS medium keeps a superior position in the market place even as

new alternatives to SMS text messaging are being introduced. SMS is a unique application in that it works on

all handset models, on all networks, anywhere with basic cellular coverage.

Text messaging via SMS has an unrivalled immediacy and ease of use. It is fast, discreet and in many ways the

quickest, most personal and most cost-efficient way to communicate. Practically all mobile phones provide

an intuitive interface that is usable for all literate subscribers. Most subscribers have acquired the reflex of

reaching for their mobile phone as soon as they hear an incoming message, reading them within seconds of

receiving them.

prOfeSSiONaL MeSSaGiNG appLiCatiONS

As a complement to SMS sent from one person to another, enterprise or Application-to-Person (A2P)

messaging is emerging as the sending of tailored text messages from enterprises to their mobile end

customers. Increasingly, companies realize that they can use SMS in their business processes to develop and

deepen relationships with customers and to increase business. A2P messaging is now used by companies

in virtually every industry sector for everything from providing reminders and time-critical alerts to

banking services and payments, from mobile marketing and customer service updates to authentication and

transaction oriented services.

Enterprise messaging services currently represent 25% of the messaging revenues globally and are forecasted

to grow to 40% in five years [Footnote: Portio Research Ltd, 2011]. A2P messaging is also expected to give

mobile operators higher revenues per message compared to traditional Person-to-Person (P2P) traffic. .

the Shift frOM perSONaL tO prOfeSSiONaL MeSSaGiNGLooking ahead, SMS traffic is predicted to keep growing for both P2P and A2P purposes (figure 1). The total

traffic growth for traditional SMS messaging is forecasted to a healthy annual rate of 7% [Footnote: Portio

Research Ltd, 2011]. While some markets are reaching saturation, emerging markets such as Africa, Middle

East and South East Asia show double-digit growth.

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October 2011

Due to increased market saturation and the adoption of smartphones supporting instant messaging, the

growth rate for P2P messaging is however assumed to decrease over the period. The A2P segment on the

other hand is forecasted to grow at around 20% yearly. This will help compensate for the reduced growth

rates for traditional messaging and help maintain the position of SMS as a premier mean of mobile

communication and an important source for operator revenues.

Figure 1: Worldwide SMS traffic continues to grow over the coming four years. Source: Portio Research Ltd, 2011.

When considering the projected revenue streams over the coming years, the difference between the two

business areas becomes even clearer (figure 2). Total revenues from P2P traffic are projected to start

decreasing due to increased market competition. A2P revenues will on the other hand continue to grow due

to an increased market interest in commercial messaging, in combination with maintained higher revenues

per message. For mobile operators, this presents a clear opportunity to compensate for a potential loss in

traditional messaging by re-directing some focus to enterprise messaging.

Figure 2: A2P messaging presents new opportunities as P2P revenues begin to decrease. Source: Portio Research Ltd, 2011

3 535,44 633,7

6 123,37 031,1

7 900,58 747,7

9 301,8 9 731,0

437,5 591,9 813,5 964,4 1 188,8 1 415,7 1 666,9 1 934,0

0

2 000

4 000

6 000

8 000

10 000

12 000

2008 2009 2010 2011F 2012F 2013F 2014F 2015F

SMS traffic (in Billion)

P2P SMS traffic

A2P SMS traffic

68,1 73,4

83,989,5

93,6 95,5 94,289,4

22,4 25,5 30,737,4

44,252,3

60,469,6

0

20

40

60

80

100

120

2008 2009 2010 2011F 2012F 2013F 2014F 2015F

SMS revenue (in USD Billion)

P2P SMS traffic

A2P SMS traffic

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October 2011

MeSSaGiNG – StiLL iN the SpOtLiGhtFor mobile operators with an invested interest in the messaging market, the following conclusions can be made:

•TraditionalPerson-to-Person(P2P)messagingcontinuestorepresentasignificantmarketopportunityinthe next five years and will remain an important part of operators’ service portfolios worldwide. Decreased growth rates in P2P messaging and forecasted reduced revenues will however require operators to look for new and smarter ways of controlling cost of operations to maintain bottom-line profitability from SMS.

•ThegrowingmarketsegmentsofenterprisemessagingwillbegintocompensateforthepotentiallossinP2P messaging. Grasping this opportunity requires a true understanding of the demands of enterprise customers and the emergence of new traffic patterns, and an ability to match these new requirements in professional, scalable and cost-efficient ways.

•RevenuesfromA2Pmessagingwillinitiallyberelativelylowcomparedtomostoperators’establishedP2P revenue streams. It is therefore important for operators to ensure that new business development of enterprise messaging services does not take place at the expense of current business operation and revenue streams. Existing services must at all times be protected from any negative impact of enterprise traffic.

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October 2011

aN iNtrODUCtiON tO CLOUD-baSeD ServiCe a NeW paraDiGM fOr ServiCe DepLOyMeNt Cloud-based services represent a new business model for how organizations get access to hardware and software applications and functionality. The idea is to leverage the speed of modern computer networks and give customers access to functionality and applications as services in the network or “the cloud” rather than physically distributing hardware and software. In a cloud-based solution, a single installation is typically deployed to cater for the needs of a number of different entities such as sites, countries or individual operators. All services are updated and administered centrally rather than being distributed through the geographical organization or across companies.

The cloud is attributed a number of benefits such as reduced capital expenditure, lower recurring costs and reduced time-to-market for new services. As a result of this, cloud-based services have gained huge momentum in the IT industry during the past five years and are currently increasing at a yearly rate of 25% on the expense of traditionally sold software and application.

As today’s mobile operators re-evaluate their current business and delivery models for messaging services, to better capitalize on existing and new market opportunities, cloud-based services are emerging as a qualified alternative also in the operator domain.

DiffereNt pathS iNtO the CLOUDThe common theme for all cloud-based services is that they are centrally hosted while serving several geographical locations. With this as a starting point, there are basically two ways of realizing cloud-based messaging services in a mobile operator framework. In a third-party cloud-based service, an external service provider is operating and administering a common messaging platform for the benefit of two or more operators. While the operators are sharing a technical platform, the messaging services are marketed and delivered to operator customers as an integrated part of each respective operator’s service offering. Technically the services deployed on the common platform are strictly separated with each logical partition serving one of the operators. In a private cloud, the organization deploying cloud-based services instead choose to operate the service as an integral part of its own operator infrastructure. Rather than sharing the platform with other external parties, the cloud-based services are shared between different internal entities. The most typical scenario is an international operator providing value added services in several countries, deploying message services through a private cloud across the different geographical markets. Another likely scenario is a major operator delivering messaging services under several different brands from one central platform. A third concept sometimes discussed in a similar context as cloud-based services is managed services. While managed services in many ways can be set-up to deliver the same benefits as a cloud-based service in terms of cost reduction and increased cost efficiency, these services do not necessarily involve a virtualization of the service. Although being sold and delivered under a service or license model, the hardware might well be delivered and installed at customer site in a traditional manner.

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October 2011

DepLOyiNG the CLOUD fOr bUSiNeSS GrOWth freeD CapitaL aND iMprOveD rOi A strong incentive for mobile operators to choose a third-party cloud solution for their messaging services is to avoid direct costs and capital being tied-up in privately owned infrastructure. Rather than investing in local hardware, cloud services present the possibility to pay for services as a monthly or quarterly fee. The concept of sharing resources between several sites, whether in a private or a third-party cloud, gives additional benefits. Synergies help in reducing overall operating costs, floor space, power-consumption and the amount of staff needed to administer a complete messaging solution. Typically, a cloud-based messaging solution also provides relatively rapid cost advantages in that solutions are ready to use and continually updated by the cloud-service provider, without the need for local installations, upgrades and administration. A successful cloud implementation can thus result in direct cost savings as well as a reduced need for capital employed for mobile operators, compared to deploying and running an own messaging infrastructure.

ShOrteNeD tiMe-tO-Market fOr NeW ServiCeS aND NeW CapaCityIn a cloud service, all functionality is deployed centrally. This gives mobile operators new functionality and opportunities in a more scalable and flexible manner than usually possible with local development and administration. Third-party cloud services furthermore enable organizations to scale up or down on the utilization of their services as the needs of the organization change. This can be done without any additional cost associated with the changes being made and without paying for unused excess capacity. Tying operations together over different geographical locations can also present the additional benefit of load-sharing between different sites. This results in improved customer satisfaction and also increased utilization and resource efficiency in both hardware and software licenses as a result. This means that cloud-based mobile messaging services can contribute not only by reducing investments and cutting costs, but also by presenting concrete advantages when meeting market needs.

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October 2011

CONSiDeratiONS fOr MObiLe CLOUD-baSeD ServiCeS Cloud-based services present an attractive option for mobile operators looking for new ways of addressing the changing messaging market. To fully grasp the benefits offered by the cloud, mobile operators evaluating different deployment alternatives could consider a number of variables impacting the type of solution selected.

DepLOyMeNt MODeLOperators looking to deploy cloud-based messaging services must decide whether they want to own and operate a private cloud, or if a third-party cloud provider is a better choice. Operators with significant traffic volumes from a larger number of geographical markets can realize large savings with a private cloud. Smaller players are on the other hand typically better served by third-party clouds. Different infrastructure and solution providers will have different approaches to solutions, sometimes fitting one scenario better than the other.

Market SeLeCtiONAn operator has to choose which traffic to handle using a cloud solution. If not all traffic is managed in the cloud, it is often preferable to move traffic with large peaks into the cloud to share resources between different networks with different traffic patterns. It is also valuable to work with a supplier that has worked with cloud-based messaging before and can assist in this analysis.

iNfraStrUCtUre arChiteCtUreCapacity sharing is a key feature of cloud-based service delivery solutions. Still, to avoid that extreme traffic patterns in one location have a negative impact on other sites, separation must also exist between different markets. If an unmanageable peak in one market would be allowed to stop traffic for all customers served by a common solution, cloud-based SMS would become less reliable rather than more reliable. It is important to ensure that the solution allows for traffic limits to be set per country, to ensure that a peak in one market does not affect traffic in other markets.

reLiabiLityIf a third-party cloud model is preferred, it is important to select a provider that has the experience and tools necessary to provide a reliable service. Even more than with a stand-alone SMSC, it is important to evaluate the support capabilities of the provider and their future plans for their cloud-ready SMS offering.

ServiCe CapabiLitieSAs the market for P2P messaging becomes saturated, most mobile operators will be considering solutions that are fit to address the requirements and demands for enterprise messaging solutions. It is also advisable to work with a player that has a true understanding of the demands of enterprise customers, one that is able to match these new requirements in professional, scalable and cost-efficient ways. As revenues from A2P messaging initially will be relatively low compared to most operators’ established P2P revenue streams, it is important that a cloud-based service can be designed to address the new opportunities in a manner that does not have a negative impact on current revenue streams.

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October 2011

SUCCeSS StOry: DepLOyiNG a private CLOUD

For a multi-country operator with operations in a large number of European countries and a significant share of young customers, SMS is an important source of revenue. As part of an ambition to continuously find new ways to leverage the large geographical footprint the mobile operator searched for a multi-country SMS solution that would allow them to offer similar services in different markets while retaining the possibility to customize services and integrations in each country. Key requirements on the new solution were the possibility to: • quicklybringnewsolutionstomarketinseveralcountries • centralizeSMScompetenceintheorganization • increaseoperationalefficiencyandimprovesystemutilization The new messaging solution is based on a private cloud, enabling the mobile network operator to deliver short message services in a large number of countries from one single messaging platform. Functionality is added once to be accessible in all markets simultaneously, without the need for hardware or software applications to be installed in the individual markets. A small group of operator employees is efficiently managing the complete solution.

Figure 3: A private messaging cloud revolutionizes the business logic for international mobile operators

The cloud-based messaging solution presents a number of benefits for the international operator:

• Greatlysimplified introduction of new services as a single upgrade of the messaging solution is sufficient to make new functionality available to all markets being served. This has lead to increased agility in the market

place with shorter time-to-market for new services and better understanding of service trends.

• Withonlyoneinstallationtoupgradewhenrollingoutnewupgrades,costs for implementing new

functionality has decreased significantly.

• Theconcentrationofalltraffictoacommonsolutionhasenabled the operator to gain a better overview of service adoption and traffic patterns in different markets. The competence gained leaves the operator better

prepared to identify trends that can be exploited commercially.

• Improved utilization of SMS infrastructure through the sharing of capacity between markets while

maintaining service quality.

• Capacity utilization has improved over SMS-intensive holidays that are specific to a single market. These are handled more efficiently as capacity can be shared from other markets that experience lower traffic at the time.

SMSC SMSC SMSC SMSC

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October 2011

SyMSOft – yOUr partNer fOr CLOUD-baSeD MeSSaGiNG virtUaL SMSC fUNCtiONaLity fOr the CLOUD The Symsoft SMSC solution supports different approaches to cloud-based operations, both private and hosted third-party solutions. Symsoft SMSC includes Virtual SMSC functionality that enables the hosting of several virtual SMSCs on a single hardware cluster. The solution even makes it possible to operate a separate SMSC for an individual enterprise customer if needed. With a product architecture adapted to the needs of multi-network operators, functionality can be shared between all virtual SMSCs with service configuration specific to each market.

fULL raNGe Of prOfeSSiONaL ServiCeS For private cloud deployments, Symsoft provides integration services to ensure a successful deployment. This includes integration towards all the different markets to be served by a solution, both with mobile networks and with existing online charging, BSS, and OSS infrastructure.

hOSteD SMSC SOLUtiONS Symsoft-hosted SMSC solutions provide an attractive alternative for mobile operators wanting to purchase SMS capacity rather than investing in a dedicated hardware-based system. We support integration of our hosted virtual SMSC directly to mobile operator networks, online charging, BSS and OSS infrastructure, to create a seamless solution for scalable SMS delivery. By enforcing capacity limits for each virtual SMSC, we can secure that traffic is not negatively affected by peaks in other Symsoft-hosted SMSCs.

LONG experieNCe aND LeaDiNG expertiSe From working with over 30 mobile operators worldwide and through close cooperation with our sister company CLX Networks, we have in-depth knowledge and a thorough understanding of mobile messaging. We closely monitor market developments and trends, including the demanding enterprise messaging segment to ensure that our customers stand ready to efficiently grow their messaging business.

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Symsoft is a trusted charging and messaging expert

with over twenty years of industry experience. Symsoft

provides solutions enabling operators globally to stay

ahead of their competitors in an increasingly competitive

telecom market. Its innovative products are used by

leading operators such as America Móvil, Millicom,

Polkomtel, Saudi Telecom, Telefónica, Telenor, Tele2,

TeliaSonera and 3 in more than 30 countries, serving

over 120 million subscribers.

www.symsoft.com

Middle East & AfricaSymsoft MEA Dubai Internet City P.O. Box 500649Dubai, United Arab EmiratesTel +971 4 36 16 637

AmericasAmericas Symsoft Inc.5700 Granite Parkway, Ste 200Plano, Texas 75024, USA Tel +1 972 731 6708

Corporate Headquarters Symsoft AB Kista Science Tower Färögatan 33, PO Box 1219 SE-164 28 Kista, Sweden Tel +46 8 566 166 00

Asia Pacific Symsoft Asia Pacific 9 Temasek Boulevard #31-02 Suntec Tower Two Singapore 038989 Tel +46 8 566 166 00

© 2011, Symsoft AB. All rights reserved.

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1111 symsoft cloud_messaging_white_paper