TechZine – Alcatel-Lucent

Business

What Providers Should Know About the Cloud

Highlights

  • 3 reasons why now is the time for network service providers to offer cloud services
  • Network intelligence and capabilities are an advantage for network service providers
  • An open approach and partners bring flexibility and speed

Growing revenue: Tapping a huge market

Demand for public, private and hybrid cloud services is on the rise. Specific numbers for the cloud services market vary. But they all tell the same basic story: Cloud is a really big market opportunity. Consider these market predictions and analyses:

  • The total market for public cloud services in 2011 is estimated to be US$25.5B. Of that total, US$21.2B will be spent on SaaS, US$2.9B on IaaS and .8B on PaaS.[1]
  • The global market for cloud computing will reach US$241B by 2020, encompassing everything from software to cloud-based platforms.[2]
  • 85% of new software will be available as cloud services by 2014, and nearly a third of all new software purchases will be bought via the cloud.[3]

Enterprise demand for cloud services is driven by business and financial imperatives. They’re looking to simplify operations, increase productivity and reduce costs. They’re also looking to meet the demands of Millennials, the new generation of tech-savvy and hyper-connected employees who increasingly bring their own devices to work, and are accustomed to collaborating via social media tools rather than traditional siloed business tools.

Network service providers already have established and trusted relationships with enterprises. Extending those relationships to include cloud services puts them in a better position to help enterprises address challenges. As network service providers increase their value to their enterprise customers, they can steadily take a larger share of the very substantial cloud services market.

The time is right

Three main reasons make now the right time for network service providers to take advantage of cloud services opportunities:

  • Cloud services give network service providers incremental revenue opportunities. Demand for cloud services is high. And most network service providers are already offering cloud services in some form. Unified communications, disaster recovery and back-up services are all driven by software applications in the network and charged on a per-use basis. Infrastructure as a Service (IaaS), Platform as a Service (PaaS) and Software as a Service (SaaS) let network service providers build on existing investments, relationships and success to grow revenue.
  • Cloud services help network service providers compete against alternative providers. In the hot new cloud services market, competition is equally hot. Many alternative providers are actively offering data center and managed services to network service provider enterprise customers. But network service providers have a big advantage: Their network. They can offer cloud services with security, quality and assurance capabilities that alternative providers simply can’t match.
  • Cloud services and technologies increase agility. Internal agility drives business agility. Network service providers can use cloud services and technologies to streamline and accelerate their own operations. This reduces the cost and complexity of delivering cloud services. Another way to look at it: By using cloud technologies and business models to increase operational efficiency, network service providers are better able to help their enterprise customers use cloud services to make the same improvements.

Competing: The network is a major differentiator

Alternative providers aren’t wasting any time targeting enterprises with cloud-hosted business services offerings — particularly small- and medium-sized businesses (SMBs). But most of today’s cloud services offerings could be considered part of the “casual cloud”. Quality of service (QoS) may or may not be guaranteed. Service level agreements (SLAs) are minimal and typically have few if any penalties.

The casual cloud is not enough for many enterprises and organizations. Consider vertical markets. Healthcare, finance and government organizations all have specific requirements for security, privacy and industry compliance. They also have longstanding business relationships with their trusted network service provider for managed network services, such as virtual private networks (VPNs).

VPNs provide secure, virtualized, cloud-based connections between multiple sites. Ethernet- and IP-based VPNs provide higher speed connections with higher QoS, lower latency, and at lower cost than traditional wide area network (WAN) services. Most SMBs, enterprises and organizations already trust their day-to-day and mission-critical applications to their network service provider’s VPN services. For many, embracing cloud services is a natural next step.

Network service providers with a High Leverage Network™ (HLN) can use the embedded intelligence in the network to broaden their relationships with customers and take them well beyond the casual cloud. Along with providing VPNs with high bandwidth, advanced QoS and low latency, a HLN enables them to:

  • Deliver universal access to wired and wireless bandwidth
  • Scale bandwidth up and down when needed
  • Provide different levels of secure access
  • Provide intelligent traffic management
  • Monitor cloud application performance
  • Provide application assurance and application SLAs
  • Provide open application programming interfaces (APIs) that stimulate innovation

Network service providers can also combine these capabilities with other capabilities, such as security, policy and mobility, to further differentiate their cloud services and make them more attractive to discriminating enterprises.

Agility: Partners accelerate the move to cloud

A growing number of network service providers are recognizing the opportunity to use cloud services to combine internal transformation and business transformation. The typical large enterprise supports anywhere between 250 and 750 IT applications. Network service providers often support well over 1000. They have all of the typical enterprise applications. Plus they have all of the operational and management applications required to support a plethora of legacy services.

Moving to a Service Oriented Architecture (SOA) reduces complexity in network service provider organizations. In addition, virtualization and abstraction of applications and services allow network service providers to move away from traditional “stovepipe” or “siloed” delivery mechanisms. Virtualization also contributes to network service provider eco-sustainability initiatives.

With these efficiencies, network service providers can move to the streamlined service delivery model needed to deliver and support dozens, potentially hundreds, of new cloud services — quickly, efficiently and cost effectively. A simplified, more dynamic back office makes it easier to do business.

Partners can help network service providers gain the speed and flexibility they need to improve their own operations and meet market demands.

  • Vendor partners accelerate access to cloud services. Building out infrastructure to support new services can take many months. Relying on partners to host white-label cloud services in their data centers gives network service providers almost instant access to new offerings.
  • Like the enterprises they’re serving, network service providers can take advantage of an outsourcing model to easily add offerings to meet new demands. Alcatel-Lucent experience shows that service deployment times can drop by up to 90% in a cloud model compared to traditional deployment models. Revenue-sharing agreements make the arrangement attractive for network service providers and their partners.
  • Application and content provider partners accelerate innovation. With application enablement, network service providers can satisfy customer demand for capabilities they can’t deliver right away. And they can combine innovations from multiple partners — for example, in service mash-ups — to add creativity and value to partner innovations. Network service providers can also allow enterprise customers to create applications in the cloud then customize the level of service assurance associated with those applications.

An open, secure, common approach is key

As they move forward, network service providers will need work with vendors who can deliver an open, standards-based approach that lets them federate applications across their own and other clouds. They should also ensure that security and compliance are designed into the solution at all layers. Above all, network service providers will need to ensure that network, storage and computing resources are managed in a common way across their environment to enable them to deliver truly elastic services that can be optimized on demand based on the application or business requirement.

To contact the authors or request additional information, please send email to techzine.editor@alcatel-lucent.com.

  1. [1] ©2011, Forrester Research Inc., Sizing the Cloud, Understanding And Quantifying The Future Of Cloud Computing, April 21, 2011.
  2. [2] Ibid.
  3. [3] ©2010, IDC, Worldwide Software as a Service 2010-2014 Forecast: Software Will Never Be the Same, Doc #223628, June 2010.