Moving up the telecom value chain

Telecommunications Americas, Nov, 2004 by Manfred Reitenspiess

I recently returned home to Germany after a few days of vacation in Mexico. What do my travels have to do with telecom, and more specifically, increasing productivity and efficiency of service providers? More than you might think if you knew the cost per minute for a phone call from Mexico to Europe or the United States. There was Internet access at a flat rate in the hotel, not what you would call high-speed, but at 50 kbps, it would have been sufficient to talk to my kids back home on the PC--if VoIP was available.

The next generation of enterprise business process optimization and customer interaction improvements is heavily dependent upon the potential of network and service operators to interact with the enterprise environment. IP-based convergence plays a key role to turn this potential into business. To quote Zenas Hutcheson, senior managing director at Vesbridge Partners, "Web Services is the technology that will become the intelligent network, allowing a more tightly coupled interaction between applications and devices."

Recently, RKO Consulting, on behalf of the Service Availability Forum, performed the study "Managing the Move Up the Telecom Value Chain." The study showed that to survive and thrive, telcos need to, among other things:

* Address the market space (information value generation);

* Offer a single services base with vertical layering.

For network and service operators, addressing the market space means being able to interface to corporate infrastructures, which are all based on standard IT infrastructures. The support of IT standards is therefore a key requirement, as is the support of integrated services such as billing all services in one itemized and originator-specific bill. Last but not least, customer self-installation and self-administration are crucial for business success. This not only increases user friendliness, but also reduces operators' opex costs.

Offering a single services base with vertical layering is a key strategy for reducing capex and opex. Vertical layering enforces the use of standard, off-the-shelf components, which are the driving force behind continuous price reductions and ever-increasing price/performance ratios. Standards are driving down the operational costs of a system as expertise is widely available and user know-how is applicable to systems of multiple vendors (compare, for example, the UNIX market or the Windows market).

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As a consequence, a new service infrastructure is on the horizon, which is based upon standards (driven by information technology) and off-the-shelf components. Because this new service infrastructure will need to be installed with restricted budgets, standards will help to leverage volume sales and technology advances. For example, the same service will be portable across a number of computer architectures. Also, standards will help to reduce implementation complexity stemming from more services, more interfaces to the corporate environments and required availability levels. For example, if a corporate e-mail system is outsourced to a network operator, the same service levels are expected for the e-mail service as for telephony services: 24 X 7, 365 days a year.

In the future, enterprises will continue their thrust toward business process optimization, driven by a focus on core competencies. Network infrastructures and services are supportive functions of these core competencies and will be provided by operators using new, standards-based, vertically layered service infrastructures.

It is this approach that will help operators fulfill their corporate customers' demands in time and keep their investment budget, as well as operating costs, relatively flat. Standards, for example for high-availability interfaces, will play an important role in turning this cross-market business potential into revenue. New opportunities are on the horizon for network and service operators that will help their corporate customers focus on their core competencies and at the same time optimize their business processes.

Whether we look at this from the operator perspective or enterprise perspective, the advances of enterprise and network services can be real and create new business opportunities for network and service operators who have to enter the data and enterprise world and move up in the value chain from plain transport capabilities as well as for enterprises to enter the next generation of business process optimization.

However, these advances will only become real if they come with the quality enterprises can trust. "The enterprise must replicate carrier availability models and standardization is a requirement for broadest adoption," said Jon Kenton, strategic marketing manager of the Motorola Computer Group. The Service Availability Forum is standardizing interfaces and management to make sure that critical business processes such as customer interaction or supply chain management will be able to fulfill customers' carrier-grade quality expectations.