How Cloud Computing Will Enable Telecom Operators to Do More with Less

A Frost & SullivanWhite Paper

Ronald Gruia, Principal Analyst—Emerging

Telecoms

www.frost.com

50 Years of Growth, Innovation and Leadership

How Cloud Computing Will Enable Telecom Operators to Do More with Less

Introduction: The “Cloud” Defined ........................................................... 4

Communications Service Provider (CSP) View of the Cloud.................. 6

How the Cloud Addresses the Key CSP Objectives ............................... 7

Cloud Paradox .................................................................................. 9

CSP Cloud Lifecycle........................................................................... 10

IBM’s Approach To The CSP Cloud ......................................................... 11

Conclusions ................................................................................................ 13

About The Author..................................................................................... 14

About Frost & Sullivan ............................................................................. 16

Frost & Sullivan

CONTENTS

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INTRODUCTION: THE “CLOUD” DEFINED

Cloud computing has certainly been a big catalyst in the IT and telecom sectorsthat are being overhung by the ongoing global macroeconomic challenges. In fact,the “cloud” has been both acclaimed as the next major disruptive force in themarketplace and also as the next outsourcing failure (the telecom industry has hadits share in that department, including Centrex services as a replacement forpremised-based KTS or PBX systems).

In reality, the cloud does represent a good opportunity for operators to streamlinetheir operational costs, focusing mainly on their core competencies, while alsodeferring some of the risks and up-front costs associated with deploying aparticular solution. In other words, the cloud will enable carriers to reduce theirOPEX (operational expenditures) while also incurring some CAPEX (capitalexpenditures) savings.

Therefore, a better way to characterize the cloud would be as a business model forthe creation and delivery of compute resources. In other words, the cloud is aflexible and scalable shared environment in which third-party suppliers distributecomputing resources to customers on demand. Usage is charged on a pay-per-usebasis, as depicted in Figure 1 below:

Figure 1—The “Cloud” Defined

Source: Frost & Sullivan

SaaS

PaaS

IaaS

Software as a ServiceE.g., Salesforce.com, Google Apps, Symantec Hosted Services, Oracle On-Demand

Platform as a ServiceE.g., force.com, Microsoft Azure, IBM CloudBurst

Infrastructure as a ServiceE.g., AT&T Synaptic Hosting,Verizon CaaS, Amazon EC2

The “Cloud” is an IT Resources Delivery Method

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There are three different market segments empowered by the cloud: applications(known as either OnDemand or SaaS for Software as a Service), platforms andinfrastructure:

• SaaS is an application delivery model in which software and its associated dataare hosted centrally in the cloud. It is paid for on a subscription basis, and thesoftware is typically hosted by the vendor and accessed by the subscriber overthe Internet. SaaS has become a common delivery model for certainapplications, such as Accounting, Collaboration, CRM and HR Management.

• PaaS (Platform as a Service) is a model where platforms can be leveraged todeploy new apps that are provided either by partners or the customersthemselves. Some notable platform vendors include the likes of Salesforce.com,NetSuite, Google (App Engine), Amazon (EC2), VMware (Cloud Foundry),Microsoft (Windows Azure) and IBM (CloudBurst).

• IaaS (Infrastructure as a Service) is a model through which infrastructurevendors provide raw physical capacity for cloud computing, including acombination of hosting, development environment and storage. With managedhosting via companies such as IBM, Rackspace, Savvis or Terremark, customersobtain all their infrastructure provided to them and are only responsible forthe apps sitting on top, thereby eliminating their infrastructure burden.

The cloud is part of a broader portfolio of delivery method that IT chooses from;common cloud options include:

• Public cloud, in which multiple companies share physical servers andnetworking resources hosted in a provider’s data center.

• Private cloud, in which companies do not share resources (althoughefficiencies may be realized by hosting multiple virtual applications from thesame company on a single physical server). Private clouds can be located eitherin a provider’s data center or in the company’s own on-premises data center.

• Hybrid cloud, in which virtualized applications can be moved among privateand public cloud environments.

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Figure 2—Cloud Options


No matter which option is chosen by IT, one important consideration is how toprovision the cloud efficiently, as cloud creation costs significantly impact theoverall creation process. Thus, it is important to have a tool enabling “what-if”scenarios to be considered; for instance, a cloud that is built to support a baselineload, one that can handle a spike load, or a hybrid implementation that can managea baseline load and provide a spike load “on demand.”

COMMUNICATIONS SERVICE PROVIDER (CSP) VIEW OF THE CLOUD

The cloud paradigm offers CSPs new opportunities to enhance their ownoperations while deriving revenue from cloud services. Consequently, CSPs areincreasingly concerned with evolving their cloud communications strategy.

Like most enterprises, telecom operators are seeking to improve their serviceagility, efficiency and speed while lowering their operational costs. As a first step,CSPs are looking to virtualize their software assets. Following that, they would liveto move toward “cloud enablement,” where they will abstract their hardware layerand achieve hardware independence. Finally, as a last step, CSPs will be ready tooptimize the cloud from a resource management perspective. With the rightstrategy, CSPs can leverage their move to the cloud in order to reach these goals,as outlined in the next illustration:

VM

VM

VM

VM

VM

VM

VM

VM

SaaS

PaaS

IaaS

Premises-Based Hosted

Private Cloud

Physical Servers

Public Cloud

Hosted Private Cloud

Co-Lo Dedicated Hosting

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Figure 3—CSP View of the Cloud


How the Cloud Addresses the Key CSP Objectives

The advent of cloud technology also represents another instance of the ongoinguptake of flatter, more horizontal architectures by service providers. Old vertical“stovepipe” approaches requiring siloed implementations with dedicated hardware,applications and resources are giving way to more flexible and elastic environments inwhich equipment and applications are virtualized, and processes and operations arestreamlined. As a result, new services can be quickly added to an operators’ portfolio,while existing services can sometimes be recombined to create a new offering.

The adoption of the carrier cloud will enable CSPs to virtualize and transform theiroperations, consequently becoming more efficient and improving their servicevelocity (i.e., ability to introduce new services faster to the market), whilesimultaneously lowering their costs, as shown in the following table:

Cloud Ready• Virtualized Applications

Cloud Enabled• COTS Hardware• Platform Independence

Enhanced Carrier Cloud• Cloud Resource Management

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Figure 4—Cloud Drivers & Tangible Benefits


CSP Objective Cloud Driver Tangible Benefits

Improved RevenueGeneration

Faster TTM (Time-to-Market)

• Full management of

end-user QoS

• Assure cloud SLA

• Flexible scaling

(small/large clouds)

• Automation reduces

time for NPI

(New Product

Introduction)

Gradual Network Evolution

Dynamic Scaling New “Just-in-Time” Model

• OPEX reduction

• Improvement in

“service agility”

• CAPEX savings

(typically 25-35%)

• TCO savings (overall

solution) of 5-10%

Enhanced OperationalPerformance

OPEX Reduction • Substantial

CAPEX/OPEX

savings

• Catalyst for adoption

of Tier 2/3 CSPs

• Ability to fine-tune

performance

(better scalability,

optimized HW

platform usage)

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The CAPEX gains through the cloud can be anywhere from 25 percent to as muchas 80 percent of the network, depending on the amount of network hardware thatcan be virtualized. There are also other trickle-down positive impacts, such as alower cost-per-subscriber addition and reduced construction/civil worksexpenditures. From an OPEX point of view, the cloud can deliver savings in termsof lower operational costs (typically in the range of 25 percent), planning costs(around 20 percent) and lower energy and footprint costs.

In addition, the carrier cloud can also help carriers de-risk their investment in newservices by giving them the opportunity to try before they commit to a particularapplication. Operators can also achieve a higher ARPU via a faster time-to-marketand longer-term market share gains by improving their service velocity.

Cloud Paradox

Cloud computing is emerging as a viable CSP business proposition as Web 2.0forces the increased virtualization of resources into the Web. The cloud computingmarket is embracing the typical “pay-per-use” or utilization-driven business model,where the subscriber is charged based on storage and computational resourcesbeing used. While processing and storage follow Moore’s Law, network bandwidthdoes not, since it grows at a much slower rate.

This gives rise to a Cloud Paradox for CSPs: cloud computing providers start upproviding a VAS (Value-Added Service) but inevitably will end up offering acommodity service, while CSPs will begin providing a perceived commodity service,but ultimately will offer a VAS in the end: connectivity!

The key component of a CSP’s cloud strategy is exactly that interconnection; the OSImodel calls for three components of the data network, and the connectivity layer is thethird one. The connectivity layer is the greatest CSP asset, given its carrier-gradecapabilities, which are sought not only by consumers, but also by enterprise customers.

Therefore, cloud computing can deliver benefits not only for the carriers’ ownoperations but also in terms of delivering carrier-grade, highly reliable and availablecloud services with fast fault recovery. In other words, the cloud can be leveragedby service providers both internally and externally. CSPs can be helped in theirquest to deliver superior connectivity and streamline their operations via the cloud.

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CSP Cloud Lifecycle

As they map out their cloud strategy, CSPs need to tackle a few key issuessummarized in the figure below:

Figure 5—Key Issues in the CSP Cloud Lifecycle


CSPs have to consider three steps in their cloud lifecycle: planning, building anddelivering their cloud implementation:

• Plan: In this stage, CSPs assess their efficiencies, gaps, risks and opportunities forchange, including both operations and revenue generation. CSPs also typicallyconsider their strategy (whether to build their cloud to meet a certain baselinepeak or rent a spike “on-demand,” or a hybrid of both approaches). The end resultis a transformation plan that will manage change and reach a return on investment(ROI) target via services charged on the basis of a utilization-based model.

• Build: In this stage, CSPs actually carry out their plan to implement cloudservices geared toward streamlining their own operations and offering newservices via new provisioning models to enterprise and consumer customers.Security is a paramount concern for most customers that are consideringadopting cloud computing, so this is an important part of this process. In thisstage, CSPs also ensure that their cloud solution addresses quality, privacy andaccessibility compliance issues.

Plan property (e.g, buildto baseline, “rent” spike“on-demand”, hybrid)

1

Security, both off thecloud’s content andthe cloud itself, ensurecompliance (monitorcloud standardsadherence)

4

Deliver the solution;ensure cloud meets critical SLA metrics(latency, minimumthroughput, etc.)

3

Build the cloud securely and ensuring the properapps are virtualized and cloud is provisioned properly (can withstandlarge loads at the peakbusy hour)

2

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• Deliver: In this stage, CSPs ensure that their cloud implementation meets somekey metrics via functional, regression, GUI and data-driven testing. Concomitantly,CPSs also need to enhance their resource flexibility and availability, improve theirasset utilization and ensure the rapid delivery of services (i.e., service velocity oragility to introduce new services faster to the marketplace).

IBM’S APPROACH TO THE CSP CLOUD

IBM is a vendor offering a comprehensive portfolio that addresses the key issues ofthe CSPs’ cloud lifecycle. IBM Rational Software for Cloud Computing includes awide range of integrated functionality for design, development, testing, anddeployment of carrier cloud implementations that can be leveraged internally andexternally by CSPs. The all-inclusive solution set is depicted in the figure belowand addresses all stages of CSP cloud lifecycle:

Figure 6—IBM Rational for Cloud Computing

Source: IBM

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For the planning stage, IBM tools including Enterprise Architecture Management andDeployment Planning and Automation can be leveraged to align business, networkand IT goals by creating a consolidated view of the CSP’s current and target stateafter embracing the cloud. Furthermore, these tools can be used to generate atimeline for implementing new cloud services and set up a unified analysis andreporting platform that can monitor the performance.

In the build stage, CSPs can benefit from the Rational Software Delivery Services forcloud computing, which can help a CSP create a private, public or hybrid cloudenvironment, build applications for its cloud, and deliver those applications on itscloud. This enables the CSP to transform software delivery by offering best-in-classsoftware development and test solutions across a variety of platforms. In addition,the CSP can also manage its own Service Creation Environment (SCE), which is usefulwhen interacting with third parties such as ISVs, system integrators, and networkequipment vendors. This allows the generation of a set of specifications andrequirements that can be conveyed to both the CSP’s suppliers and its contractors.

From a security standpoint, in the build stage, IBM also offers a host of solutions,including IBM Rational AppScan OnDemand, which provides comprehensive testingof pre-production applications, and also provides continuous scanning ofproduction sites to monitor vulnerabilities that might have been introduced after aparticular cloud service went live.

Finally, on the delivery stage, IBM solutions such as Rational Software DeliveryServices for Cloud Computing and Rational Load Testing can be used to help CSPsensure they can meet their cloud metrics (e.g., Service Level Agreement parameters)via functional, regression, GUI and data-driven testing. In addition, Rational Test LabAutomation can be leveraged to provide automation from the testing side, alongsideRational Performance Tester for load testing. Both of these tools can be used inconjunction with Rational Quality Manager and Rational Functional Tester to furtherensure compliance from a Quality Management perspective.

Key IBM Rational Cloud Intangibles

The key differentiators for the Rational for Cloud Computing portfolio include:

• Collaboration enablement: Rational software is based on the IBM Jazz platform,a highly sophisticated environment devised for collaborative software delivery.The Jazz platform enables all members of the project team, including businessstakeholders and delivery partners, to view progress and provide input. Withall team members on the same page, projects are subject to fewer changes anddelays. More importantly, Jazz helps bridge the gap between the developmentand the operations side of the CSP organization.

• A comprehensive set of capabilities: This includes not only technologies to helpCSPs plan, build and deliver secure cloud services, but also consulting services and

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extensive partner collaboration. IBM has built a significant acumen in helping CSPsroll out their cloud implementations and can draw upon these best practices toadvise its clients. Moreover, IBM also collaborates extensively with its partners inorder to both develop and offer value-added cloud services for software delivery.

• An integrated approach: Development and delivery typically are separate, buthighly interdependent functions. IBM Rational solutions for cloud computingoffer a flexible gamut of cloud delivery options for both test and productionenvironments. For instance, IBM Rational solutions for cloud computing areavailable for deployment in your private cloud via the IBM Smart BusinessDevelopment and Test Cloud or the prepackaged IBM Cloudburst Solution(which encompasses both hardware and software), as well as on IBM’s hostedenvironment, IBM SmartCloud Enterprise. There are a lot of synergies that canbe exploited between IBM Rational tools and IBM WebSphere’s ServiceExecution Platform and IBM Tivoli’s service management capabilities.

CONCLUSIONS

Geoffrey A. Moore wrote in his best-seller “Crossing the Chasm” that fighting one’sway into the mainstream market is an act of aggression, drawing the analogy to DDay: the early market base is England, the strategic market target is Normandy,while the English channel represents the chasm. The ultimate goal is Europe, whichrepresents the mainstream market.

Cloud technologies are getting closer to that point of adoption, in other words, toreaching the early majority that is mainly constituted by pragmatists. Until then,however, certain best practices among visionaries and technology enthusiasts canbe shared, in addition to the formulation of strategies to help address the keyissues relevant to a particular customer.

In this white paper, we examined how the cloud paradigm will enable CSPs toachieve more with less, enabling them to achieve an improved service velocity(shorter TTM for new services), CAPEX/OPEX reduction, and the ability to betterscale (i.e., follow the “cap-and-grow” model more efficiently). Furthermore, wediscussed the key issues faced by CSPs as they consider cloud architectures forstreamlining their internal operations and offering their customers new solutionsleveraging cloud infrastructure.

Throughout this exercise, CSPs will need to adhere to well-known business practicesin order to maximize the benefits of cloud computing, including virtualization,standardization and automation in order to enhance flexibility and lower costs.

IBM Rational can be a trusted advisor to CSPs throughout the entire process.

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ABOUT THE AUTHOR

Ronald Gruia is the Principal Analyst for Emerging Telecom at Frost & Sullivan. His main focus areas include NGN migrationstrategies, IMS (IP Multimedia Subsystems), 4G (LTE, WiMAX),FMC, VoIP, Next-Gen Carrier Messaging Platforms, IPTV, Triple Play Services, Application Enablement, SoftwareDevelopment, Enterprise Communications Systems and UnifiedCommunications, among others. He has authored severalreports, managed subscriptions and has also led and played a keyrole in strategic consulting projects in these areas.

Since joining Frost & Sullivan in February of 2001, Gruia has spoken at conferencessuch as Supercomm, VON, 3GSM, CTIA (IMS Summit), IMS Expo, Futurecom(Brazil), IP Comm, Fierce IPTV, Intel Communications Summit, IMS World Forum,TMIA, VMA, VON Canada, IP World Canada and Comdex Canada. He also writesarticles for various publications (such as IMS Magazine, VoIP Magazine,Telecommunications Magazine and Telemanagement), has appeared on CNBC(U.S.), BNN, Report on Business Television and TechTV (Canada), Decision TV(Brazil) and Telecom TV (U.K.), and has been quoted in publications such asBusiness Week, Financial Times, Forbes, Wired, API, DJ Newswire, Reuters,MarketWatch, Network World, IT Business, IT World, Los Angeles Times, San JoseMercury News, Wireless Week, National Post, San Jose Mercury News and CIOMagazine.

Gruia is an MIT graduate in Electrical Engineering and has accumulated years ofexperience in the telecom industry, having held several roles at Nortel Networks'Enterprise Division, where he earned a U.S. patent. He also possesses years ofexperience in all aspects of the software development cycle, includingprogramming, code review, unit/system testing, and SCM (Software ConfigurationManagement). Gruia fluently speaks Portuguese, Spanish and Romanian, and hasworking knowledge of Italian and French.

This paper is part of the ongoing coverage of worldwide ICT (Information andCommunications Technologies) markets by Frost & Sullivan (www.frost.com), aninternational growth consulting company. Working closely with our clients, weuse advanced market research methods to identify and analyze the critical marketchallenges they must address to become successful competitors in their industry.

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How Cloud Computing Will Enable Telecom Operators to Do More with Less

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