Cloud services present a major business opportunity for communications service providers and can create a new or expanded source of revenue. But CSPs need to act quickly to establish themselves as leaders in this field, says Hewlett-Packard
Based on a survey of more than 900 SMBs worldwide carried out by Forrester Research on behalf of Hewlett-Packard, CSPs are identified as the second most considered type of cloud vendor after dedicated “as-a-service” players. The credibility for CSPs to become a preferred cloud service provider for business customers is real, Erwan Ménard, vice president and general manager of the Communications & Media Solutions Business Unit at Hewlett-Packard, tells European Communications.
EC: Erwan, everyone is talking about the cloud these days, and the opportunities it will bring for enterprises and service providers. Just to kick off the conversation, could you provide the HP definition of what “cloud” and “cloud computing” actually mean?
Erwan Ménard: The simplest way to express it is to look at the business model because I think cloud, first and foremost, is a business opportunity. We are in a world that is evolving towards an “as a service” model in many dimensions, and so what cloud is about is to enable this as a service model.
So what does Cloud means for a CSP:
First, it is a promise of internal efficiency. Like any large enterprise, a CSP can leverage cloud technologies to improve the efficiency of their IT systems and back office systems.
Secondly, cloud is an opportunity to develop new revenue streams by selling new kinds of services to enterprise customers. And in that respect we think the communication service providers have a very unique opportunity to play a role in this new value chain as they have always sold things “as a service” through subscription models, and have a unique knowledge of their business customer needs. Furthermore, as a historical provider of communication services, they are in a unique position to mash up their network capabilities with IT capabilities and offer aggregated on demand services to their business customer.
For CSPs, new revenue sources are particularly important given the changing market landscape.
EC: Do you think there has been a shift this year in how business users view cloud services?
Erwan Ménard: Absolutely, and it’s more than a belief: it’s something we’ve confirmed with some research. We surveyed 900 small-and-medium enterprises in every continent about communications-as-a-service. We found that 50-75% of companies are expecting a number of services to be available to them “as a service.” In addition, 90% of those companies that expressed an interest in CaaS solutions also said they would want multiple and bundled solutions delivered to them “as a service”.
EC: Can you give an example of the kinds of services that small and medium enterprises say they would be interested in from their service provider?
Erwan Ménard: CSPs are best positioned to offer those services that sit between IT and communications -- and are “adjacent” services for CSPs.
Infrastructure-as-service (IaaS) is a natural area of business need where CSPs can use the as-service-model to add great value for SMBs. With a dynamic cloud based platform for IT data center needs, CSPs can provide SMBs with flexible, on-demand processing power, network resources, storage capacity and other software capabilities. This is what HP is helping SFR do in France - for its business customers
Other business critical services are quite natural play for CSPs. For example, in the Communication-as-a-Service area, I’m talking about things like contact centre as a service, unified communications as a service, and IVR [interactive voice response] as a service. These are not so exciting or fashionable, but they are actually very critical to any business. There are many other service possibilities. Device management as a service comes to mind. I can easily imagine innovative CSPs creating their own ‘mash-ups’ of business services.
So, do SMBs believe traditional service providers can be their cloud provider also? Based on HP research, the vast majority of companies say ‘yes.’ They see multiple benefits. CSPs can aggregate attractive bundles of services, reducing complexity and cost for the SMB. CSPs have strong brands and local presence. Their shops are almost on every street corner. And the CSPs are known for their security and reliability. It’s really all about trust. And CSPs are seen as a trusted partner.
EC: A lot of people talk about SMBs as being the first big opportunity with cloud services. What about the opportunity with larger enterprise customers?
Erwan Ménard: In terms of addressable markets for CSPs with cloud services, I don’t think the SMB market is the only one, although it offers untapped potential for CSPs as cloud lowers the barriers to entry in the previously under-served SMB market. Cloud technologies and business models are actually also helping service providers in their current business with large enterprises.
Larger corporations can now look at their communications service provider as a telecoms and IT partner -- as CSPs are working in partnership with companies like HP. However, this is really a company-by-company private cloud offer. But when CSPs develop more “mass-market” services that are initially suitable for SMBs, such as infrastructure as a service, UC, contact centre, IVR, device management as a service and others that are at the crossroad between IT and telecoms, such services also scale up to large companies. So we absolutely have the opportunity to expand the addressable market into large companies.
EC: So what are the key challenges that they face if they are to establish themselves in this new market? What is HP’s role in all of this and how are you helping CSPs to address the nascent cloud market?
Erwan Ménard: I think the first challenge, which is true for any service you want to launch in the telecoms world, is to really accelerate your time to market. We are slow as an industry to launch new stuff. It requires up-front investment to have the right platform that will help CSPs launch services rapidly; monetize and provision them. A lot of the critical preparation is the integration with the back office system of the service provider.
So I’m talking about BSS and OSS here.
HP is helping CSPs in two key ways:
Providing a single aggregation platform to deploy, manage and monitor all cloud applications, whether they are existing CSP solutions, new services or 3rd party SaaS services.. This aggregation platform is deployed with interfaces to the service provider’s BSS and OSS. This integration enables CSPs to stack services on top quickly and efficiently. And dramatically shorten time to market.
Then, our professional services organization partners with CSPs through the journey to final launch of an offer, which also shortens the time to market – and time to revenue. Beyond launch, HP provides consulting and integration to build, secure, manage, and optimize the cloud environment.
The second challenge is to get their sales force and channels ready to play with these new offerings. Our consultants are working with CSPs to help them launch their offers
Finally, there is a third aspect. It’s really more of an opportunity than a challenge. CSPs will need to think about vertical offerings, targeting specific industries such as healthcare. In those verticals you find very specialized and even local application partners. CSPs could not only act as an aggregator of cloud services, but also offer a platform for their partners to develop cloud applications and offer them to their vertical customers.
EC: A key question with any new service offerings and business models is how are these to be monetized, of course.
Erwan Ménard: I think we need to acknowledge that as an industry, we have a lot to learn about what the right price points are going to be. We have to watch what the response is going to be to cloud services that are being launched by service providers such as France’s SFR.
On HP’s side, we address this challenge through two angles: 1) enabling business models with underlying technology that is flexible and cost-effective – so there are few barriers and CSPs are not cornered into certain pricing models; and 2) providing business consulting to help CSPs define the sustainable business models. We try to be really, really flexible, and then it’s a matter of launching it and getting market feedback. But I’m optimistic on that front because this is what we’ve always done as an industry: We’ve always been able to adjust and invent and be creative on pricing plans. This is a journey our industry is starting and it’s exciting.
EC: From your discussions with service providers, would you say that cloud is now pretty much on all of their agendas?
Erwan Ménard: Yes, definitely. Not all of them are at the same maturity stage but I think all of the major service providers are very seriously looking at this because it’s a revenue opportunity. It’s a global opportunity. It’s an opportunity for them to take a very interesting role in the value chain and expand the value they bring to their customers. Cloud also has a very beneficial side effect for CSPs: they are also looking at it from their own internal needs because cloud technology would be a great way to save money, and these service providers are using a lot of IT resources.
In a nutshell, cloud is part of the transformation journey of CSPs. They are changing their business model, their organization, their processes, and their technology to produce tangible business benefits.
EC: Can you provide an example of how you are working with any particular operator on their cloud strategy?
Erwan Ménard: SFR is a key partner of ours when it comes to cloud services. HP is helping the French operator generate new revenue by building a complete cloud services platform that will enable SFR to offer small, midsize and large companies IT infrastructure as a service (IaaS) with utility-based pricing. The computer services are being provided via tightly integrated HP software, hardware and services, including the HP Aggregation Platform for SaaS, HP Cloud Service Automation, and HP BladeSystem Matrix.
EC: So in future, how do you see CSPs managing their cloud?
Erwan Ménard: There will be many dimensions that CSPs will evaluate … not only to optimize their operational cost but also to maximize their market impact. Key questions include how will they be reimbursed for their services? How will they pick the right application partner and monetize the application partners who are using their offer? Where they are going to be in the value chain in the on demand service market? What is their agility to introduce new Cloud Services Bundles rapidly for their business customers? How will they manage their cloud for their business customer? Who will host the applications? CSPs will win by asking themselves those questions
Like SFR, CSPs need to see cloud as a technology that will open the door to new revenue sources. The market is changing and CSPs know they must transform. Cloud can be an integral part of that transformation.