Nokia Siemens Networks Cloud computing –business boost for communications industry

Telecommunications service providers will play a central role in the cloud computing boom

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Executive summary Cloud computing already commands $60 billion global market, and is growing at a rapid pace. It provides major opportunities for telecommunications service providers (hereafter called operators) to reduce cost; generate new revenues and differentiate in the cloud ecosystem with the network services.

Cloud computing helps operators rationalize their telecom and IT computing platforms across organizational and geographical borders. Moreover, by procuring telecom and IT software like OSS, CRM, CEM and Value Added Services as a service, the operators will soon be able to convert their own CAPEX to OPEX, as well as scale their services in accordance with business needs. Surely so, a large number of Tier 1 carriers have already begun to offer infrastructure as a service (IaaS) business model; a sign of more things to come in the future!

As on date, the operator community has access to a variety of unique assets; including end-customer user profile, location information, billing relationship and messaging platforms that can enhance and customize cloud services across all end-customer segments, thereby empowering them with a host of new revenue opportunities.

In the consumer segment, these assets have been largely untapped owing to a number of reasons; fragmented technologies and business practices, technical barriers for developers in terms of understanding telco protocols, along with commercial barriers between small developers and very large operators, have always been detriments in the path of Cloud computing.

In terms of the enterprise segment offering, Software as a Service (SaaS) has proved to be one of the most attractive options as it has contributed significantly towards the acceleration in the take-off of cloud services and allowed operators to expand their scope of value-addition beyond traditional connectivity services. In the Machine-to-Machine area, the connectivity and Smart Object Enablement Services (SOES) provide operators with new revenue sources from adjacent industry verticals.

Given the fact that applications are used as a service on the cloud, quality of network services becomes one of the key customer experience factors; as third parties are relying on the operators’ know-how on how to deliver reliable and high quality data connectivity to ensure high quality of service for their applications. This consolidates the position of operators as important players in the cloud services ecosystem, while also adding incremental value to broadband network services.

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Nokia Siemens Networks is set to lead the transformation of Telecom industry by providing cloud solutions, which enable operators to improve their customer experience and operational efficiency, expand their services portfolio and optimize their networks for quality of service differentiation. The wide range of cloud solution portfolio of Nokia Siemens Networks includes solutions from cloud optimized Telecom applications such as OSS, CEM and value-added-services to new cloud based software as a service solutions targeted to consumers and enterprises including different M2M verticals as well as the network optimization services.

1. Business opportunities for Operators

1.1 $60 billion market and growing The cloud is one of the most talked about topics in ICT. But it’s much more than media hype. It’s a real business on which enterprises where spending around $60 billion globally in 2009, according to analyst company Gartner. The growth rate of this spending is expected to be at about 20% CAGR from 2009 to 2014.

Enterprises spend money on a variety of cloud services. A major share of cloud revenue comes from Business Processes as a Service (BPaaS), wherein advertisement automation happens to be one of the largest areas. Other typical cloud offers include Software as a Service (SaaS), such as office tools or CRM, (see picture 1 for SaaS deployment plans), as well as Infrastructure and Platform Solutions (IaaS/PaaS) providing computing and data storage resources.

Figure 1. Yankee, July 2010 FastView Survey: Cloud Computing Grows Up

The success of cloud computing is further underlined by the huge numbers of users enjoying services based on cloud technologies. It seems that consumers can’t get enough of services such as Facebook, YouTube and Microsoft Live which are based on cloud approaches. The user experience is further heightened by the fact that these do not require any upfront commitment or expenses by the consumer, nor are limited by the device used. In addition to the aforementioned benefits, the Enterprise segment also benefits substantially from cloud services; point-in-case being a report that talks about Google Apps being used by more than 3 million enterprises

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in 2010, taking into account both the paying enterprises, as well as those who use Google Apps for free. Another example is salesforce.com, which offers CRM in a Software-as-a-Service (SaaS) model managing customer information for approximately 87.200 customers (Salesforce.com statistic by October 31st 2010).

A growing number of telco CSPs are already offering cloud services. They are bundling their assets to deliver a range of services, such as storage and back-up, resale of third party applications and targeted cloud-based business solutions for different vertical markets, such as healthcare, in a cloud business model. In US market for example Verizon and AT&T have offered infrastructure as a service.

1.2 What is cloud computing? Briefly speaking, Cloud computing is a new business model that promotes a new way of managing infrastructure and service delivery. It advocates changes in the traditional process of resource delivery and business model, typically in the way of a public cloud service, which implies that services can now be accessed by customer with an internet connection:

• IT resources (Physical resources) are shared on demand basis (i.e. resources are not allocated statically to the client)

• IT resources in the cloud are virtualized, which means clients see logical runtime units, but not the physical ones. This also reliefs the client of having to deal with resource limitations.

• Cloud services are provisioned over the internet. With the help of web-based tools or portals users can access the resources as if it were installed locally on their own computer.

• Cloud services (public) are sold with for example pay-per-use or per user pricing model i.e. the client pays only for and when using the resources, not for owning them.

In addition, some large and geographically diverse organizations may opt to invest in their own data centers to create cloud computing capabilities for use within the enterprise only (private clouds). This allows them to optimize their IT investments, as well as reduce operational costs involved in running the IT infrastructure from a (few) single facility.

The evolution of high bandwidth networks is a key enabler for cloud computing. Without fast and ubiquitous available IP connectivity, it would not be possible to run software and share resources in a centralized data center for millions of users (as done in the cloud model). Laptops with dongles, smart phones and tablets have indeed facilitated 24/7 access to one’s favorite applications from anywhere across the globe. Cloud provisioning of services for all these users and devices increases the dependency and load on networks, because applications are used in an online and typically “always-on environment, and not as a local application in the device.

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2. Business opportunities for Operators In the current scenario, operators can look forward to three major business opportunities on the immediate horizon:

• Reduction of internal costs through carrier-grade cloud solutions

• Generation of new revenue streams, by combining the telco and Internet applications from cloud for services offered to consumers and enterprises

• Leveraging on new business opportunities arising from Service Level Agreements (SLA) assuring connectivity, privacy and security services to dedicated cloud services, as well as Quality of Experience (QoE) differentiation.

Apart from the new efficiency opportunities and revenue that Cloud computing brings on an operator’s table, the latter’s role assumes greater importance in terms of maintaining network services with a view to ensure the best-in-class quality of experience for cloud services. In addition, privacy and security concerns strengthen the role of an operator as a trusted partner for the end-customers. How and where these opportunities can be leveraged, depends on the strategic directions the operator will choose; what kind of role it wants to play in the overall ecosystem of the communications service providers and how it wants to organize its internal operations and partnerships.

3. Transforming telco applications Enterprises have started to adopt cloud across relatively less mission critical applications such as e-commerce, payment, human resources and automating advertising. In fact, Gartner indicates that the financial & manufacturing sector has become one of the earliest adopters of public cloud services, with the Communications and High-Tech industries following closely on their heels.

An undying and constant need to improve efficiency across business processes becomes the primary motivator for operators to explore cloud opportunities in a much more detailed manner. Centralization of the processes and supporting tools across the organization, as well as partnering for out-tasking some of the processes or outsourcing complete operation, offer the best possible options for business process optimization..

Although the cloud can provide internal efficiency opportunities for the operators, it doesn’t follow a one-size-fits-all approach. They can now address the topic as any large enterprise by keeping in mind a variety of crucial factors; their future aspirations, the evolution of the organization, its geographical location, partnership strategy; what to keep in-house and what and how to partner, are among the points that need to be considered carefully. Privacy and security also happen to be key issues for regulators,

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which require careful business and technology planning of the operators to comply with regulatory requirements.

Considering all the cloud enabling factors as well as the concerns, there are many examples where the telecommunications applications can leverage cloud computing. The adaption of the cloud computing and ‘as a service’ business model can be approached as an evolution, beginning (for example) with virtualization of the computing environment prior to the actual transformation to cloud and focusing on applications such as customer relationship management (CRM), Customer experience management (CEM) and Value added services (VAS) as a service.

Capacity need increases with the number of operators’ customers for both the traditional IT functions as well as the delivery of end-customer services such as SMS, MMS, email, mobile content and service portals. The usage of these applications causes unpredictable peak resource needs. Additional capacity can also be procured from the cloud, in line with usage patterns visible across services as well as for short-term needs to avoid investments in mostly idle hardware/software resources.

Time-to-market is one of the key benefits of cloud services. As the cloud based services support the web-based usage, the operators can provision needed applications through self-service immediately after the decision making.

The applications, which are related to the more complex areas of the networks and applications on the local, regional and global level and which require real time transactions such as charging, require more detailed investigations what are the evolution steps to cloud and which parts of the systems can be executed in public cloud and where there might be a need for private cloud.

4. New revenues Applications business through cloud is estimated to grow from USD 5.79 B to USD 20.72 B between 2009 and 2014. (Gartner: Forecast Public Cloud Services, Worldwide and Regions, 2009-2014).

Software as a Service (SaaS) has been the key area for adoption by enterprises, which provides operators with the opportunities to enhance their connectivity offering with the SaaS, targeting the Small and Medium Size (SME) segment. Business users are more critical for the quality of service and willing to pay premium for the service levels and complete packages with application and connectivity. Operators are in the central role in service assurance of often complex technological environments of the cloud computing.

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Consumers are increasingly spending on the latest innovative mobile applications and services. Keeping the interest alive are millions of developers who are building applications for platforms like android, apple and networks sites like Twitter and Facebook. Moreover, operators have unique assets, including voice control, messaging, charging and location information, which can be exposed to developer communities with the aim of developing new & enriched services.

As an example, for an end-user buying an android game, and during the purchase process, the subscriber is asked if they “want to pay by credit card or by debiting your prepaid account.” Operator can get additional revenue by revenue share of the charged purchase and developers can reach those end-customers who don’t have credit cards. Cloud computing allows operators to respond to this still untapped opportunity in more dynamic fashion, especially with partners more willing to work with revenue-sharing model.

Beyond human users, the integration of communications technology continues to grow across a wide range of industries. As a result, we are experiencing the “internet of things ”or Machine-to-Machine (M2M) that is growing fast in its breadth, with domestic and industrial devices connected, communicating, and controlled over the network. The two fundamental revenue sources for operators are the M2M connectivity services and the Smart Object Enablement Services (SOES) such as remote object management, service creation, data collection and processing etc. Here the operator can leverage the platform as a service (PaaS) to re-use the same service enablement functions for several vertical industries thus make better business from low-ARPU (average revenue per subscriber) services.

Hence operators have unique new revenue opportunities in bundling the connectivity with the cloud applications, exposing the telco assets to applications developers through cloud and leveraging the platforms on cloud to enter to adjacent industries with low upfront investments and business risks.

4.1 Re-establishing the role of telco networks Success of cloud services increases the demand for reliable and high capacity data connectivity solutions for data centers. Operators providing data connectivity services for enterprises benefit from this development.

Use of cloud services and generally demand for Internet access has positive impact on operators’ broadband access revenues. Fixed broadband business for enterprises and households grows due to new access subscriptions as well as upgrade to higher capacity connections. There has been a constant rise in the overall demand for access to cloud services anytime anywhere, driven by smartphones, netbooks, and tablets Both business and private reasons drive the significant growth of mobile broadband users.

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Enterprises providing and enterprises consuming cloud services face the fact that the data connectivity services are even more critical for daily business operations. Therefore cloud computing increases the demand for premium data services including SLA guarantees. Two key qualitative parameters of the data connection are fast response time and quality of service (QoS); fast response time requires low latency time in the access network, i.e. for the mobile access the selection of the right radio network can make a clear difference, while, owing to the fact that mobile networks capacity is shared between users within the same cell, end-to-end quality of service (QoS) differentiation becomes the key to deliver a superior user experience. Operators that expand their service offering with cloud services are in unique position to differentiate from 3rd party cloud providers by bundling the cloud services with high quality data connectivity services and different service levels.

Furthermore, security of personal data and the privacy of end-customers (in terms of who can access it and how is it being used) continues to be an area of prime concern. This area warrants immediate attention of the regulator community, in addition to the focus on high profile security needs, such as protecting children from harmful content. There is a clear opportunity today for operators to protect and raise their brand image by ensuring their network and systems are clean and totally secure, and also to offer security services to their customers and act as a trusted identity provider.

As on date, subscribers place a high premium on QoS and are becoming increasingly aware of possible threats, given their dependence on applications, services and data provided over the network. They are also willing to pay to ensure privacy, security and confidentiality of their data. As such, cloud services provide a golden opportunity to operators in terms of re-establishing their central role in the communications ecosystem.

5. Nokia Siemens Networks driving the transformation of Telecom industry in experience and efficiency Nokia Siemens Networks is set to drive the transformation of Telecom industry in experience and efficiency by providing cloud solutions to the operators.

We will:

• Lead the adoption of cloud technology and business models in telco products and solutions both by developing the telco application on cloud and providing telco applications as a service to the operators

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• Innovate for new consumer and enterprise services for operators, offer a broad M2M solution portfolio and help operators expand cloud offering to adjacent industries.

• Provide the best end-to-end telco solutions, including privacy, security and the customer experience and insights to help operators provide quality of service differentiation for cloud computing

Our cloud solution portfolio includes Telecom applications such as voice, messaging, OSS/BSS, customer experience management and value-added-services, enterprise and consumer cloud services and machine-to-machine solutions. In addition, we offer professional services such as consulting, integration and management, completed with strong insight and expertise gained through internal development and testing of cloud applications as well as in numerous customer projects. Our focus is on the areas where our customers, have the biggest business opportunities and where we as solution provider to telecommunication service providers have most value to add.

Figure 3. Nokia Siemens Network’s cloud solutions domains

5.1 Examples of Nokia Siemens Networks telco applications Case European operator – Our VaaS Solution

Business issue: The legacy messaging solutions, MMSC and Messaging Gateways had sustainability issues with huge OPEX and uncontrolled cost structure. The objective of the operator was to break down application silos to create new innovative services while improving their internal operations.

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Our solution: As all transformation projects, we recommend phased approach for complete renewal of the systems. Our value added Service as a Service (VaaS) with the virtualized environment and our capability to integrate the VMWare/RHEV environment from the customer, wide messaging portfolio complemented with unique SDF value proposition and with strong track record on system integration convinced the customer to start the transformation journey with us.

Nokia Siemens Networks Value-Added Services (VAS) products support private clouds. For example SMS Center and MMS Center products can be deployed in virtualized private cloud environment, which means SMSC and MMSC are Virtual Machines (application and operating system bundled together) that can be run on the supported Hypervisor (the software layer on top of bare metal hardware that decouples the application from the underlying hardware) on any Hardware Infrastructure in the Private or Public Cloud. Operator benefits are for example better HW utilization, simpler maintenance and faster time-to-market for new VAS application launches. This is an example of telecom products in figure 4.

Figure 4. Evolving VAS from virtualized infrastructure to public cloud

Case Empower – Field Services Management (FSM)

Customer issue: Multinational group offering construction, maintenance and professional services, was facing an issue in terms of sustaining its competitive edge through improvements in resource utilization while also delivering high quality of services.

Our solution: Nokia Siemens Networks Field Services Management (FSM) is a SaaS application for managing field engineering and maintenance tasks. The application is implemented on Amazon’s cloud technology using Framework for managing the Cloud Infrastructure developer by Nokia Siemens Networks. This is an example of enterprise applications in Figure 5. In the category of enterprise services an example of field management

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solution as a service helps Empower manage field engineering and maintenance tasks.

“It is important for us to adopt a consolidated solution for our multi-national operation that will support us to identify repeating elementary tasks and streamline the processes. Nokia Siemens Networks’ solution will help us to boost our competitiveness and our flexibility, providing us the much needed agility to manage our recourses.”

Juhani Vanhala Chief development officer

Empower Group

5.2 Bring new innovations Nokia Siemens Networks is investing strongly in innovative cloud computing solutions and services. We drive internal innovation in our existing business units, as well as in our Silicon Valley-style ventures team, “Startups at Nokia Siemens Networks”. In addition, we collaborate with external developers to help us deliver solutions to our customers more quickly than the typical industry development cycle.

The example solutions from the development cycle on Cloud domain include:

Case Indosat – Telco asset marketplace services

Customer issue: The operators need to provide application developers with safe access to their telco resources like messaging, charging, billing, location information etc., primarily with the aim of enriching their overall services portfolio for new revenue streams.

Our solution: The Nokia Siemens Networks’ cloud-based telco asset marketplace development platform will allow Indosat’s application developers to access network assets easily and at a low cost. Cloud computing technology removes the need for any heavy, and upfront large capital costs, normally associated with such development platforms. Furthermore, the platform will be tightly integrated with Nokia Siemens Networks’ Service Delivery Framework (SDF) deployed at Indosat. Our platform enables operators to bridge the gap between end users and developers while using the operators’ assets to enhance the end-customer experience.

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Case Cubio – Configurable messaging services

Customer issue: Oy Cubio Communications Ltd is based in Finland and is the oldest independent virtual service provider in the market. Cubio is currently undergoing complete reorganization and has revised its strategy with strong focus on “next generation” of value added services to enhance their service portfolio and customer segments for new revenues.

Our solution: Configurable messaging application that allows end-users to create personalized voice messaging, integrate it with social networking applications such as Plaxo and Twitter and to provide more personalized services with local relevance. For example, it will take only few minutes for Cubio’s SME customers to register in the portal and use pre-defined templates for their customer centric messaging services that assure no customer call goes unanswered. The ‘as a Service’ business model is also attractive for the SMEs. For consumers, the integration with the other social media tools will enable them with the personalized messaging service, which they can integrate for example with the social media applications, email and SMS to ensure that they can provide immediate response to their friends although not personally available for the call.

Case: Open capacity trading marketplace

Customer issue: Operators have dimensioned their networks for the estimated usage behavior of their customers. However, the end-customers

Stephen Hobbs, Director and Chief Technology Officer Indosat 

“Nokia Siemens Networks’ telco asset marketplace will facilitate a cost-effective and collaborative application development platform along with accelarating the development of a vibrant developer community.”

Harry Järn, CEO of Cubio

“This application will make us much more interesting partner for our business customers as well as provide us with a platform, which we will use to further develop our contextual and proactive content and messaging services,”.

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can be un-predictable and furthermore special occasions can cause issues in quality of experience when the traffic grows above beyond the capacity available.

Our solution: Buy and sell connectivity on-demand

Imagine the next Olympic Games in London; an event that will attract a large number of sports enthusiasts who would prefer to stay up-to-date through an online medium of their choice. Moreover, the local capacity need might also vary drastically from one nation to the other, depending on the sport being broadcast at a particular point in time. Consider a situation where in an operator could dynamically transfer his spare capacity to an interested counterpart whose country is more inclined towards one particular sporting event, like cricket as an example! Simplifying the process of trading capacity near real time, would assure a “win-win” situation for both the parties; the operator catering to cricket fans stands to gain the double benefit of incremental revenue as well as delivering a superior customer experience through the enhanced capacity, while his counterpart can also enhance his revenue by offloading spare capacity.

Case: Machine-to-Machine platform

Customer issue: M2M business is high volume business: the ARPU (average revenue per unit) is typically far lower than traditional communication services, but the associated margin is higher. The reasons for this include lower acquisition costs, service delivery is typically cheaper and the network usage is far less than with a “personal” user. However, the operators need to control the other costs such as integration and object management low for better profitability.

Our solution: Nokia Siemens Networks Machine to Machine Application Platform is a dedicated M2M solution. It design enables operators to move above simply providing connectivity for M2M, to delivering M2M applications and automated device control, all the way through to enterprise application integration. Added to this is the Nokia Siemens processes for service delivery: assessment, design, build, sell and deploy. The target is to enable operators to offer cost efficient Smart Object Services, such as prepaid energy, Logistics management and medical service, over the full life cycle, utilizing existing business, service and network assets. We support operators keeping maintaining and enhancing their position as an M2M service provider, offering both retail and wholesale M2M offering. We enable operators to offer M2M multi-vertical business cost efficiently with optimized business framework, and optimally utilizing existing assets.

Case: Customer Experience Management as a Service

Customer issue: Declining ARPU and rising churn force CSPs to leverage their existing customer base by improving the customer experience and lifetime value. But most are cautious due to the large initial investments to get customer insights and the long lead times to be operational.

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Our solution: Existing customer-experience impacting offerings such as Device Management, Serve atOnce Intelligence and Mobile Quality Analyzer will be evolved into SaaS-capable subscriptions available via a portal. It lowers up-front investments, reduces asset ownership and makes costs more predictable. Infrastructure complexity, CEM applications and maintenance is moved from the CSP to the cloud that can be accessed device-agnostic – and CSPs are up and running quickly.

Examples of business processes that can be improved are corporate customer management or VIP customer management. Other areas are Smartphone insight & action, mobile broadband optimization, service usage or roaming analysis.

5.3 Taking care of the security Case: With Telefonica O2 - Czech companies gain secure Internet access

Customer issue: Security is a multifaceted task, given the fact that we have to encounter new threats on a daily basis while addressing the multifaceted challenge of protecting an equally diverse range of customers and devices. The sheer complexity of the situation calls for leveraging upon considerable operator resources to sustain the security mechanism on a long-term basis. This is where Cloud computing steps in to introduce a series of new elements, including ever increasing regulatory concerns and requirements.

Our solution: With this Security as a Service solution, CSPs can offer their customers with the benefit of deploying a reliable, easy-to-manage, and always up-to-date protection mechanism. Moreover, it is device independent, doesn’t require any further investments in terms of expertise, and doesn’t incur a high running cost. The solution is built on a modular portfolio of services that can be tailored to each CSP’s needs.

The key elements of this solution includes a host of features like:

• Web / WAP filtering

• Parental control / guardian control for enterprises

• Anti-virus, Anti-Phishing, Ads-blocking, Anti-malware, Anti-spyware and file blocking to Web Portal for self care and reporting to help users manage their security easily.

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Oscar Gómez, Director of Product and Services

Telefonica O2 Czech Republic

“With its thorough knowledge of our network and expertise in smooth deployment of security suites, Nokia Siemens Networks was chosen to create a bespoke Internet service that we can offer to enterprises that addresses both security threats and responsible use.”