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Report author: Rob Rich Managing Director, TM Forum Insights Research: Publications Managing Editor: Annie Turner Creative Director: David Andrews Commercial Sales Consultant: Mark Bradbury Publisher: Katy Gambino Client Services: Caroline Taylor Marketing: Saryia Green, Marketing Manager, Publications & Virtual Events Report Design: The Page Design Consultancy Ltd Head of Research and Publications: Rebecca Henderson Advisors: Keith Willetts, Chairman and Chief Executive Officer, TM Forum Martin Creaner, President and Chief Operating Officer, TM Forum Nik Willetts, Chief Information Officer, TM Forum Published by: TM Forum 240 Headquarters Plaza East Tower, 10th Floor Morristown, NJ 07960-6628 USA Phone: +1 973-944-5100 Fax: +1 973-944-5110

Page 4 Executive summary Amidst the hype, cloud services are taking shape and their deployment is accelerating Page 6 Section 1: The cloud emerges Understanding the opportunities for service providers Page 14 Section 2: Analysis Service providers discuss present and future actions and plans for the delivery of cloud services Page 20 Section 3: Key areas in providing cloud services Critical areas service providers must focus on to succeed Page 25 Section 4: Recommendations Issues to consider first Page 28 Section 5: A new era of agile IT Introducing TM Forums Enabling Cloud Services Initiative

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Executive summary
Amidst the hype, cloud services are now taking shape and their deployment is accelerating.

In this report, we are addressing the issues and opportunities around providing those services for each player in the cloud ecosystem. We discuss the communications service providers (CSPs) view of the services potential benefits and challenges, and the factors critical to their success with the services. The report also introduces TM Forums Enabling Cloud Services initiative. The Forums initial, primary research, gleaned from interviews with 20 Tier 1 service providers, indicated CSPs are more active in the field of providing cloud services rather than consumption at this stage. (We explore the possible advantages and potential pitfalls of using cloud services in a Quick Insights report, Cloud services: The users perspective which is published in tandem with this one.) The first section of this report outlines how cloud services are a new approach to planning, delivering and consuming IT and network-enabled services for businesses and consumers. They are end-user focused, with little or no onus on the user to understand the location or characteristics of the underlying infrastructure. It explains the hope is that cloud services can greatly improve todays IT delivery model through smaller upfront costs, reduced capital and operational expense, and less financial risk. Other benefits could be faster time to market, less downtime and fewer delays, access to greater expertise, and higher levels of standardization. The cloud services market is in its infancy and will likely enjoy double digit annual revenue for the foreseeable future. In fact, cloud looks to be a far more sustainable phenomenon than

many other recently hyped architectures and technologies. It shares many characteristics of tsunami-like trends such as:
n early market leadership by web icons

like Amazon and Google;

n rapid emergence of new tools and

technologies for use and operations;

n strong endorsement by long established and

emerging technology companies;

n substantial investment by service providers

of all types, including some of the largest and most innovative CSPs; n the attention of hordes of developers across a very broad spectrum of markets, applications and capabilities; and n the attention of a variety of users, including large enterprises, small and medium businesses, and early adopting consumers. In addition, cloud providers and customers alike are increasingly accepting of cloud service delivery model definitions, including Software as a Service (SaaS), Platform as a Service (PaaS), and Infrastructure as a Service (IaaS), as well as industry-specified deployment models, including private cloud, community cloud, public cloud and hybrid cloud. At the same time, lack of clarity (or even acceptance) of definitions, a lack of standards, and a healthy dose of skepticism are creating barriers to adoption. Concerns about security, availability, performance, unit costs, interoperability, flexibility and personalization raise those barriers, and slow the adoption of cloud services. The cloud services market will not realize its


Many challenges of providing cloud services could be met through partnerships

potential unless these concerns are addressed, and cloud services deliver the effectiveness, variety, value and security that they promise. Working on this premise, the report explores some workloads which have characteristics that might be well served through cloud services, as well as those that might be inappropriate, at least at this stage. The report goes on to assesses the strengths and weaknesses of CSPs as cloud services providers to business customers. CSPs have many strengths, such as a long history of selling services to enterprises, reliability, and a proven ability to scale services to meet demand. On the other hand, they need to tackle difficult issues such as gaining sufficient business agility and IT market knowledge, and delivering cloud services at low cost. Some of these challenges could be achieved through partnerships and several CSPs have already established partnerships with apps vendors, security software vendors, unified communications vendors, and PaaS and IaaS vendors to flesh out their portfolios. The second section of the report summarizes primary research involving 20 Tier 1 CSPs including the status of their cloud services programs, the perceived benefits of the services, target markets, the most important services, and the biggest challenges and critical success factors. Some 65 percent of CSPs are offering one or more services with most targeting business markets initially. Respondents think their largest revenue gains will come from cloud-related connectivity and computingrelated services to established customers. They believe the primary benefit of their cloud services would be cost savings, better value for the money, reduced capital expenditure and greater flexibility of IT resources. CSPs are most keen to offer services such as collaboration and conferencing, connectivity, applications, unified communications and security, but acknowledge their biggest challenges include managing service quality and costs, providing good customer experience, and security management. They see the most critical factors to their

success as being operational excellence, customer experience management, service portfolio management, and managing partners. Section 3 explores four broad areas of focus for service providers in delivering cloud services: security management; performance and service level agreement management; usage metering and charging; and end-to-end process automation. These are just a few of the areas that require attention, but they are among the most important and some have been neglected in the past. CSPs need to address them if they are to succeed with cloud. Section 4 puts forward a series of recommendations, ranging from the need to understand the big picture and crafting an effective strategy, to the importance of focusing first on excellence in service quality, leveraging partners and seeking top management support. It also advises CSPs to take advantage of standards and frameworks: to assess and adapt revenue management to the new services, for their delivery mechanism and business models; to test their own services; and to bolster and emphasize security and performance as key issues for would-be customers. Section 5 introduces TM Forums Enabling Cloud Services initiative, which aims to stimulate the growth of a vibrant and open marketplace for the services by bringing together the ecosystem of enterprise users and cloud providers to remove barriers to adoption through industry standards. We hope you find the report valuable. Though cloud services scope is broad and the models inherently complex, for the foreseeable future they will provide considerable revenue opportunities for service providers that can focus and execute.

CSPs have many strengths, such as a long history of selling services to enterprises, reliability, and a proven ability to scale services to meet demand.


Section1: The cloud emerges

Understanding opportunities for service providers

Many question whether todays incumbent IT delivery model is sustainable in the long run. While hardware capital expenditure (CapEx) is relatively flat, thanks to the effect of Moores law, the cost of power and especially the cost of systems and network management is increasing markedly, with no end in sight. Clearly, the worlds collective compute infrastructure needs to be simplified if users are to manage costs. This has given rise to the cloud computing movement, which is probably the most hyped topic in IT today. Cloud services are a new approach to planning, delivering and consuming IT and network-enabled services for businesses and consumers. Cloud is end-user focused, with little or no onus on the user to understand the location or characteristics of the underlying infrastructure. To accomplish this, cloud requires ubiquitous network access, resource pooling that takes no account of location, rapid elasticity, flexible pricing models, readily available self-service, and, most of all, economies of scale. The implementation of cloud seems to be complex, but it appears to address most if not all of the issues in the incumbent IT delivery model. Some view cloud services as a recent phenomenon, others suggest they have a long history and that the first cloud was the PSTN. The term cloud is believed to have been coined in the 1990s in telephony, when it was used to refer to the network in the context of Virtual Private Network (VPN) services, which at the time were for voice. Others argue that the real origin of the concept behind cloud computing dates back to 1960, when pioneering computer scientist John McCarthy suggested that computation may someday be organized as a public utility Certainly from the end-users point of view todays cloud computing shares some conceptual characteristics with service delivery models that date back to the 1960s. This is especially true with service bureaus, where subscribers used connected dumb terminals to perform computing tasks through very expensive mainframes at remote facilities, and never physically encountered the infrastructure. The advent of cheaper hardware (minicomputers in the 1970s and PCs in the 1980s) spelled the death of many of these services bureaus, but ultimately the proliferation of computing platforms (including smart devices), the mushrooming of management costs and technological evolution (such as virtualization, Service Oriented Architecture SOA and so on) appears to be bringing us back to more of a cloud-based, service bureau-type approach, although in a far more flexible, robust, and scalable environment. Despite its rich history, cloud today is a service delivery model and a market in its relative infancy. It is buoyed by a collection of capabilities and models that have emerged

To accomplish this, cloud requires ubiquitous network access, resource pooling that takes no account of location, rapid elasticity, flexible pricing models, readily available self-service, and, most of all, economies of scale.

The purpose of this report is to:

n outline the issues and opportunities relevant

to each of the players in the cloud services ecosystem; n discuss communications service providers (CSPs) views of the potential, benefits, challenges and critical success factors of cloud computing for them; n introduce the TM Forums Enabling Cloud Services Initiative.


Cloud looks to be a far more sustainable phenomenon than many other recently hyped architectures

over the last decade or so, and many observers think it will enjoy annual revenue growth rates greater than 20 percent, sustainable for the foreseeable future. In fact, cloud looks to be a far more sustainable phenomenon than many other recently hyped architectures and technologies. It displays many characteristics of other tsunami-like trends such as:
n early market leadership by web icons like

Amazon and Google;

n rapid emergence of new tools and

technologies for use and operations;

n strong endorsement by long established and

emerging technology companies; n sizeable investment by service providers of all types, including some of the largest and most innovative CSPs; n the attention of hordes of developers across a very broad spectrum of markets, applications and capabilities; and n the attention of a broad variety of users, including large enterprises, small and medium businesses (SMBs), and early adopter consumers. These points notwithstanding, there are many different views on the future of cloud services, due in large part to the diversity of ways in which cloud services and computing are perceived. In summary they constitute an emerging computing and communications paradigm that has the potential to change how businesses, consumers, governments and a variety of devices gain access to, generate and consume information, content and entertainment services. Some think cloud will rise rapidly to become the most important service delivery platform

of the future, while others say it will collapse under the weight of expectation. The lack of clarity (or even acceptance) of definitions, the lack of standards, and a healthy dose of skepticism create adoption barriers. Concerns about security, availability, performance, unit costs, interoperability, and flexibility and personalization raise those barriers, and slow the adoption of cloud services. These concerns have been fueled by a handful of events where access to services have been lost for extended periods, and in one case, a critical database storing information from thousands of mobile devices was lost and largely unrecoverable. While these sorts of disruptions are to be expected in early stage deployments, they are not acceptable in more mature production environments, and customers confidence must be bolstered to encourage growth.

Figure 1.2: The potential benefits of cloud services.

Lower upfront costs Reduced financial risk Decreased time to market

Lower capital expense

Increased standardization Decreased downtime

Lower operational expense

Access to broader expertise


Cloud clearly offers terrific potential benefits to subscribers and providers alike (as shown in Figure 1.2) including:
n lower upfront costs. When introducing a n access to expanded expertise. Cloud service

new application, hardware is an upfront cost, but cloud services allow the subscriber to pay the provider for usage, avoiding advance expenditure and allowing them to spread the cost over time, and manage it closely. So the ten servers required by an application can be purchased incrementally. n faster time to market. It typically takes a few months to get an application into production, but in the cloud, applications could be deployed and scaled in hours. Of course, rollout issues like training remain, but online training and support facilities can help speed rollout as well. n reduced financial risk. If an application is not successful for whatever reason, or its use within the business is for a limited time, it can be discontinued without the user being left with ownership of the infrastructure. The user also avoids the financial risk of technological obsolescence. n lower capital expense. Cloud computing allows the user to avoid not only the expense of the hardware, but also the expense of setting up data centers, which may exceed investment in the computing infrastructure itself. For large users, it also avoids the potential limitations of power and cooling for a single facility, as workloads are spread across the cloud. n lower operational expense. With economies of scale, high levels of automation and self-service, users can avoid many of the expenses of current operations, and the best cloud providers may gain energy savings. n decreased downtime and delays. Since the workloads can be spread across many facilities, and even across clouds, redundant instances of applications can be used to avoid downtime. In addition, data distribution strategies can help address disaster recovery and business continuity issues. Finally, larger providers can afford to build hardened facilities, with state-of-the art, backed up power supply and cooling equipment.

providers can afford to offer more specialized services and deeper expertise than many IT departments, given their economies of scale. For example, advanced security techniques, application performance optimization, tailored user support and business continuity services may be available. n Standardization. The use of cloud services drives standardization among users, who might not get every bell and whistle they have in a proprietary world, but the overall benefits of cloud services often make up for this. Importantly, standardization of services can also facilitate the simplification and alignment of business processes, yielding further savings and enabling the scaling of processes within an enterprise. Offerings by pioneering cloud service providers have demonstrated some of these benefits to some extent. The scale of benefits is still relatively small, but they are real and will only increase as the market grows, along with the maturity and experience of cloud service providers. Yet it cannot be over-stated that clouds potential will not be realized unless real customers needs are addressed, and cloud services deliver the effectiveness, variety, value and security that they promise. Defining the cloud Before dealing with cloud services in the communications industry, it is useful to introduce the baseline definition of what cloud is. By far the most accepted (and neutral) definition is provided by the National Institute of Standards and Technology (NIST).


By far the most accepted (and neutral) definition is from the National Institute of Standards and Technology

Here is what NIST has come up with: Cloud computing is a model for enabling convenient, on-demand network access to a shared pool of configurable computing resources (for example, networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction. This cloud model promotes availability and is composed of five essential characteristics, three service models, and four deployment models.1 Essential characteristics of cloud computing: On-demand self-service. A consumer can unilaterally provision computing capabilities as needed, such as server time and network storage, automatically (without requirement for human interaction with each services provider). Broad network access. Capabilities are available over the network and accessed through standard mechanisms that promote use by heterogeneous thin or thick client platforms (e.g., mobile phones, laptops, and PDAs). Resource pooling. The providers computing resources are pooled to serve multiple consumers using a multi-tenant model, with different physical and virtual resources dynamically assigned and reassigned according to consumer demand. There is a sense of location independence in that the customer generally has no control or knowledge over the exact location of the provided resources but may be able to specify location at a higher level of abstraction (e.g., country, state, or data center). Examples of resources include storage, processing, memory, network bandwidth, and virtual machines. Rapid elasticity. Capabilities can be rapidly and elastically provisioned, in some cases automatically, to quickly scale out and rapidly released to quickly scale in. To the consumer, the capabilities available for provisioning often appear to be unlimited and can be purchased in any quantity at any time.

Measured Service. Cloud systems automatically control and optimize resource use by leveraging a metering capability at some level of abstraction appropriate to the type of service (e.g., storage, processing, bandwidth, and active user accounts). Resource usage can be monitored, controlled, and reported providing transparency for both the provider and consumer of the utilized service. Service models: Cloud Software as a Service (SaaS). The capability provided to the consumer is to use the providers applications running on a cloud infrastructure. The applications are accessible from various client devices through a thin client interface such as a web browser (for example, web-based email). The consumer does not manage or control the underlying cloud infrastructure including network, servers, operating systems, storage, or even individual application capabilities, with the possible exception of limited user-specific application configuration settings. Cloud Platform as a Service (PaaS). The capability provided to the consumer is to deploy onto the cloud infrastructure consumercreated or acquired applications created using programming languages and tools supported by the provider. The consumer does not manage or control the underlying cloud infrastructure, including network, servers, operating systems, or storage, but has control over the deployed applications and possibly application hosting environment configurations. Cloud Infrastructure as a Service (IaaS). The capability provided to the consumer is to provision processing, storage, networks, and other fundamental computing resources where the consumer is able to deploy and run arbitrary software, which can include operating systems and applications. The consumer does not manage or control the underlying cloud infrastructure but has control over operating systems, storage, deployed applications, and possibly limited control of select networking components (for example, host firewalls).

Source: Peter Mell and Tim

Grance of National Institute of Standards and Technology (NIST), Information Technology Laboratory


Deployment models: Private cloud. The cloud infrastructure is operated solely for an organization. It may be managed by the organization or a third party and may exist on premise or off premise. Community cloud. The cloud infrastructure is shared by several organizations and supports a specific community that has shared concerns (e.g., mission, security requirements, policy, and compliance considerations). It may be managed by the organizations or a third party and may exist on premise or off premise. Public cloud. The cloud infrastructure is made available to the general public or a large industry group and is owned by an organization selling cloud services. Hybrid cloud. The cloud infrastructure is a composition of two or more clouds (private, community, or public) that remain unique entities but are bound together by standardized or proprietary technology that enables data and application portability (e.g., cloud bursting for load-balancing between clouds). Note: Cloud software takes full advantage of the cloud paradigm by being service oriented with a focus on statelessness, low coupling, modularity, and semantic interoperability. Source, NIST 2009 It should be noted that there are various useful extensions or additional components to the definition that have been suggested by industry players. These include service models like Business Process as a Service (BaaS), where business process outsourcing providers might provide services like travel, payroll/benefits administration, clearinghouse or procurement services through a cloud delivery paradigm. Another useful extension is Communications as a Service (CaaS), which provides a variety of IP-based communications and collaboration capabilities using a cloud service model. CaaS is generally targeted toward small and medium businesses (SMBs). TM Forum is also exploring the concept of

Database as a Service (DBaaS). There are a handful of other emerging models as well, but for the most part, we will stick with the NIST definitions throughout the report. Leveraging the cloud finding workloads that work As stated earlier, cloud computing is a service delivery model and a market in its relative infancy. As such it should not be seen as a panacea, but rather as a model able to deliver some (but not all) important services and applications. Users must be careful about which sorts of services they choose to deploy initially if they are to be successful and gain momentum. Some initial services that are suitable for cloud deployment include:
n Compute services and storage services

which could exploit economies of scale, provide attractive financial benefits and get to market faster. n Development and test environments can often be provisioned far more quickly, as existing capacity can be used rather than having to provision new servers and development tools. n Business continuity and disaster recovery can also be provisioned more quickly, and offers the advantage of instant, off-site, ubiquitous access, as well as substantial CapEx and operational expenditure savings. n Audio, video and web-style collaboration can be accessed almost immediately, again with significant savings. n Select industry applications, especially those for a distributed workforce (such as sales force automation) can be provided faster, and at lower cost. Also, resource intensive applications that are run only periodically (like invoice rendering) are good candidates. n Analytics can be provisioned quickly as a service, and provide additional horsepower for in-house, compute-intensive, analytical applications, or they might be used for realtime results on cloud-centric information like web or mobile advertising, n Contact center services like IP-based automatic call distribution (ACD) and

Another useful extension is communications as a service (CaaS), which provides a variety of IP-based communications and collaboration capabilities using a cloud service model. CaaS is generally targeted toward small and medium businesses (SMBs).


There are a number of areas that cannot be easily accommodated by cloud

interactive voice response (IVR) can be deployed in the cloud, especially for SMBs or informal contact centers that wish to avoid the expense involved in a full blown contact center. Collaboration tools also fit in here. n Data storage and archiving could be offered relatively inexpensively by cloud, either as part of a business continuity/disaster recovery solution, or standalone. n Desktop virtualization separates a PC desktop environment from a physical machine using a client-server model of computing. The model stores the resulting virtualized desktop on a remote central server, instead of on the local storage of a remote client. This can potentially be done more efficiently in a cloud model There are also a number of areas that cannot be easily accommodated by cloud, at least at the present time. Some examples include:
n Highly customized applications since

Cloud service brokers an emerging concept Among the most interesting roles emerging in the market is that of the cloud services broker. One characteristic of rapidly emerging markets, such as cloud services, is the proliferation of new roles. There is a growing opportunity for socalled cloud service brokers to serve as trusted intermediaries between end-users and cloud services providers. There are many small and specialized firms, each with their own characteristics, flooding into this market. Cloud services brokers can help customers select the right services, deploy services and applications across multiple clouds, and perhaps even gain by arbitraging services across clouds to improve users pricing and brokers profitability. There are a number of ways brokers can add value, including:
n One stop shopping: Brokers can ease the

CSPs would do well to explore the cloud service broker opportunity, perhaps mixing some third party services with their own and leveraging their brand by marketing them to their customer base.

selection process and add expertise;

n Expanded service portfolios: Brokers can

some of the scalability and flexibility of cloud infrastructure is dependent on standard software, users should use caution in moving these applications to the cloud. n Sensitive data as concerns remain regarding security in the cloud, users should be careful about moving sensitive data there. This is particularly true for data with geographic storage restrictions if the cloud services provider cannot guarantee the location of the data to the user. n Complex transactions may not be suitable, given the latency and interoperability concerns around current cloud implementations. n Applications and data with regulatory restrictions; given the relative immaturity of cloud infrastructure, users should proceed with caution here. n Legacy batch applications which have already been optimized or may have a relatively short reaming life may gain little from transition to a new delivery environment. There may be exceptions to each of these cases, but generally speaking services and applications in the first group will see more value and less risk from a cloud implementation.

expand the offerings to their customers, increasing responsiveness; n Cloud aggregation: Brokers can deploy user services across multiple cloud infrastructures and platforms, potentially improving performance and avoiding provider lock-in; n Cloud service intermediation: Brokers can build additional services on an existing cloud providers platform. Examples might include beefing up security and management capabilities, or building complementary applications; n Cloud service arbitrage: Brokers can facilitate opportunistic choices driving competition among cloud providers for the benefit of the broker or the customer. CSPs would do well to explore the cloud service broker opportunity, perhaps mixing some third party services with their own and leveraging their brand by marketing them to their customer base.



CSPs and cloud services Many service providers have already announced or deployed cloud services, a considerable number of them through partnerships. CSPs must demonstrate business agility, market knowledge, and cost leadership with their own offerings. They can also do so through partnerships with other providers. For example, a CSP may choose to partner with a lower cost supplier to provide cheaper infrastructure for customers lower priority applications, or to gain early access to a particular application. This gives the partner access to a stronger distribution channel and brand in return. The list of services and partnerships is too long for the purposes of this paper, but generic partnership types include:
n Apps vendors as a number of CSPs are

CSPs have stiff competition as cloud service providers, and the number of competitors is growing. CSPs have particular strengths though, especially in what they can offer enterprise and SMB market segments. CSPs advantages include:
n Enterprise sales capability: Telcos have a long

offering SaaS services, especially in the areas of customer relationship management (CRM), email, collaboration and conferencing. Some have also augmented these offers with their own software; for example, BT has coupled its Ribbit software with a popular third party sales force automation suite. n Security vendors are offering security services in partnership with security software vendors. These may be offered as standalone security services, or in conjunction with another cloud service, such as messaging. n Unified communications providers have offerings particularly for SMBs; n PaaS is on offer through a number of CSPs partnering with a variety of operating systems, middleware and development tools vendors which collectively act as PaaS suppliers. A few are partnering with other PaaS vendors to sell their services. n IaaS is available from some CSPs which are making their own compute and storage Infrastructure available as service offerings. Some are also reselling the IaaS of other players in specific circumstances.

history of selling to enterprises. Unlike their consumer or very small business counterparts or start-ups, enterprise CIOs expect dedicated account teams collaborating closely with them as part of a long relationship. n Lifecycle service and support: Enterprises expect after-sales service and support throughout the service lifecycle. This includes lifecycle management teams ensuring successful service delivery 24/7; advanced tooling for service monitoring and management; self-service portals for network and application performance; usage monitoring; configuration and provisioning changes; and in some cases e-bonding between enterprise systems and service provider systems. Many CSPs that deal with enterprises already have these capabilities in place. n Scalable, reliable operations: CSPs have a long history of engineering services for very high availability, even as they scale up to many millions of customers. This reliability at scale is built into CSPs service culture, and in some cases reinforced by regulatory policy. Enterprises expect this of their applications and service providers, especially for mission critical apps. n Service level agreements (SLAs) with financial penalties: Most enterprises expect meaningful SLAs with clear metrics for evaluating the achievement of those SLAs, backed up by monitoring and management systems, and financial penalties such as credits or refunds if service levels arent met. A low-cost service with best effort delivery quality is generally not attractive to a CIO.



Service providers must move quickly and decisively, leveraging their inherent advantages

n Broad enterprise solutions portfolio: Many

n Financial stability and market commitment:

enterprises prefer to buy solutions rather than put pieces together themselves. Moreover, bundles of services may result in additional discounting. Providers with larger enterprise portfolios offer a broad range of services including network access and transport, multi-protocol label switching (MPLS) VPNs for backhaul to the enterprise data center, application management, global load balancing, asymmetric web acceleration, network-based firewalls and other network-based security services, content delivery, Voice over IP, Video over IP, managed messaging, web conferencing and remote access. All of these services can offer synergies when combined with cloud applications, computing and storage. n Vendor independence: CSPs tend to be independent of software and hardware vendors, as their customer base has a wide range of requirements and preferences, and CSPs tend to try to reach as wide a market as possible. Consequently, lock-in to a specific storage, server, operating system, hypervisor, middleware, database or application vendor would be self-defeating by limiting market penetration. This contrasts with some other players, which may have proprietary elements to their platforms. One note of caution here; managing the number of offers from the start would be a wise move. n Global footprint: Many enterprises have a global footprint, and expect their strategic partners to have the same. Some of the largest CSPs are achieving this through organic growth or acquisition and have facilities to provide local services, in a consistent way, across much of the world.

In todays challenging economic environment, enterprises are increasingly focused on the financial stability, brand and business viability of service providers that provide key parts of their infrastructures. Enterprise governance will likely concentrate spending for cloud services across a relatively small number of providers which have demonstrated proper handling of their IT services. There will probably be some ad hoc purchasing, but most enterprise expenditures will go to financially stable, trusted partners like CSPs. CSPs can extend some of their advantage to innovative partners through a service broker relationship, as discussed above. n Long term relationships and performance: Large scale networks, an experienced skill base, long term enterprise customer relationships, management tools, support organizations, service culture, and local access and regulatory relationships that deliver services successfully, at scale, are difficult to replicate. Enterprise CIOs understand this well, and tend to concentrate their purchases with suppliers that have strong track records. Clearly, CSPs are well positioned to benefit from cloud services, both as users of cloud services (which will be explored in the Quick Insights report Cloud services: Looking from the users perspective, to be published in July 2010) and providers of them. To maximize the benefit however, they must move quickly and decisively, choosing appropriate services to deploy, selecting the right partners and leveraging their inherent advantages.

In todays challenging economic environment, enterprises are increasingly focused on the financial stability, brand and business viability of service providers which provide key parts of their infrastructures.



Section 2: Analysis

Service providers discuss present and future actions and plans for delivery of cloud services
To investigate firsthand how service providers are approaching cloud services, and to identify their goals, perceptions, learning and results, TM Forum Insights conducted interviews with senior executives at 20 service providers from around the world. While the goals, positioning, perception of value and progress varied broadly among the service providers, all had cloud initiatives or at least management discussions underway. All were far enough along to talk about drivers, barriers, target offers and delivery priorities, positioning, potential, program challenges and critical success factors. Importantly, one can look at service providers as both providers of commercial cloud services and consumers of those services. In practice, most service providers seem more concerned with rolling out commercial services than consuming them as an enterprise. This should not be surprising, given the push for new services revenues, and general reticence of large corporations (and many service providers are among the largest) to trust mission critical applications to new delivery paradigms. It became clear from the interviews that there are many different views of cloud services from almost every perspective. This is an indication of the diversity of markets around the world, but also a by-product of market maturity, as service providers determine what their customers require and how to deliver it. A large majority indicated they needed to move quickly, but at the same time recognized that this is a market that will develop over a number of years. Almost all said this was a visible issue with their senior management, but not all felt that top management had a realistic or even clear view of the market. Still, many providers are beginning to get their arms around the basics, and there are enough early efforts out there for the industry to start learning from implementations. Equally important is that most respondents expect to begin to shift gears with a stronger focus on service enablement, and delivering new services and business models. This should help them differentiate their offerings from those of competing players.

Respondent profiles: views from across the industry

The service providers we interviewed came from two segments. The largest segment, representing 75 percent of our respondents, were convergent suppliers, offering voice and data, both fixed and wireless, and in some cases video services. Most of the converged carriers operated primarily in a single country, though a few had a substantial regional presence. Interestingly, a few of them owned divisions that were already offering hosting and other IT related services beyond their usual geographies. Wireless mobile companies were the second most common respondents, comprising 25 percent of the base. Most of the mobile providers have multi-country operations. A few owned some fixed infrastructure, but their fixed revenues were dwarfed by their wireless operations. The vast majority of our operators were among the top ranked in terms of market share in the countries they served, though in a few cases the mobile operators slipped below this ranking in some countries. There was only one case though where an operator was not among the top three.

To investigate firsthand how service providers are approaching cloud services, and to identify their goals, perceptions, learning and results, TM Forum Insights conducted interviews with senior executives at 20 service providers from around the world.


Determining just how committed the industry is to cloud services

Question 1: State of the cloud initiative Our first question was intended to determine how committed the industry is to cloud services. We found that almost every CSP has a budgeted cloud program of some sort, and most have launched at least a service or set of services. Of those CSPs that had not yet launched, all were experimenting, or studying the market.

Status of cloud services

n Launched initial cloud services n Budgeted but not fully launched n Experimenting but not budgeted




Question 2: Primary benefit to CSPs of the cloud initiative We asked this to determine how CSPs would benefit from their cloud initiatives. While opinions were split, the most frequent answer was gains in revenues from connectivity services. This was particularly true of those service providers focused on partnerships to drive revenue. CSPs expect the move of applications and computing services to the cloud to drive big increases in connectivity and transport services. They also believe that much of the increase will be in higher quality, managed communications services, and not just best effort Internet traffic. The second most popular response was revenue gains from application services and computing infrastructure services. A few of the service providers felt that by differentiating themselves with cloud services, they could gain new customers which do not subscribe to their core services currently. One CSP felt that offering cloud services would make its portfolio sticky enough to impact customer retention.

Primary benefit of cloud services to CSPs

5% 10%

n Revenue gains from connectivity


n Revenue gains from infrastructure


n Revenue gains from application




n Acquisition of new subscribers n Retention of current subscribers


A few of the service providers felt that by differentiating themselves with cloud services, they could gain new customers which do not subscribe to their core services currently.



Question 3: Target markets for cloud services This question endeavored to establish which markets were most important to CSPs as they develop their cloud services offerings. Only one CSP said it was most interested in consumers, but a slight majority was targeting all business customers, from small and medium businesses (SMBs) to large and enterprise customers. This is cause for some concern, as there will likely be marked differences in the services consumed, delivery expectations and marketing strategies among customers in each of the segments. Such a broad focus could dilute service providers efforts. When we expressed this concern to some of the respondents, they replied that many of the services they will be offering they already offer to these segments (see question 5 for details), but they will be delivered differently. The second most popular response was SMBs. This has previously been viewed as a potential strong suit for CSPs, and as SMBs are currently leading cloud services adoption, the response makes sense. There are myriad challenges here though, especially in going beyond basic cross-industry services, as each segment will have some unique requirements, particularly at the application level. Managing sales and marketing costs is also a real challenge in dealing with this segment. Only a few were focused primarily on enterprise to start. Question 4: Primary benefit to customers Our next question was about the value of services to customers. We asked respondents to give their opinions about the top three benefits to their customers through deploying cloud services. Not surprisingly, most of the responses focused on cost. Almost all responded first with cost savings as the primary benefit, but they also cited reduced CapEx and IT management effort as equally important. A majority also cited improved service quality and delivery. Most felt this was particularly important for SMBs, where dedicated IT staff were limited. Respondents also highlighted greater flexibility of resources available to

Target markets for cloud services

5% 5%

n Business markets n Small-medium businesses n Large enterprise n Consumers n Other


55% 25%




Primary benefit to customers


n Cost savings n Improved service/value n Reduce CapEx n Increase resource exibility n Rapid deployment n Latest technology n Reduce IT management effort

55% 55%


40% 35%


20% 15%

users, especially in terms of scalability to meet customers peak demands. Rapid deployment of applications on infrastructure was proffered by 35 percent of respondents, who felt this would be important to customers with overloaded IT organizations. Finally, 20 percent felt that access to the latest technology will be important to customers who may struggle to understand, acquire or manage it.


Service providers discuss which cloud related services are most important to them

Question 5: Most important services To get a more granular sense of where service providers believe they might achieve the greatest revenue gains, we asked which cloud related services were most important to them. We allowed respondents to name their top three services. Interestingly, most of the top responses were services many are offering in some form, but that could be offered via cloud. Collaboration services included voice, video and web capabilities, as well as some web-related content delivery. As mentioned previously, CSPs expect connectivity services will receive a boost from cloud services adoption. Enterprise applications were the third choice, with customer relationship management/sales force automation dominating the responses, but a few mentioned enterprise resource planning and helpdesk applications for the SMB segment as being important as well. The fourth most important category was unified communications, again, especially for the SMB segment. Security is also expected to play an important role, with 20 percent of respondents placing it in their top three choices. The rest of the offers were spread fairly evenly. Perhaps most important here is that core infrastructure and platform services are not viewed as the primary money makers. In fact, many service providers have partnered, at least initially, to deliver these services. We believe this is driven by CSPs desire to stick to their knitting as well as recognizing the strength of potential partners.

Most important offers for service providers


60% 55%

n Collaboration/ conferencing n Connectivity services n Enterprise applications n Unified communications n Security n Contact center n Computing services n Data storage/archiving n Messaging/email n Desktop virtualization n Business continuity/disaster

40% 35%




20% 15% 10% 5%

n Development & test


In fact, many service providers have partnered, at least initially, to deliver these services. We believe this is driven by CSPs desire to stick to their knitting as well as recognizing the strength of potential partners.



Question 6: Biggest challenges for cloud services providers This question dealt with the biggest challenges service providers perceive in delivering cloud services. Generally speaking, challenges ranged from highly strategic business issues like portfolio, partner and customer management, to more operational issues of service quality, cost, and security management. We asked respondents to name their top three challenges. Not surprisingly, service quality, cost and customer experience led the list by a considerable margin. CSPs already understand the importance and difficulties of dealing with this three-headed monster, just as they struggle with it to deliver core services now. Cloud services increase the complexity of each of these challenges for CSPs, since there are more services, devices, applications, platforms, partners and competitors added to the mixture. Managing delivery costs is particularly important here, especially for infrastructure and platform services. Those who remember the race to the bottom in hosting prices during the dot com boom and bust will be prepared for a real shakeout in the commodity services market. Standing alone as the fourth biggest challenge is security management. Many service providers are less worried about the execution than customers perception. Indeed, when those who did not select this as a great challenge were asked why not, they responded they felt that if they could simply match or exceed a given customers required level of security, the issue would fall away. Many of these respondents felt that competitors that could not demonstrate adequate security would be among the early casualties, or relegated to very low margin services. Revenue management was cited by 20 percent of respondents. The concern here was whether the billing and charging systems could handle the myriad services and pricing models in a timely and accurate fashion. Managing partnerships was also viewed as the most challenging by 20 percent of the respondents, as many were using partners to

deliver at least some of their services. This included attracting the best partners, managing partner performance and implementing fair and accurate revenue sharing. Several CSPs expressed concern about top management commitment, and a few wondered whether their top management had an adequate understanding of the cloud universe, and what it would take to be successful in this endeavor. A handful of CSPs included managing the service portfolio as a key challenge. Those respondents felt that it would pose a real challenge to the marketing organization to differentiate a CSP through myriad new services in an immature market. Finally, a few CSPs expressed concern about their ability to guarantee the performance of a variety of applications, especially when those applications would not necessarily reside on their own infrastructure.

70% 65%

Biggest challenges for service providers






20% 15%

n Managing service quality n Managing delivery costs n Managing customer experience n Security management n Revenue management n Partner management n Managing the service portfolio n Applications performance


Wide agreement about the top three critical success factors

Question 7: Critical success factors As with biggest challenges, we asked respondents to name their top three critical success factors. The leading response was operational excellence. While many CSPs felt they could offer a premium service, they were sensitive about the number of competitors and the specter of aggressive pricing. They felt that cost leadership and efficiency would be key to competitiveness and profitability. The second most popular response was customer experience. Most CSPs felt that self-service is extremely important, but simply providing adequate capability in this area would not be enough, especially for larger enterprise customers and high touch SMBs. There was also widespread recognition of the complexity involved here, as reflected in the biggest challenges responses. The third most popular response was service portfolio management. Offering a competitive set of services and offers, cognizant of the customer base and competition, was most often the factor first mentioned by respondents even though it was eclipsed overall by other issues. Managing partnerships was viewed as critical by 35 percent of respondents, as many were using partners to deliver at least some of their services. In fact, if service providers are to profitably offer all the services their customers are looking for, it is likely that they will need partners. As with challenges, revenue management was cited by 20 percent of respondents. They felt the billing charging system being able to handle myriad services and pricing models, in a timely and accurate fashion, was critical to early success. Again several CSPs expressed concern about top management commitment, and whether their top management was truly committed to cloud services. Again a few wondered whether their top management truly had an adequate understanding of cloud, and what it would take to be successful in cloud services. Finally, some CSPs focused on the importance of their sales and marketing organizations ability to properly position cloud services with their customers. These respondents also stressed the importance of proper tools and skills within the sales organization to help the clients make the right choices.

Critical success factors for CSPs








n Operational excellence n Customer experience n Service portfolio management n Ability to manage partners n Revenue management n Top management commitment n Sales/marketing abilities


As can be seen by the responses, most CSPs are on their way to delivering cloud services, and feel they have a good sense of which customers they need to target, what they need to offer, their biggest challenges and critical success factors. Increasingly, and especially for the largest players, it seems that the remaining questions are around focus, commitment, and execution.

Most CSPs felt that self-service is extremely important, but simply providing adequate capability in this area would not be enough, especially for larger enterprise customers and high touch SMBs.



Section 3: Key areas in providing cloud services

Critical areas service providers must focus on to succeed

While the scope of cloud services is huge, there are a number of critical areas on which service providers must focus if they are to be successful. Out of all of these, we have picked four broad areas security management, performance management, billing and charging, and process automation as being critical to the success of any cloud service provider in delivering a competitive set of offers. The differences between ordinary enterprise security and cloud security management reside largely in the delivery and operational models, and the subsequent division of responsibility and labor for the provider and consumer. The scope of security management for all IT service providers is broad and complex. In addressing IT operations, providers must focus on physical security (for example, facilities), network security, IT systems security, data security and privacy, and applications systems security. In addition, there are many controls necessary at the process level for each of these areas, including identity management, separation of function and responsibility, access control, change management procedures, and so on. Organizations must address all of these aspects to be effective, and often levels of sophistication and maturity vary between different areas, or may even vary among different facilities in the organization. Since the chain is only as strong as the weakest link, each of these aspects must be examined closely across all cloud and the usual delivery and operational models. Security management is further complicated by the delivery models, and the roles that suppliers and consumers must play in each of them. So for an Infrastructure as a Service, the responsibility for security might include only physical security and virtualization security, leaving the customer responsible for everything from the operating system up (such as middleware, applications, data, and identity management). On the other hand, a Software as a Service would need to provide security functions up through applications and data in addition to the

Security management
Security has been identified in many instances as a critical prerequisite for cloud services adoption, especially among business customers. This has been shown again and again in studies, and has been highlighted repeatedly at meetings of the TM Forums Enterprise Cloud Leadership Council and several Executive Roundtables on cloud at Management World events. In fact, we believe that providers that are unable to demonstrate proper security measures and recovery plans, at least for services to business customers, will be among the early casualties in the cloud services market. Proper security management is table stakes for business customers and savvy consumers, and repeated inadequacy by providers will not be tolerated for long. Generally speaking, security management and controls for cloud services are functionally similar to security management and controls in any robust IT environment. This is an advantage from a market perspective, since a knowledgeable customer will already understand the relative importance of various aspects of security, and therefore be able to judge if a providers offer is good enough.

In fact, we believe that providers that are unable to demonstrate proper security measures and recovery plans, at least for services to business customers, will be among the early casualties in the cloud services market.


The key areas are divided into governance and operational domains

Consumers responsibility for security increases with lower level services

Software as a Service Platform as a Service Infrastructure as a Service Infrastructure elements Suppliers responsibility for security increases with higher level services

Figure 3.1: Security responsibilities relative to delivery models

Source: TM Forum, 2010

infrastructure-related aspects since it provides essentially a turnkey bundle of capabilities. This still leaves the consumer with some aspects of network, process and access security, but alleviates a considerable amount of the overall burden. Figure 3-1 illustrates the relative roles and responsibilities for security related to delivery models. One of the greatest challenges of security is providing services that are considered flexible, and accommodating to a variety of users, while maintaining adequate control. This balancing act is a tall order for service providers, as consumers may view industrial strength security controls and practices as overly restrictive. Security management must be implemented flexibly, while retaining overall integrity and providing an audit trail. The Computer Security Alliance has identified a number of critical areas of focus. The areas are divided into governance and operational domains. The governance domains include: n Governance and enterprise risk management the ability of an organization to govern and measure risk induced by cloud computing. This encompasses items such as legal precedence for agreement breaches, user organizations being able to assess the risk of using cloud providers services adequately, the responsibility to protect sensitive data when both user and providers may be at fault, international boundary issues, and others.

n Legal and electronic discovery extends

to potential legal issues such as protection requirements for information and laws concerning disclosure in the event of a breach in security, regulatory requirements, privacy requirements, international laws, and others. n Information lifecycle management includes identification and control of data in the cloud, controls to compensate for the loss of physical control when moving data into the cloud, taking responsibility for data confidentiality, integrity and availability, and so on. n Portability and interoperability is about being able to move data and services from one provider to another, including bringing it back in-house, as well as Issues surrounding interoperability between providers. The operational domains include: n Traditional security, business continuity and disaster recovery is about how cloud services affects the operational processes and procedures currently used to implement security, business continuity and disaster recovery. Identifying where cloud services increases or decreases security risks. n Data center operations: How to evaluate a providers data center architecture and operations? Understanding characteristics that could be beneficial or detrimental to short and long term stability. n Incident response, notification and remediation involves proper incident

One of the greatest challenges of security is providing services that are considered flexible, and accommodating to a variety of users, while maintaining adequate control.

detection, response, notification and remediation, including an understanding of the complexity that cloud services bring to these processes. Applications security covers securing application software in the cloud, whether in operational or development mode, and assessing how appropriate the use of cloud is for particular applications. Encryption and key management demands the identification of proper encryption usage and scalable key management. Identity and access management means managing identities and leveraging directory services to provide access controls, plus assessing organizational readiness to conduct cloud-based identity and access management Virtualization the use of hardware and system virtualization technology in cloud computing gives rise to risks associated with multi-tenancy, virtual machine (VM) isolation, VM-co-residence, hypervisor vulnerabilities and so on. include factors such as device management as well. Sophisticated customers look for service level agreements (SLAs) with specific guarantees of performance against established measurements and customer credits if those levels of service are not met. SLA management strategy considers two well-defined phases: contract negotiation and the monitoring of contract fulfillment over predefined intervals (such as downtime per billing period). Measuring, monitoring and reporting on cloud performance are based on an endusers experience or the end-users access to resources. This can be difficult as determining the root cause for service interruptions or degradations are hindered by the complex nature of the environment. The more complicated the service, the more complex the determination of SLA fulfillment becomes. Service providers vary greatly regarding how granular the metrics of their agreements are, as well as the measurement periods they use, their credit policies for missing their SLAs and deciding who is responsible for notification of a violation of the SLA. Often service providers put the onus of notification on the customer, which does not further customer satisfaction or confidence, but instead creates more complexity for customers in evaluating and comparing service providers. Reporting and audit is an important area of performance management. Sophisticated customers will require both periodic and on-demand reports detailing usage, quality, outages, provisioning intervals, incident response and recovery, and so on across a variety of services. They will also look to be able to perform periodic audits to insure that service delivery, security management and performance are within the contracted boundaries and their own corporate policies. Finally, customers will look for ways to manage service contracts over the life of the contract, attempting to correlate the technical detail they receive from suppliers with the specific business goals stipulated or implied in the contract. This emerging discipline of service contract management will become more important as customers move more

Finally, customers will look for ways to manage service contracts over the life of the contract, attempting to correlate the technical detail they receive from suppliers with the specific business goals stipulated or implied in the contract.

This alone demonstrates the complexity and criticality of security management and control in a cloud environment. While the scope here may seem daunting, service providers and consumers must remember that different levels of security are necessary for different workloads. Great importance must be attached to balancing security with flexibility, and the goal for service providers should be to achieve at least the level of security required or demonstrated by their consumers, rather than perfection at the expense of business effectiveness.

Performance management and SLAs

Performance is among the most important mentioned aspects of cloud service delivery, eclipsed perhaps only by security as a requirement. Performance shares much of securitys complexity in that consumers expectations are end-to-end, a difficult challenge for any service provider. For cloud this cuts across at least network, system and application management, and may


Flexible, accurate billing and charging are critical prerequisites for success

functions to the cloud, and as service providers seek to expand, extend and renew contracts.

n To support the SLA reconciliation process if

the service levels are not met;

n To support the settlement process with

Usage metering, billing and charging

Flexible, accurate billing and charging are critical prerequisites for success in cloud services. Billing has long been a critical component for CSPs, and has become far more flexible as new services, offers and business models have emerged in recent years. Cloud services however, combined with self-service capabilities and real-time processes, will introduce a new set of challenges for billing, charging and revenue management in general. Not only are the services more diverse, but the big rise in delivery components, competitors, business models and functions will likely drive unprecedented creativity into the service delivery, offer management, order management, customer management, settlement and revenue management processes. Billing and charging will have an important role in all of these processes. For example: n To handle increased transactions as service providers introduce more usage-based services; n To work with order management, provisioning systems and product catalogs to ensure appropriate handling and provide things such as quotations or advice of charge; n To help initiate new offers upon achievement of certain thresholds for example if a usage or spending threshold is met, the billing system could trigger a new offer or reward; n To work with product catalogs dynamically to create new bundles and offers, or enforce eligibility in real-time; n To deal with a variety of new transactions and formats (through mediation);

partners for a variety of services;

n To support real-time notifications, alarms,

budget control, de-provisioning and promotion management for both prepaid and postpaid customers; n To provide the customer with a single source of usage and billing truth in situations where the CSP is a cloud service broker. Clearly, billing and charging are key components for any cloud services provider.

Process automation
Much has been said about the benefits of cloud, including rapid elasticity, fast time to market, low expenses, effective self-service and decreased downtime. However, these benefits are only possible with a high degree of automation, data integrity and operational excellence. In fact, operational excellence was the single most popular choice among our respondents when asked to name critical success factors, and process automation is an extremely important part of that. While we have already discussed the importance of automation in billing, performance, and security, there are a number of other areas where automation is important. They include: n Offer management as service providers must be able to create and communicate offers dynamically, and drive them through a variety of channels. While most enterprise accounts will require a sales team, self-service and messaging can supplement personal interaction.

Not only are the services more diverse, but the big rise in delivery components, competitors, business models and functions will likely drive unprecedented creativity into the service delivery, offer management, order management, customer management, settlement and revenue management processes.



Many smaller businesses and consumers will use and even prefer self-service. Moreover, the ability to generate real-time offers based on usage will become more important in consumer and small and medium-sized business markets, so this will increase in importance over time. Order management, because without real-time order management and activation, time-to-market and the cost of activation are increased, which is a lose-lose proposition for both customer and provider. To succeed service providers must deploy strong systems logic that can translate an order to a set of services, and work with the infrastructure, billing and customer support systems to complete the order. Service catalogs are critical to the self-service experience as they house the information needed to identify and deploy a new service. Catalogs also should be able to describe and support the service throughout its lifecycle, fostering processes from services creation to retirement. Automated peering and settlement allows service providers to improve their partner relationships, gain better visibility of costs and revenues, and scale the number of partners they can work with. Configuration management is necessary with so many new elements added to the infrastructure. An automated way to manage configuration parameters will reduce cost and improve availability and performance. Self-service integration it is critical that underlying applications and process flows are designed to work well in a self-service environment. Without seamless self-service integration, it will be very difficult for CSPs to be competitive from a cost perspective, and to provide an acceptable customer experience.

These are just a few of the of the process areas that require automation, but they are among the most important or those neglected in the past. Service providers will need to address them if they are to succeed with cloud.

Service catalogs are critical to the self-service experience as they house the information needed to identify and deploy a new service. Catalogs also should be able to describe and support the service throughout its lifecycle, fostering processes from services creation to retirement.


Trying to do too much too soon can retard growth

Section 4: Recommendations

Issues service providers should consider first

Sharing with more than 20 service providers and an approximately equal number of vendors, the early direction of the cloud services market is becoming clearer, even though we are in the early stages of a market that will likely play out over a decade or more. The following are our recommendations, gleaned from these conversations and the perusal of countless documents:

1. Understand the big picture

At the outset of this report, we explored the NIST definitions of cloud computing, including service models, deployment models, and essential characteristics. It is important for service providers to understand the broader market, including all these aspects, as well as relevant competitive initiatives and attractive emerging capabilities and business models like the cloud service broker model. Service providers must develop an enterprise-wide vision of all aspects of cloud if they are to deliver an appropriate experience to customers.

everything for many service providers, that would serve only to overwhelm them from the start, ensuring failure. Rather, the CSP must determine what is important to its target customers in its serving domain, and prioritize and focus on those things that will differentiate it to the customers. Focus, as determined by market needs and differentiated competencies, is likely the best approach to quick success and building momentum in cloud services markets. If you must provide a broad variety of services, consider partnering with various vendors to deliver these services, or even becoming a cloud services broker. For a service provider in multiple countries targeting multinationals, a consistent strategy regardless of geography is often the goal, so enterprises can know what to expect and local operations can be in compliance with corporate goals. The overall concept here is that the cloud strategy must be tailored and achievable. Trying to do too much too soon can result in operational problems, which could retard growth.

2. One size does not fit all

3. Focus first on operational excellence

Operational excellence in service management is key. CSPs have a long history of delivering highly reliable, available services, and this has gone a long way to strengthen their brands. Most customers are likely to expect this kind of service when extending their purchases to cloud services. In addition, service providers will need to focus here to differentiate themselves from smaller, agile players, and to ensure their operational costs are as low as possible.

Focus, as determined by market needs and differentiated competencies, is likely the best approach to quick success and building momentum in cloud services markets.

Understanding the possibilities within cloud, market characteristics and their competitive differentiators, communication service providers (CSPs) must craft a compelling yet manageable cloud computing strategy. The initial urge may be to try to provide everything and go after all markets simultaneously, but this creates a huge challenge even to the largest of players. Developing a cloud services strategy does not require the CSP to be world class at

4. Tailor your customer experience strategy
CSPs customer experience strategies must be appropriate for their target audiences. As discussed in our recent Insights Research Report, Customer Experience Management: Driving Loyalty & Profitability (available from TM Forums website) on managing customer experience, programs must match the expectations of the target market while remaining affordable to the service provider. Enterprises and SMBs often expect different capabilities and levels of sophistication from their service providers; be sure to offer the right suite of capabilities for your target market.

7. Exploit existing frameworks

Given the breadth and complexity of the problem, any help with best practices, data management and domain frameworks is useful. TM Forum has a number of useful artifacts in this space for service providers and vendors alike (see Section 5). Moreover, standards will play an important role for customers of cloud services, allowing them to avoid service provider lock-in.

8. Assess and adapt revenue management

CSPs would do well to evaluate their data collection, charging and even their revenue assurance infrastructure to be sure it can handle the additional volume and diversity of transactions. This is crucial, given the diversity of services, delivery models and pricing plans involved.

5. Leverage your partners

Cloud initiatives can benefit not only service providers and their customers, but also their partners. CSPs can help their partners (and gain market power) through a variety of cloud services. This is especially true for Software as a Service, but also for other functions. In fact for some services, co-branding may make sense, and different levels of cooperation for customer support can be shared among partners. Partners may also be effective at providing referrals for services to their customer base. CSPs spawning new initiatives can learn lessons from experienced partners. In any case, make sure that managing partnerships is involved in the planning and execution of your cloud initiatives.

6. Top management support

Dont leave home without it. Given the scope and complexity of planning and executing a cloud services strategy, top management support and approval is essential. Cloud services are, after all, as much a business strategy as a delivery model, not just an opportunity to implement the latest widgets. Not only must top management have the vision, it must determine affordability, allocate appropriate resources, ensure cross-functional coordination, approve strategic partnerships and remove some of the barriers that will inevitably pop up during the course of implementation.

Cloud initiatives can benefit not only service providers and their customers, but also their partners. CSPs can help their partners (and gain market power) through a variety of cloud services. This is especially true for software as a service, but also for other functions.


Using your own cloud services is beneficial for three good reasons

9. Security and performance management

Bolster and stress these capabilities because along with operational excellence, security and performance management are particularly important. Certainly they are two of the greatest areas of concern for potential customers of cloud services. CSPs must be able to demonstrate best practices and a strong track record in security management, or they will be deal breakers for many customers. A well conceived performance management capability (including customer reporting) will go a long way toward building confidence.

11. Use what you sell

CSPs should seriously consider using at least some of their own cloud offerings for internal operations. This will provide three important benefits. Firstly, it will create a large friendly customer who can give candid, useful feedback. Secondly, it will provide additional scale, which is particularly important when a service launches. Thirdly, it can serve as a reference site for the sales and marketing organizations as they promote the services. This may seem like a lot of recommendations, but it is really the minimum set from our perspective given the scope and complexity of cloud services. We could go on and on with domain specific recommendations, but those would likely vary by service provider and strategy, so we will stop here. We hope you have found the report valuable, and we wish you good fortune in your drive to make your cloud services more successful. Though the scope is broad and the models inherently complicated, cloud services will provide substantial revenue opportunities for the foreseeable future for service providers that can execute.

10. Pick your places

Weve discussed the importance of a tailored strategy, but we feel it cannot be emphasized too much. The breadth of cloud services is huge, and service providers can only be expected to deliver what they have defined and scoped properly. Better to deliver well on a smaller portfolio than to overextend and damage the brand through a poorly executed start.

CSPs must be able to demonstrate best practices and a strong track record in security management, or they will be deal breakers for many customers. A well conceived performance management capability (including customer reporting) will go a long way toward building confidence.



Section 5: A new era of agile IT

Making the most of a big opportunity to make better use of computing resources
In-house computing resources consume an enormous amount of a business operating capital. IT departments costs continue to rise to enable them to operate, redeploy, and refresh underlying technology as business needs change. Cloud services (computing, storage and applications) represent a big opportunity in the use and provisioning of digital information services through better use of computing resources. They remain over-provisioned, even with first generation server virtualization technologies in place. Cloud services could usher in a new era of agile IT that offers an on-demand, everythingas-a-service operating model. The result would be a lower cost, fully governed IT system that is more responsive to line-of-business requirements. As organizations start to realize the enormous savings of this new approach to IT, it will become apparent that either these savings can appear on the bottom line or they can be reinvested in the organization. At the moment computing resources are under-used. As much as 75 percent of a companys IT expenditure goes on business as usual activities, with very little spent on what creates competitive advantage growth and innovation. Cloud services offer the potential to create competitive advantage by allowing companies to greatly increase their investment in growth, innovation and their customers you and me. However the market is already littered with a confusing array of technical features, names, terms and proprietary operating characteristics. As enterprise consumers start to look in detail at using these services, a number of barriers to adoption are evident and must be overcome. They include:
n the danger of being locked into a

n n n n n

relationship with a cloud service provider resulting in marooned islands of information and data; information security concerns; network latency and other communicationsrelated issues; integrating in-house IT operations, including establishing hybrid clouds effectively; maximizing return on investment from cloud technology assets; being able to choose between various suppliers through transparent, common metrics and benchmarks.

Cloud services could usher in a new era of agile IT that offers an on-demand, everythingas-a-service operating model. The result would be a lower cost, fully governed IT system that is more responsive to line-of-business requirements.

As with any new business model, adoption and uptake are subject to the consumers willingness to invest. That willingness is based on a host of factors including having requirements met and establishing trust in the providers. Hence the industry needs to develop cloud services around enterprises requirements and industry standards to address market concerns and remove barriers of adoption. In the past requirements and standards have been vendor-lead, so cross-vendor management was often a low priority and the onus of integration was on the buyer. If the cloud services industry is not based on standards and best practices we will end up with a non-competitive, non-differentiated marketplace where solutions and technology are not shared and improved upon.


The Enabling Cloud Services Initiative facilitates collaboration

Technical Agreements & Liaisons

Ecosystem of Enterprise Consumers & Cloud Service Providers

TM Forums Enabling Cloud Services Initiative

The TM Forums Enabling Cloud Services Initiative has a primary objective of stimulating the growth of a vibrant and open marketplace for cloud services by bringing together enterprise users and cloud providers. Its goals are to:
n Create a platform through which the entire

transparency of product features, service levels, metrics and benchmarks; n Establish technical agreements, many of which will be in collaboration with other industry groups. The Enabling Cloud Services Initiative facilitates collaborative work between large potential consumers of cloud services and those who will provide them, as well other industry organizations that specialize in various aspects of this emerging market. The aim is to agree common approaches on important aspects of cloud services that will reduce buyers risk and resistance. These include common terminology and approaches to allow movement from one supplier to another, security issues, benchmarking and more.

ecosystem of enterprise consumers and cloud service providers can cooperate and propel the commercialization of this major business opportunity; n Accelerate the agreement of standards and frameworks for cloud service components, processes, management and so on; n Provide business guidance through the

Industry Standards Groups Cloud Service Providers Cloud Technology Suppliers

Enterprise Consumers (ECLC)

The Initiatives ecosystem consists of enterprise consumers, cloud service providers, cloud technology suppliers and industry standards groups. They all have an important role to play in removing barriers to adoption. Enterprises need to define their IT needs to realize greater efficiency when buying cloud services, while cloud service providers must identify their top supplier and integration priorities for product development and operational management. Cloud technology suppliers are responsible for advancing functionality and removing cost from todays business and software solutions while industry standards groups are working with other key industry bodies on the development and adoption of cloud technologies and standards. Enterprise consumers are at the heart of the Initiative and are represented by a group called the Enterprise Cloud Leadership Council (ECLC). The Council helps set priorities for business requirement that will enable enterprise consumers to spend their money more easily and with greater confidence. There are also groupings of technology suppliers and cloud service providers that need to understand these business requirements

and priorities to continue the development of their products and solutions to create competitive advantage. The ECLC was set up to avoid the usual situation of unified technologists speaking to a fragmented array of enterprise consumers to enabling enterprise consumers, with common requirements, to foster an effective and efficient marketplace for cloud compute infrastructure and services across the globe. In doing so, they will reduce the risk involved in the adoption of cloud services, accelerate their standardization, and be able to share industry-specific, validated commodity stacks and processes. They will also be able to share knowledge and reference information about what works, enable the benchmarking of services across service providers and geographies, plus assess vendor measurements against normalized and agreed service level metrics. In turn, the ECLC assists cloud service providers by enabling the differentiation of cloud service offerings, and providing direction on product requirements, reducing product management costs and R&D risk. It is also a key indicator for business and geographic

The Initiatives ecosystem consists of enterprise consumers, cloud service providers, cloud technology suppliers and industry standards groups. They all have an important role to play in removing barriers to adoption.


TM Forums Frameworx is an integrated business architecture

requirements, and delivers enterprise-class engagement models to accelerate market maturation. In his article in Computerworld, Scott Stewart states, Many new technologies have emerged in the world of IT but none is more confused and misunderstood than cloud computing. Here is another new technology paradigm that is crying out for a set of common standard definitions and a global consensus of understanding. Standard definitions and capturing enterprise consumers real requirements will enable cloud services to grow quickly and effectively based on industry standards and we need to embrace the entire ecosystem to enable this to happen. With the need for an holistic approach in mind, the ECLC is working on programs including defining service level agreements (SLAs) for cloud services and Database-asa-Service (DBaaS) reference architecture and cloud application program interface requirements. Its other priorities include secure virtual private cloud reference architecture, standard service definitions and SKUs (taxonomy of core services) and the common definition of commercial terms (business contract language).

As the TM Forums Enabling Cloud Services Initiative stimulates the growth of a vibrant commercial marketplace for cloud-based services, we recognize it will have an impact on TM Forums Frameworx as the Business Process Framework (eTOM) and the Information Framework (SID) are adapted and upgraded for cloud services. As mentioned, these aspects include common terminology and approaches to allow transparent movement from supplier to supplier; security issues, benchmarking and more. TM Forums Frameworx is an integrated business architecture that provides a service oriented approach to rationalizing operational IT, processes and systems. It enables enterprise consumers and cloud service providers to reduce their operational costs substantially and embrace new business models more easily. Service-oriented approaches encourage nimble business practices through the re-use of all types of service components. This is essential in todays market where service providers need to deliver new services rapidly and increase revenues in the face of changing value chains and technologies. Frameworx defines the mechanism by which the TM Forums existing NGOSS standard Framework components are integrated into a comprehensive enterprise IT and process architecture that also embraces major IT industry standards such as ITIL and TOGAF. Its components are:
n Business Process Framework (eTOM), the

TM Forums Frameworx is an integrated business architecture that provides a service oriented approach to rationalizing operational IT, processes and systems.

Collaboration and Catalyst Programs

Another very important aspect of TM Forums Enabling Cloud Services Initiative is its Collaboration and Catalysts Programs, which address the challenges of managing cloud services throughout their lifecycle. Through collaboration across the ecosystem and multicompany demonstrations, the Programs find ways to maximize business benefit by making services more flexible, and improving quality and security. Put another way, they explore how to simultaneously manage costs and enable new cloud-based business models. There is a common belief among participants in the Collaboration and Catalyst Programs; they believe that standardization will accelerate commerce and remove risk from the adoption of cloud services. Further, they see that without standardization, the widespread adoption of cloud-based business models will be delayed.

industrys common process architecture for both business and functional processes; n Information Framework (SID), which provides a common reference model for enterprise information that service providers, software companies, and integrators use to describe management information; n Application Framework (TAM) offers a common language between service providers and their suppliers to describe systems and their functions, as well as a common way of grouping them; n Integration Framework delivers a service oriented integration approach with standardized interfaces and support tools.


Business Proc es sF r

rk wo e am

Inf or

ion at m
ework Fram


A recent Zinnov study estimated that the entire global cloud computing market would be worth over $70 billion by 2015, so its little wonder Amazons CEO, Jeff Bezos, commented, Cloud computing has the potential to be as big as our retail business. Likewise Microsofts CEO, Steve Ballmer, is betting that the future of computing will be in the Internet cloud, which he said is also likely to play a role in the companys investments in PCs, smartphones and Internet-enabled television. He stated, The cloud is the fusion of the best of the Internet with the best of the enterprise data center with the best of the PC, with the best of the phone and the TV. Today, these different entities are loosely linked through the browser. We are trying to make these links stronger. To realize this vision, the industry must work together to create the processes and standards


ation Framew plic or Ap k

needed to make cloud services live up to their potential. As Michael Wade, associate professor of management information systems at the Schulich School of Business at York University, Toronto, Canada, observes, The real story is more complex because companies can use cloud computing to not only take care of standardized routine processes which is what I think it was mostly designed for they can also use it to improve their own processes. Because they can standardize across the company on this platform in the cloud, they can more effectively innovate on a local level. TM Forum, with its Frameworx and Enabling Cloud Services Initiative, is able to drive standards and processes for cloud services so that companies can start to concentrate on growth, innovation and truly serving their customers.

Likewise Microsofts CEO, Steve Ballmer, is betting that the future of computing will be in the Internet cloud, which he said is also likely to play a role in the companys investments in PCs, smartphones and Internet-enabled television.

Service providers discuss present and future actions and plans for addressing cloud services

TM Forum Enabling Cloud Services Initiative

Cloud services represent a significant evolution in the use and provision of digital information services for business effectiveness. Yet as buyers start to look at using these services, it is clear there are a number of barriers to adoption. The primary objective of TM Forums Enabling Cloud Services Initiative is help the industry overcome these barriers and assist the growth of a vibrant commercial marketplace for cloud based services. The centerpiece of this initiative is an ecosystem of major buyers and sellers who will collaborate to define a range of common approaches, processes, metrics and other key service enablers. An Enterprise Cloud Leadership Council will serve as the anchor for this ecosystem.

How to get involved

Existing TM Forum corporate members are welcome to join the program and take an active role by contacting Matthew Edwards, Director, Enabling Cloud Services Initiative Program at If your company is not currently a member, please contact Apostolos Kallis, SVP, Account Management & Sales at The Enabling Cloud Services Initiative is just one of many benefits openly available to TM Forum members.

Learn more at




Monetizing Cloud Services

By Vijay Kanchi Cloud computing is a game changer for businesses to become more efficient and it presents a significant new way for Services Providers (SPs) to deliver greater value to their business customers, while generating new revenue streams through innovative products and service offerings that improve customer retention and increase competitive advantage. Cloud computing technology is a new way for businesses to consume IT services from IT infrastructure to business applications. The technology, as an enabler, allows IT to be delivered as a service while providing added flexibility, efficiency, performance and dynamic capacity like never before. Business Challenges In relatively short time, cloud computing has caught the imagination of businesses and IT executives around the world. Like the Internet business explosion of the 90s, cloud promises to revolutionize the way companies consume IT related services. Leading SPs are starting to view cloud technology as a key enabler for realizing their visions and in creating distinctive competitive advantages. The ability to leverage innovative, emerging technologies is a way that leading organizations get out in front, to redefine market paradigms, and to create break-through opportunities. However, the ability to not only understand the technology, but also anticipate unspoken customer needs, and to harness the creative prowess of an organization to realize the innovative potential of new technology is not easily achieved. All SPs are struggling with the following vexing questions: What market segments do they need to focus on to drive the most value for their businesses? What constitutes a set of compelling

A compelling opportunity for Services Providers

Customer-facing Applications are Converging With Network -facing Connectivity

Streamed Data / Information Software as a Service (SaaS) Hosted Storage, Content Distribution Content, Applications, Managed Services

Future Platform

Application Services
Current Platform

Converged ICT Services/ Solutions*

Network Services
Traditional Platform

Managed VPN, Security Services Private Line, Frame Relay, ATM, Voice

Ports and Pipes

Traditional Network Products such as PL, Frame Relay, ATM

ICT Information and Communication Technology

Figure 1: Opportunity for Cloud Services must be viewed in the context of trends shaping the demand for solutions

new products and services that can be provided over cloud technologies? How do they differentiate themselves in this marketplace? How do they leverage the technology platform for their commercial business interests while positively impacting their internal operational needs? Do they build, lease, or white label the technology platform? What should the new operational model look like, to evolve an organization that currently sells and services traditional communications services to the new model of selling and servicing IT & Communications services? And finally, what initiatives should the SPs bet on to drive increased profitability for their business and their shareholders? Market Opportunity SPs have an unprecedented opportunity today to penetrate and expand their share of the business markets by providing the comprehensive range of IT services that their customers want and need. The catalysts behind

this opportunity are cloud computing, Software as a Service (SaaS), and mobile applications. SPs are well positioned to deliver these cloud-based services to enterprises because they typically already own the network, have extensive infrastructure to utilize, can differentiate themselves through service quality, and have trusted relationships with customers. SPs can grow their share of the IT services market through both new offerings and expanded pull-through of existing services and, in the process, protect the customer base against intrusion by specialty providers such as web hosting services. However, to capitalize on this opportunity, SPs must launch their cloud offerings expeditiously, and back them up with differentiating sales and service processes. Enterprise Customer Markets Enterprise customers are looking to cloud computing for on-demand scalability for their compute, storage and network infrastructure in the form of Infrastructure as a Service (IaaS), cost-effective delivery of business


critical but basic services like email and document management as Software as a Service(SaaS), and to access, manage and support new or custom business applications and services. Large enterprises may differentiate themselves, and even gain competitive advantage by developing and deploying innovative information systems. They can afford the investment and they need complex systems to coordinate business operations and trading relationships that may span the globe. Gartner estimates that the cloud services market will grow to $150B by 2013, and that SPs are unlikely to garner more than 5% of that revenue given the fast-growing array of providers and services. At the same time, they assert that cloud services will become table stakes for telecom carriers hoping to compete for enterprise hosting and mass-market communications opportunities.1 Its not a pretty forecast youve got to do it but you cant expect to make much money out of it. We believe theres a broader opportunity here, not just to protect
US SMB ICT Spending 2010 & 2013

market share but to expand it. Enterprises want customized solutions that fit into their already extensive computing environments, consultative sales that show them operational and financial opportunities, absolutely reliable service levels, and dedicated high-touch support. In other words, they want from all their IT services providers the kinds of capabilities that SPs already provide for communications services today. Neither small and specialty competitors, nor utility services from Amazon or Google, can provide that complete package not against a large and established SP that succeeds in putting the necessary pieces together. For example, one of the pieces is Information Systems Backup and Recovery services. Enterprises should be attracted to reliable cloud-based services that simultaneously lower their cost (because they utilize shared infrastructure) and improve business continuity (through flexible off-site backup). Large SPs have the spare infrastructure to host such services and the networks to deliver them.
Key Trends
CAGR -10 13
5.7% 6.3%

The offerings can grow revenue in two ways the service itself and increased bandwidth utilization for the process of backing up and restoring files Small & Medium sized Businesses (SMB) Markets SMB customers would rather not deal with IT systems, hardware or software. SMBs want to keep it simple with IT. Much like consuming power from the grid when needed and switching it off when done, SMB customers would like to consume IT services on an as needed basis. They want to use the best affordable applications available, but they distinguish themselves in the eyes of their customers by how effectively they use applications and information not by their ability to develop software and operate systems. Theyd rather keep it simple all round and focus on their operations and customers, not their technology. IT shouldnt be a distraction. But SMBs have traditionally struggled to use IT effectively because theyve had to do too much themselves. Very small businesses may have one person an employee or contractor whose part-time job is to take care of IT needs. But as soon as a business grows, it needs capable general business and even industry-specific applications, its technology set-up gets more complex, and it must manage and protect its information and systems more comprehensively. Thats when IT gets significantly more complicated and cumbersome for SMBs buying hardware, buying or licensing software of many types, making sure systems and databases are properly secured and backed up, and maintaining and managing the computing environment. SMB staff typically have to do too much manually, including deploying, managing, and supporting




IT Services

Growth in cloud computing and IT utility services (purchased by ~35% of mid-sized businesses by 2012) Greater outsourcing by upper-end of mid-market (firms with 500-999 employees) Software-as-a-service (SaaS), cloud computing, open source software and Web 2.0 technologies will be key growth drivers Increased spending on wireless LAN equipment, IP telephony, VPNs and other areas providing cost savings Legacy voice services will continue to decline with increased interest in VoIP, and substitution by mobile voice and data services Traditional data network services will continue to be commoditized

IT Sof tware


$ Billion

IT Hardware



Telecom Equipment



Telecom Services




ICT= Information and Communication Technology Source: Gartner, EMC Consulting Analysis

Figure 2: SMB Market opportunity for Communication Service Providers


Monetizing Cloud Services

applications and moving data between applications. And SMBs are typically unable to take advantage of the most capable applications, because its too difficult to swap applications in and out, and too much trouble to add new ones. So financial applications stop at bookkeeping, employee applications stop at payroll, operational applications stop at order entry or inventory control, and basic opportunities for performance improvement, cost savings, and employee productivity are forfeited. SMBs often have their own versions of the technology problems that can plague large enterprises silos of information and functionality, and legacy systems and infrastructure that are increasingly difficult to maintain and change. They may prefer to outsource their IT altogether, but there are no full-service providers no one who can offer a full range of applications, operate a secure and cost-effective infrastructure, and be responsive to the business patterns and growth opportunities of SMBs. Given their longstanding relationships with SMBs and track records of reliable service, SPs are in the one of the best positions to put the pieces together and gain revenue and share in the enormous but fragmented SMB market. The opportunity is there, but it turns into a threat if aggressive competitors seize it first. Service Offerings Three trends have converged over the last few years to change the game for SPs that serve business markets: Cloud computing offers the business customers compute processing and storage infrastructure as a service (IaaS) that is reliable, scalable, cost-effective, and managed largely via self-service. The business customers can have computing

A compelling opportunity for Services Providers

resources on demand and pay for them by usage with utility services like backup and recovery built in. Technology investment and management expense are dramatically reduced. Software as a Service (SaaS) offers use of a wide variety of robust and easy-to-use applications. The applications operate in the cloud and are maintained by their authors. Business customers have access to more and better applications, including a growing number of industry-focused ones, with usage-based payment options. Applications and their use can scale with the business, and the businesses can experiment with new functionality at extraordinarily low cost. Mobile enabled business applications are becoming as ubiquitous as the cell phones and other devices they run on. Its no longer just a matter of accessing information and applications on a mobile device and hoping the interface doesnt garble things.

More and more business applications are configured to run completely and securely on mobile devices. Thats great news for business customers because more and more of their employees work remotely or on the road. These three trends can enable business customers to get out of the IT management business while at the same time making far better use of their applications and information. Business consumers of SP provided cloud services will see technology costs come down, track actual usage, and become more predictable and manageable. Business customers will experience a technology environment that can scale up and down as needed and a selection of more high quality applications, including mobile applications that they can use. Operational Considerations But who will capitalize on these trends, put the pieces together, and emerge as a full-service provider to the enterprise

Small Business
Simple Packages & Bundles On-line Portal, Telesales, In-Direct

Best-of-Breed Integrated Services & Solutions

Customized Solutions



Direct: Consultative Sales




SLAs & Penalties

Service & Care

Plug & Play

High Touch

Dedicated, High Touch

Life Cycle

Standardized, Automated

Scalable, Automated

Flexible, Repeatable

Figure 3: Each market segment requires a different set of operating models


and SMB markets? SPs are in the best position to seize this opportunity because of four advantages: They have longstanding relationships with business customers and track records of reliable service. They already provide a large portion of the IT environment voice, data, and Internet communications. They already handle a variety of flexible service bundles, usage-based pricing options, and the associated combined billing. They have extensive (and often underutilized) IT infrastructure of their own that can be exploited to provide cloud-based services. That said, there are still pieces to put into place, likely with the help of expert partners: Cloud technology for operating an efficient and secure infrastructure. Applications enablement platform offering automated provisioning of software, on-boarding of custom applications and certification of SaaS providers. Revised processes for customer self-service, pass-through payments to SaaS partners, and getting the best mix of in-person and online performance of both sales and customer service. New processes such as partner software certification and the migration of customers existing data and applications to the cloud and SaaS environment. Enterprise customers look for high quality, secure and scalable IaaS, a small set of the applications, and typically have customized solutions that can take advantage of the cloud infrastructure to more effectively manager their capital expenditure.

The SMB market however is varied and fragmented, but cumulatively very large and potentially lucrative. A long tail solution platform that supports a slew of unique needs and demands is needed to effectively service them. A full-service IT & Communications provider to this market must succeed on two possibly conflicting fronts: Automation. The only way to serve such a varied market is with highly productized offerings and automated processes, incorporating as much selfservice as possible. This is the only way by which a scalable offering can be sustained and support costs are tightly controlled. Experience. The business customers are happy when the experience of using IT is both productive and painless. The provider must focus on superlative delivery experience. Capitalizing on the Opportunity A number of leading communication service providers look to EMC and its product families VMware, RSA, Decho, and EMC Atmos to deliver cloud services to their customers today. EMC hardware and software provides a key set of SPready features including integrated and highly scalable compute, storage and network platforms (Vblocks offered by the Virtual Computing Environment coalition) and software to provide policy management, multi-tenancy allocation and control, self-service management consoles and security features. EMC is also working with SPs across the globe, via EMC Consulting, to provide services for SPs that are enabling the development of cloud monetization strategies and the plans that will drive them to execution. EMC Consultings communication industry experts are working with our SP clients to develop business strategies, technology

blueprints, operational processes and tools, and organizational models to enable the delivery of cloud based services. EMC Consulting is working with clients to segment their business markets and identify the appropriate cloud service product mix, to design new processes and platforms that enable the discovery and automated provisioning of SaaS and to develop new customer care and ISV partner relationship management models and processes. Conclusion The delivery of cloud based services by SPs can be viewed as an opportunity, threat or both, whatever it is though, it probably cannot be ignored. Many SPs are realizing this and have strategies at various stages of evolution to define their approach. Minimally, SPs are evaluating this market opportunity and determining which business market segments and product sets will drive revenue and impact other factors such as customer retention. As when pursuing the launch of any new product set, SP organizations need to evaluate their capabilities and resources to serve the market. What new process and applications, such as application stores, will be required to effectively sell, provision and service these new products? What new underlying technology capabilities will be needed in order to deliver service to the levels expected of SPs? These, of course, are all good questions that if you are not trying to answer today, you should be soon.

Source: Gartner, Dataquest Insight: How and Why Telecommunications Carriers Must Pursue Cloud Services Opportunities Now, September 24, 2009




CA Technologies:

Harness Clouds without Creating Storms

Service Providers (SPs) are aggressively exploring new business models and ways of generating new revenues from new services. Since they already operate vast, highly-efficient and developed networks, data centers and applications, they are exploring how to leverage these assets and experiences beyond the traditional services. At the same time, enterprises are looking for new ways to manage IT and convert CAPEX to OPEX. SPs can benefit from tremendous advantages as they add cloud service offerings to their portfolio. They have demonstrated success in migrating their circuit-switched services to a converged IP infrastructure supporting next generation services. For decades, they have honed the skills, techniques and best practices required of managed services for enterprises and small and medium businesses, as well as for managing, troubleshooting, billing and securing services across multiple domains and with multiple partners. All this can help provide infrastructure, platform and applications as services on a global basis through the cloud. The cloud is disruptive. Public cloud

offerings allow the business to directly access external services, creating security holes and quality blind spots while potentially eroding enterprise ITs perceived value. To become internally agile and efficient, IT must go beyond just virtualizing servers to provide elastic, on-demand private cloud services. At the same time, IT needs to transform itself into the master of a dynamic service supply chain, driving smart sourcing decisions and orchestrating how internal, external, virtual and traditional resources work together to optimize business value. In a sense, SPs have been offering public cloud services for 100+ years of the industrys existence. A voice call leverages a vast communication network cloud that spans individual telcos, geographies and national borders. That technology is highly virtualized and has been perfected over decades. However, today the industry is moving from highly proprietary, telco-focused, carrier-grade platforms to IT-like, commodity, lowercost ones, both hardware and software. SPs, especially those betting big on managed services and cloud, need to address new challenges:

How do you monitor services that are dynamically created, moved around in the virtual environment and then retired? How do you achieve the same level of reliability and performance with distributed platforms that werent designed for carrier-grade quality of service? How do you ensure security of each individual service in a multi-tenant environment, when data and business logic can move between the servers to achieve optimal service at each particular moment? And finally, how do you automate the provisioning and activation of cloudbased services, especially with a user self-service option? Harness the Cloud with CA Technologies CA Technologies cloud solutions accelerate your path to agility, efficiency and control by helping you assemble, deliver, secure, assure and support services across public and private cloud environments, spanning your diverse virtual and physical platforms. In addition to extending its portfolio of solutions for cloud computing and virtualization, CA Technologies is investing aggressively in game-changing solutions to help you optimize your business value with insight to guide investment and sourcing choices, and ultimately, dynamic controls to orchestrate your service supply chain. The mandate is clear for SPs offering cloud based services. Deploy optimization technologies so that the underlying platform is utilized efficiently; develop SLAs that meet the business needs of clients; develop systems that track the performance of the SLA at the technology and business level; and ensure that every transaction is delivered in a robust, secure and timely manner.


Cloud computing is a natural extension of CA Technologies 30-year focus on heterogeneous IT management. Proven CA Technologies solutions are used by 300+ Communication SPs throughout OSS/BSS environments globally today. They are being further extended to play essential roles in helping companies use, deliver and manage public and private cloud services. With industry-leading solutions for security, service assurance, service automation, service level and catalog management, portfolio management and service management, you can more quickly deliver and responsibly consume cloud services across virtual and physical environments. At the same time, CA Technologies is aggressively acquiring, developing and integrating innovative solutions designed specifically to accelerate your cloud initiatives. Examples include 3Tera AppLogic for dynamic application assembly and

provisioning, CA Oblicore Guarantee for service level management of multisourced services, and CA Technologies own cloud-based IT Management Software as a Service (ITM SaaS) offerings, such as Clarity On Demand for project and portfolio management. Delivering Agile Solutions for the Creation of Cloud Services CA Technologies offerings can drive the creation and optimization of the providers cloud infrastructure, both offered externally, public cloud, and used internally, private cloud. Manage your Existing or Evolving Cloud Environment CA Technologies service assurance solutions provide visibility across composite services from end to end, top to bottom, from physical to virtual, applications to networks, root cause isolation to end-user experience and

transactions. The solutions use a single pane of glass approach, spanning discovery, performance, availability and more so you can holistically manage services. Further, CA Technologies will provide a set of streamlined virtualization management solutions for customers that need a quick start and laser focus on managing virtualization, including assurance, security provisioning, selfservice and metering. CA Service Automation and Virtualization Management solutions offer closed-loop automation and orchestration of provisioning, assignment and configuration that spans virtual and physical resources and workloads, up and down the application and infrastructure stack, across multiple vendors, for both on-premise and into external services. CA Identity and Access Management solutions extend security and




CA Technologies:
compliance policies across traditional on-premise, private, and public cloud services and resources, down to the data level, with automated control over identities, their access and the organizations information assets. CA Oblicore Guarantee provides service quality modeling and SLA measurement from a top-down business perspective based on contracted service level agreements, for internal services and those consumed from external providers. CA Service Catalog and Accounting ensures transparency into service cost and consumption for internal, external and composite services so you can better understand the cost of providing and consuming services without the investment in a bottom up data warehouse approach. CA Technologies service management solutions provide ITIL-driven process control over composite services, including change, configuration, release, and incident and problem management. To evolve existing investments in applications and infrastructure into a private cloud, CA Technologies combines management of virtualization with automated provisioning, self-service and metering for resources and services. CA Technologies solutions bring your virtual resources under enterprise-class management so you can take your virtualization initiatives further while creating a well-managed resource pool for a private cloud. Build, Deploy and Monetize your New Revolutionary Cloud Services For SPs who are seeking to develop a new platform for cloud services, CA Technologies offers AppLogic, a commercial cloud computing platform

Harness Clouds without Creating Storms

designed, from the ground up to provide a comprehensive infrastructure solution. AppLogic provides a fast track to onpremise private cloud with a single environment for service assembly, dynamic provisioning and scaling, selfservice and resource metering all in a single environment. 3Tera AppLogic takes the stack of hardware infrastructure previously needed to support an application and delivers it as software. You can assemble and package n-tier services so they can be moved and scaled up or down. Load balancers, firewalls and network-attached storage become virtual and reusable. Instead of being hardwired to each other, infrastructure components are abstracted and encapsulated at almost any level, with intelligence and a radically simple interface that enables you to visually drag-and-drop components together to assemble even complex composite business and infrastructure services. 3Tera AppLogic is also a dynamic run-time environment that understands the n-tier structure of your applications, so it can scale in and out; automatically maintaining the performance parameters you set as it elastically matches business demand. 3Tera AppLogic deploys to a pool of physical resources, either on-premise or off-premise, thanks to the growing number of Managed Service Providers (MSPs) running 3Tera technology to power their Infrastructure as a Service offerings. An off-premise approach with 3Tera AppLogic-powered MSPs can be used to quickly assemble and deliver new cloud services, without acquiring and installing the AppLogic software or underlying physical resources, to create an externally hosted private cloud, to move workloads on and off premises to dynamically match cost and capacity requirements, or a combination of all the above.

Simplify and Optimize your IT Functions CA Technologies has developed services that are offered by emerging and established SPs in the areas of business continuance, data backup, portfolio planning and infrastructure monitoring. These services can be delivered using on-premise software or leveraged software hosted on independent and CA Technologies own platforms. The portfolio, alongside offerings from CA Technologies partner offerings, represent a comprehensive solution to providers needs in delivering cloud services. Make the Promise of the Cloud Real CA Technologies cloud solutions for delivering and using cloud services help you accelerate your transformation to master a dynamic services supply chain to: Optimize business value with insight and controls to preserve choice and guide investment and sourcing decisions; Protect and assure public and private cloud services for security and quality as part of your service mix; and Realize agility and cost-efficiency faster with solutions to quickly plan, assemble and dynamically provision elastic services across private and public clouds. Additional Information Visit for more information about CA Technologies cloud solutions.


can you rapidly maximize the business value of virtualization and cloud computing? using data center of the future solutions from CA Technologies, you can.

Copyright 2010 CA. All rights reserved. All trademarks, trade names, service marks and logos referenced herein belong to their respective companies.


A bright outlook
Cloud computing is increasingly recognized by the IT world as an effective way to achieve more value with less investment in servers and storage, thus lowering the lifecycle costs of hardware in IT centers. The telecommunications industry, on the other hand, has stringent quality of service requirements that cloud-based business technology finds challenging. But its a concept that undoubtedly has a bright future in communications. Virtualization is one of the hottest buzzwords in the IT industry. Its also at the heart of the cloud computing concept in which users and organizations avoid the hassle and cost of owning and managing their own IT hardware and software in favor of buying in the services they need when they need them. The main promise of cloud computing is that hosting numerous application servers in large data centers and making them available over the Internet brings huge economies of scale to cut the costs of IT. The latest services and applications are always available to end users, and organizations only pay for what they use. Also, resources can be scaled up in near real time, without the need for lengthy and costly projects. The need for huge upfront investment in owned infrastructure and the high costs of maintaining and updating it are eliminated. Not yet good enough for communications? While cloud computing is rapidly gaining fans among IT professionals, it is currently leaving much of the communications industry cold. There are good reasons for this. Modern communications infrastructure works to very demanding performance requirements, or Service Level Agreements (SLA). Telco-grade networks are designed to support real-time and other applications where five-nines

for cloud-based communications

Availability 99,999% Telco grade environment IT environment 99,99% 99,9% 1sec 500ms Latency 5ms 150ms

1/sec> 10/sec> 100/sec> >1000/sec Throughput





100 1000 Concurrent sessions

Transaction duration

Telco and corporate IT performance demands differ in key areas such as availability and latency

(99.999%) availability is a pre-requisite. That translates to a meager downtime of about 5 minutes in a year. Todays cloud environment gets nowhere near this figure. For example, Google Apps offers just three-nines availability and does not even recognize outages shorter than around ten minutes in its SLA. While five-nines availability is not needed by all telecom applications (for example VAS, OSS), its critical for some, such as prepaid charging systems or critical subscriber registers and user plane equipment. During any system downtime, a prepaid customer may not be able to use services, or the communications service provider (CSP) may not be able to charge for usage. Latency, or round-trip time, is another important criterion. Telecommunications standards require the latency for charging on carrier-grade networks to be 150 milliseconds. Yet today, this cannot be achieved by even the best virtualization middleware. Security is a further issue. Local regulations in many countries compel CSPs to hold personal data only on

servers located within the country or region. European companies, for example, are unable to store personal data on US-based servers. Chinese regulations require data to be held on the Chinese mainland, and revenue needs to be recognized in the country where the monetary transaction occurred. Early adopters are making gains While cloud computing may not be a mega-trend within the telecommunications business today, its benefits make it a viable bet for the future. It can equip CSPs with the flexibility needed for rapid service innovation, so that they can introduce new services quickly to meet evolving consumer needs. It can also help improve internal efficiencies, enabling CSPs to save costs and increase their profitability. Some CSPs have already taken prompt action and made early in-roads into virtualization. Several European providers are already bundling cloud services with connectivity. Last year, Vodafone in partnership with EMC-owned Decho, launched a data backup service for


consumer and businesses on its European network.1 Orange Business Services of France Telecom has also announced plans for the cloud for enterprise customers.2 Cloud services as growth engines So, there is growing recognition that the technology will be able to offer huge benefits to CSPs and their customers in the future. Cloud computing potentially affects almost all aspects of a CSPs network and business operations. Its capable of bringing huge economies of scale to the CSPs operations, while also creating the flexibility to drive up revenue by meeting the rapidly changing demands of the communications market. A typical CSP strategy for moving into the cloud will take a step-by-step approach with the first point of entry being to simply use its connectivity to offer cloud applications to customers. Most CSPs already do this, offering access to web-based email, VoIP services and other Internet applications. Using these cloud applications increases end users reliance on connectivity, shifting their expectations

from software quality of an application, to a total end-to-end experience (both software quality and connectivity quality). CSPs are well positioned to satisfy that expectation by packaging applications, whether their own or from third parties, with connectivity to win a higher share of what customers are spending. Another early mover is Australian CSP Telstra with its T-suite service. With T-suite, Telstras customers can access applications such as email, collaboration and conferencing, data security, customer relationship management (CRM), financial and human resource management, as well as online storage with a softwareas-a service (SaaS) model, for a monthly subscription fee.3 This is a commercial model that works well for small business customers who can keep their IT costs down, paying only for what they use. Telstra and its software business partners have a new revenue stream with vast business potential. As the use of these kinds of cloudbased applications grows, CSPs will need to meet the demand for greater connectivity, particularly from the

enterprise sector as companies run more and more of their business over the cloud. Only CSPs will be able to provide the connectivity, security and guaranteed performance that small, medium and large businesses demand. Clearly this is a great revenue opportunity for CSPs. Cloudy ways to improve operational efficiency The opportunity becomes even more attractive when CSPs are able to apply economies of scale to their connectivity solutions so that networks, through infrastructure virtualization, become more flexible and agile to provide more connectivity with less equipment. A further step would be to make use of cloud-based computing models for their own internal business processes to radically improve their total cost of ownership. Virtualization can already significantly improve CAPEX efficiency, simply by compressing more virtualized applications into fewer hardware elements. Virtualization also improves operational efficiency by eliminating the need to run installation projects that last weeks or months at several sites to launch a service or deploy a sales campaign. Virtualized applications can be scaled up and down easily for any required duration or even cloned remotely. Virtualization allows instant roll-backs, and depending on application capability, live migrations from one physical resource to another, capabilities simply unachievable previously. For example, virtualization is the approach being taken by Verizon Communications in the US, which has adopted a virtual approach to enterprise resource planning, consolidating hardware and other IT components, by implementing cloud computing for internal processes. The CSP has reduced operating costs by one-third and improved

Enter the cloud application market by packaging connectivity with applications

Expose own capabilities as cloud services

Benefit from new business models when using cloud services

Identity Location


Communications Service Provider Residential & Enterprise Customer Increase revenue as cloud connectivity provider Leverage cost efficient cloud computing models internally XaaS provider

CSPs can take a step-by-step approach to adopting cloud computing technologies and business models


A bright outlook

for cloud-based communications

them into the cloud will become a natural evolution. However, some physical hardware will always be required, such as antennas and fiber optic networks. Bringing mash-ups to communications The concept of mash-ups, whereby innovative services are created by linking together different applications is one that is well established among IT application developers. Yet mash-ups have been largely missing from the communication scene, and only a few providers have mastered them. And it is here that cloud computing may achieve their most significant impact on CSPs customers. By working with its application developer partners to link their own service capabilities with the vast range of applications available through the cloud, a CSPs will be able to create new revenue growth areas. Identity management, location information and billing capabilities are all examples of opportunities open almost exclusively to CSPs. With efficient and flexible development environments, developers can rapidly assemble new services and make full use of telecom system capabilities.

Departmental systems: cause the bulk of CAPEX & OPEX Tactical systems

e.g. Departmental IT apps, Email, Offline billing | Inventories Reporting... | Content & Service Delivery

e.g. Major IT Applications | Service & Resource Mgmt | Telco Service Enablers

Strategic systems

e.g. Heavy duty IT Databases | SDM, charging | Switches, Gateways

3rd Wave 2nd Wave 1st Wave

Simplify architecture and harmonize data

Enable fast process deployment

Virtualize & consolidate departmental systems for efficiency

A roadmap to adopting cloud computing would see departmental business applications such as email and reporting being virtualized first. More complex systems with higher performance demands will be moved into the cloud as the technologys capabilities develop

IT performance by 400 percent.4 Taking this a step further, it could re-deploy these cost savings towards investments in affordable, high-value cloud services, to create new revenue streams for itself. Taking this evolutionary path into the cloud even further, CSPs will be able to benefit from the innovative business models that cloud computing enables by shifting parts of its architecture from traditional license schemes to pay-per-use schemes. This effectively converts CAPEX into OPEX, an added benefit on top of the other cost savings. Typically today, CSPs may have hundreds if not thousands of applications and platforms within their business, each with their own server and software. Migrating applications to the cloud enables CSPs to reduce staff training and management costs, and focus more on their core business. For most CSPs, the internal transition will begin with non real-time telecom systems similar to IT systems. Most applications such as CRM, service and content delivery, management systems, many departmental systems, and Value Added Services (VAS) fall within this category.

While there remains a good deal of legacy telecom infrastructure, for example user plane traffic controls with extreme transactional processing such as echo and noise cancellation that cannot yet be migrated easily, the differences between IT and telecom requirements will fade gradually. As more telecom systems are migrated to standard IT hardware, virtualizing these processes and moving

Providing insight based on real experience of cloud computing

For its part, Nokia Siemens Networks has been working to analyze the role of cloud computing and its potential impact for CSPs. Part of this program has been the adoption of virtualization over the last five years or so in Nokia Siemens Networks laboratories to gain real, practical experience of the technology. One result of this work, for example, has been the identification of the shortfalls in cloud computings capabilities to deliver the quality of service needed for critical telco business systems. Nokia Siemens Networks believes that the technology is developing fast and will meet all the needs of CSPs, perhaps within a decade, and that CSPs need to start planning and working towards large-scale virtualization to be ready to reap the huge benefits as they become feasible.


Private cloud or public cloud? Or a bit of both?

Public clouds like those offered by service providers such as Amazon, Azure, Google and Microsoft are suitable for non time-critical applications such as CRM, web, email and remote meetings. These services are generally available to the wider public and charged per use or delivered free such as Google Docs. The benefits of these public clouds include huge economies of scale and a rich ecosystem of third party offerings. On the other hand, they will have lower reliability and their SLAs may not meet enterprise or telecom needs. Many CSPs may also be apprehensive about a potential loss of control or longterm security of migrating services onto external servers, compared to running their own data centers. Furthermore, they may face regulatory barriers that impose restrictions on storing subscriber and other sensitive data on hardware that is located abroad. Private clouds solve all these issues and offer an effective solution for CSPs who will already have their own data centers. A private cloud is a CSPs internal computing architecture that is set up in accordance with the principles of cloud computing to offer cloud-based or hosted services. As they are managed by the organization they serve, private clouds offer virtualization without the inherent risks, such as loss of control over data stored in the cloud, security, service availability and overall control over performance. With a private cloud a CSP can overcome the silo restrictions of conventional infrastructure in data centers and be able to deploy services rapidly, a critical business enabler in fastchanging markets. In the foreseeable future, many telecom applications will move to private clouds, such as value added servers, reporting and management systems, and service delivery. Finally, theres the hybrid cloud, which is a few years away, but is expected to be the way ahead. It will see the co-existence of multiple internal or external service providers, where non-critical information will reside with a public cloud service, while missioncritical applications will be hosted on the CSPs private cloud. Today, the barriers to both private and public cloud infrastructure are being lowered. A data center can be simply connected to a public cloud service providers resources using virtual private networks (VPN) and IP address range limitation. Some cloud service providers even offer more secure isolated resources that are invisible to others.

For example, with most of the worlds communications customers being prepaid subscribers with an account with a CSP, there is huge opportunity to handle payments and credit on behalf of other businesses. Or location-based data can be linked to business processes, for example courier services, to bring new capabilities for enterprise customers. CSPs can build their own cloud-based storage for data mining and analytics to improve the customer experience. There is a myriad of opportunities available to CSPs. Not too early to start planning To live up to its promise, cloud computing for communications will need to be planned for and implemented in a controlled way. There are vital technology considerations to be addressed, including

which systems and services are suitable for virtualization and which are not. Cloud computing raises several policy issues that existing regulations do not cover. Customers will expect protection of privacy, data security, reliability of service and clearly defined liabilities in case of disruptions of cloud services, all of which will need revisions in IT and telecom regulations.5 So, it seems that cloud computing holds huge potential for the communications industry in the long term and CSPs would be advised to start making plans now for their move into widespread virtualization. Its a huge transformation, but one that can be undertaken in discrete, wellplanned steps. The promise of higher operational efficiency, coupled with new capabilities to create differentiated revenue models

and offer new services to customers cannot be overlooked. However, the journey will be a challenging one and will require a close look at many aspects. 1 media_relations/news/group_press_ releases/2009/pcbackup.html 2 content/article/132-virtualisation/25982orange-business-services-launches-cloudcomputing-service 3 http://www.telstrabusiness. com/business/portal/online/site/ productsservices/tsuiteapplications.11003 4 asp?doc_id=185578 5 publications/Jaeger_etal_2008.pdf


Carrier cloud:

Carrier-centric, carrier-grade and founded on IT and network innovation

Acquiring new value chains with cloud There comes a time in every successful business when it becomes hard to grow. In developed and developing countries alike, market saturation in telecoms is limiting customer acquisitions and value added services have not been able to generate the same revenue as voice services. To continue to grow, it is time to look for other revenue sources. NEC believes that for sustainable and substantial growth, Business IT from the cloud should be one of the first places to look. Figure 1 shows four examples of value chains that are important and mature sources of revenue. Which value chains are most accessible will depend on your local situation. Carriers already dominate the communications (and to some extent the personal media distribution) value chains. Energy and government service provision are certainly important areas to study, but in most cases Business IT seems a good place to start due to the general trend of SMEs moving to opex oriented models for software, systems and services. As the diagram shows, the carrier can position itself to capture value from many value chains by providing an IT + communications capability to enable these business models or help deliver public services at lower cost. Through connecting customers or delivering content, this hub and spoke (core oriented model) has placed you at the center of many business models, maximizing your potential for revenue.

The previous Internet age saw users and content providers breaking away to form a direct relationship beyond the reach of the carriers billing system. The cloud era, underpinned by the concept of if we share, we can save money and gain best practice, is ironically marked by consolidation and a return to centralization, featuring the carriers preferred, core oriented business model. This time, the datacenter is the new core. Cloud is not new and we can already see well known Web 2.0 cloud players controlling payment, identity and access within the cloud, justified through a much enhanced end-customer experience. NEC is committed to helping its carrier customers expand their business horizons to include new value chains such as Business IT. This new revenue will come from a new, more intimate relationship with business or enterprise customers, penetrating further into the technology, service and management aspects of their business operations. Carrier Cloud This paper describes something we at NEC call Carrier Cloud. The concept has three pillars: Carrier-centric cloud, which is the use of cloud computing services, technologies and business models to acquire new value chains; Carrier-grade cloud being able to deliver cloud services that millions can rely on; Differentiation through IT and network innovation and integration. Later we will discuss what makes Carrier Cloud special, but first lets take a look at the service landscape. Cloud services by carrier Cloud services are the fundamental

Figure 2: Cloud service phases

purpose of cloud: The ability to provide services on demand, on a per-use basis, which scale dynamically, with the illusion of unlimited resources and without exposing the actual assets providing the service. What is important to the business customer, whose core purpose is rarely IT, is that they can convert much of their IT capex to IT opex while cutting inhouse IT support opex. For consumers, it is the same model except that they are expected to generate advertising or market intelligence income for the provider. The uptake of cloud services among the small to medium size enterprise community is complicated. We need to look at network bandwidth and stability, the prevalence of software piracy, regional trust levels and the attractiveness of the accumulated business applications (SaaS) portfolio. NEC can see at least two phases of cloud service provision for carriers. The phases are differentiated by ecosystem complexity. In Figure 2, Stage 2 demands more cloud user devices, embedded devices, new business models and processes interacting within a more complex ecosystem. Carriers advantage We have already talked about the need

Figure 1: Carrier-centric cloud



they can exclusively manage users location information such as GPS or femtocell information for example. Carriers can even handle settlement and authentication functions, and use information about their customers and sales channels. All of which add value to cloud services. As carriers can bundle network access with cloud services, they can offer competitive pricing. Building clouds Cloud is not about platforms, its about people, services and solutions. While SaaS services will run on a Platform as a Service (PaaS), digital signage, Desktop as a Service (DaaS) and Connected Home need much more than PaaS, they need servers, devices and a business model. On the telecoms infrastructure side, we have many industry standards and blueprints on which to build a network, but IT oriented services are driven more by the carrier and their customers. So when NEC works with customers on Carrier Cloud, we design the service together; including the business model, service roadmap, platform, support and operations. To achieve Carrier Cloud, you need to visualize and automate

cloud services operations. It is also important to virtualize the network and to control the networks paths and flows dynamically. A Carrier Cloud solution has at least the following key elements: Inside the datacenter IT Platform (IaaS) NGN core infrastructure OSS for cloud + network Cloud Service Platform (PaaS) SaaS applications Call center & helpdesk Datacenter operations Outside the datacenter NGN access and transport Gateway equipment End-user terminals & devices IT consulting Third party management Core platforms Below we can see the logical structure of the Carrier Cloud the heart of several value chains beyond pure telecoms. In the center we have the core IT platform (servers, storage and IT networking) and the network core with its policy control, IMS and service switching functions.

Figure 3: The carrier advantage

for new revenue sources and how the cloud owner can control the cloud business model. This is strong motivation for carriers to move into this space but what competitive advantages do they have? Our studies have shown that carriers have several advantages over Web 2.0 cloud service providers. These advantages includes their networks, which provide appropriate bandwidth, quality of service and end-to-end security; and commercial maturity which provides more commercial stability, customer support, customer trust and better operational processes. Better service availability can be derived from both. Carriers already have humanresource and know-how to build/ operate datacenters and backup centers. Carriers also have many telephony switching central offices that have earth-quake resistant, high-power air conditioning, power supply and security facilities. Carrier can use these offices as datacenters. Based on their human and material resources, carriers are considered to have great advantages over other cloud providers. These advantages give the carrier a secret weapon, an end-to-end SLA that can only come from a carrier with service availability at carrier levels. Carriers have other strong points too:

Figure 4: Building Carrier Clouds




Carrier cloud:

Carrier-centric, carrier-grade and founded on IT and network innovation

Figure 5: Solutions for Carrier Cloud services

Thirdly we have our cloud + network OSS allowing the integration and fulfillment of carrier borne cloud services. Cloud Service Platform Utilizing this core is the Cloud Service Platform. Its role is to provide the facilities required by SaaS applications so they can operate and thrive within the cloud. The most important function is the marketplace. It allows customers to buy service licenses, give feedback on services, get expert help from the community and move data between applications. This is a different level of functionality than earlier ASP models which ran hosted software licenses in separate silos. Other more basic functions of the Cloud Service Platform include single sign-ons for all services, and a charging gateway that accepts charging events from SaaS applications. The PaaS hosts APIs which allow the SaaS service to access the secure database, message passing and multi-tenant IaaS capabilities of the core IT Platform. SaaS applications Revenue generating applications are hosted on the Cloud Service Platform.

These are typically provided by third party ISVs wishing to provide services to the carriers SME subscribers. They could be hosted on another cloud but a carriers attractive traffic and hosting prices, an SLA and the carriers brand should win them over. NGN transport and access The quality of cloud services is only as good as the network delivering the service. QoS, stability and security are the carriers primary weapons when competing with Web 2.0 clouds. In some countries, carriers are looking at LTE hot zones as the key to providing cloud in central business districts, where customers are highly mobile. In some developing countries, this will be the primary broadband access service. Lighter cloud based services such as SaaS can be used successfully over lower broadband speeds provided by DSL and HSDPA. Heavier services such as DaaS require more bandwidth. A single user can normally use DSL or HSDPA to support a DaaS session when out of the office, but it may not be feasible to have many users sharing the same connection.

As we move from an era of best effort to as promised, more bandwidth will either have to be managed on a per flow basis or within fatter virtual pipes, dedicated to commercial cloud traffic. Transport networks that are service and user aware will have an advantage in delivering cloud. This awareness has to permeate every layer of the transport since higher level policy control systems can only really work when they receive the bandwidth they expect. In the future, NEC believes that OpenFlow technologies will unify the telecoms transport and datacenters IT network. OpenFlow brings an unrivalled awareness and communication between the network and the application management layer. This level of integration allows the networks topology and policies to be changed, depending on the changing state, configuration and health of the cloud. Cloud connected devices, gateways and terminals Home Gateways and femto cells are the critical link between the cloud, home and SME domains. Now users can stream media in their house from anywhere. They can access media libraries in the cloud or remotely control home electronics and appliances such as personal video recorders and digital picture frames. Machine to Machine (M2M) can be commercial or consumer in nature but millions of cloud devices will need to be connected and controlled, each within their own unique cloud business process. From smart cars to e-book readers, set-top boxes to electricity meters, each one will have their own business model, charging model with embedded traffic charges and roaming policies. This list continues to grow.


Supporting cloud services For most SMEs, IT is not their core purpose and cloud unchains them from IT, allowing them to focus on customers. In the Carrier Cloud model, the carrier takes the responsibility for their IT support needs. Ideally each user within a customer should be able to call one number and receive help on any of their SaaS subscriptions. Limiting calls to nominated representatives may have individuals questioning if economies made on in-house support are valid. Remember that in cloud, applications will increasingly share data and interact, so most applications cannot take a silo approach to support. Problems will often happen at the border between services as data is shared between applications. Over time, a scalable way to manage cloud application support will need to be implemented as the cloud portfolio expands. Winning in cloud NEC believes that there are two critical elements to the winning formula for Carrier Cloud: 1. Carrier-grade cloud, the ability to deliver cloud services that millions can rely on; 2. IT + network innovation and integration. Carrier-grade cloud As a carrier you know how to keep millions of customers happy at once. You know the cost of managing and compensating for an outage and you can imagine that while telecoms provided critical infrastructure to the nation, cloud IT infrastructure is critical to the businesses that would be paralyzed without access to their systems. These are just some of the issues that

underline the difference between mass cloud IT and todays enterprise IT. For this reason, NEC has developed carrier service platforms that are 99.9999% available at the service platform level. We are not suggesting that every customer wants to invest in that level of availability, but it is an option. In fact, many of the same mission critical middleware and operational management systems are available to all as part of our standard cloud proposition. Inherent cloud risks Cloud computing was designed as a business model that allowed extreme dynamic scaling at a cost closely matching actual usage. To achieve this dream, multi-tenant scale and resource sharing are essential. The consolidation and centralization of resources brings a concentration of risk that of all the eggs being in the same datacenter. Secondly, to continually offer more value, cloud services are encouraged to interact for the common good, exchanging data and sharing functionality. This closer cohesion links services such that they become highly dependent upon each other. This is another substantial inherent risk. Many cloud risks can typically be resolved through various forms of redundancy and service mobility. Redundancy ensures that there are always more IT resources (and copies of data) available to continue processing during any failure; Service mobility ensures that the live service can be moved at the right time to alternate resources, while providing fast access to storage. To implement these strategies we use many tools and processes including

Invariant Analysis (which can detect silent errors), Virtual Machine mobility (which moves the service before failure) and Network Virtualization (which moves the service between datacenters) to name but a few. Happily, NEC uses these same management techniques to make clouds more environmentally friendly too. IT + network innovation and integration Carrier Cloud is a fusion of IT and telecoms business models, technology and infrastructure plus some people to help. For NEC and our customers, now is the time of IT and network integration: Openflow technology lets the application layer talk to and dynamically control the network. Thin clients are tuned for DSL and wireless networks. Home Gateways link home IT to the WAN. Virtualized servers smooth video streaming peaks on VOD management systems, while application statistics between network and application look for silent problems. We have released our Cloud Platform Suite: a Cloud IT virtual processing and storage platform with power, weight and cooling optimized for telecoms switching rooms. Nearer to you We want to help carriers build their own Carrier Cloud, a carrier-centric platform featuring services, solutions and people who allow you to acquire new value chains and revenue. Each cloud is different, so we are expanding our ability to work with you locally to help design the right business case, service portfolio and operational capability. This will enable you to operate an innovative, SLA-driven, carrier-centric, carrier-grade cloud. For more information on NEC and NECs Carrier Cloud solution, please visit us at:


Communication Service Providers (CSPs)

Cant Afford to Miss the Cloud
It could be argued that Communication Service Providers (CSPs) missed some opportunities in the last 10 years. They certainly didnt lead the market in the mobile application revolution. The next big opportunity is with Cloud services, and simply put, CSPs cannot afford to miss the Cloud. The Good News The good news is CSPs are in a fantastic position to capitalize on Cloud services for two main reasons: they own the underlying network infrastructure and they have existing commercial relationships with millions of customers. Further, some CSPs are already offering certain Cloud services like web hosting. However very few have invested enough in the infrastructure or marketing to make them successful or bring them meaningful revenues relative to their traditional network and voice services. In general, all customer segments will adopt, or already use, some Cloud services, whether its enterprise, small business, consumer, education or government, and CSPs must provide
Difference in Churn* for Small Businesses: Web Hosting Service: With vs Without Email
*Based on all Parallels Panel licenses shipped in Q4 2005 and reporting <5m mailboxes

Cloud offerings that align with the specific market being addressed. To date, CSPs have been focusing their Cloud energies on their enterprise and public segments. This is delivered largely through a direct sales model and the product centers around their core network and data center services with some branching into virtualized infrastructure and storage. The Small Business Opportunity While the Cloud opportunity in the enterprise and government sectors is exciting in terms of potential deal size, in this article wed like to draw attention to another market small businesses. These are the businesses that typically have very little in terms of their IT resources and they can benefit the most from the Cloud services and applications. There are over 73.5 million small business and easily another 100 million home or small offices worldwide. Virtually all need a web presence and simple email. However, the majority of them will also greatly benefit from a range of applications, some of which were traditionally available only to bigger organizations. These include messaging and collaboration, backup and archiving, customer relationship management, and hosted PBX, especially as their business and marketing needs evolve. Small businesses are and will be adopting these Cloud services very quickly, partly because it improves productivity and efficiency, and partly out of necessity, since they do not have an internal IT department. This becomes the easiest and best way for them to consume technology. Cloud services also make sense financially for small businesses, as there are no large capital outlays required and they can pay for just the services and applications they need, easily adjusting for both good and bad markets.

Cloud Services Reduce Churn Another reason CSPs cannot afford to miss the Cloud is that Cloud services fundamentally increase the average lifetime value of a customer. Lets look at some internal data from Parallels that shows the impact in churn rates among small business that use one service (web hosting) versus two services (web-hosting and email hosting): In short, small businesses that subscribe to web hosting services and use the hosted email services as well remain a customer almost three times longer than if web hosting without email is consumed! Furthermore, this positive impact to churn scales, as additional Cloud services are added and bundled together. How to Rapidly Offer Cloud Services to Small Businesses What is the best way for a CSP to rapidly get to market with Cloud services for small business? Developing a Cloud solution from the ground up and integrating into existing OSS/BSS systems is a multiyear project. Building and managing a shared environment for applications (multi-tenancy) along with authentication, security, billing, and payment system integration are all very extensive and expensive projects. Implementing commercial off the shelf automation software designed for Cloud services that integrate with existing OSS/ BSS systems is the fastest way to go to market. Given how rapidly things are evolving, time-to-market is THE critical decision making factor. This approach is also the most flexible, as a CSP will be able to adjust pricing and margins with the market, along with adding new cloud services. Therefore, CSPs can rapidly and profitably get to market, offering Cloud services, by deploying an open solution built on open multi-tenant standards, security, authentication and license





28.7% 19.9%


First Year

Second Year

Third Year

Fourth Year



tracking. Such a solution must: 1) Offer a catalogue of SaaS applications 2) Provide a flexible framework for easily adding new services and applications 3) Enable the syndication or sell-through of external third party cloud services (such as Microsoft BPOS). The key to success for a CSP is managing a Cloud platform that is flexible, extensible, and rapidly enables the roll-out of new Cloud services. Just as automation is critical to profitability for traditional voice and data services, every possible aspect of purchasing, provisioning, billing, and selfservice management for Cloud services should be automated. This is critical to keeping book to bill days low, support costs down, and being able to rapidly introduce new cloud services. Further automation ensures operational efficiency thereby creating the opportunity for higher margins. Cloud Services must be easy for Small Businesses to consume The way small businesses consume technology in general, and particularly Cloud services, is unique. Most of them do not care how it works so long as it does. To be successful, CSPs must make it incredibly simple not just to subscribe to Cloud services but also modify and manage their services and applications at any time. Modifications could be made to the existing Cloud services being subscribed to such as adding or deleting users or increasing storage capacity or this could mean adding new Cloud services to their subscription bundle. The last thing a CSP wants to do is introduce existing support costs from small businesses that cause confusion or frustration with their Cloud services. This will destroy margins. The answer is providing an intuitive, self-service portal, or control panel, for small businesses to be

Parallels Automation
A complete cloud service delivery automation solution for CSPs Operations Automation
Provisioning Customer Self Service Marketing and Branding Monitoring and Event Handling Server Management Application Management Service Plan Management Reseller Management

Billing Automation
Billing and Payments Customer Self Service Marketing and Promotions Customer Communication Workflow Domain Registration Service Plan Tracking Reseller Storefronts

- Existing OSS Systems - Web & Email Servers - Database Servers - DNS Servers - Storage - Virtual Servers - Application Servers - Syndicated Services

External Systems
- Existing BSS Systems - Trouble Ticketing - Monitoring - Payment Gateways - Domain Registrars - CRM

able to easily manage the overwhelming majority of their needs. Why Parallels Automations? Parallels Automation is a commercial off the self Cloud service delivery automation solution. CSPs use Parallels Automation to launch and manage Cloud services and increase average revenue per user by automating repetitive and time-consuming tasks. This highly-scalable solution is ideal for Cloud services providers who want to: Automate the delivery of multiple services such as Microsoft Exchange and mobility services Set up Cloud provisioning and recurring revenue billing system which focuses on the specific needs of service providers and integrates with their existing billing system Offer white label services to resellers, VARs and SIs Upsell/cross-sell additional services

Delegate management and admin functions directly to customers through a unified control panel or portal Some examples of CSPs using Parallels Automation include KPN, Portugal Telecom, and Telekom Austria. The Future of Cloud Services for CSPs Over the past few decades, communications have become ubiquitous. We no longer call a place, we call people. Cloud services take this trend to the next level. Documents, contacts, calendars, applications and other IT services are moving into the Cloud. CSPs that are able to leverage their network assets, put the right Cloud automation systems in place, and aggressively target small businesses will be positioned for success in the years to come. After all, close to 40% of overall IT spent is coming from small businesses and this spend is moving the Cloud very quickly.


Cloud Services
Cloud services today are becoming increasingly common. Its not just productivity and business applications being offered in the SaaS model but also infrastructure services such as computing power and storage space that are being offered on-demand. Service providers are now offering a myriad of application and infrastructure packages to their SME and enterprise customers with the goal of offering an end-to-end service from telecom to IT for these customers. But are current billing systems geared up to support this new line of business? Is there something that needs to change in the way we look at billing system in order to better support the cloud business? This paper discusses the implications of the new cloud business on billing systems, the new capabilities required and what monetization options we can leverage with these new capabilities. One important point before we dive into the implications for billing systems is to first define what billing for cloud services is. Billing for cloud services means billing for a variety of hosted computing services such as Software, Platform, and Infrastructure as a Service. This is not to be confused with Billing as a Service which is offering billing services to ISVs from a central system using multi-tenancy capabilities. Implications for billing systems Looking at the different components that are involved in supporting the cloud services, we can identify the implications for the following components: Mediation Interacting with the cloud platforms, mediation systems need to be able to receive and send event information to and from the cloud. When dealing with cloud platforms, rather than telecom network, the implications are around formats that the mediation system will

Implications for billing and monetization options

Figure 1: Cloud services categories

be communicating with (e.g. Diameter, radius), frequency of interactions and acquisition methods of the events such as real-time or file transfer. Also, cloud platforms need to be able to send relevant data such as QoS analysis, resource utilization, and usage time and volumes to mediation systems. Product catalog As with telecom services, the offer repository resides within the product catalog. The same product catalog should hold both telecom and cloud offers alike to exploit the convergence of telecom and cloud lines of business. The product catalog should enable the easy creation of new cloud services by supporting new units of measure (UoM) such as number of users, CPUs used, QoS, storage capacity etc. Moreover, the product catalog needs to support multidimensional rating to combine several types of parameters into one event (e.g. traffic/number of users/ CPUs). The advantage of having one product catalog for both telecom and cloud services is clearly demonstrated when service providers can handle both telecom and cloud offers in the same package as one bundle.

Settlement How does settlement come into play when talking about cloud services? Just think of a cloud burst scenario. When the cloud platform is reaching its maximum utilization and capacity and SLAs must be met, traffic is shifted to other platforms that might reside outside the service providers data center. That means that service providers need to have agreements with cloud infrastructure wholesalers to make sure capacity requirements are met at all times. Existing settlement solutions would need to support cloud services formats and UoM and also new cloud services business models and pricing methods such as per megabyte, per server/user/traffic, monthly subscription or a percentage of each deal completed. Charging At the heart of the billing process lies the charging and rating engine. Today, most of the rating requests this engine handles in dealing with cloud business models concerns recurring charges for SaaS applications or basic usage-based charging for IaaS models. But requirements from the charging engine are going to intensify. Charging engines will need to support and understand new UoM, new pricing


schemes that are relevant to the cloud world and new dimensions in its rating capabilities. Additionally, service providers who aim to become end-to-end service suppliers, from telecom to IT, need to be able to charge across lines of business, rating both communication services and cloud services in the same engine. This would enable service providers to offer benefits across the telecom and cloud worlds and stimulate usage of one line of business by delivering benefits on the other (e.g. use more than 200 hours of IaaS instances and get 20% discount on your monthly bill). As with telecom data services, notifications and visibility are an essential part of the user experience and so the charging engine should work in realtime and offer visibility and control to the cloud services customers. The real-time capabilities would also serve as the cornerstone for the innovative monetization options that are described below.

Collections Collection systems by nature are focused on the relevant local market the service provider is working in. In a regular telecom scenario when an account is moved to the collection system, the process is pretty straightforward as there are local collection agencies, policies and legal aspects that the collection system is aware of. That changes when talking about a cloud scenario. Just consider the following use case: A service provider in the UK is offering an exclusive application as a SaaS model. Since this is cloud-based, anyone can sign up for it as long as service provider authorizes them to do so. This means a customer can sign up for the application that does not reside in the same country as the service provider. If this customer fails to pay his bill, how will the service provider collect it? The collection system would need either to have collection policies and agencies for that country or be able to connect with external collection

systems to execute the collection process. Monetizing the cloud Weve already established billing systems will need to evolve better to support the cloud business. But what will this evolution especially adding real-time capabilities to the charging and rating module mean for the monetization aspects of the cloud business? Real-time charging for cloud services will enhance the experience of the cloud customer and will also provide the service provider with additional ways of making money. Real-time charging enables creating service caps Being able to create service caps for cloud services enables service providers to offer control and visibility to the finance departments of their business customers and to limit cloud services consumption for specific customers.

Figure 2: Billing modules impacted in a cloud scenario




Cloud Services
Finance departments can set allowances for cloud services to each appropriate team so they can control the expense of cloud services, keeping them within expected limits, and gain a predictable cost analysis. Service providers on the other hand can define usage caps for customers that might be a credit risk or have a low credit rating, minimizing potential loss of revenues. With real-time charging, usage caps are pre-determined for customers based on financial guidance and business policies. When a customer reaches a specific threshold the service provider notifies the customer in real-time that the service allowance/cap will soon be reached. When the customer reaches the service cap, he receives another notification in real-time that his allowance has been reached for this month. Naturally the allowance can be extended during the month if necessary, based on business decisions. Real-time charging enables real-time marketing With real-time charging, using the same underlying principle as with service capping, service providers can use thresholds configured in the system to encourage upsell opportunities and increase services uptake. This enables service providers to interact with their business customers in real-time during the month so they dont have to wait for the monthly bill. An example of real-time marketing for cloud services can be seen in the following: a customer registers for Storage as a Service, signing up for 50GB storage space. While using the storage service he passes the 75% threshold and, since its not even the middle of the month, the system sends a notification with a promotion offer to upgrade to a larger storage package with 30% discount for the first six months.

Implications for billing and monetization options

Real-time charging enables using dynamic pricing schemes Even with real-time capabilities, the rates for the various services are predetermined and inserted into the product catalog and rating engine. But what if we didnt need to set the rate in advance? What if we could just choose a range of rates and let the system determine the most applicable rate based on parameters such as demand and utilization? Real-time charging enables service providers to better monetize their cloud offerings by using dynamic pricing schemes. Instead of having to decide on a particular rate in advance, they can set a range, deciding on the minimum and maximum rates they are willing to sell the service for and then let the system decide on the best price in real-time. The system will take into consideration elements such as demand, utilization of the cloud platform and other parameters, and then quote the appropriate price for that moment. As demand and utilization levels change so will the price. Summary Billing cloud services will impact billing systems as we know them today. It will change the way we look at mediation, collection and partner settlement solutions. It will also prompt changes in the product catalog and the charging engine to enable better alignment and monetization capabilities for cloud services. Amdocs convergent billing system supports billing for cloud services with a unified charging platform for both prepaid and postpaid customers. It has a business oriented product catalog that allows great flexibility in creating new cloud services and bundling them with telecom offers. Amdocs convergent billing has the mediation know-how and experience to integrate with the cloud platforms and ensure data flow to and

from the billing platform. With these capabilities, Amdocs convergent billing can help service providers to better monetize cloud services and enhance their customers experience.


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