Maybe Telco’s need to go back to basics

Utility services, the dull boring stuff that we all take for granted, are incredibly valuable.  We take them for granted.

Initially I was going to title this post “turn it off” , this was based on a converstation with a client who wanted to continue to use the utility service (in this case data networks), just at half the price.

In my meeting with the client, I fronted him. I said to him

“sure, we can give you something for 50% of the price but before you jump think it through. What is the cost of moving to a consumer grade resolution on your business (we’ll get around to you sometime in the future). Or, how much would it cost you if you lost connectivity to your DataCentre?”

Then I drew out a basic network that included all the types of sites that he had, and lead him through the impact of his goal.  Maybe i’ll win that argument, maybe i won’t. I suspect after the Christchurch earthquake, and the amazing effort my employer (and other network providers) have made to restore services, this guy might well appreciate the utility.

Same is true of consumers, watching the events unfold and seeing the way that the utility telco services have enabled people to text and call and tweet in this time of crisis puts the value beyond all doubt. As a friend said on my facebook page

“what we do means people can text and watch the Internet to find out their family is ok. I am stoked for Facebook and SMS right now”

I’m proud to be able to do that.  Being able to hang your hat on that when asked what you do is meaningful.Profoundly human.

Perhaps the marketing teams in network providers need to get over themselves, leave that confusing value added services stuff alone. Go back to basics, “we provide the infrastructure so you can connect with your people”

Telcos will be a force in Cloud Computing

This is a cross post from

Ben Kepes asked me to write my thoughts on Jeff Kaplan’s post Can Telcos dominate cloud computing, in which Jeff argues, that based on their history, this is 'unlikely'

 While there is nothing wrong with delivering reliable services, in today’s rapidly evolving cloud computing environment reliability is quickly becoming table-stakes as businesses of all sizes seek cloud computing services which can give them greater agility, better economies and added functionality to reduce their operating costs and strengthen their competitive positions. These are not attributes which people associate with telcos…

…Telcos are still struggling to figure out managed services, which have been around for over a decade, as a new wave of Software-as-a-Service (SaaS) and cloud computing services become mainstream.

Jeff also throws in a comment about Telcos failing it their own markets:

 In fact, even responding to new ideas and business models in their core communications business continues to be a struggle for the telcos… Now, Skype is the largest international long-distance carrier.

This is a red herring and I will tell you why later.

First let me be very clear; in this post when I talk about cloud computing, I mean utility computing, IaaS or Cloud Computing services. I am excluding PaaS & SaaS from that definition. These are different propositions and to the best of my knowledge only BT, Telstra & Telecom NZ have commercial propositions launched.

Within that definition, I do believe telcos will have a large role (maybe not dominant), here’s why;

All cloud services require a network, who better to provide you that? SLAs that are currently conspicuously absent in cloud computing will become table stakes as businesses demand greater surety from their providers (just look at the buzz when gmail goes down). Unless you can deliver the end to end service, you aren’t easily able to do this

Telcos know about reliability. I just don’t get Jeff’s point above. If reliability is table stakes then can you seriously consider an internet delivered model as being better than an integrated private network and cloud model?

Cloud Computing is only just becoming mainstream. Really, just look at the numbers. The vast majority haven’t moved. Cisco, IBM, Microsoft and HP have only just entered the market. Customers look at these guys for legitimisation of any trend. No offence to any existing provider, but most companies are risk averse and naïve about today’s market leaders. By endorsing cloud computing, these vendors will make the cloud computing market much more real to end customers.

The other critical component of these vendors entering the market is their view on Telcos as a channel. That is the vendors that are going make cloud computing real for the majority of business users are all looking to work with Telcos for local delivery. Just look at the recent announcements (Cisco, IBM Juniper), they are all partners Telcos are familiar with.

It is also my belief that Governments are going to force regionalisation to occur within the cloud market. When Governments realise what this movement to the cloud will do for their tax intake (less IT spend, combined with less employment) they will figure out ways of protecting that. This again is advantageous for Telcos as they can enforce geo boundaries and they are generally large regional players.

Telcos have access to capital in the sort of multiples most start-ups would kill for. And make no mistake; it takes lots of cash (see this for speculation on Google’s spend) to build this sort of stuff.

Convergence of data and IT means this is a logical extension of Telco services. This is important because as Jeff accurately states, Telcos are under financial pressure. The difference between Cloud Computing and tolls is incumbency. One of the reasons Skype was successful is that they disrupted the incumbent Telco business model, a business model that Telcos are still very eager to protect. That is not the case in cloud computing, all that utility hardware is an upside for them. That’s why Jeff’s comments about Skype are a red herring, completely different challenges.

I’m not clear if Telcos will dominate this industry, compared to many other types of organisation they are slow to move and aren’t that innovative. That certainly isn’t universal and I would question whether it’s altogether relevant to mainstream customers. But I do believe that when the dust settles, some Telcos will be major providers in this space.


Disclosure – I work in the ICT industry – the views in this post are my own and may, or may not be, shared by my employer

So what happens to SaaS if the internet fails?

I haven’t read any commentary on these two articles claiming that by 2010 the internet will be so congested it will start to slow. So I thought I’d throw my hat in the ring.

"Users will experience a slow, subtle degradation, so it's back to the bad old days of dial-up," Nemertes President Johna Till Johnson told USA Today. "The cool stuff that you'll want to do will be such a pain in the rear that you won't do it."

(As a by-line a bunch of nethead telco guys have been hoping and / doing their best to drive just this sort of situation for a long time)

If this does happen – and I’m not entirely sure it will – It’s an interesting paradox. Many governments and markets have regulated Telco’s to a point where they are really under the hammer financially. And now, they are being asked to fund an internet up-grade of immense proportions so that the internet (which effectively ‘ate their lunch’) can continue to work as well as it currently does. This will of course make everyone more productive (youtube being the best productivity aid by far – check the comments) and the world will be a much better place…

The degradation of the internet also has large implications on SaaS and the whole web 2.0 phenomenon. As the quote above indicates, the service experience will degrade to a point where users will walk. Let’s face it, no one ever, says ‘give it to me slower’. Sure ISV’s etc can create cute codecs to do compression, thin client could help as well, but the reality is that this kind of negates the point of mashupable Internet delivered services.

It does point to a gapping hole in the SaaS provider’s end to end service experience. It’s kind of like building a cool race car while not thinking about the terrain it actually rides over – a formula one on an off terrain track in this instance. This omission also points to a massive opportunity for those ICT companies who understand how and why you need to couple connectivity and applications together.

I’ve written before about who it could be that would disrupt the old school on prem ISV business. It looks to me like the landscape has changed again….

Anyone else have any thoughts on this? Anyone else even alarmed that this could impact their SaaS service or customers?

In a SaaS world, Its ALL about the platform

SaaSweek just posted with provocative title, is PaaS a passing Fad?  The answer is hell no.


If you buy into the rudimentary definition of SaaS that Ben Kepes, Smoothspan and I got to recently, then the whole SaaS ecosystem will be dependant on platforms. And logically, it doesn’t make economic sense for every SaaS vendor to create their own.  (I know this gets into shaky ground because I still don’t believe there is a good understanding or even consensus of what a platform is.)

If every SaaS vendor were to build their own platform, then literally there is a cost transference from the on premise business to the SaaS providers and the only people who will win out are the hardware and storage vendors. That just doesn’t make economic sense. There is already a bunch of data (here and here) showing that its harder to get to profit for a SaaS business. Why would you want to lump the expensive costs of setting up your own datacentre, operational framework, billing, backup, site diversity etc when you can just buy that?

Would a SaaS company build another “internet” to connect to its customers? Again, no. SaaS companies use the internet as its network because of sound economic reasons (name another globally ubiquitous network, with understood standards – loose as they are – that’s cheap?).  The infrastructure, diversity cost are provided by other platform providers (ISP’s) and they can do this through economies of scale.Platform providers, those doings PaaS, offer the potential for the same basic economic advantages.

SaaSweek raises a couple of valid points about why PaaS isn’t globally accepted.I’d counter those with the following comments.

  • Apart from, none are approaching scale so the benefits aren’t really there. But they will be.
  • Expertise, its really hard to build a good SaaS application, let alone build a good datacentre, operational framework, back up and restore environment, internet connectivity.
  • Speed to market. Given that SaaS is sold on a subscription basis, it is subject to the rule of 78. the sooner you hit the market the soon you’re revenue starts compounding. Also the faster you develop the less costs and that’s a good thing too.
  • PaaS brings its own community and the associated advertising, social networking and open source development mantra. This helps you with speed of development, resources and of course customers.
  • Funding, what is to stop a PaaS provider supporting a great idea on its platform in a VC capacity?
  • PaaS is still in its infancy, the models, rules and mores of how to be a PaaS provider aren’t 100% formalised. Smoothspan talks about being Switzerland and questions whether can pulls this off. I’d agree that you do need the neutrality. I’d also say watch this space. It’s my prediction that will become wholly focused on PaaS, and be more than willing to let the CRM business fight its own fights. Why? Well CRM only solves part of a business’ needs. is solving the rest.  And this is what platforms are all about, more services from same infrastructure.

I’ve said before Telco’s do SaaS, they also do platforms really really well. Don’t believe me, well check out this. They’ve taken one core asset, or platform (copper) and sold at least 3 core services down it. Voice, access / rental and now data. They are doing the same with mobile networks. Voice, SMS, data, and content.  They’ve also sorted out sales, provisioning, billing and support (to a greater or lesser degree I).

These traits are the mark of a great platform provider. Telecommunications is a $1.2 trillion dollar business built on platforms. If you want to know what the future looks like, do your history.

The boogie man is coming!!!

The boogie man is not only coming, i’d say he’s arrived.

One of the things that i’ve been watching over the last 18 months is the slow creep of Microsoft into the traditional telco space. Its been an interesting exercise in patient slow build up.

Small things have shown up in various places, LCS for one, the advent of P2P calling in MSN messenger. But just lately the covert has become, well overt. 

Here are two bits of the puzzle coming together (IMHO). Firstly, the Innovative Communications Alliance. Not exactly new, but a great play by MS (and Nortel for that matter). Why, well MS controls the global desktop. Now i know a bunch of people will argue the whys and what fors about that and even that the open source movement is getting in there, but its an indisputable fact, they do own it.  This is important because the true vision of IP Tel is unified communications. One communications platform that i can subscribe to however i like but MAINLY through the place that i work, that being my desktop (and how owns the desktop??) The Nortel bit is a side play for MS, they needed the PBX bridge to make this convergence real. Nortel was the clear choice for them due to them being late, having their market share eaten alive and basically needing MS as much as MS needed them. Incidentally the roadmap of stuff in the ICA is much more healthy than anything i’ve seen from Cisco. That is logical when you think about it though, ICA has bundled the desktop with IP Tel. Whereas Cisco is just doing IP Tel.

But wait, today i’ve been sent this link about the MS response point. Which is in fact a small business PBX. I’m stating the obvious when i say i think it’s a rebadged PBX but it’s an interesting play. Imagine if in the same box that you got you PBX it was pre-configured to work with outlook, OCS and MS CRM. Wow cool we package.

Another play, another market segment.

The third bit of this jigsaw was this article i saw in ZDnet. More MS compliant SIP devices. Yip, desktop, devices and PBX.  Nice. That kinda relegates telco’s to providing dumb pipes, something that they just hate. But given the extent of this play, the desktop incumbency that MS has and the shear marketing clout they can bring, i’d say the boogie man has arrived…

On-demand isn’t just about the application

On-demand isn’t just about the application, its about the complete stack of componentry required to deliver the solution.

I say this because i see an interesting dichotomy in action in the SaaS (on demand) market. Many vendor seem to get the application themselves into pretty good shape for delivery on demand, and forget about the bits and pieces it runs on.

Here’s a classic example by Intuit.  If they’d embraced their own mantra about subscription based services, taken a grid computing or ondemand infrastructure solution from a platform provider could they easily boost their capacity to match these peaks? Hell yes. Why didn’t they? I can only guess but it would seem that like quite a few of the application vendors i see, they think the value is all in the app. That’s missing the point.

The value of any application or service is in what customers (the end users who pay the bills) can do with it.

That means that the outcome that a customer buys, is not solely based on the application (that just like all of history, every solution is only as good as the weakest point). A good many SaaS providers should think about this more.

So, what is the value of a hosting provider?

Depends on their own go to market play  but it could be any of the following

Robust infrastructure, capacity planning, redundant internet links, pre prod etc

Operational support processes and teams who understand that they need to focus on the system not just the end customer

Reach, apex type platforms can expose a new ISV to a wider customer set that their limited marketing and sales budgets couldn’t achieve

Identity management, yip the ole single sign on and administration chestnut

Billing (if you let them)

API’s or webservices to integrate with other apps on the platform (to solve the limitations of your offering

Customer credibility – SaaS can be daunting enough without providing uptime type assurances.

Economies of scale


I think for this reason you will see more and more hosting plays, what interests me the most is ‘the who’ element of hosting plays. You’ve got Google and MS supposedly putting out global coverage of Data Centres (hosting 1.0 in my opinion), you have Telco’s who control the pipes and know scale and data centres (but beggar all about services and service delivery) and then you have the SaaS vendors themselves who understand applications and their interactions.

Interesting future landscape here.