SPONSORED BY

Cloud Supplement 2012

OFC_NEC Supp_Feb12.indd 1 09/02/2012 09:08

The Third Wave of Cloud Computing:Releasing the Value of VerticalsTelecom Operators have begun to make headway with their Cloud Offerings but the real opportunity lies in the next wave of services.

Advertisement

The first wave of cloud computing was the exclusive domain of large internet players like Amazon and Google who saw an opportunity to

grow their own business by creating a model in which they shared more openly the benefits of scale. The Cloud Computing model was a new way to deliver IT resources and services, and many enterprises experienced the benefits of only paying for the IT services that they used, as and when they used them.However, security and privacy considerations have kept many enterprises from fully exploiting the benefits of these Public Clouds. Larger enterprises had the option to build their own private cloud which was a useful compromise but not one that

brought the full benefits of the cloud model.The Cloud Computing model continued to evolve. NEC, along with a number of major telecom operators, has led the way in this evolution as a part of the second wave of cloud computing. This was the first chance for telecom operators to step in and build on the infrastructure they had already put in place by expanding and adapting the service models for their existing customers. A good example of telecom operators taking part in this second wave of cloud computing has been the Carrier Cloud services, such as those delivered on the NEC SaaS Market Place. These services are delivered in a cloud model but with more focus on specific needs of the customer such as security and

localization. NEC has partnered with telecom operators to build successful cloud programs from Latin America to Asia.The approaching third wave of cloud computing is about connecting more than IT resources and services. The next wave will be about bringing specific services to vertical industry such as healthcare, education, retails and government. One of the resulting trends will be to accumulated data out of the cloud. The increasing need to integrate services with process will require a broader number of sensors and devices to be connected to the Carrier Cloud. Increasingly, we will see machine-to-machine (M2M) communications come to the forefront of services focused on industry verticals.

NEC’s third wave Carrier Cloud proposition lets telecom operators address opportunities like SME. Shinya Kukita, Chief Manager of International Sales at NEC, explains, “In the first wave of Cloud, the telecom operators weren’t invited---so we came up with the second wave. But, it is for the third wave that telecom operators are uniquely positioned to leverage their communications advantage and their ability to focus on the national markets. Within each industry, key offerings are company-appropriate bundles of applications that include common

Shinya Kukita, Chief Manager of International Sales at NEC

functionality delivered from cross-industry horizontals such as M2M connectivity, fleet management, digital signage and biometrics-based authentication.”NEC has a proven track record of delivering such integrated systems customized for specific verticals. Each enterprise has the flexibility to aggregate the package of services most appropriate for it. The bridge between these services and the SMEs that have been left out until now is the local telecom operator.

Big data, Big OpportunityThe connected world of smart objects, from mobile terminals to sensors, meters and networked appliances, is a world full of fast-flowing and rapidly accumulating

data. The growing prominence of M2M connectivity, as well as the big data that comes with it, is a problem for which growing companies will have to find solutions.Big data is a problem that telecom operators are in a unique position to solve. Wherever data is widely spread and changing rapidly is an opportunity for a telecom operator to provide valuable services to new and existing customers. The time for asking whether the cloud is serious business for telecom operators is over.The question that remains is, do telecom operators have a greater role to play in the third wave of cloud computing than dumb-pipe provider? With NEC as their partner, the answer is yes.

Wider Cloud with NEC

Hospitals Schools Hospitality Logistics Retails

SMBEnterprises Developers

IaasInfrastructureas a Service

PaasPlatform

as a Service

Saas

Healthcare Education Hospitality Logistics Retails

Softwareas a Service

ID Biometrics

Digital Signage

M2M ConnectivityFleet Management

Cloud Orchestration “Common Management Layer” forPortal, Ordering, Provisioning, Data Center and Network Management

Expa

ndin

g ...

A big chance for small businessUntil now, only vertically integrated industries such as healthcare, hospitality, education, logistics and retails have required large capital investment in integrated software packages to manage their core industry functionalities. This has often meant that traditional IT offerings have left large customer groups, such as SMEs, underserved in these verticals as vendors focus on those segments with higher margins.

NECCP0048 Cloud Solutions SP_MCI Telecoms.indd 1 26/01/2012 12:17

EDITORIALEditorial DirectorMike HibberdDeputy EditorJames MiddletonAssistant EditorDawinderpal SahotaSenior Content ProducerBenny Har-Even

Editorial enquiries:Mobile Communications International EditorialMortimer House, 37-41 Mortimer Street, London W1T 3JH, UKTel: +44 20 7017 5495Email: mike.hibberd@informa.com

WORLDWIDE MEDIA SOLUTIONSAccount ManagersMichael ButcherEmail: michael.butcher@informa.com

Chris BealesEmail: chris.beales@informa.com

All advertising enquiries to: MCI Media Solutions, 37-41 Mortimer Street London W1T 3JH, UKTel: +44 20 7017 5218 Fax: +44 20 7017 5647Email: tim.banham@informa.com

PRODUCTIONDesign & Production ManagerJoanne LoweEmail: joanne.lowe@informa.com

HEAD OF MARKETINGSophie BurdajewiczEmail: sophie.burdajewicz@informa.com

PUBLISHERTim BanhamEmail: tim.banham@informa.com

© 2012 Cloud Supplement

While every care has been taken to ensure that the data in this publication are accurate, the publisher cannot accept and hereby disclaims any liability to any party to loss or damage caused by errors or omissions resulting from negligence, accident or any other cause. All rights reserved. No part of this publication may be reproduced, stored in any retrieval system or transmitted in any form electronic, mechanical, photocopying or otherwise without the prior permission of the publisher.

Printed in the UK

The telecoms cloud sector may be lacking maturity but it is already a hotbed of competition. 2011 saw yet another indus-try land-grab tack place, with carriers worldwide seeking to acquire the physical

assets data centres and the like required to build a portfolio of virtual services. On page 6, Informa Telecoms & Media takes a look at the movers and shakers at the dawn of this era of cloud services.

The North American and Asian operators have been the most aggressive in this regard, spending billions on global assets, yet Europe, at risk of falling behind, has received a boost from ‘Steely’ Neelie Kroes, vice president for the Digital Agenda at the European Commission, who recently announced the creation of a European Cloud Partnership and a €10m investment designed to get the sector moving.

On the basis that the EC faces a “more complex” landscape than that in the US, the initial focus will be on the establishment of common requirements for standards, security, and competition, with the fi rst fruits of labour expected in 2013 a full report is on page 3.

But where cloud services have traditionally been the domain of the IT sector, the operators actually own the most important element required —the

infrastructure. According to NEC’s director of global carrier cloud business development, Manuel Gallo, this goes beyond the communication lines to the peering agreements and all the support structures and contracts with customers.

In an interview on page 12, Gallo talks about the importance of trust as something which operator’s have already established with their customers. It gives the carriers a distinct advantage and paves the way for deeper, richer partnerships across a whole suite of new service offerings.

But these service offerings have to be differ-entiated from existing low cost, commodity cloud computing providers, as business grade, high quality services. Analysts with research fi rm Ovum delve into this area on page 4, examining the importance of choosing the right specialist partner to assist with the complexity of the cloud enablement process.

There are three main service models in use and each one is at a different stage of development in the telecoms market today. Ovum defi nes the strengths and weaknesses of each one: IaaS; SaaS; and PaaS, and looks at how operators can adapt and evolve their offerings to keep up with the trends in the market.

A perfect storm

Mobile Communications International | Cloud Supplement 2012 03

Editorial

03_NEC_Supp12.indd 3 08/02/2012 11:20

04 Mobile Communications International | Cloud Supplement 2012

Cloud computing provides an im-portant opportunity for the telcos that provide communications services for enterprises across the globe. Many of these telcos would

fall under the classification of enterprise communications service providers (CSPs) and find that they can draw on and extend their existing capabilities and strengths to generate new revenues and increase their customer base with cloud computing.

However, cloud computing is becom-ing a highly competitive market and CSPs must deliver high-quality, business-grade services to differentiate themselves from low-cost commodity cloud computing providers. This means great care must be taken in the design and planning of the cloud service to ensure that services can be delivered and managed cost-effectively and to high service levels.

Telcos that are looking to launch cloud services must first determine their route to market. A lack of expertise, available resources, and difficulties in bringing internal network and IT teams together means that telcos are increasingly turn-ing to IT services players such as HP, IBM, Cisco, and Oracle to help them enable their cloud offerings. Many telcos have taken this route as it is the fastest way of establishing themselves in the cloud services market. However, this has often resulted in the implementation of a new set of siloed OSS/BSSs that are capa-ble of supporting cloud service delivery. This could become an issue in the future as price pressures and the introduction of complex bundles force telcos to look for efficiency gains in their operations. Choosing the right vendor partners is

important for telcos that want to own their own infrastructure as this can have a big impact on the complexity of the cloud enablement process, the flexibility of the infrastructure to offer competitive services, and the time-to-market for of-fering new services.

Despite the early hype around cloud computing, there is no doubt that the technology and business models available will profoundly impact the future of IT in the enterprise. In many respects the term “cloud computing” is too broad, which has led to confusion in the market about its current position and its future. A US body, NIST (National Institute of Standards and Technology), has produced the most widely used definition of cloud computing, which we at Ovum broadly adopt.

NIST identifies three “service models” for cloud computing:Software as a Service (SaaS) – is the most mature aspect of cloud computing, with salesforce.com—one of the best-known SaaS applications —now more than ten years old. SaaS enables businesses to use applications that run on a cloud infrastructure. The applications are accessible from various devices (e.g. PCs, smart mobile devices) through a thin client interface such as a web browser. The user does not usually have any control over the cloud infrastruc-ture, although some access to application configuration settings will often be avail-

able. SaaS also addresses communications and collaboration applications, which are particularly relevant to CSPs.

Infrastructure as a Service (IaaS)—is still relatively new by comparison and provides compute and storage resources as an on-demand service. Enterprises of all sizes increasingly view IaaS as a powerful IT delivery model with many benefits. Key among the benefits are a dramatic reduction in time to get IT resources in place for new projects and lower IT operating costs. These translate into important and measurable busi-ness benefits for enterprises. Even CIOs who were originally skeptical about the IaaS model (mostly for good reasons) now recognize its potential and the is-sue for them is more likely to be when, not if, they will make the step into IaaS. In the most developed cloud computing markets, such as the US, we are increas-ingly seeing new start-up companies

Despite the early hype around cloud computing, there is no doubt that the technology and business models available will have a profound impact on future business models. Peter Hall, Principal Analyst, Mark Giles, Senior Analyst and Daniel Hong, Lead Analyst at Ovum investigate.

Understanding service models for cloud computing

Service models |

Types of service

• Software as a service

• Platform as a service

• Infrastructure as a service

Essentialcharacteristics

• On-demand self-service

• Broad network access

• Resource pooling

• Rapid elasticity

• Measured service

• Private cloud

• Community cloud

• Public cloud

• Hybrid cloud

Cloudcomputing

model Deployment models

Source: Ovum, based on NIST

04-05_NEC Supp.indd 4 06/02/2012 10:00

05Mobile Communications International | Cloud Supplement 2012

basing their entire IT requirements on cloud computing with little internal IT resource or skills.

Platform as a Service (PaaS)—provides an online development environment by offering computing resources and develop-ment tools in the cloud. The platform allows a user to build and test applications and then provides the run-time environment for applications to be deployed from the cloud. PaaS is the least likely type of cloud com-puting capability to be included in a CSP cloud computing portfolio today, as many application developers use specialist cloud platform services based on specifi c develop-ment languages or methodologies.

NIST also defi nes the “essential characteristics” of cloud computing and “deployment models,” as shown in the fi gure. The essential characteristics are what distinguish cloud computing from other hosted services models. Address-ing the key characteristics is an essential component of design of infrastructure and management systems for cloud computing platforms. For example, the requirements for on-demand self-service place consider-able demands on the cloud infrastructure, including customer portals for ordering services, automation of enablement pro-cesses, and end-to-end management of the entire infrastructure including compute, storage, security, and the network.

The requirement for measured service

and rapid elasticity means highly fl exible provisioning and billing, which corre-sponds to the realtime resources consumed and allows service providers to offer crea-tive and differentiated billing models. It is common to see cloud computing services with no setup charges or fi xed contract terms. These two elements are quite foreign to CSPs for traditional services such as networking, but are consistent with the prevailing cloud computing market.

Broad network access is a key aspect of cloud computing, which not only means standard networking options such as public internet but also commonly used enterprise-grade networking technologies such as MPLS VPN and carrier Ethernet.

While not all customers will want the full fl exibility of realtime resource provisioning and elastic services, these are important characteristics of the cloud computing model and are essential to any service that describes itself as such.

It is important to note that the three service models are at different stages of market development today but CSPs enter-ing the cloud computing market will in-creasingly rely on IaaS as a key component of their proposition and differentiation. Therefore this places great demands on the infrastructure, management systems, portals, and billing processes. Leading global CSPs went early to market with IaaS offerings and have largely built the cloud

environment in-house using best-of-breed vendors for individual components. This was a lengthy process, and it was com-mon to spend 18 months and considerable resource to get a solution to market and further time to realise the full capabili-ties of cloud computing with a self-service portal and automated provisioning. Time to market is now key and fortunately CSPs going to market with cloud computing today can greatly reduce this time through close vendor technology partnerships and adoption of a converged infrastructure.

Although cloud is part of the today’s over-ly hyped trifecta, “soclomo”, which stands for social, cloud, mobile-cloud computing is a proven and powerful model for IT delivery that is able to deliver important benefi ts for enterprises, including much faster deploy-ment of IT resources for new projects and savings in IT costs. As the market for cloud services evolves, telcos must be able to adapt and develop their offerings to keep up with other CSPs and trends in the market. The cloud computing opportunity for CSPs is wide ranging, and both SaaS and IaaS are key market opportunities that are highly relevant to telcos that provide enterprise communications services.

For more information please refer to the Ovum report The CSP Opportunity for Cloud Computing Services on www.ovumkc.com. Follow Ovum @ovumICT

| Service models

While not all customers will want the full fl exibility of realtime resource provisioning and elastic services, these are important characteristics of the cloud computing model and are essential to any service that describes itself as such.

04-05_NEC Supp.indd 5 06/02/2012 10:00

Mobile Communications International | Cloud Supplement 201206

Many carriers are making a land grab for physical assets as they look to make virtual goods a significant part of their arsenal. According

to Informa’s Telecom Cloud Monitor, an analytical tool tracking the cloud-related activities of operators worldwide, acquisi-tions and investments totalling almost $8bn were made in the first six months of 2011. Of these, 80 per cent involved the acquisi-tion or construction of datacentres to house virtualisation infrastructure. In this period, operators established 22 go-to-market part-nerships, favouring IT services firms and integrators, and 88 new cloud services were announced.

Moreover, in the first half of 2011, 25 operators initiated cloud-related investment programs or acquisitions. Based on pub-licly-announced deal values and Informa estimates, this totalled $7.8bn committed to cloud services. But European telecom opera-tors risk being sidelined in the global cloud computing market by aggressive North American and Asian operators spending bil-lions on an international presence.

Research from Informa reveals that Euro-pean operators accounted for only seven per cent of the $13.5bn that service providers

spent on cloud assets in 2011. North Ameri-can and Asian operators accounted for 90 per cent, or $12bn of the total.

Camille Mendler, principal analyst at Informa, believes uncertainty around Eu-ropean security and privacy laws, coupled with continuing economic weakness, are re-sponsible for stalling investment. However, the European Commission aims to define a common legal framework for cloud comput-ing in 2012. And European operators are supporting local innovation, with half the cloud services launched in 2011 relying on European cloud technology vendors.

“European operators are being outgunned in cloud infrastructure,” says Mendler. “Al-though they are working to stimulate local demand, their investment strategy remains cautious.“

It’s essential that the industry defuses concerns about cloud computing in Europe to drive market development. European op-erators are major players in this endeavour with their trusted brands and sales outlets,” Mendler adds.

Informa’s research highlights fundamen-tal differences among the 127 operators worldwide currently selling cloud services. European operators are focusing on launch-ing services at home, while North American

operators are acquiring client bases and assets at home and abroad and Asian opera-tors are pursuing a blended strategy of in-frastructure investment and service launch nationally and internationally. Meanwhile, Latin American, Middle Eastern and African operators are building up domestic infra-structure and competencies.

Many of the acquisitions made were big, but very much forward-looking; Centu-rylink’s $2.5bn purchase of Savvis and Verizon’s $1.4bn Terremark buy involved generous multiples for so-called cloud com-panies, but they don’t yet deliver significant cloud-related revenues. With few exceptions —such as NTT’s OpSource buy—acquired companies generate at best 15 per cent of their revenues from annuity cloud services versus traditional hosting and related services. For example, Terremark generated an annualised run rate of $30m in cloud services against 2010 turnover just shy of $300m, and Savvis reported $15.2m for its Symphony cloud services against 2010 turnover of $933m. That said, the pace of annual cloud revenue growth is 100 per cent or more for companies such as Savvis, and that’s the main attraction.

The scale of multi-year cloud investment programs saw AT&T (US), Telstra (Australia),

Cloud computing caters to all telecommunication customers; from the consumer to the multinational corporations, as well as the service providers’ internal operations. But it can also be a make or break play for the service providers.

Operator strategies |

A new dawnThe rise of cloud services

06-08_NEC Supp.indd 6 06/02/2012 10:05

Mobile Communications International | Cloud Supplement 2012 07

Rostelecom (Russia) and Portugal Telecom (Portugal) headline investment activity in the first half of 2011, with moves to beef-up net-work, data-centre and software infrastruc-ture to support cloud computing services.

Cloud services are multiplying in emerg-ing markets but, in their haste to claim terri-tory, many telecom operators in both mature and emerging regions haven’t focused on service differentiation. Portfolios do not vary widely from operator to operator, or against pure-play cloud service providers. Among the 88 cloud services announced in the first half of 2011, 70 per cent were mass-market launches serving generic needs: business productivity apps, unified communications and collaboration (UC&C), infrastructure as a service (IaaS) compute, as well as storage, backup and restore services.

Therefore, Informa’s Mendler believes, operators also need to find unique, but lu-crative niches, such as that offered by NTT Data in Japan, which offers a COBOL cloud platform service to help enterprises main-tain and manage the billions of lines of code still powering legacy mainframe applica-tions, particularly in the public sector.

And although SaaS represented six out of ten service launches, SaaS partners often demand hefty revenue shares, which presents a risk. SaaS still remains the easi-est market entry point into cloud services, though, for operators and customers alike. It familiarises customers with cloud-based service delivery and payment, it can help tie customers into bundled connectivity contracts and it provides an upsell path for higher-margin cloud services.

Telecom operators are highly dependent on third parties for cloud service delivery. This includes SaaS, infrastructure and professional services vendors. On aver-age, an operator works with 16 partners to deliver cloud services. Some relationships may simply be a SaaS resale agreement, but many telecom operators have also cemented extensive go-to-market partnerships.

While some partnerships involve a formal joint venture, others involve a go-to-market partnership for certain customer targets or specific deals. Notably, IBM was a sought-after partner across geographies and indus-tries, working with Cable & Wireless World-wide (UK) and NTT Europe (UK), separately, in energy and utilities, PLDT (Philippines) in retail, and Rostelecom (Russia) in public sector cloud services delivery. AT&T is also using IBM technology for a new version of its flagship Synaptic Compute as a Service.

Operators are also allying to dominate market segments. KT and Softbank part-nered pragmatically to offer South Korea-based cloud services to Japanese enter-prises concerned about infrastructure and power reliability in the aftermath of Japan’s Tohoku earthquake and tsunami.

But are providers just talking the talk? Are they actually using cloud computing themselves? Various companies want to help telecom operators exploit the cloud, but cloud-enablement comes in two related classes: go-to-market services to facilitate the launch of a cloud service; and opera-tional services, which use the cloud’s opera-tional model to manage an internal process.

Telcos often have a wide range of legacy systems in place, as well as countless different platforms which change from operation to operation. The sheer scope of this fragmentation puts pressure on the operator’s internal IT management that is not the same as in other sectors, something which Jose Luis Gamo, global cloud services director at Telefónica believes is driving the speed of the migration to the cloud.

Also, cloud-based M2M service manage-ment is becoming the norm. M2M rivals cloud computing as a technology with tempting revenue growth potential, and the two are increasingly entwined. In the first half of 2011, KPN (Netherlands) and Verizon moved to cloud-based M2M service management with Sierra Wireless to sim-plify service launch and operation; SingTel

and HP launched a cloud-based health trial using an M2M heart monitoring device. The combination of cloud-based management of M2M and embedded devices is powerful.

And even billing is moving to the cloud. Some operators see value in developing in-house billing systems, others are buying in expertise. But the launch of new cloud-based services can act as a catalyst to use cloud-based billing. In 1H11, upstart cloud-billing firm Zuora notched up a strategic win with Tata Communications for its IaaS subscription management service, and KPN and EZWIM renewed a long-term partner-ship for online bill presentment.

Meanwhile, outsourced cloud services are also on the rise. For swifter cloud-market en-try, and to supplement skills, a range of man-aged and outsourced cloud services exist for operators. Jamaica’s Digicel took advantage of this in the first half of 2011 as it launched cloud services. Digicel’s first cloud service is Cloud Backup, which is a white label of vendor Asigra’s cloud-storage platform.

Undoubtedly, these are perilous times for telecom operators and cloud computing is a make-or-break opportunity. Positions staked today will have profound repercussions for revenue growth, profitability and diversifi-cation away from connectivity-centric busi-ness models. Yet operators must not deny their connectivity heritage; it can provide powerful differentiation against pure-play cloud service providers, integrators as well as software and hardware vendors.

Cloud computing depends on both IT and telecom expertise. Without a network, there is no cloud. And without secure service persistence and accessibility irrespective of device or location, cloud services cannot function effectively. These service attributes require network reach, control and complex service-management capabilities. But the bulk of telecom operators marketing cloud services aren’t asserting this truth force-fully in their marketing literature or their service portfolios. »

| Operator strategies

06-08_NEC Supp.indd 7 06/02/2012 10:05

Mobile Communications International | Cloud Supplement 201208

processes. Despite indications to the con-trary, cloud computing functions outside the walls of the datacentre. The opportunity to mobilise access to cloud applications is a powerful differentiator for operators. Criti-cally, this must include not only people but also embedded devices.

Not all client wins are made public, but re-search suggests there’s good news out there: Those publicised customer wins are growing for infrastructure as a service (IaaS), a key cloud service that operators can sell to move away from SaaS-centric revenues.

By industry, client wins are widely distributed. However, Informa believes that fatter margins exist in serving vertical markets, with some operators beginning to recognise which vertical industry seg-ments are more open to cloud computing propositions, and are shaping services to suit them.

This remains a minority activity among the 90 or more operators tracked by Infor-ma, but operators following through report good margins by customising cloud services to serve specific industry needs.

Health, at 15 per cent and energy and utili-ties, at 13 per cent of total amount of cloud deals struck in the first half of 2011 are identi-fied as the strongest markets. With profes-sional services and IT not far behind.

Operator strategies |

And it is questionable how many com-modity cloud players the market can sus-tain. Going broke for scale sounds feasible as a strategy, but it’s failed miserably in the past. Operators must not re-architect the boom and bust cycle of the Enron Era, price is the only true distinguishing feature of a commodity service. For all the effort —and investment—that operators have put in the cloud to in 2011, that’s hardly a desirable outcome.

Therefore, Informa’s recommendations to operators are, firstly, to control the cost base. There is no point in selling the cloud without taking advantage of it and operators must transform internally, or they will fail to understand the cloud’s benefits and how to market them. Nor will their cost base match or improve on that of pure-play cloud players.

Secondly, they must invest in high-value community clouds and serve the needs of an industry ecosystem. Adapting and certify-ing cloud services for the specific usage of an industry is already paying dividends and differentiating some service provid-ers. AT&T, Orange Business Services and T-Systems are among operators executing on this strategy in the health, transport and utilities industry sectors.

Finally, Informa recommends operators mobilise the cloud to transform business

It is questionable how many commodity cloud players the market can sustain. Going broke for scale sounds feasible as a strategy, but it’s failed miserably in the past.

Mass market services

Generic business apps24%

Unified comms & collaboration16%

laaS compute15%

Storage, backup& restore

15%

Security6%

Desktop Virtualization 3%

Multimedia content management 3%

PaaS 2%

Vertical apps – various* 11%

Other 5%

*Vertical industry apps include: retail, health, energy & utilities, public sector and financial services

Source: Informa Telecoms & Media

Other 20%

Health20%

Energy and utilities

13%

Automotive5%

Education5%

Manufacturing5%

Media and broadcast5%Telecom5%

Public sector7%

IT10%

Professionalservices10%

Source: Informa Telecoms & Media

For more information on Informa Cloud Monitor visit: http://www.informatandm.com/cloud-monitor/

Service launches by type Customer wins by industry

06-08_NEC Supp.indd 8 06/02/2012 10:29

Untitled-1 1 03/02/2012 17:23

10 Mobile Communications International | Cloud Supplement 2012

According to Informa Telecoms & Media’s cloud specialist Camille Mendler, Europe is at risk of be-ing relegated to the second tier of the global cloud computing

sector, with North America and Asia Pacific streaming ahead. Of the total investment in cloud during 2011, Europe accounted for just seven per cent, Informa research revealed.

But Neelie Kroes, vice president for the Digital Agenda at the European Commis-sion, used a recent speech at the World Economic Forum in Davos to set out the EC’s plans to ensure the region remains competitive in this emerging digital market sector. Key among her pledges was sig-nificant investment in the sector and the creation of a European Cloud Partnership to stimulate uptake.

Underlining the urgency of the issue, Kroes said: “Our flagging economies need us to make the best out of this. We cannot afford anything less. We need to act to support speedy uptake of cloud computing in Europe.”

Kroes announced her intention to launch the EC’s Cloud Computing Strategy early in 2010 and told the WEF this year that nu-merous consultations, with cloud providers, users and consumers have been under-taken in the interim. These have revealed underlying concerns in the market, with target users and organisations—especially SMEs—expressing hesitation over issues such as data protection, service definition and contractual obligation.

“All these issues—standards, certification, data protection, interoperability, lock-in, legal certainty and others—are particularly troublesome for smaller companies,” Kroes said. “They are the ones who stand to ben-efit the most from the cloud but who don’t have a lot of spending power, nor resources for individual negotiations with cloud

suppliers. Where these barriers exist, I am determined to overcome them,” she added.

While the Commission has already pro-posed new data protection legislation that covers cloud services there is much more that can be done, she said. The public sector, which suffers from fragmentation, could de-rive significant benefits from cloud services and—at 20 per cent of the prospective cloud market in the EU—could serve as a useful proving ground. Kroes said that the buying power of the public sector across the region could be harnessed through cross-border procurement processes.

“The cloud sector will listen and adapt, creating benefits for cloud adoption throughout our economy,” she said. “For ex-ample: more standardised services, new and better offers, cheaper prices. And it is a true win-win: the cloud market will grow, bring-ing opportunities for existing suppliers and new entrants. And cloud buyers, including the public sector, will buy more with less and become more efficient.”

Kroes extended an invitation to public authorities and industry, both on the supply and demand sides, to create a European Cloud Partnership, which will benefit from a startup investment of e10m. In the first phase this partnership will focus on the creation of common requirements for standards, security and competition. The second phase will see the delivery of proof of concept solutions for those requirements and, in the third phase, reference implemen-tations will be built, she said. Kroes added that she expected to see the first results of the Partnership’s work in 2013.

She stressed the benefits of cross-border collaboration, arguing that even when procurement is conducted on an individual basis, the benefits of a common approach could be significant. But collaborative

procurement is clearly the goal, and Kroes suggested that the private sector might also move in a similar direction, once the public sector has shown the way.

Kroes cited similar moves from the federal administration in the US, as well as a collaboration between a number of European scientific institutions, including the European Space Agency and CERN, as evidence that such collaborative strate-gies can be made to work. She conceded though that the EC faces a “more complex” landscape than that in the US, or among groups with shared areas of expertise, such as scientific bodies.

Cross border initiatives such as these are the kind of strategies that have Euro sceptics in all markets throwing up their hands in horror—and Kroes was at pains to point out that her new project is not intended to create a United States of Europe in cloud form.

“The Cloud Partnership, and indeed our overall cloud computing strategy, is not about building a European super-cloud, nei-ther outright nor by forcing the integration of existing public cloud infrastructures,” she said. “Cloud business models, and the set-up of Cloud suppliers’ and publicly-run data centres, should be determined by ef-ficiency considerations on the market.”

She added that the plan called for an increase in commitment and initiative to be successful, stressing that it should focus on collaboration only where it makes sense. “We are already talking to potential part-ners and working on setting up this Europe-an Cloud Partnership. No doubt the concept will evolve as more details are fixed,” she said. “These will be set out, together with other elements, in the European Cloud Com-puting Strategy later this year. A strategy as a whole to ensure Europe becomes not just Cloud-friendly, but Cloud-active.”

In a speech given to the World Economic Forum in January, Neelie Kroes unveiled an initiative designed to keep Europe from falling behind in the global cloud sector.

Steely Neelie sets out vision for the European cloud

Analysis |

10_NEC Supp.indd 10 06/02/2012 10:08

Untitled-1 1 03/02/2012 17:26

12 Mobile Communications International | Cloud Supplement 2012

Cloud services are becoming of increasing importance to carri-ers worldwide, with virtually all players either already offering them, or harbouring plans to

launch. But in a market that has until now been dominated by IT firms, many opera-tors feel that they have been followers rather than leaders.

Typically, carriers have been focused on providing office automation and email ap-plications through the cloud. But now their portfolios of offerings are broadening, with applications such as e-education, healthcare and logistics in high demand, particularly for large organisations. Towards the end of 2011, there was a notable increase in this kind of application, according to Manuel Gallo, director of global carrier cloud busi-ness development at NEC.

“M2M is also something that is gaining momentum, but I would say that the most significant trend that we have seen, by far, is a new concept: the cloud services broker,” he explains.

The cloud services broker is a platform aimed at simplifying the way carriers de-liver cloud services to enterprise custom-ers. The system addresses complex barriers to cloud adoption, and lets carriers use their knowledge of the customer’s specific needs with respect to application perfor-mance, costs, security, location, ethical standards, and other criteria, and then matches these to the capabilities of cloud

service providers. The carrier can then deploy the appropriate service within the cloud, ensuring that the services continu-ally work together to meet the customers required business objectives.

“On one side, the cloud services broker system is integrated with the carrier’s back end systems. It is integrated with the billing, CRM, ERP and all those systems, so that they don’t need to integrate application by application and service by service, but they integrate the system just once,” says Gallo. “Then on the other side, the services broker can integrate, one by one, each of the differ-ent services, with some easy-to-use APIs. This means that they can very quickly add new applications, virtual servers or virtual storage, or any kind of new services to the customer. Therefore, the operator provides a marketplace for customers to go and buy services and start using them.”

Over the past couple of years, it has been accepted that the drivers for cloud imple-mentation would be very similar for all organisations: reduction of cost and ease of use being the prime motivating factors. But as businesses and cloud services are matur-ing, drivers for carriers’ different target segments are differing.

“For example, we can see that drivers for residential consumers are very different than from large enterprises,” says Gallo. “Drivers for SMEs are ease of use, ease of implementation and to be able to pay a monthly fee as they don’t often have the

CapEx for large outlays. For larger organisa-tions, drivers are different; it’s to reduce the total cost of ownership, because they have the resources, but are looking to be more efficient. For operators, main drivers are very clear, they cannot afford the 12 to 18 months to market their services, they need to go to weeks instead of months.”

Despite the obvious benefits of using cloud services, there is still some reluctance among firms to loosen control of their data and allow it to be hosted in the cloud. How-ever, Gallo argues that this not a reluctance that comes from companies, rather the people who work within them.

He says that, from his experience, the reality is that, in many people’s minds, they perceive a threat to their personal control and personal power in their organisations. However, the higher you go in an organisa-tion, the lower their reluctance to turn to the cloud. CXO-level executives have a broad view of the business, and are not afraid of releasing power or their responsibilities here. If they can see the business benefits of using the cloud, they will not be reluctant to use it.

“This is not something new; when we tried to sell outsourced services a long time ago, we found exactly the same situation. But if you take, for example, SoHos and SMEs, there is much more demand for the cloud than from large accounts,” says Gallo. “When you deal with a small company, you’re dealing with the CEO, GM and CSO all in the same person and he’s worried about his business,

Manuel Gallo, director of global carrier cloud business development at NEC, talks about the lessons to be learned from the IT sector.

Do not follow, become pioneers

Interview |

12-13_NEC Supp_interview.indd 12 06/02/2012 10:11

Mobile Communications International | Cloud Supplement 2012 13

| Interview

not about his power. And decisions are easier and much faster —it’s a matter of business survival, rather than power.”

So given the obvious benefits of business-es moving to the cloud, and given that the barriers can be overcome, how can carriers best go about providing these services to their customers? The answer is in forming partnerships with application vendors.

Historically, most carriers have had a small number of partnerships with players such as antivirus firms or office applica-tion vendors. Those partnerships were, in general, close relationships between the carrier and the application vendor. Now though, operators cannot make a huge impact on customers by just offering two or three services or applications, they have to many more partners because they have many different customers, target seg-ments and verticals to address, so there is a broad range of applications and services that they need to offer.

“Carriers need to integrate partner systems into their own systems and adding new services to their carrier offering could take between 12 to 18 months. This is far too long,” says Gallo. “They do need part-ners, there’s no doubt about that, because operators are not software developers; they cannot develop all of their services. But they need a fast time to market, and they need a wide portfolio.”

Operators can slash the time it takes to bring cloud services to their customers by

using the partnership aggregator concept, argues Gallo. This is a concept that helps operators become an “end-to-end cloud services broker”. It involves NEC provid-ing, not only the cloud services broker platform, the technical tools to make cloud service deployment easier, but also the ag-gregation of services.

“From the carrier perspective, they can get one strategic agreement with NEC, one single point of contact for business or for technical purposes, and we take care of the integration,” explains Gallo.

NEC would also take care of all the carrier-customer contracts, negotiations and invoices between service providers and operators. By doing this with a range of operators, NEC is developing cloud services catalogues with hundreds of different ap-plications and services inside that carriers can provide to their customers.

“If they want to add any services, they can request it from us, and we will take care of negotiating the contracts, performing the technical integration, and make it available to the carrier in their cloud services broker system, in their market place, in an average time of six weeks.”

And he advises operators looking to broaden their cloud offerings to avoid being bound by the rules set out in the IT industry. For example, the US National Institute for Standards and Technologies has defined only three categories of cloud service: Software-as-a-Service (Saas),

Platform-as-a-Service (Paas) and Infra-structure-as-a-Service (IaaS). This is too IT-influenced an approach, argues Gallo, as if you take into account operators’ strengths, several major categories are overlooked. There is no mention of communications as a service, for example, or unified comms as a service, M2M, security as a service—cate-gories that are very important for carriers’ businesses.

“The key message to operators for cloud services is that they are not IT companies, they cannot behave like an IT company and take the same approach. As a carrier, many are feeling they are followers in the cloud—but the reality is that they are the most important part of the actual cloud,” he says. “They own the most important pieces of the real cloud; the infrastructure. I don’t mean just the communication lines, but peering agreements, and all the support structures and contracts with customers, and they even have the trust of customers.”

Therefore, carriers should focus on ad-dressing the customers they have today and let their partners focus on the applications that are required.

“As a carrier, don’t think about Saas, PaaS or IaaS, think about your market segments: residential, SoHo , SME and large business, Gallo advises. “Don’t think about the stand-ard category definitions by the IT industry and focus on your own sales and marketing, forget about everything else, as you can rely on your partners for that.”

Operators own the most important pieces of the real cloud; the infrastructure. I don’t mean just the communication lines, but peering agreements, and all the support structures and contracts with customers.Manuel Gallo, director of global carrier cloud business development at NEC

12-13_NEC Supp_interview.indd 13 07/02/2012 10:12

Untitled-1 1 03/02/2012 17:30

Untitled-1 1 03/02/2012 17:31

Untitled-1 1 03/02/2012 17:24