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The New Smart is Not Dumb

Telcos, their move to the cloud and why file sync and share is a smart service.
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Picture this: Your business is losing 5% revenue year over year, but your market share remains constant. I know it sounds terrible, but this is where many land line carries are today. Traditional service revenues are declining, because the market for these services is declining from a revenue standpoint. So their market share remains constant, while their revenue declines. While it’s not obvious today, you would be wise to assume this will also happen to the wireless business before long. What is a telco to do when the days of their core business – providing dumb pipes to businesses and individuals around the world – are numbered? The answer is simple, though not necessarily easy: find a new source of revenue.

If you were at Mobile World Congress, or any other telco event in the past few years, you will see telcos flocking to at least one common answer for their growth: cloud computing. Verizon bought Terremark, Century Link bought Savvis, and there was a lot more acquisition and cloud service action this past year. If the analyst predictions are to be believed, telcos that secure just a fraction of the billion dollar market lay the foundation for their future. But not all cloud solutions are created equal.

For example, a number of telcos started their cloud game with Infrastructure as a Service (IaaS). It seemed like a good idea, because it was something they could build or buy and implement quickly. And more to the point, it taught them about offering services to cloud customers. But, this is a race to the bottom. Yes, there is a market for IaaS, but it is a market dominated by major players like Amazon. They have brand recognition, the customer base, and the scale to win. As a result, telcos are market takers limited to $0.08 an hour for their comparable IaaS service, because that is what Amazon charges. Moving from dumb pipes, to offering essentially dumb virtual machines is definitely not the answer.

What is the answer? Smart services. What is a smart service? It is something that leverages a telco’s strengths in consumer or business relationships, complements their “dumb” offerings, and takes advantage of what customers are demanding now. Take, for example, the file sync and share space. This is a good example of a smart service for telcos: it takes advantage of existing customer relationship, leverages offerings in their current portfolio, compliments the business and individual pipes that are offered, and it capitalizes on a very real need that customers have. Of course, offering a smart service means you have to be smart about how you offer it.

For example, one of the largest pains in file sync and share today is the need for IT to offer a service that is simple to use for the individual, and also enables security and control for the IT department. This is not a single multi-tenant implementation, as these services created the problem for IT in the first place. Instead, this is probably a combination of on site, hybrid, and cloud-based storage, with a single solution acting as a gateway to mobile devices, desktop and web-based clients. Naturally, file sync and share is just an example, but I use it because it is something all of us have used, and let’s be honest, used in ways that are not so compliant with corporate policy. There are plenty of other smart services out there if you understand your customer, their pains, and how you can complement your “dumb” offerings with smart ones.

To sum this up, dumb pipes are a thing of the past, and it is likely wireless will go the same way. Dumb cloud-based virtual machines, while useful, are a race to the bottom. To secure future revenue streams, telcos need to move away from dumb, and seek out smart. In other words, it seems the new smart services are not dumb.

ownCloud GmbH

March 12, 2012

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