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Tuesday, November 8, 2011

Cloud Computing and the Transformation of Telecom: An Example

Cloud Computing and the Transformation of Telecom: An Example
by Ali Kafel, Product Marketing at Sonus Networks
Oct 27, 2011
On October 20th, 2011, my friend from KT Corporation in Korea, Hong-jin Kim, gave a riveting talk at the Sonus Connexions2011 Leadership Conference in Coral Cables, Florida.  Mr. Kim, the Senior Executive Vice President of Service Transformation at KT Corporation, talked about the common problem that all telcos, including KT, are facing:  the exponential growth of network traffic versus the anemic growth of revenue.  He made a case that the old ways of doing business are no longer sustainable and, to thrive in the future, telcos need to do three things:
·       Optimize costs
·       Monetize infrastructure investments
·       Innovate in a rapidly changing environment

He presented the transformation taking place at KT Corporation as a journey of reducing costs and improving revenues and profits.  Rather than just cutting people and changing its service offerings, KT Corporation developed a compelling model for transformation across several dimensions: brand, strategy, network architecture, IT systems and the corporate culture.  He shared some specific changes that KT has made in simplifying its network architecture to reduce operational management and its move from dumb pipes to a smart network.  KT has embraced the idea of becoming a converged telco and IT service company through its use of a simplified network architecture and cloud computing to increase operational efficiencies, innovate with new service models and stay relevant to the future.  One might argue KT has become a next-gen Managed Service Provider (MSP).

 Regarding its people and corporate culture, Mr. Kim was adamant that KT does not believe in laying off employees.  Instead, the company has spent a lot of time implementing programs and processes that re-train people, detect and correct organizational problems and increase employee engagement.  This investment in employees has led to greater trust, increased engagement, improved collaboration and growth in innovation.   Although this transformation is still less than one year old, it is clearly paying dividends.  KT’s “Olleh” brand has improved visibility by over 3X, helping to make KT one of the five most valuable brands in Korea behind Samsung, LG and Kia.  The company  was also selected as the world’s most sustainable communications company in 2011 by Dow Jones Sustainability Indexes(DJSI).

Another great speaker that followed Mr. Kim was Joe Weinman from HP. Joe, who leads HP’s Communications, Media and Entertainment Worldwide Industry Solutions, did a fantastic job of describing the different opportunities that Communications Service Providers (CSPs) have to deploy innovative services. Avoiding the technical features that vendors often use to sell “cloud” solutions, Joe explained the benefits of cloud computing in simple English and explained how it is not always the right answer to deploy services. His position was very clear: “All other things being equal: If cloud services cost less than enterprise IT, then…use them.  If cloud services cost more than enterprise IT, then… …don’t……jump to conclusions.” He went on to explain when dedicated IT resources (private cloud) would make sense for a company versus using a public or hybrid cloud.  Both Joe and Mr. Kim were very well received by the Connexions2011 audience.

Connexions2011 Postscript: Thoughts on Opportunities for Telecom Providers Worldwide
It seems that telcos worldwide have started to embrace cloud computing, at least in terms of offering it as an Infrastructure-as-a Service (IaaS) solution that povides virtualized servers in the cloud to quickly turn processing capacity up when it’s needed and down when it’s not.  This model competes with incumbent cloud leaders, however,  such as Amazon, Google and Rackspace. What I have not seen, and what I believe are the real opportunities for the telcos, are Platform-as-a-Service and possibly Software-as-a-Service models. I think the opportunity in Platform-as-a-Service could be a real winner for the telcos if they integrate cloud computing with service delivery platforms and smartdevices.  Imagine an environment where a developer or a user (yes, you heard me right, a subscriber) could easily create new apps or features.  For example, all smartphones today have location information that is accessible by the subscriber.  I can easily track the location of my youngest son who has an iPhone. So why can’t I create a “policy” that generates an email or SMS (based on my preference) when my son stays out past his curfew? Another example is the recent home monitoring service introduced by Verizon. Yes, it allows me to monitor and control activities using a prebuilt app on my phone, but I still can’t customize and define my policy. How is this service different from what the alarm company offers?

In my view, telcos need to adopt the Web 2.0 model and implement Telco 2.0, which is about empowering the users to customize and personalize their services.  Telcos don’t need to build all these tools themselves: they can get third parties to build them and simply share the revenue.  This, to me, is the true value and power of cloud computing for the telcos.

Do you have comments or other examples of how telcos are transforming their business through cloud computing? Please let me know by entering a comment below.

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