Cloud Computing In The Telecommunications Sector

Published Date: 02 Nov 2017

Introduction

Information technology is a fast track industry and so it is imperative to keep ourselves abreast of the changes that happen around us. As future global leaders, we want to lay our research in an area which would help us achieve a long term goal of self learning, adding value to our organisations when we go back to our work places. There is ample scope of business growth in the technology space as long as companies are creating value for themselves and foraying into new spaces and investing in research.

In today’s world the word computer is just an old adage until it is related to its peripheral benefits. Man has come a long way from Stone Age to technology age to cutting edge digital age that impacts business today. The focus today is on the various aspects of IT and its relevance in various fields. One such aspect is the much talked about cloud computing. As an analogy of the web or internet, "the term cloud" is a well known cliché, but as soon as it is intertwined with the term "computing," the context gets muzzier. Cloud computing was in its nascent stage and is gradually evolving into a stronger platform. As and when IT needs arise; adding new capabilities, adding resources, increasing capacity without investing huge sum of money in licensing cost, infrastructure, recruitment or training the focus shifts to cloud. (Gruman, 2008).Cloud computing revolves around any subscription-based or pay-per-use service model that, in the actual time, extends the strength and capability of IT. Cloud has been around for the last two decades and is an extension of the concept of virtualisation. This trend of virtualisation has now reached an echelon where Cloud has the potential to deliver value for organisations.

Cloud computing has evolved over a period of time from the adoption of virtualisation, service-oriented architecture commonly known as SOA, utility and autonomic computation. Effectively, Cloud is a next age revolution that happened from infrastructure management in the data centre, ability to manage complex hardware, software, applications inside the data centre, across the enterprise, and finally with Cloud, across multiple domains and organisations. Cloud is largely

viewed as a management system, globally treasured for its technological capabilities. Apparently, cloud can become a commodity for the IT industry.

We see two most prominent industries that use cloud based services in the global market i.e. financial sector and the telecommunications sector, contributing 16% and 10% of the cloud business respectively (IBM confidential). Analysis of the cloud space invoked us to study more about cloud computing and hence choosing the telecommunication industry as our pivot which might surpass the banking sector’s presence in cloud space as more and more telecommunication giants join the race in future.

Through our field research project we want to analyse the following things:

Impact that cloud computing has had on the telecommunication sector

Benefits of using cloud computing by the telecommunication sector

Why do organisations invest in cloud

Theoretical Framework

Understanding ‘The Cloud Concept’

The National Institute of Standards and Technology (NIST) define cloud computing as "a model for enabling rather convenient, on-demand network access to a shared pool of configurable resources (e.g. servers, storage, applications, network and services) that can be provisioned quickly and rapidly and also released with minimal management effort or service provider interaction."

Cloud computing deals with system software in data centres that deliver services and applications delivered as services over the Internet.

Clouds can be broadly categorised into three types depending on their usage. (Grance, 2009)

Public clouds – Public clouds follow the model of pay as you go and are sold in the market as utility computing. These clouds are mostly run by 3rd parties; networks, storage systems and servers host applications for a range of consumers. These clouds are often hosted away from customer base (such as internet), and facilitate ways to reduce consumer risk by throwing up a different feasible solution to the current infrastructure. (Armbrust, 2009)

Private clouds – Private clouds are exclusively built for large firms who have economies of scale and the affordability to build these kinds of data centres. These data centres are internal for a certain organisation which is not made available to public. In this category the firm owning the data centre has the complete control over the data, service and the security. However, the enterprise owns the entire infrastructure and has entire authority to deploy applications on the platform. They can be deployed in a bigger environment such as enterprise datacentre, and could be deployed at a smaller centre if needed. (Lee, 2012)

Hybrid clouds - is a mix of both kind of cloud models discussed above. This type of cloud help to externally provisioned scale, on demand. The power of augmenting a private cloud with the advantages of a public cloud could be used to maintain consistency in service levels during workload imbalance/spike in workload. This peculiar behaviour is more often seen with the use of storage clouds to support Web 2.0 applications. Workload spikes, also known as "surge computing" is often used to handle abnormal spikes in workload whereas to perform routine and periodic activities public clouds can be deployed easily. The technology of Hybrid clouds allows distributing various applications of a firm on a healthy mix of public and private cloud. (Srivastava, 2011)

Telecom operators could also offer a fourth category of cloud services known as ‘Network as a service (NaaS)’. NaaS revolves around the optimal use of resource allocations taking network and computing resources as a unified whole.

After classifying clouds into three categories based on their usage, this paper’s focus is to holistically analyse two areas of the telecommunication where cloud as a technology is used to provide benefits to other customers to whom the Communication service providers cater and how telecommunication sector uses cloud for its own benefit. With telecom operators’ move to embrace the two-sided business models, the entire telecommunication industry is under rejuvenation and transformation of their internal support systems. This leaves them with the capability to expose network assets and interfaces that can be exploited by such features as location and presence, and by assets such as user profiles. CSPs (Communication Service Providers) can use these attributes (for e.g., user preferences and activities and analytics) with 3rd party cloud services that would lead to their value enhancement by making them more contexts relevant to users. Irrespective of the mode of use, the nexus between both the components are critical in two-sided business models.

Telecommunication firms as providers of Cloud

Cloud computing has provided a new dimension and opportunities galore to all the communication service providers to move ahead in the information and communication technology (ICT) value chain. Communication service providers have two major advantages over other industries in terms of clouds.

First of all, the ICT industry provides connectivity in terms of connectivity and domesticity. As far as networking is concerned, no other player is close to the consumer. As a result, the service providers can instantiate cloud functionality with the minimal latency that the users can use.

Secondly, service providers can create bespoke services according to the needs of the consumer; for example, by mobilising the channels available such as bandwidth pipes that connect data centres and user, they could allocate an arbitrary period of time on demand to a consumer.

Telecommunication firms as adopters of Cloud

Telecom service providers operate in a complex operational environment today, heavily dependent on technologies to run their networks and support the delivery of their services. Telecommunication companies have embraced the latest cloud technology to make the most out of its use in achieving potential higher by catering to their clientele, though it is equally beneficial for the telecom firms to start using cloud themselves. With telecom companies having the potential of higher growth, early movers and early adopters who can have the muscle power, the operators are trying to transform their organisations, moving away from legacy systems to adopt cloud services to achieve operational efficiency within the organisation, make substantial cost savings and gain efficiently.

Cloud-based services are also highly suitable for product prototyping and trialling ahead of large-scale market launches.

As users of cloud computing, telecom operators can either:

Simply switching their important business functions and applications to harness the real flexibility, efficiency and operational gains just as any large enterprise would. The service providers can move their ERP systems or other important functions to cloud technology and become their own customers. This would enable them to reduce their total cost of ownership and their initial investments in various technologies and domains can in fact be channelized to one area.

Simultaneously commercialise those cloud-based applications that have been adopted, becoming both users and providers of the service in their organisations at the same point in time. An opportunity exists in mundane/routine telecom functions like OSS/BSS, where a telecom operator outsources its billing and customer care to

an OSS/BSS specialist while partnering with the specialist to offer that functionality to other firms, such as utilities providers or over the top providers.

Apparently, the telecom companies are expected to move to a very different model where all the networks would be spread across various geographies, no longer in the operator’s domain and certain parts of the network functionality and service intelligence could be used on a pay-per-use or pay-as-you-grow basis far from the reach of third party scavengers. (Ericsson, 2012)

The diagram below is a schematic model on which our two pronged theory is laid out.

Source : Ericsson - A world of communication

Though our research framework is based on two aspects of cloud computing for communication service providers, it is also necessary to describe the platforms and service models of cloud. NIST also defines three primarily used service models for cloud computing (GARRISON, 2012). The extensible use of these service models help cloud users or adopters to fulfil their needs in terms of technology which is used in the research paper. All the communication service providers use these models and platforms mentioned below to cater to the needs of their own firm as well as the needs of their client:

• Software-as-a-Service (SaaS)

SaaS is the ability to use the various kinds of user/providers applications hosted on a cloud. The applications deployed on SaaS platforms are accessible from any end user device mainly via interfaces such as web browser (e.g., emails, portals). The end user need not manage the underlying cloud infrastructure which includes network, various servers, complex operating systems, storage facilities, or even individual application capabilities.

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• Platform-as-a-Service (PaaS)

PaaS essentially provides the ability to the client to deploy custom applications using different programming languages onto the cloud infrastructure that are provided/supported by the service provider. In this model the user need not manage any infrastructure, server or storage facility. However the user has certain level of control over the applications and hence the right to retain the host applications within environment configurations provided by the provider.

• Infrastructure-as-a-Service (IaaS)

IaaS on the contrary has the provision to process, store and use other fundamental computing resource where the user has the capability to deploy and run proprietary software, OS, deployed applications for his/her own use. (Buttell, 2010)

Srivastava K, Kumar A (2011) discusses the infrastructure models in cloud computing in detail and mentions the kinds of model to follow when moving from a standard application to a cloud computing platform. The diagram given below is the topology for using the various platforms mentioned above for firms who are cloud service providers or adopters.

Source: Thoughts On cloud

Literature Review

In an attempt to understanding cloud computing it’s a good idea to know evolution of the computing technology. Cloud computing evolution goes back to 1980’s when it started with grid computing by solving large problems with parallel computing and making mainstream by Globus Alliance. In 1990’s utility computing created avenue for clusters as virtual platforms for computing with a metered business model. In early 2000s – SaaS increased the virtualization to the application, with a business model of charging to subscribers by the value of the application. Late 2000s marked the focus on infrastructure and applications for users can gain access to applications from any place, at any time through their connected devices. By 2010s - The cloud computing evolves and matures with better security, more prevalent standards, improved process optimization, composite SLAs and expanded connectivity( IBM confidential).

The present day cloud service has become a key factor for all businesses to consider. Several literatures trace the growing importance and relevance of cloud and cite the decision of the governments host applications on the cloud. The UK government plans to shift all future digital services to a private, secure cloud name ‘g-Cloud’. It shall help realise a return on investment in 3 years, post which the benefits of elastic scaling, infrastructure savings and rapid provisioning will reduce the costs substantially. (Philip Hunter, 2009). Similarly, the US government has also started using and promoting cloud and cloud standards. (Goodburn, M. A., & Hill, S. (2010))

Our reading, further explores the potential of cloud computing as it makes peoples life easier & businesses more efficient. Cloud computing technology is now gradually being introduced to the telecommunications industry as demand from operators for mobile Internet services has started to take off (Bin, 2011)

For telecom consumers cloud means they don’t have to store anything not applications, not photos, not videos etc. in their local systems .So in case the data is lost, customers need not worry as the data is all there in the cloud. For business cloud can enable powerful computing on devices such as Mobile, PC, Tablet etc. (AT&T, 2011)

The next key idea in the literature was the importance of cloud services in the telecom sector. As mentioned by Steve Gold (2012), an example of one of such innovative service offering was the use of Voice over IP, or Internet telephony, to host regular geographic UK numbers (01xxx and 02xxx) in the cloud, and then send inbound calls to the device of choice – this could be a regular landline or a mobile phone using GSM/3G cellular, or alternatively a mobile using VoIP technology across 3G or Wi-Fi channel. By porting the landline into the cloud we get minimal monthly bills for line rental, discounted outbound calls, as well as the ability to deliver a call to one or more devices.( Gold,2012)

Literature has also shown the foray of telecom firms not only in cloud services as SAAS but now even as IAAS. (Komatsu puts IT into Telstra's cloud, 2010) Our study of telecom providers in Sydney brought us to Telstra which is in a quick competition to set up enterprise-grade cloud computing services in the Australian marketplace. It has been silently building its capabilities in cloud computing for the joint goal of both transforming the internal approach to IT and creating a new service offering for enterprise customers in the company. The Komatsu deal is the second significant cloud computing contract won by Telstra following on from a A$50 million deal struck with Visy Industries. Komatsu is extending its existing three-year managed network relationship contract with Telstra to include a wider scope of telecoms services and will also push all its IT services into Telstra's existing infrastructure-as-a-service environment by the end of June. Various reasons why for Komatsu considered a new approach to IT sourcing were ageing infrastructure, expiring contracts, and the need to gear up for a doubling of processing and storage capacity as part of a business transformation project and SAP expansion. In addition, the company is growing rapidly, so speed of deployment is important. Geographically dispersed operations in mining and construction locations meant that Komatsu was seeking a vendor that could deliver reliable services integrated end-to-end (Komatsu puts IT into Telstra's cloud, 2010).

Many companies such as Komatsu & Visy are seeing major cost as well as business benefits adapting to these changing technology needs. We went deep to dig into the benefits in our literature review and found that it’s critical to understand why cloud computing has become the need of the hour. Its significance to consumers and businesses is frequently addressed in various literatures. Ernst and young states that ‘Cloud computing is a fundamental shift in IT that will alter the technology industry power structure, improve business agility for all industries and increase everyone’s access to computing, storage and communications power’ (Ernst and Young, 2011) . Some key points were made on why cloud adoption is a natural move for businesses in the next century.

Business benefit of adopting Cloud services :

Deloitte (2009) discuss the key benefit the cloud services provide to businesses on adoption.

Costs: Reduces upfront IT CAPEX investments for users of both hardware & software since vendors spread their own costs across customers. The key driver is the ‘ pay as you go’ pricing model, (Rawal, A., 2011) where charges are based on its consumption via a subscription model or utilization-based alternative. Also, consumers can pay in parts to subscribe with minimal upfront costs instead of paying for hardware and licenses upfront. Also, cost related to software upgrade, maintenance cost etc. could be transferred to cloud service providers. It also streamlines the IT procurement process by reducing the investment costs & by avoiding administrative costs of multiple level approval process which is traditionally the IT Way. (Deloitte, 2009) . Overall it enhances the businesses speed to market by eliminating any information latency. (Goodburn, M. A., & Hill, S. (2010)

Return on Investment: Accelerates payback and improves Return on Investment (ROI): A lower initial investment and faster deployment time for Cloud deployments leads to quicker benefits and positive ROI. The efficiency gains are primarily linked to the scalability (or elasticity) of Cloud deployments. (Deloitte, 2009)

Risks: Reduces the risks linked to IT deployments, by transferring them (in part) to Cloud providers. (Braude, E., 2008) (Deloitte, 2009)

Accelerated deployment: Business cycles are accelerating in a web-enabled world, with businesses requiring immediate deployment of their supporting IT environment. Achieving this is possible only by leveraging out of the box solutions benefiting from optimized procurement, set-up, and migration time, as well as relatively high standardization. This reduced lag between business & IT helps business focus on the real business issues. IT within organizations should be focussed change agents instead of wasting efforts maintaining the internal IT structure. (Deloitte, 2009)

Scalability: Firms can instantaneously scale up or down their IT infrastructure (processing power, or storage and networking or number of users) as per consumption needs, without costly upgrades or wait times and no capacity constraints. (von Solms, R. R., & Viljoen, M. M. (2012)

The figure 3.a represents the payback period and ROI curve of cloud computing versus in house computing decisions.

Source: Deloitte

Fig: 3.a – ROI curves for Cloud Computing vs On premise Computing

These business-needs drive the need for a shift of services to the cloud in most firms. With the present day growth of cloud, entrepreneurial (Smith, 2009)/small businesses (Braude, Eric, 2008)no longer find IT set up costs as a barrier to entry in the market since cloud offers computing as a utility that can be bought on demand.

Additionally, specifically for the telecommunication industry, the clouds ability to instantly deliver simple, sophisticated, easy-to-use computer applications and information will help meet the business need generated by the proliferation of smart mobile devices, which are similar to handheld wireless computers. (Ernst and Young, 2011)

The literature has further explored the multibillion dollar business opportunity available to cloud service providers (CSP).

Business Opportunity for Service Providers

Analysis by Informa, on the cloud strategy of over 130 CSPs across the world has revealed an accelerating investment and activity to secure revenues from their network assets. (Navigating the Telecom Cloud, 2012).

Fig 3.b: spend on cloud pursuits in various continents

The figure 3.b highlights the spending on cloud pursuits in various continents. While revenue growth rates are beyond 100% per annum are common, only a few make higher than 5% of overall revenues from such cloud services. The literature recognises the need for CSPs to promptly secure long-term profits from these services since demand for

is shifting to emerging markets in developing nations (Greengard, S. (2010)) and across customer segments. (Navigating the Telecom Cloud, 2012).

Recognizing the cloud as an untapped source of business, telecom operators are getting ready to increase their Information and communications technology (ICT) wallet share by exploiting this next wave of opportunity. The global investments in cloud is projected to be more than double from an US$55 billion in 2011 to almost US$130 billion annually by 2015. U.S.-based Verizon has already spent over US$2 billion in 2011, including a major acquisition, to capture a significant share of the global cloud services opportunity. France Telecom’s Orange Business Services has invested €750 million in its global network in 2011 to support cloud based service delivery. Telstra, in Australia, has partnered with leading software, hardware and IT services companies, and acknowledged that cloud offerings will produce 25 to 30 percent of its total revenue within the next five years. The Australian operator plans to make $800 million, cloud-related investments during that period. (Ericsson, 2012)

Further literature review to the CSP’s use of cloud Enablement Framework to enhance the value chain and customer value propositions: They identify 3 main enablers, and company need’s to identify where it fits in the framework based on their strategies, risk appetite & their goals. (Fox, 2012)

Use of Cloud by Optimizers to perform business activities more effectively & efficiently is the need of today. In this way they can increase valued propositions to the customer by improving the connectivity, speed or the storage space etc. (Michael Armbrust, 2010)

Innovators use of Cloud to significantly improvise on customer satisfaction through leveraging assets of Cloud Service Provider while delivering current services, which is expected to result in revenue generating streams based on new business models, which increases the roles and responsibilities of service provider within the system. (Michael Armbrust, 2010)

Disruptors depend on Cloud technology to develop radically different value propositions or what’s called the out of Box ideas. Understand customer needs to generate new market segments, by enhancing the end-customer experience through creating new Business. (Michael Armbrust, 2010)

Key Trends:

2012 Forecast/Growth Rate (Gartner, 2012): Widespread consumerism with Cloud computing

Telecom operators have recognised it as a source of new revenues, with international investments in cloud services is projected to increase from an estimated US$55 billion in 2011 to almost US$130 billion annually by 2015 (Ericsson, 2012)

Following the industry trend, below are examples of telecom industry, which reference to our theoretical framework of adopters & providers:

Cloud as Adopter/Optimizer: O2 will offer Microsoft Cloud services as part of a new partnership between Microsoft and O2 in Ireland. The first service available to O2 business customers from Microsoft is Office 365, cloud productivity solution of Microsoft. O2 can explore the full potential of office 365 and will be able to avail services including Microsoft Office, email and communications on a basis of subscription from O2. This particular deal removes upfront costs of software buying, instead offering customers access to the service

on a payment basis through a single bill from O2. Services such as mobile broadband, voice, and fixed phone lines will be offered with Office 365 software. Subscribers will find it beneficial from packaged offering from O2(Microsoft, 2011)

Cloud as Provider/Innovator: This is a current example of Telecom Company providing a combination of services such as PaaS, SaaS, IaaS .Singapore’s SingTel was chosen to install a private cloud computing infrastructure on a whole-of-government base. G-Cloud provides the first private cloud infrastructure which is developed on a large scale to cover all government bodies in Singapore.

SingTel will provide and maintain G-Cloud for initial 5 years with an option for renewal for the next five years as well. The G-Cloud is an infrastructure whole-of-government private cloud that has multiple users. The benefits include multi-tenancy of services, virtualisation of automation with on-demand provisioning and rapid scalability. The G-Cloud will need to address the different levels of governance & security needs of the Singapore government. This will create standards across the board by shared computing applications & resources across all government agencies thus leading to faster response and reduction in IT operating costs. Innovation is one of the foundations of the G-Cloud’s design, its unique & extensible platform can also be used for trying & piloting new and innovative applications without any heavy initial cost and asset of ownership.

G-Cloud services redefine the government sector’s delivery of services online, to both internally and public as well. G-Cloud paves the road for more government owned e-services to be delivered quickly, securely, on-demand and at a less cost plus anywhere and anytime. (SingTel, 2012)

The next key aspect in the literature studied, covered the various challenges faced by cloud adopters before they move their respective IT structures on the cloud. Before adopting cloud as a service or even providing cloud as a service to various businesses it is essential to understand the challenges faced and provide solutions to meet the same.

Challenges and Debates in Cloud Adoption

Armbrust. M, Fox. A, Griffith. R and Others (2010) discuss some key challenges which providers of cloud face when selling these services to potential customers.

Business Continuity and Service Availability: The primary concern with adopting cloud computing services is its continuous availability and chances of disruption. In spite of several data canters in different geographic regions with different network providers, there could possibly be common software infrastructure or systems which put customers at risk if the firm goes bankrupt. Large customers need the assurance of a business continuity strategy for crisis situations before migration. (Armbrust, 2010) This argument against cloud is however debatable with authors citing the offsite nature of cloud services as a plus for firms who have data stored in in-office servers. Cloud environments additionally meet regulations for business continuity, by bodies such as Securities and Exchange Commission. (Buttell, 2010)

Data Lock-In: The storage for cloud computing is proprietary or not standardized, thus making it difficult for customers to extract data from one website and run on another. Such a dependency may lock-in customers and be attractive to providers, but users are vulnerable to reliability issues, price increases , and risks of providers going bust. (Michael Armbrust, 2010)

Data Confidentiality/Auditability: Data security is the primary objections to cloud computing. Additionally, requirements for auditability, such as Sarbanes-Oxley and Health and Human Services Health Insurance Portability and Accountability Act (HIPAA) regulations (Witt, C., 2011)are essential before moving all corporate data to the cloud. Clouds use virtualization as a primary security mechanism. It protects against users who try to attack the underlying cloud infrastructure. But limitations and bugs in virtualization software or incorrect network virtualization could lead to access to sensitive portions in the provider’s infrastructure. (Ernst and Young, 2011)(Nicolaou, Christina A., Andreas I. Nicolaou, and George D. Nicolaou. , 2012) (Rawal, A. (2011)

Limitation of Session oriented services: A challenge specific to the telecommunication industry is the virtualization of telecommunication (telecom) services, which are session-oriented by nature and currently run on dedicated hardware. Existing mechanisms for running services in the cloud are typically web services with short-lived sessions making them resilient to intermittent failures of the network or endpoints. However, Chang, Y ; Hari, A ; Koppol, P;Martin, A & Stathopoulos, T (2012) have identified that such mechanisms are insufficient for implementations of typical telecom services where sessions are long-lived and service users are intolerant of service and network interruptions. Hence telecom providers need to work towards meeting this challenge. (Chang, 2012)

Cloud Computing is the Future of Telecom

Although we have explored the limitation, its advantages far outweigh those limitations. Hence there exists a strong budding future which is explored via supporting literature review.

As the world is moving towards wireless smart phone world, it is causing rundown for some telecom companies, but it’s also creating opportunities for many telecom companies. One such company is Kuwait Telecom Company. Koreans spend lot of their time at work compared to US or European counterparts. The company is building "Smart work centers" using Cloud Computing and smart technology to decentralize Work places. Because they can work from anywhere, closer to home and customers, it saves the time that is wasted in commuting to & from workplaces, reduces carbon emission, traffic congestion etc. It provides work from home options which many companies adapt these days as a cost saving methodology. (Hugos, 2011)

There are valuable future opportunities for Australian telecommunication sector as well in cloud computing: The Government of Australian needs to ensure to reap the benefits & opportunities by removing unnecessary barriers. With the low cost of infrastructure for users of the cloud, Australian start-ups can compete on ideas, rather than on the amount of resources. The cloud will support the development of new products and services in many sectors. (Mudge, 2010)

Research Methodology

Our research paper focuses on secondary research. During the course of the research we felt worthwhile to keep the fulcrum of our methodology on secondary data collected from academic journals, other research papers, online articles, white papers etc.

We collected information from various academic journals for the literature review. This provided useful insights into the current obstacles in the telecom industry in adopting cloud and providing cloud services.

During the course of our research we referred to many white papers which gave us a bird’s eye view about various aspects of cloud technologies in the telecommunication sectors.

As part of our ongoing research methodology we would choose case studies and industry relevant data to help us broaden the knowledge about the industry standards. Apart from this, we also intend to do primary research by meeting people from industry and ask them relevant questions.