Competition, cost pressures, and the demand for “anytime, anywhere, any device” services and apps are forcing telecom service providers to consider alternative models for the delivery of IT services.
Service providers regard their networks as a strategic asset capable of driving incremental revenue and increased profitability, but how do they extract maximum value from that asset? This is where a cloud computing services model has an advantage for service providers over their current enterprise IT models. With a cloud computing services model, service providers can insert themselves into the value chain by redefining their roles to expand beyond connectivity and provide Web-based application delivery services.
Here are five reasons why service providers should capitalize on cloud computing for their business and for their customers:
The value proposition
Cloud computing has the potential to affect service providers' operating costs by reducing the hardware and software requirements of their current networks and platforms.
Network architectures that build on optimization and consolidation are a key interest -- also, increasingly, a requirement -- for all service providers. Cloud computing platforms also enable enterprises to provision an infrastructure and add computing capacity on demand. This elasticity promotes rapid deployment of solutions and allows service providers to scale their infrastructure based on demand and consequently to improve time to market for new services.
IT independence
With more employees scattered in global offices or telecommuting, web-based services and applications are perfect for the rapidly changing enterprise workplace. Service providers can increase their revenue and market share and capitalize on web-based application services by communicating and promoting the tangible business benefits to their customers.
Mobile communication, accelerated developments in broadband networking, open source technologies, and web 2.0 have made on-demand services more reliable and affordable. Using cloud-based services, businesses can store more data than on private computer systems, allowing them to save on the processing power and hard disk space required for desktop software while giving them access to an unlimited number of applications.
Additional benefits for businesses -- and selling points for service providers -- include lower costs, improved system performance, reduced software cost, instant software updates, data reliability, universal data access, and hardware/device independence.
Managed services revenue
Managed services is one of the fastest growing segments in the IT industry, and service providers are uniquely positioned to capitalize on it. Cloud computing offers carriers an ideal model for developing managed services because they already have the size and depth to build scalable services.
By assuming an end-to-end position (application to end user) in the cloud computing value chain, the service provider can improve and add significant quality of service to user-to-application experiences. This network-based approach to service assurance can position service providers to capitalize on the software revenue market related to the use of the applications -- a market that network providers have yet to fully explore and utilize.
Data center efficiency
With typical data center costs running to approximately 25% of total IT budgets, service providers are under pressure to find cost-efficient business solutions and models to operate their data centers. A cloud computing data center model enables rapid innovation, scalability and support of core enterprise functions, resulting in significant economies of scale.
Opex and capex savings are realized through the standardization of systems and software components. A cloud computing data center reduces the need for additional hardware, software and facilities, as well as automation of server, network, storage, operating systems and middleware provisioning, and security issues, all of which are costly and time-consuming functions.
A cloud computing platform also increases the utilization of servers, which can range from 20% to 70%, resulting in a decrease in required infrastructure. This hardware reduction translates to a dramatic drop in some associated operations expenditures: rack space, real estate, power and cooling. And let's not forget the cost savings associated with continuity and data center longevity. The average life expectancy of a large data center is 12 years. With the cost of developing a data center at approximately $500 million, cloud computing becomes both a business and operational value.
Service provider differentiation
The current economic climate has forced service providers to take a hard look at their business models and how they differentiate themselves from their competitors. The old business model was about cost-per-bit, but in the new paradigm, service providers realize they have to focus on what makes them stand out.
Delivering cloud-based consumer and business-critical applications with solid service-level agreements (SLAs) will not only allow service providers to differentiate themselves but will maximize the value of the network while promoting a new business model.
Moving to a cloud-based platform poses challenges and concerns for service providers. Dealing with standards, security, performance, data compliance aligned with procedures and operations, and availability issues are just a few of the organizational and technical challenges they'll have to address to make cloud computing a true value proposition.
Service providers can leverage their reputations and solid performances to offer reliable, comprehensive and secure cloud services. Most importantly, service providers can show value by strongly emphasizing that cloud computing allows enterprises to focus on other aspects of their businesses without having to concentrate resources on IT, server updates, and maintenance issues -- a win-win service offering for both service providers and their customers.
And last but certainly not least, by ensuring the value of services delivered via cloud computing, service providers not only deliver business value to their users but increase and extend their sustainability.
Ray Mota, managing partner at ACG Research
This article originally appeared on SearchTelecom.com