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Perspectives & Challenges

NEC believes that Cloud Computing is the most important sustainable revenue opportunity for carriers since voice. By delivering Next Generation IT through the Next Generation Network, carriers would become a strong player in the Cloud Computing business, with unique competence and valuable assets.

Beyond Telecommunication

There comes a time in every successful business when it becomes hard to grow. In developed and developing countries alike, market saturation in telecoms is limiting customer acquisitions and value added services have not been able to generate the same revenue as voice services. To continue to grow, it is time to look for other revenue sources.

NEC believes that for sustainable and substantial growth, "Business IT from the cloud" should be one of the first places to look. Figure 1 shows four examples of value chains that are important and mature sources of revenue. Which value chains are most accessible will depend on your local situation. Carriers already dominate the communications (and to some extent the personal media distribution) value chains. Energy and government service provision are certainly important areas to study, but in most cases Business IT seems a good place to start due to the general trend of SMEs moving to opex oriented models for software, systems and services.
As the diagram shows, carriers can position themselves to capture value from many value chains by providing an IT + communications capability to enable these business models or help deliver public services at lower cost. Through connecting customers or delivering
content, this hub and spoke (core oriented model) has placed carriers at the center of many business models, maximizing their potential for revenue.

The previous Internet age saw users and content providers breaking away to form a direct relationship beyond the reach of the carrier's billing system. The cloud era, underpinned by the concept of "if we share, we can save money and gain best practice", is ironically
marked by consolidation and a return to centralization, featuring the carriers' preferred, core oriented business model. This time, the datacenter is the new core.
Cloud is not new and we can already see well known Web 2.0 cloud players controlling payment, identity and access within the cloud, justified through a much enhanced end-customer experience.

NEC is committed to helping its carrier customers expand their business horizons to include new value chains such as Business IT. This new revenue will come from a new, more intimate relationship with business or enterprise customers, penetrating further into the technology, service and management aspects of their business operations.

Carrier Cloud

NEC's concept of the Carrier Cloud has three pillars:
1. Carrier-centric cloud – the use of cloud computing services, technologies and business models to acquire new value chains;
2. Carrier-grade cloud – being able to deliver cloud services that millions can rely on;
3. Differentiation through IT and network innovation and integration.

Cloud Services by Carrier

Cloud services are the fundamental purpose of cloud: "The ability to provide services on demand, on a per-use basis, which scale dynamically, with the illusion of unlimited resources and without exposing the actual assets providing the service."

What is important to the business customer, whose core purpose is rarely IT, is that they can convert much of their IT capex to IT opex while cutting inhouse IT support opex. For consumers, it is the same model except that they are expected to generate advertising or market intelligence income for the provider.

The uptake of cloud services among the small to medium size enterprise community is complicated. We need to look at network bandwidth and stability, the prevalence of software piracy, regional trust levels and the attractiveness of the accumulated business applications (SaaS) portfolio.

NEC can see at least two phases of cloud service provision for carriers. The phases are differentiated by ecosystem complexity. In Figure 2, Stage 2 demands more cloud user devices, embedded devices, new business models and processes interacting within a
more complex ecosystem.

Cloud Services by Carrier

Carriers' Advantages

We have already talked about the need for new revenue sources and how the cloud owner can control the cloud business model. This is strong motivation for carriers to move into this space – but what competitive advantages do they have?

Our studies have shown that carriers have several advantages over Web 2.0 cloud service providers. These advantages includes their networks, which provide appropriate bandwidth, quality of service and end-to-end security; and commercial maturity which provides more commercial stability, customer support, customer trust and better operational processes. Better service availability can be derived from both. Carriers already have the human resource and know-how to build/ operate datacenters and backup centers.

Carriers also have many telephony switching central offices that have earth-quake resistant, high-power air conditioning, power supply and security facilities. Carrier can use these offices as datacenters. Based on their human and material resources, carriers are considered to have great advantages over other cloud providers.

Carriers' Advantages

These advantages give the carrier a secret weapon, an end-to-end SLA that can only come from a carrier with service availability at carrier levels.

Carriers have other strong points too: they have preferential access to their user's location information such as GPS or femtocell information for example. Carriers can even handle settlement and authentication functions, and use information about their customers and sales channels. All of which add value to cloud services. As carriers can bundle network access with cloud services, they can also offer a more competitive price.

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