Network monetisation: Build the business of your network
This is the first in a series of blog posts on Network Monetization, a new suite of services and programs that Ciena has unveiled to help service providers accelerate revenue growth. Chuck Kaplan is Ciena’s VP of Portfolio Solutions, and leads the Industry Marketing team that helped develop Ciena’s Network Monetization program.
“How much?” and “When?” For a vast majority of network equipment vendors, this is as far down the path of understanding your network needs as they want to get.
But the maturity of enterprise requirements and the emergence of cloud are two major factors that are dramatically changing the business environment for service providers. Competing and winning in this challenging new world requires new ways to build and sell services, and more intelligent go-to-market plans. And these needs are only getting more acute with the growing adoption of cloud services.
Early on at Ciena, we realised that it is not enough to help our service provider customers modernise their networks; we need to be a strategic partner that helps them succeed in their business, helps them build the business of their network. So, over the last two years, our Industry Marketing team has been working closely with both internal Ciena and industry experts and consulting directly with our service provider customers to develop specific strategies for monetising their networks.
The result is a new suite of solutions, services and programs aimed at network monetisation – available today as part of our broader Network Transformation Solutions practice – that help service providers better address their enterprise customer needs, and therefore succeed in this new market environment.
With this focused approach, we look past the “how much” and “when” of your network, to address the “why” and “how” for your business model and the enterprises or wholesale customers you target.
To better understand the journey of accelerating service provider revenues, let’s look first at what is changing in the market and the challenges that service providers face.
The challenges of the cloud
Increasingly, enterprises are adopting cloud services to harness an enhanced IT experience using more applications, while maintaining or reducing their operational and capital costs. These applications – including HD video, automated financial trading, and data replication to name a few – require more bandwidth at more enterprise locations, higher performance at certain locations, higher security, and faster service turn-up.
At the same time, this growing use of cloud-based applications within enterprises has added another wrinkle for service providers: how to deliver agile, high-performance connectivity services that respond to variations in bandwidth demand based on time and/or location.
Nowhere is this more important than in the world of cloud-based storage and computing virtualisation, which has spawned a new on-demand consumption model under which connectivity can be rapidly adjusted to economically conform to application-specific requirements.
Too much competition for too few buildings
These shifts in the market create multiple challenges in growing revenues in the connectivity services market. For example, the current markets in which service providers operate are by-and large mature and saturated, requiring service providers to better differentiate both the connectivity services and enterprise applications they offer.
This market saturation seems to conflict with the market reality that network reach (or lack thereof) continues to be a significant challenge for service providers, with fiber reaching only about 30% of business buildings occupied by at least 20 employees in the U.S. and 20% in Europe (both stats from Vertical Systems Group).
With the availability of high-bandwidth services restricted to a minority of a serving market, higher competition and price erosion is the inevitable outcome.
Changing this model will be based partly on a service provider’s ability to reach more enterprises and data centers quickly with differentiated service offerings. The key to this process, however, is finding intelligent ways to identify where to expand their fiber footprint to ensure a future profitable Return on Investment (ROI).
Legacy networks, services, and revenue models
Service providers are also saddled with internal complexity and cost pressures related to their service offers. New services have historically been added to their networks in an incremental, “siloed” fashion, leading to overlapping management systems, back-office processes, equipment inventories, and other components.
This approach has also led to the creation of a portfolio of services with inconsistent attributes and which lack the flexibility and agility needed for supporting new cloud services. This makes it difficult for a provider to clearly articulate its value proposition and effectively market its services.
And, more importantly, the integration of network with compute and storage under programmable IT applications forces service providers to look at new way of monetizing these resources, in a pay-per-use model, different from the traditional Monthly Recurring Charge (MRC) that is traditionally used for network services.
Cloud challenges = new revenue opportunities
The ability of service providers to overcome these challenges in a highly competitive market will, in large part, determine their success in monetising their network assets and succeeding with enterprise customers who have cloud challenges of their own. So what is the way forward for service providers committed to winning in the new “cloud era”?
The answer lies in two fundamental areas: creating a more “cloud-like” model for network connectivity and taking a new, more focused look at your go-to-market strategies.
Creating a more cloud-like network
In the cloud era, connectivity resources must join computing and storage resources as shared assets that can be monetised to serve enterprise applications. Networks must be built to enable tight integration with computing and storage into virtualised resource platforms, on top of which multiple cloud applications will operate. Ciena’s OPn (/ōpən/) architecture is the blueprint for this network evolution in the new cloud applications ecosystem, bringing performance-on-demand as needed by those applications.
This platform approach has wide-reaching business implications. In the near term, service providers are able to consolidate their many legacy telecom services into a streamlined set of optical, Ethernet, and IP services.
This allows them to not only realise considerable operating and capital expense savings, but also open the door to meaningful competitive differentiation in areas such as service turn-up time, visibility, and SLA compliance.
Under this simplified and differentiated framework, connectivity services can be adapted to deliver optimal performance across various enterprise applications. Examples of these applications include data center interconnection, virtualised computing, and managed encryption services. These applications incorporate (among other things) unique interfaces, bandwidth management requirements, and security protocols that underscore the critical importance of adaptation.
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