Telcos Show a Virtual Networks Trend for CIOs to Follow

If CIOs have any lingering doubts that their enterprises and IT departments are facing an impending virtual network revolution, fresh analysis of the telecommunications industry, by research giant IDC, should help dispel them.

A new IDC report – ‘The Network Virtualization Evolution in Telecom’ – has concluded that network virtualization strategies – based on software-defined networking (SDN) and network function virtualization (NFV) – are now reshaping the telecommunications ecosystem.

The researchers’ latest evaluation discovered that, during the first half of 2014, a series of Communications Service Providers (CSP) and supplier announcements were made that “provide concrete evidence of the maturity of CSP network virtualization”.

The IDC study found that “IT industry approaches and technologies such as virtualization, balanced with telecom industry business considerations, are coming to the forefront of telecom industry dynamics”. The research even went as far as declaring that “network virtualization is set to revolutionize the telecom industry as it transforms the culture and operational infrastructure, as well as the fabric of legacy proprietary infrastructures that have, until now, dominated the space”.

It could be argued that, of all industries, telcos are historically among the most dependent on legacy infrastructure and technology, so if this behemoth industry is radically changing, there is a clear message for all CIOs, no matter what their sector or country.

In its report announcement, IDC says: “As technologies and business dynamics continue to evolve, network virtualization strategies are reshaping the telecommunications ecosystem. The shift to the 3rd Platform, built on cloud, mobile, social, and big data and analytics technologies, is driving communication service providers (CSPs) and their suppliers to accelerate their efficiencies and agility.

IDC describes this 3rd Platform as a ‘hyper-disruption,’ – a once every 20 – 25 year shift to a new technology platform for growth and innovation – something forward thinking CIOs and their enterprises, cannot afford to ignore. Some have even described SDN as the most significant transformation of network architecture and technology since the 1950s.

Research House Gartner also sees SDN as a powerful emerging technology, and not just for telecommunications.

In a recent blog, Gartner Research Director, Gregor Petri, said that, thanks to SDN, network capacity can – over time – just as cloud compute and cloud storage capacity – be consumed, allocated and even paid for on-demand and as-a-service.

“The big advantage of SDN – just like any other type of ‘software defined’ infrastructure – is that it no longer consists of dedicated and proprietary hardware boxes with names such as firewall, load balancer, router, etc,” Petri said.

“If an organization tomorrow suddenly needs twice firewalls then load balancers (or vice versa ), they can do such through software. And as everything that is controlled by software, it can be fully automated. For end-users, this can have major advantages, for example by reducing the time needed for the network to be (re) configured can be reduced from several days to a few hours, or even shorter.”

Many risk-wary and disruption-shy CIOs may be nervous and have concerns about any SDN-NFV ‘revolution’, but Elisabeth Rainge, IDC’s Research Vice President, Communications Service Provider Operations, puts it this way: “Despite budget concerns and questions about the ability to execute on the network virtualization vision, CSPs, telecom vendors, and partners are all embracing potential opportunities.

“Network virtualization for telecom represents some significant challenges, but the upside is extremely high,” Riange said. “And, while not everyone will reap the benefits of this profound sea change (e.g., entrenched telecom equipment manufacturers), IDC sees an evolution of infrastructure that is already elements underway.”

And, if CIOs believe these trends are far away, IDC begs to differ. In its announcement, the research house pointed to what is expected to happen by the end of this year.

Nav Chander, IDC Research Manager, Wireline Network Infrastructure, said: “Many existing CSP network, such as service provider routers, Ethernet switches, and packet optical switches, will transition over the next few years to become software-enabled and programmable with open, northbound interfaces.”

“Many networking vendors are already delivering their first generation NFV-based Virtual Customer Premises Equipment (CPE) solutions, and a number of leading CSPs will begin to launch commercial virtualized telecom services beginning in late 2014,” Chander said.

If you’re interested  in finding out more about SDN, read our blog post Can CIOs Lead the Software Defined Network (SDN) transformation? 

 

Defining Service-led Transformation

Keeping up with the pace of change in technology and services is a challenge for many businesses today. Often core trends start in the consumer space before jumping to the enterprise, in a reversal of what went before.

This shift is what IDC defines as the “Third Platform”. It’s a solutions-focused world of cloud, mobility, big data analytics and social business, disrupting the current status quo of LAN/internet and client/server.

Crucially it’s a shift from infrastructure to services. Value is migrating up the “stack”, from infrastructure to platforms, from applications to data, to industry-specific solutions and communities.

Cloud is a huge driver and enabler of this. Cloud spending is predicted to grow 25% in 2014, reaching over $100 billion, with public clouds winning 75% more deals than private.

 

Shifts in service procurement

End-user demands and expectations are also changing, presenting a challenge for IT departments. Executives in other areas, such as marketing or sales, are increasingly identifying and procuring services that were once the domain of the IT department.

Just as these executives are accustomed to trying and buying apps for their personal smartphones, so they now buy tools for business productivity such as CRM, file sharing, social business and collaboration tools. They can contrast and compare the different services on offer, and mix and match them to arrive at the experience that best meets their needs.

It’s projected that between 2014 and 2017, IT spending by groups outside of IT departments will grow at over 6% a year, nearly 2.5 times the rate that IT department spend will grow. According IDC, 60% of CIOs believe their line-of-business colleagues will have more influence over IT spending in the next three years.

The result? IT departments will likely find themselves managing service providers rather than managing infrastructure or procuring hardware.

 

Service Defined Enterprise

Enterprises are demanding much more from IT. It has to cut costs while enabling business growth and faster time to market. These demands will see business leaders taking a much more active role in IT decisions.

According to a global study that Logicalis carried out into CIO pressures and priorities, interviewing 186 CIOs and IT managers across 24 countries the majority of CIOs are aligned with these goals. They want to reduce their organisation’s emphasis on running IT legacy systems and focus instead on delivering business transformation. Half of CIOs interviewed said they spend between 80-100% of their budget on running past investments.

No one wants to be stuck paying for the past. Modernising internal IT systems, processes and infrastructure increasingly means working externally with more service partners.

This will see organisations evolve into what Logicalis calls the “Service Defined Enterprise”. A Service Defined Enterprise focuses less on what IT systems it owns and more on which IT services it has access to.

A Service Defined Enterprise is a more agile enterprise, because it consumes the services it needs when it needs them, from the most efficient and appropriate source.

 

Focus on the End-user experience

The focus will be on the end user experience rather than the underlying technology that enables it. That’s now someone else’s problem. The IT department no longer needs to build and develop its own solutions. For example, instead of deploying mobile devices it will embrace BYOD and develop effective mobility policies and services. The mindset will be to (securely) enable, rather than to limit and control.

As we step onto the Third Platform, more and more new technologies and services will emerge. While not every emerging technology will significantly disrupt the business landscape, many traditional business models will be overturned. IDC predicts that by 2018, one-third of the top 20 market share leaders in most industries will be significantly disrupted by new competitors.

Choosing the right services and service partners will be critical for an organisation’s competitive edge, and CIOs will be instrumental in driving this.

Though their role in the new landscape will be different, it will be no less vital. Formerly the technology guardian, the CIO will become the internal enterprise service provider (IESP). It will be their job to perfectly align the needs and ambitions of a business with the technology and services required to fulfil them.

The IESP’s motto will be “externally first”: always looking to see if an external service provider can meet their needs before looking to build the service themselves.

Instead of managing technology, they will manage experiences and offer a well-defined service portfolio. They will need to be thought leaders and proactively investigate new service opportunities and possibilities. Their survival, and their organisation’s survival, will depend on embracing disruptive innovation and using it to transform their business.

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Third Platform and its Impact on CIOs

IDC Research predicts that cloud computing will only grow more rapidly over the coming years. In fact, IDC anticipates a tenfold increase in new cloud solutions which is driven by the ‘Third Platform’.

What is the Third Platform?

IDC believes that the IT world is reshaped once every 20 – 25 years by a shift to a new technology platform. IDC refers to this new platform as the Third Platform. The Third Platform is essentially an integration of technologies that came about during the second decade of the 21^st century. It consists of mobility, cloud services, big data analytics and social interaction, and is expected to transform IT more than ever before.

With the advent of consumerised technology such as mobility, social and cloud, and commoditised technology such as compute and storage, enterprise IT is no longer operating in the strictly regulated worlds of the mainframe and client-server computing that made up the First and Second Platforms of ICT.

The Third Platform will bring about a different set of challenges that CIOs and IT have never faced in the past few decades. These are:

• Rapid growth of unified communications, convergence and mobility
• Proliferation of the number and types of devices requesting access to the enterprise network
• New devices – including those related to machine-to-machine communications –bringing greater complexity in traffic patterns, more security threats and different user requirements, including compliance
• Volumes of data traversing networks growing at staggering rates
• The ability to make sense of the ever-increasing information becoming a growing challenge for enterprise customers

The CIO’s role and IT will be impacted in a number of ways:

1. Moving beyond traditional IT

Both CIOs and IT will have to move out of the comfort of the traditional IT organisation, as enterprise IT will be comprised of so much more than internal network management. Requirements for access to the network will continue to rise along with connectivity demands, while IT cornerstones such as compute and storage are commoditising.

The organisation’s stakeholders, especially employees, now have vastly different requirements for their working arrangements. It may include Bring Your Own Device (BYOD), collaboration, working from home or the use of social networks, which will all need the appropriate security measures.

2. Shared responsibility for IT decision-making

The CIO and IT organisation are not always the buying centre and are struggling to match technology with people and processes, according to IDC. As front-office functions and line-of-business managers become more customer-facing, they have a better understanding of customer requirements, and hence, play a greater role in making the organisation’s ICT decisions.

With the increased consumerisation and commoditisation of technology, the line-of-business’ role in ICT decision-making will grow and surpass IT’s role. IDC predicts that by 2016, line-of-business managers will be the lead decision-maker in half or more of new ICT investments.

3. IT will be at the heart of business growth and innovation

IDC believes that the IT function will be integral to an organisation’s growth and innovation efforts. ICT discussions will shift from the technical specifications about a particular technology such as equipment speeds and feeds, to questions about how the particular investment will support the business’ goals, from faster time to market, improved customer response times, etc.

CIOs can no longer be inward looking and technology focused. With the enterprise demanding much more from technology investments, CIOs must position the IT department as a technology service provider in order to leverage relevant products and services to ensure that the organisation successfully achieves their objectives.

Ultimately, IDC believes that the growth of the Third Platform will set in motion the evolution of IT and the CIO’s role. CIOs must step out of their technology-focused role to become technology agnostic to maintain relationships with a few key vendors that can provide a range of services, and ultimately determine how IT can contribute to the organisation’s innovation and growth.

To learn more about the changes to the CIO role and IT and the factors contributing to them, refer to our blog on the key factors reshaping the CIO’s role.