© 2014 IBM Corporation Cloud in Telecommunications Point of View IBM Institute for Business Value Partner’s Name, Partner’s Title DD Month YYYY

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2014 IBM Corporation Cloud in Telecommunications Point of View IBM Institute for Business Value Partners Name, Partners Title DD Month YYYY Slide 2 2014 IBM Corporation IBM Institute for Business Value Executive summary The telecommunications Industry is the backbone of Cloud Technology, enabling all industries to realize the potential of enhanced efficiency with guaranteed reduction in TCO. Data has become the dominant segment in the Telco industry. The industry has remained at the lower end of the value chain, viz. as a provider of basic data communication. Cloud, however, can radically change this value chain positioning and create new monetization avenues. Cloud deployments are beneficial in the Telecom industry because they 1) help in transforming the internal operations, and 2) help other industries translate capital expense into operating expense, reducing TCO significantly and enhancing performance. IBM is uniquely positioned to help Telecommunication companies envision, strategize and implement innovative cloud-based solutions. 2 Slide 3 2014 IBM Corporation IBM Institute for Business Value 3 IBM and cloud 2 Charting the path for cloud adoption 1 Cloud will transform the Telecom Industry - Generating Revenue as well as Improving Efficiency 3 Slide 4 2014 IBM Corporation IBM Institute for Business Value Market and technology trends are forcing communications service providers to make fundamental changes in the way they do business Intense competition including non-traditional entrants Legacy infrastructure Rapidly evolving consumer expectations $ Decreasing returns, declining ARPU New technology that may be risky for incumbents Eroding customer trust due to performance and privacy issues Change in Telecom Spending - Worldwide Telecom Services Revenue Trend - Worldwide Source: Gartner Report Aug 2014 4 Slide 5 2014 IBM Corporation IBM Institute for Business Value Cloud is a key capability for reducing costs, improving customer experience, and creating new revenue sources and business models 5 The Lean Digital Telco Drastically simplified Rationali- zed IT Digital and real- time Analytics- driven Cloud- powered Globally Integrated Three differentiating capabilities core to telecom providers Traffic vs Revenue New Revenues Sources Cost Reduction Customer Experience Lean Digital Telco will be the key to succeed in todays tough telecoms markets Slide 6 2014 IBM Corporation IBM Institute for Business Value Cloud helps CSPs to realize both efficiency improvements and growth in revenue and profit. 6 Providing cloud services to enterprise customers (B2B) Exploiting cloud technologies for internal workloads Small & medium enterprises Large enterprises IaaS, PaaS, SaaS, BPaaS, vertical solutions, managed private cloud ISVs, born in cloud Churn prevention (B2B) Additional revenues from adjacent services New enterprise customers Agility, faster TTM Elasticity Cost take-out Network monetization Software Defined Environment Compute, Storage, Network. Network Function Virtualization (NFV) Enterprise apps IT & infrastructure Carrier network Providing cloud-based services to consumers (B2C, B2B2C) Consumers Cloud eco-system, developer communities, APIs Apps developers Churn prevention (B2C) Additional revenues from adjacent services New customers Business partners Efficiency Improvement Revenue Generation 12 Slide 7 2014 IBM Corporation IBM Institute for Business Value CSPs have a unique opportunity to take a central position in the Cloud that differentiates them from other potential Cloud parties 12 7 CSPs differentiated capabilities bring them in a central position End-to-end Quality of Service 1 Trust, Security & reliability 2 Customer Insight 3 Local presence to deal with regulatory issues 4 Aggregator expertise 5 Existing relationships with customers 6 IaaS PaaS BPaaS PaaS SaaS Cloud based Solutions Cloud Service Models The three most important characteristics of Cloud Pay per Use Cloud Computing provide metered service usage, i.e. pay for what you use. Elastic Resources Cloud Computing allows users to scale up or down quickly and as needed. Self Service Cloud Computing provides the IT resources you need with self-service access Business processes and users Customer interaction Technology enablement Impact on Slide 8 2014 IBM Corporation IBM Institute for Business Value Client diversity and local market requirements drive the need for Cloud Service Brokering and provides a differentiation opportunity for CSPs 12 8 White Label Resale Data Center Infrastructure Born-in-the-Cloud Applications AGGREGATION PLATFORM On Premise Cloud Applications Syndicated Cloud Services IBM BlueMix IBM Cloud marketplace IBM Service Engage Horizontal Cloud applications Slide 9 2014 IBM Corporation IBM Institute for Business Value Business Challenge KPN Wholesale needed a platform to support the generation of new revenue streams by enabling its distributors and VARs to offer cloud-based application services quickly and easily. Solution Summary KPN Wholesale chose Parallels Automation to help it achieve full operational and commercial service automation that is allowing it to build new revenue streams through its Wholesale customers. Products Used SoftLayer Parallels Automation APS Many integrated ISVs 12 9 KPN made a decision to BUY vs BUILD, and selling value added services on top of IBMs SoftLayers IaaS Results Generate new revenue streams for its wholesale business Leverage APS to enable fast, cost-effective application delivery Tailor application offerings to individual distributor, reseller and market requirements Parallels Automation and the Application Packaging Standard are hugely advantageous for us and crucial to the future of our business. Norbert Van der Knaap, Manager Hosted Applications, KPN Wholesale Slide 10 2014 IBM Corporation IBM Institute for Business Value 12 10 CSPs need to think of new, innovative ways to build applications on the cloud Ecosystems emerge comprising platforms, marketplaces, developer portals, and storefronts as companies seek to be essential to their customers A companys business assets (data, function or computing resources) can be represented as digital Web APIs are created providing access to the companys business assets. Digital products emerge. Co-value creation occurs using 3rd Party APIs, developers, partners, hobbyists, or IT departments all of which consume, compose and produce APIs and APPs APPs as strategic applications emerge; APPs and APIs are used to re-imagine the client experience creating new or enhanced business processes leveraging mobility, cloud, analytics and social platforms Business models evolve to increase customer value resulting in more customers, less churn and more revenue Optimization is continuous based on insights from new customers and usage of APIs. APPs and APIs continuously improve. Product management emerges for APIs as digital products Slide 11 2014 IBM Corporation IBM Institute for Business Value Systems of Engagement Systems of Records 1 2 11 Cloud streamlines systems and operations while also enabling the transformation to a Digital Service Provider Systems of Insights Globally Integrated Enterprise Digital Front Office Improve company efficiency and effectiveness to enable new growth Connect, transact, and engage with customers to create mutual value Employees Business Partner Customer Cloud CRM... SCM ERP Ecosystem Connectivity Pioneer digital- physical innovation Open up to customer influence Craft engaging customer experiences Slide 12 2014 IBM Corporation IBM Institute for Business Value 1 2 12 Hybrid cloud provides a new delivery model for CSPs mission critical applications and OSS/BSS systems Off Premise Rapid access Low entry cost Highly elastic Supported by rich APIs Encapsulating expertise into patterns Open, extensible hybrid model Building on IBM HW/SW/Svc capabilities that are delivering client value today On Premise Fully customizable Robust management Scalable Slide 13 2014 IBM Corporation IBM Institute for Business Value 1 2 13 CSPs who are moving to a Cloud platform can expect typical cost savings of >50 % in IT resulting in payback within ~1 year Financial Benefits Business Benefits IT labor costs reduced up to 50% due to: 1.Automated provisioning with elimination of manual activities 2.Reduction of labor associated with approvals 3.Reduction of labor for image maintenance driven by image standardization Reduce Capex up to 75% for services: 1.Provisioning of Services, Network, hardware and software as needed 2.Reduction in software licensing costs. 3.Automated usage metering and billing Provisioning of fully configured, security and enterprise architecture compliant test environment in less than one hour rather than weeks. Improve quality by eliminating more than 30% of all defects that come from faulty configurations 3.4 Million Dollar Annual Expense [Example] Without cloud With cloud 1.03 million-dollar annual expense Strategic change capacity Liberated funding for transformation investment or direct saving Depreciation (and amortization) New development Software and other costs Labor costs (operations and maintenance) Depreciation ( - 91.6 percent) Labor cost ( - 80.7 percent) Deployment (1-time) Software and other costs New development (for business-enabling capabilities) Annual cost of operation (- 79.0 %) Note: 5-year depreciation period with 5 percent discount rate Slide 14 2014 IBM Corporation IBM Institute for Business Value 1 2 14 Cloud is helping to transform CSPs internal IT and Data Center operations Key reasons for datacenter investments: Datacenters becoming critical part of telecom infrastructure Datacenter interconnection key part of differentiation strategies Cloud-based DC Operational Optimization Efficiency Consolidated its data centers by approximately 97.5 percent - from 200 data centers into five sites, over