Telcos and SaaS – An End to End SLA?

Recently The Unreasonablemen posted a critique of one of Krish’s posts. I’ll leave aside some of the more caustic comments he makes but focus on the thrust of what he said.

To paraphrase the post, The UM is critical of those cloud computing commentators that seem to dismiss as a minor point the fact that cloud computing still requires a network on which to deliver it. The post highlights the fact that the current market for cloud computing is (depending on whose figures you use) possibly 5% of the total telecommunications market. As such The UM points out that;

Cloud computing is a parasite on the networks of these Telco’s. But what they don’t realise is that their current business model exist solely at the benevolence of these Telcos. ..The internet (and all other networks) costs loads of money to run. The average Telco spends 10-15% of the revenue on capital.  That’s $100-150bn spent per annum to provide this network. Spends of this nature need to be recouped, & cloud computing companies better understand this because they are going to be asked to pay their way, guaranteed

I’ll come back to the telco specific comments a little later but I was interested to read a post by jim Donovan on En Avant in which Jim makes the comment that;

despite their enthusiasm, many IT people remain balanced and open to the pros and cons of their preferred solution and others…some IT operatives and commentators become increasingly one-eyed in
favour of their chosen way and blind to the merits of others, further
inflamed if the object of their disdain does anything untoward

It’s a valid criticism, and one which Jim so rightly points out can be cast down both sides of the spectrum. From legacy vendors saying that the cloud is pure hype and seemingly a risk to all that is robust and stable, to those on the evangelist side of the divide who say that everything will eventually find its way to the cloud. Jim gives a number of examples of the same us vs them phenomenon (most of which I’m happy to say were well before my time);

• IBM v. the seven dwarfs IBM (Burroughs, Univac, NCR, Control Data,  Honeywell, GE and, depending on where you were, RCA or ICL)
• Mini-computers v. mainframes
• PCs v. everything
• Opensource software v. licensed software, especially Microsoft
• Apple v. Microsoft
• and now, Cloud computing v. on-premise computing.

Personally I join Jim and other in being somewhat pragmatic about all this. I believe there are distinct business advantage to using cloud services – for the very same reason that it’d be ill advised for companies to own their own electricity or water infrastructure, so too does it make little sense to own some part of their computing requirements.

That said, there are some mission critical, core competence and point of difference functions that are best left off the cloud. So where do we pidgeonhole those sorts of areas?

Luckily The Unreasonablemen gives us some answers, no doubt based on their years of telco experience.They state in no uncertain terms that the telcos will start to leverage end users demands for end to end SLAs (and not just uptime guarantees). With web delivered services this isn’t possible – the web being, as it is, an amalgam of multitudes of different facets. However what telcos have is an existing network that could be leveraged by way of private connects and aggregations of cloud computing offerings. To borrow (and twist) a Microsoft term – telcos are perfectly positioned to go for a S+S play – software plus services but with one of the services being end to end delivery.

The Unreasonablemen therefore see a segmentation occurring in the cloud computing market as detailed in the diagram below.

It makes sense – telcos have a network already in place, they understand providing services on a recurring revenue basis, and they’re comparatively good at providing high levels of reliability. The question however that remains in my mind is whether telcos will really understand the implications of the changing landscape, and be able to roll out cloud computing product mixes with sufficient speed to satisfy the market – before alternative providers, with alternative network options, get to scale. Having said that however, telcos are mass market players and it could be argued that telco release cycles are not entirely dissimilar to mainstream adoption – case in point being the mass uptake of telco supplied email in the 90s.

So… the bottom line is that the cloud is here and will continue to grow in importance, but do not discount the strength that private networks and (perhaps – I’m an evangelist after all) on premises delivery will continue to exert.