Vision and Value: Standards-based, Web-centric Communications Service Delivery Platforms

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Michael Palmeter's Blog | October 5, 2007   5:16 PM | Comments (0)

The Telecommunications industry has historically been defined by the particular technologies employed to facilitate highly reliable, globally accessible, conversational audio-centric distance communication (well, let's call it 'Telephony and physical networks' to make things simpler).  The social benefits of this conversational distance communication capability have been profound, and have lead to regulatory environments, operational practices, technology standards and business models (on the part of the access network operator) which have changed slowly relative to other comparable industries. While evolutionary change has been the norm since the earliest days of telecommunications, recent technological development and changing user behaviors are set to upend the status quo on a scale not seen since the popularization of mobile telephones in the mid 1990's.

The emergence of ubiquitous broadband Internet access, proliferation of multimedia-capable devices pervasive adoption of standard, easily implemented and widely supported mechanisms for interaction between network-connected users has lead to a disruption of the environment in which the Telecommunications industry has prospered for decades.  The capital costs of providing basic network access have fallen dramatically, and the nature of the access network technology has allowed the applications that use such networks to be almost entirely operationally decoupled from the network itself.  The notion of "Internet access" as a service, distinct from the access to applications which are delivered via that infrastructure threatens to finally destroy the de facto monopoly of incumbent Telecommunications.  The basic voice and messaging services that have virtually defined them in the minds of generations of aging consumers are no longer solely their domain.  Voice communication service providers like Broadvoice, Vonage and Ebay take full advantage of customer-provided Broadband Internet access.  These providers essentially offer client software, Service Infrastructure and connection to the Public Switched Telephone Network for cases where callees are not directly available on their private networks.

Even these providers, for the most part, are struggling However; the technology change is even more profound than many anticipated even a few short years ago.  The very concepts of "Telephony" are a legacy of a rapidly obsolescing technology, now relevant to a youth population, in the developed markets, in the same sense as the Long Play record.  Telephony services of historic importance, like call forwarding, call answer and the more recent services like short messaging are relatively trivial to emulate and operate using Internet and Next Generation telecommunications technologies like the IP Multimedia Subsystem.  So trivial, in fact, that their value is becoming negligible in isolation from the services and content that are at the heart of the World Wide Web user's experience and expectations.  The Internet, as it is experienced by a surging population of affluent, broadband connected and youthful consumers, is able to offer the real-time, person-to-person communications capabilities users require, enriched by (or often enriching) information and content sharing services combined from disparate providers.  These providers, for the most part, are already using the World Wide Web as a vehicle for exposure of their assets to business partners and end customers.  In many cases, these assets exist entirely because they can be exposed in this fashion, as is the case with companies like Google, Amazon.com, Ebay and the other first and second generation Web titans.

There are limitations, however, in purely proprietary systems that may prove to cap their penetration to a relatively narrow user population.  The driving benefit of standards is interoperability between systems, and it is unthinkable that there should not be many independent systems operated by geographically, politically, economically and technically insulated providers.  This is a simple matter of redundancy; at issue is the survivability of critical communications infrastructure.  While it is possible to deliver many advanced capabilities through proprietary means, at least where it comes to the user's experience, there are benefits to the use of standard infrastructure that are visible to users, and few limitations.

For example, users that install the proprietary Skype Voice over IP client (VoIP) are offered the option of installing a Skype Tool bar that extends most current Web browsers.  This browser extension automatically inserts code into rendered Web user interface by looking for telephone numbers and replacing the relevant mark-up with a click-able icon representing that number.  By clicking on the icon, the Skype VoIP client software is launched and automatically begins connecting with the target number (or other Skype user via a Skype ID).  If this target callee is registered on the system and currently reachable via a Skype client, the call session is established directly.  If the callee is not reachable directly, the Skype network routes the call to a Public Switched Telephony Network (PSTN) gateway device that is connected to the IP network at a location that is considered "local" to the callee's premises, incurring the lowest cost.  This ability to "inter-operate" with the PSTN is, in fact, the basis of the Skype business model; Skype charges users for the right to terminate basic VoIP calls outside the Skype network.  In practical terms this is a very low-cost approach that relies on the pervasive presence of the client software to drive adoption of behaviors and infrastructure that are entirely funded and supported by the users themselves, and to charge for the capability that is itself the bulk of cost of sales.  There are real limitations, however, to this approach that will become visible to users by comparison as standards-based systems begin to proliferate.

Using an IMS-like system, for example, it is possible to offer users a number of means to achieve superior utility and convenience, with more fine-grained control over the cost of delivery.  This standards-based system offers the ability to dynamically (or according to the providers design) insert similarly click-able icons or other elements of user interface into Web applications developed and delivered third parties. These click-able icons, widgets or other interface artifacts can similarly connect a callee to a caller, but with the advantage that the system connecting the caller and callee is able to make complex decisions about the caller's likely intention based on time, location, preferences, billing status, identity, group membership or any other data related to the caller, callee or context for the communication session.  These decisions can result in the callee being offered personalized information about the disposition of the caller, options regarding how the caller would like to proceed or other interaction with applications acting on behalf of the caller or callee.  These range from applications like Interactive Voice Response (IVR) user interfaces, simple voice mail, interactive Quality of Service selection, interactive or automated media negotiation, multi-device communications sessions.  All of these advanced services require interoperability between the systems used by the caller and callee.

With all of this in mind, however, it is not the utility of proprietary systems that is the primary threat to the incumbent CSPs; it is the possibility of a proprietary system becoming a standard combined with the radical change in user expectations regarding price, service, reliability, ubiquity and usability that is the real threat.  Given the recent write-down of the value of the Skype acquisition by Ebay, this possibility seems to be, as would be expected, receding.  The possibility of a proprietary system becoming a de-facto standard is very low (although examples of this are easily found), and it is likely that most of the larger proprietary IP communications systems will evolve toward standards.  While user expectations can be met using a variety of technologies, it is likely that the transition from legacy technology to new technology will involve major changes to the business models of most incumbent CSPs.  Surviving this potentially radical shift in business models is the greatest feat they must accomplish, and incumbent CSPs find themselves obligated to invest in process and technology change to improve their odds for a successful transition.  The Telecommunications industry as a whole is being challenged, and the growing minority of forward-thinking service providers that understand their need to evolve are seeking partners who can provide the infrastructure and expertise needed.  The Service Delivery Platform concept, as an example, has origins in the long-understood need for new revenue and growth, but the actual deployment of SDPs seems largely motivated by the desire to mitigate risk.  Neither opportunities for growth nor risk are currently in short supply.

The needs of this leading edge class of incumbent service providers dovetail well with BEA's historic position in the marketplace for Information Technology infrastructure and our current and future product and service offerings.  Service providers such as Yahoo!, Google, Ebay, Facebook, Amazon.com, Salesforce.com, Bebo, LinkedIn and the like are largely technology companies, driven by effective internal development of applications and infrastructure at the lowest relevant levels of the "platform stack". Telecommunications Service Providers have historically relied on their operational excellence ( as providers of an "essential" service) and the massive scale of their investments in physical plant, effectively operating as utilities, to shield them from competition.  They have relied on strategic technology partners (Network Equipment Vendors) to deliver pre-packaged systems built to carefully negotiated standards to continuously improve their operating costs and extend their reach to service more customers.  Prior to the introduction of Wireless networks (which was itself the last great disruptive Telephony innovation), this interest was almost exclusively cost-focused; there was little that could be done to a network that could increase the perceived end-user value of a minute of casual conversation. 

The notion of "differentiation" has only recently been regarded as relevant to the business models employed by these large incumbent providers, and they are ill equipped, organizationally and culturally, to develop the means to innovate and evolve at the same pace as their now well capitalized and mature Web competitors.  In many cases, such as with Google, these challengers are not only unburdened by investments in legacy infrastructure and outmoded organizational structures but are also very well capitalized and no longer deterred by the billions of dollars required to build and operate their own access networks. 

Incumbent Communications Service Providers need vendor partners (like BEA) that can rapidly augment existing infrastructure with tools and technologies needed to offset the CSPs own limited ability to innovate on the scale of their new Web competitors.  In the next two years, the notion of a "vendor built" network will begin to describe only a minority of the largest incumbent CSPs whose physical assets and massive scale are sufficient to force the largest NEPs to truly and finally devolve into out-sourced R&D teams.  The rest of the market will either have re-develop their own differentiating R&D and delivery capability or be trodden upon by the technology-focused new entrants that are born from a culture of technical and business model innovation (again, a reference to Google and Facebook and the like).  Technically, these "Tier 2.5" service providers will require the means to expose their assets to internal communities of casual developers and internal R&D organizations.  In this phase we foresee the rapid growth of the market for "Network Middleware".  This phase will be one best described as "transitional", in that it will not require wholesale changes to business models.  The focus of this phase is cultivation of the means of technical innovation as a differentiator, both in terms of new revenue and new cost savings.

Quickly following this initial phase, however, (or perhaps overlapping by two to three years) will be an equally intense period of development focused on business model flexibility.  This “second phase” will build upon the successes that come from an increased ability to undertake effective R&D and will lead to the development of new assets which can be exposed to users and 3rd parties via the Web, harnessing it as both a sand box for innovation and an immediate source of new revenue.  By adopting an infrastructure which "Web-ify's" the CSPs assets and makes them as easy to access as now well-known Web services like Google Maps or Amazon S3, it is possible to create value in a similar way.  Beyond the ability to initiate a voice session or send a text message, CSPs can offer conferencing capabilities that bridge multiple networks and technologies transparently.  They can broker media transcoding between providers and consumers based on device, client and local network capabilities.  They can provide globally accessible storage for preferences and personal information, multiple user interface options for applications, special access to content stores, handle charging and billing for third parties, offer spare network capacity for computing tasks or data processing, provide user location information or contact preferences information to external applications and a host of other valuable capabilities. There are non-functional requirements on the desired infrastructure as well, however.  The Service Infrastructure that enables this integration and exposure capability should not prevent or complicate in-house development of other more tightly coupled and sophisticated consumer services, and should not have to be sourced from a single vendor.  Taken together, these services and requirements illustrate both the capabilities of and need for Service Delivery Platforms, and make it clear what value BEA is well positioned to deliver.

Operationally, the need for scale, performance and efficiency, security, and other characteristics distinguish the necessary infrastructure from the similar enterprise-focused products that exist today.  Beyond this issue of Web exposure, the unfortunate (from the incumbent's perspective) reality is that the capabilities that once were considered highly advanced and uniquely valuable to users are now bordering on trivial in the minds of a whole generation of new customers that can barely recall a time before Voice over IP became relatively commonplace.  The need for exposure to the Web is merely the beginning of the transformation that is required, and ultimately the success of business models based on this approach will necessarily lead to development of new capabilities for which a proper Service Delivery Platform and SOA infrastructure is required. 

Even large enterprises may become their own CSPs, benefiting from lower costs, improved security, greater utility and usability and seamless interoperability with other similar systems via the Web or purpose-built IP interconnections.  Ultimately, the integration of coordinated, real-time communications channels with business process automation on a mass scale will result in tremendous value for users.  Group-ware, for example, that integrates voice mail and email and handles scheduling and automatic initiation of conference calls, offers a significant value, particularly if it does not require purchase of extensive new hardware (hence Microsoft's "VoIP as you are" marketing campaign slogan for the Unified Communications capabilities their software now provides). This value will be material in terms of service usability and, utility and substantially reduce costs and improve, cost reduction and new revenues for enterprises of all types.  Integration with integration and exposure via the World Wide Web will drive mass adoption of key technologies and volume deployments of BEA products as a consequence.  One of the added benefits of current standard technologies is their functional commonality - Enterprise VoIP systems are often re-purposed systems developed for the "Tier 1" CSPs.

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