Automate or Die: What Telecom Must Learn from the Auto Industry
Mariana Agache is Senior Director, Global Consulting at Ciena. She leads the consulting practice that helps Managed Service Providers (carriers and multi-tenant datacenter operators) better monetize their networks in the Enterprise and Cloud ecosystems.
This is the first in a series of blog posts focusing on SDN and NFV-based on-demand services. Other posts in the series:
- The Evolution and Revolution of Networking Services: On-Demand, Dynamic, Virtualized
- Can Service Providers Actually Make Money with NFV-based Services?
Imagine for a moment that you’re in the year 1903. The fledgling automotive industry is growing in mass acceptance, the average factory producing about 40 cars per year. Now fast-forward ten years to 1913. Thanks to the vision of Henry Ford and his mass production approach to manufacturing, the number of Model-Ts produced skyrockets, eventually hitting 22,000 cars per year by the 1930s. This by itself is a stunning achievement; however, all the tasks in the production process to date were still performed by manual labor.
Another 30 years passes and we now find ourselves in the mid 1960s. A major change is afoot with the introduction of robots to the assembly line process. With each passing year the technology advances and the precision of tasks increases to the point where now, in the second decade of the 2000s, car assembly plants are almost completely automated, producing up to 350,000 cars per year with minimal manual involvement. All this while the number of automobile options and features exploded.
From Henry Ford’s “People can have the Model-T in any color—so long as it’s black” to the option of heated side mirrors and retractable running boards, the assembly line robots have not just added efficiency, they’ve allowed the manufacturing to become more agile and on-demand. Changing anything on the assembling line is now as simple as a single command—the entire process easily adapts.
I believe the telecom industry is now entering its own automation era, equivalent to the car industry’s transformation during the 1960s. In telecom, software replaces the robots, networks become programmable, and the simple press of a button or interaction between machines delivers different features and attributes to end-users.
The Era of Self-Service Automation is Here
From digital interfaces and self-service portals to offering the same experience in both the digital and physical world, service providers are feverishly exploring new service offerings that are agile, on-demand, and priced by consumption. As enterprises look for additional options and faster innovation, managed service providers need to be open to introducing new products, features, partners, and vendors at the speed required in this digital era.
This has profound implications for a carrier’s network and operational functions. Technological advances, namely SDN and NFV, allow for the necessary transformations: network infrastructures become automated, programmable, and use virtual network functions (VNFs), while operational procedures become more automated and simplified to allow for an on-demand, self-serve user experience.
Economic Benefits of Automation
The economic benefits realized as the telecom industry transforms are very similar to those that drove the car industry—the business benefits of automation:
Revenue increase from shorter lead time, increased operational capacity, product differentiation, selling into new market segments;
Cost reduction from operations, inventory, errors/shortfalls, labor costs;
Cost avoidance, especially related to reduced churn and other future investments.
At Ciena, we understand that identifying and quantifying the economic benefits for a carrier going through this transformation are crucial; that’s why we’ve developed comprehensive business case models to help carriers understand their specific transformation case and support their evolution to this new digital world.
The Enterprise Evolution to a Hybrid IT Architecture
We’ve consulted multiple carriers worldwide that are considering this transformation, and inevitably the first questions we hear are about their services portfolio evolution are:
- What services should be brought to market?
- How big is the addressable market for these services?
- How do we transition from static services to on-demand services and will they cannibalize our existing revenue?
- Which enterprise segment will be targeted first?
Enterprises are increasingly moving to a Hybrid IT architecture, giving them greater access to innovation and multiple sources of IT functions. To meet customer needs, carriers have to respond with service offerings that enable and support this model: on-demand and agile, dynamic and virtual, services that are offered easily across multiple administrative domains (i.e. across multiple carriers, or that can join connectivity and cloud offerings into a single service). Ciena’s BluePlanet software can help carriers achieve this new services portfolio.
A Huge Market Opportunity
There’s a substantial market opportunity out there for carriers making this digital transformation.
That makes the total global market opportunity approximately $33 billion for a carrier transforming its portfolio by 2018. In addition, we estimate that the market could grow even more because carriers will be able to address new market segments, such as the SMB market for virtualized services—a market currently untapped for hardware-based value-add enterprise managed services.
It’s Not a Choice Anymore. The Time is Now.
Just as the automobile industry has changed drastically in the last 50 years through innovative automation and customization, the telecom industry must be prepared for these same types of user-demand services to transform networks because this is what’s coming. In fact, it’s already here.
When is the right time to make the transition to on-demand and virtualized services? It’s absolutely right now.
But what types of services are possible and how do you make a profit when offering them? In my next post, I’ll detail these services that are not just in demand, but also achievable.