CEO Interview: Niall Norton and the digital revolution

Written by on February 19, 2016 in Billing & Payments, Features with 0 Comments

Niall NortonIt reflects on how fast things are moving in the communications world that we wanted to catch up with Niall Norton (NN), CEO of Openet just a few months after our last chat. Although the technology nearly defeated us, Norton was in optimistic form.

DisruptiveViews (DV): Niall, in some of our conversations with vendors over the last few weeks, we have been hearing that there is a new will, even excitement, among operators as they transform themselves into digital telcos. Do you feel the same thing?

NN: I am not sure about the excitement exactly, but there is certainly a new impetus. I would say that some are moving as the result of a sharp stick. At the moment there are basically three types of operators. First, there are those that seem quite happy to remain what we rudely call dumb pipes, and there is nothing wrong with that. There are those that are embracing the challenge of becoming digital service providers and there are those who are somewhere in the middle.

Most have the infrastructure to do it, but it is more about the mental tuning and the bravery to do it. The rewards are clearly big, but what made telcos successful before has put up barriers to them being able to compete with the modern digital service providers.

Candidly, the old idea that a product catalogue was valuable is outdated and it is really now just a cost centre. Let’s face it, no-one is going to increase their ARPU just by sending out a thicker bill.

We are moving towards an environment where it is more about sending updates from app stores and things like that. It is worth looking at cable companies. They are becoming content producers, which is probably not something they would have done as their first choice. Something similar is happening to the mobile guys, and there are serious alternatives out there. The fundamental question is: “what do you want to look like in two years’ time?”

DV: If you look at the results of some of the big telcos at the moment, the picture seems to be increasing volumes but flat revenues, almost a defensive position. How many telcos are really making money out of the digital services arena at the moment?

NN: I think it is probably about 20 percent who are moving and the other 80 percent either haven’t made their minds up or simply don’t know yet. I think many companies in that kind of position are basically regrouping and working out what their identity is. If you think about it, there are only two challenges – at a strategic level – that they need to address. One is how do they get from profitless growth to profitable growth and a part of this is changing the partner chain that they operate in. Do more relevant things for consumers, and that is not easy.

The other is reduction in the operating cost side of the model and the move towards a virtualised environment. That means software defined networks, automated cloud, whatever the buzzword of the day is, but these are really important because volumes will continue to climb and terms like revenue per transaction will cease to be meaningful.

What we are seeing is those operators who are embracing a different future are also the first to start automating their networks and breaking the chains of ‘carrier-grade’ specialised hardware. They really are leveraging open source capabilities, taking the human cost out of the equation. For instance, upgrading a data centre with humans involved would have taken 12 weeks and it now takes 19 minutes over the network, with no reliability issues. The risks involved in someone putting in the wrong code are reduced to almost zero.

What I also see, which will make for interesting viewing, is all the big, specialist hardware vendors racing to get married, so that they are prepared for the tsunami that is coming at them. In the next year, year and a half, they will see equipment sales decimated. The operators are now dictating to the industry in ways that they haven’t since the late 1990s. Then operators and the industry moved to real-time and this upheaval is the same order of magnitude.

It is a matter of public record that in 2013 Amazon had cancelled a billion-dollar router order with Cisco, because they can build their own for less than $30 million. In the same way, huge companies like AT&T and NTT in Japan are saying to vendors ‘we are not interested in your road map, thank you, we will build our own.’ The cost savings are so enormous the move is like a religious conversion.

DV: Surely, though, there is going to be a significant cost in the short term.

NN: Yes, it will certainly cost money in the short term but the savings, the business case, is so transparently good that it is not difficult to justify. In fact, the financial analysts would seriously question why you weren’t going in this direction. Operators also won’t do ‘big bang’ transformations, they will pick and choose the most important applications – billing, CRM and the like – and migrate those to the new world, and leave the rest to run on the boxes they have already bought. Many operators have 2018 or 2019 as their conversion deadlines.

DV: The new technology is coming from start-ups, obviously, but operators are comfortable buying from the larger players. What does that combination mean for companies like Openet, you are not a start-up but neither are you an Ericsson?

NN: So, operators are certainly experimenting with the smaller, newer guys, no doubt about it, but their preference is always going to be to turn around to the bigger guys and say ‘can you do this?’ If they can’t or won’t then operators will definitely go with the newer, smaller guys. What will happen is that the bigger guys will not have these new capabilities and will gobble up many of the smaller guys and adopt their technology. That is not a new pattern.

From the Openet point of view, we have several answers. First, our products, particularly charging and policy and our new big data preparation engine are all optimised, Java enabled, programmable and highly automated. That actually is where a lot of our revenue is coming from. I guess we are also pretty respectable. We have been around a while and we can bring some pretty interesting, forward-looking perspectives to the table.

Also, since 2012 we have been investing heavily in future looking ideas, such as virtualised, programmable networks. We are also getting it into the community in quite disruptive ways. Just after Christmas we announced we were making our VNF Lifecycle Manager, our orchestration software, freely available to anyone including  standards community.

We had developed it and optimised it for our own uses, but we put it out there for generic use with all VNFs. The aim is to encourage operators to optimise their networks. So we have good traction with the operators while being forward-looking and they like that. Lastly, on this point, we have been building cash reserves over the last couple of years, generating shareholder traction and we are certainly open to acquiring new technology and companies. We looked at one just recently, but decided against pursuing it for one reason or another. But it is certainly on our minds and we see them as added to our overall value.

We see the big billing systems as a target for the same kind of disruption that is going on elsewhere and we are definitely leading in that space. We intend to rain on a whole lot of parades.

DV: We were going to ask you about your ‘altruistic’ move in giving the VNF Lifecycle Manager away for free.

NN: Well, to be honest, it is a combination of things and we have many different conversations, with enterprises trying to get into this space – and there are a lot of them yet to show – with equipment manufacturers, MVNOs, MVNEs, you name it. It definitely helps our market awareness, market perception, market value, that kind of thing. To them, I am sure it is completely altruistic! Frankly, if we can disrupt things on the benefits of quasi-open source software, then that is what we will do. And also, the industry needs it.

DV: One thing we wanted to pick your brain about is the impact of net neutrality on operators being innovative. It seems a big issue, or is it actually a red herring?

NN: To be honest with you I think it is probably a bit of a red herring. There is a lot of debate, a lot of lobbying and so on. I think there will be a lot of light, but not a lot of heat. It points to the continuation of the status quo, which is a misplaced presumption. I think operators will have a duty of care about what they deliver and the choices for their customers, but I think commerce itself will be the governing factor.

It is a bit like roaming in Europe, operators held on as long as possible, and finally the regulator got bored and said “you’re done.” I think it will work like that. I think the larger issue will be, as is going on in India, about how altruistic things like Facebook’s Free Basics really are. There is a lot of vested interest and investment and business models like that will come under increasing scrutiny. I think this is a great opportunity for operators, because they are the friend to the human in ways that content providers are not, and don’t want to be. Operators are more aligned with what humans actually want. If you are Facebook, you need to lock your audience up quickly before the next Facebook comes along. After all, Facebook only IPO’d in 2012 but we think of it as part of our world. But nothing is inevitable. The only thing, though, is we need to be sure we don’t put new monopolies in place.

DV: Surely the one thing, the vital thing, that operators provide is connectivity, without that you cannot have the services.

NN: That is true to an extent, but if you look at companies like Liberty Global, and Vodafone, they already offload a lot of their MVNO traffic onto Wi-Fi networks. If you think about it, already there are fairly contiguous Wi-Fi networks in the places where most humans live. This is a challenge for operators as well.

There are many of them. The security vs privacy debate will continue to grow, as people perhaps see that they don’t want to look at the Internet through the lens of Facebook or Google algorithms. Also, the equipment manufacturers will face growing pressure to do what the operators want, and, candidly, the standards bodies are well behind in coming up with modern regulation. We are moving too fast.

DV: Niall, we have run over our allotted time, but it was great to catch up. Thank you.

NN: Thank you. The next few months will be fascinating. Seeing who and how it will shake out will be interesting. And it is strange, if you think about it. When I joined Openet, it was inconceivable that Blackberry would not be around now. Those who cannot change their business model will die. Let us hope that Openet can implement on its strategy. If we are still talking in 12 months, you will know we succeeded.

DV: Excellent, then you’ll have to tell us what it was!

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Alex Leslie

About the Author

About the Author: Alex was Founder and CEO of the Global Billing Association (GBA), a trade body focused on the communications sector. He is a sought after speaker and chairman at leading industry conferences, and is widely published in communications magazines around the world. Until it closed, he was Contributing Editor, OSS/BSS for Connected Planet. He is publisher of DisruptiveViews and previously BillingViews. .

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