What is stopping Amazon selling telecom services?

Written by on March 24, 2016 in Billing & Payments, Guest Blog with 1 Comment

Amazon Web ServicesConsidering what Amazon already sells to businesses, how come it doesn’t sell telecom? And does that represent an opportunity or a threat for Big Telecom?

Beyond the sophistication of Amazon’s consumer operations, there’s an even more remarkable area of its business: selling distributed computing resource to businesses – Amazon Web Services.

The story of AWS represents a complete inversion of the historical model of enterprise IT. Instead of keeping core capabilities locked up and preciously guarded by IT gatekeepers, Amazon found a way to package up and expose the deepest inner workings of their own IT infrastructure. In doing so, the concept went from an experiment in 2006 to a $7 billion line of business in 2015.

Amazon is now the runaway dominant provider in a market predicted to be worth $50 billion by 2020, according to Gartner. Talk about disruptive!

Now with the convergence of IT and telecom, wouldn’t it be logical to think that a move into providing telecom services for business wouldn’t be so far-fetched? What’s so special about telecom?

IF AMAZON SOLD TELECOM

In comparison to the conventional telecom business model, Amazon Web Services has some utterly radical concepts:

  • pay only for what you use – computing power, storage and traffic
  • no long term contract – monthly reconciliation
  • pay less the more you use (compare that to anyone who’s ever run over out of their monthly mobile broadband!)
  • 99.999999999% durability on storage
  • a free usage tier! (that’s F-R-E-E!)

By contrast, here are the rules of the road for telecom:

  • Pay whether you use service or not
  • Long term contract
  • Pay more if you want more capacity
  • No free usage tier

Talk about a clash of cultures!

Now, Amazon will let you buy a direct connection to AWS. But by involving a telecom service provider here’s how that process goes:

  1. Purchase AWS Direct connection
  2. Buy the Amazon part of the service, get a magic code
  3. Give code to a communications provider
  4. Wait some 30days, 50 days, 100 days?

And along the way, you’ll have to set up and manage a completely separate relationship with a service provider purely to have dedicated connectivity to Amazon. That relationship is pretty much the exact opposite of Amazon.

Sure, network is complex and might involve some digging, but the real challenge is the OSS and BSS systems. These were designed for a world where the communications service provider (CSP) is king: the customer orders from the CSP, is billed by the CSP, and complains to the CSP when things go wrong. Most importantly they are all, to a lesser or greater degree, off-line (i.e. insulated from actual customers), with interaction through call centers.

None of them were designed for a world where someone else might be the primary customer or were designed for a customer that wants an online experience.

For Amazon and telecom to be business partners, we’re going to have to do something pretty innovative.

MAKING TELECOM AMAZON-READY

The story of AWS points the way. Amazon turned its operations inside out. It scaled and virtualized a core capability and presented an easy-to-work-with commercial and technical interface.

By contrast, telecom just hasn’t manage to virtualize its operations yet. The core stuff. Not the call centers, but the guts of how network capacity – just like computing resource – gets created, configured, pinned up and managed. (That last point is key. Worthy efforts in telecom OSS/BSS to virtualize have focused on fulfilment. Great, but of limited use once a service hits problems – then I’m back into the NOC. Which means people and screens, and manual processes; hardly the Amazon way.)

The opportunity should be clear enough: Amazon tapped into a jet stream of demand for capacity. From thousands of businesses who wanted capacity, flexibility and control on demand.

DISRUPT…OR BE DISRUPTED

Today’s telecom providers are in the best position to capitalize on their infrastructure (including their core systems and platforms). But that advantage may not last much longer. As Amazon showed, you don’t have to be in the space to disrupt it. And perhaps Amazon’s team didn’t have the internal conflict to deal with – the prospect of cannibalizing an existing line of business.

But that only serves to reinforce the mindset that’s now required for telecom to solve its commoditization conundrum: a fundamental rethink of its business model.

For years now we’ve been hearing about all-IP networks and liquid bandwidth and network virtualization – but here’s the acid test: until Amazon can sell it, nothing much has really changed.

This post and many others are cross posted to www.virtualizedworld.com.  My colleagues at Virtualized World are pursuing solutions to these and many other challenges facing the Communications Service Providers.

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Adan K Pope

About the Author

About the Author: Adan is a highly energetic and experienced business and technology leader in Communications, Enterprise Software, Operations Support, Business Support, Media Delivery and related fields of study. He has worked as a senior executive, CTO, industry expert and thought leader, product manager, VP of Engineering and software engineer. Adan is also also a technical contributor to VirtualizedWorld.com .

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  1. Bob says:

    Amazon is moving in on cable in the US, including telephony services: ‘Amazon is now reselling Comcast’s TV, Internet and television service on its site, via a newly launched section called Amazon Cable Store.The Cable Store allows customers to browse a variety of packages, from Internet-only deals up to combined Internet/TV/phone bundles, complete a credit check, and then schedule an installation all from Amazon.com.’ http://www.irishsun.com/index.php/sid/242467499

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