cloud services - issues and opportunities for services providers

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ISSUES ANDOPPORTUNITIES FORSERVICE PROVIDERS

INSIGHTS RESEARCH


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CLOUDSERVICES

INSIGHTS RESEARCH


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CLOUD SERVICES:

ISSUES AND OPPORTUNITIES FOR SERVICE PROVIDERS

INSIGHTS RESEARCH

Report author:

Rob Rich

Managing Director, TM Forum

Insights Research:[email protected]

Publications Managing Editor:

Annie Turner

[email protected]

Creative Director:

David Andrews

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Mark [email protected]

Publisher:

Katy [email protected]

Client Services:

Caroline [email protected]

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Saryia Green, Marketing Manager,

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Report Design:

The Page Design Consultancy Ltd

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Advisors:

Keith Willetts, Chairman and Chie

Executive Ocer, TM Forum

Martin Creaner, President and Chie

Operating Ocer, TM Forum

Nik Willetts, Chie InormationOcer, TM Forum

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Page 4

Executive summary

Amidst the hype, cloud services are taking

shape and their deployment is accelerating

Page 6

Section 1: The cloud emerges

Understanding the opportunities or

service providers

Page 14

Section 2: Analysis

Service providers discuss present and uture actions and

plans or the delivery o cloud services

Page 20

Section 3: Key areas in providing cloud services

Critical areas service providers must ocus on to succeed

Page 25

Section 4: RecommendationsIssues to consider rst

Page 28

Section 5: A new era o agile IT

Introducing TM Forums Enabling Cloud Services Initiative



CLOUDSERVICES

INSIGHTS RESEARCH

In this report, we are addressing the issues and

opportunities around providing those services

or each player in the cloud ecosystem. We

discuss the communications service providers

(CSPs) view o the services potential benets

and challenges, and the actors critical to

their success with the services. The report

also introduces TM Forums Enabling Cloud

Services initiative.

The Forums initial, primary research,

gleaned rom interviews with 20 Tier 1 service

providers, indicated CSPs are more active in

the eld o providing cloud services rather than

consumption at this stage. (We explore the

possible advantages and potential pitalls o

using cloud services in a Quick Insightsreport,

Cloud services: The users perspectivewhich is

published in tandem with this one.)

The rst section o this report outlines

how cloud services are a new approach to

planning, delivering and consuming IT and

network-enabled services or businesses and

consumers. They are end-user ocused, with

little or no onus on the user to understand the

location or characteristics o the underlying

inrastructure.

It explains the hope is that cloud servicescan greatly improve todays IT delivery model

through smaller upront costs, reduced capital

and operational expense, and less nancial

risk. Other benets could be aster time to

market, less downtime and ewer delays,

access to greater expertise, and higher levels

o standardization.

The cloud services market is in its inancy

and will likely enjoy double digit annual revenue

or the oreseeable uture. In act, cloud looks

to be a ar more sustainable phenomenon than

many other recently hyped architectures and

technologies. It shares many characteristics o

tsunami-like trends such as:

n early market leadership by web icons

like Amazon and Google;

n rapid emergence o new tools and

technologies or use and operations;

n strong endorsement by long established and

emerging technology companies;

n substantial investment by service providers

o all types, including some o the largest

and most innovative CSPs;

n the attention o hordes o developers

across a very broad spectrum o markets,

applications and capabilities; and

n the attention o a variety o users,

including large enterprises, small and

medium businesses, and early adopting

consumers.

In addition, cloud providers and customers

alike are increasingly accepting o cloud service

delivery model denitions, including Sotware

as a Service (SaaS), Platorm as a Service

(PaaS), and Inrastructure as a Service (IaaS), as

well as industry-specied deployment models,including private cloud, community cloud,

public cloud and hybrid cloud.

At the same time, lack o clarity (or even

acceptance) o denitions, a lack o standards,

and a healthy dose o skepticism are

creating barriers to adoption. Concerns about

security, availability, perormance, unit costs,

interoperability, fexibility and personalization

raise those barriers, and slow the adoption o

cloud services.

The cloud services market will not realize its

Executive summaryAmidst the hype, cloud services are now taking shape and

their deployment is accelerating.



Many challenges o providing cloud services

could be met through partnerships

INSIGHTS RESEARCH

potential unless these concerns are addressed,

and cloud services deliver the eectiveness,

variety, value and security that they promise.

Working on this premise, the report exploressome workloads which have characteristics

that might be well served through cloud

services, as well as those that might be

inappropriate, at least at this stage.

The report goes on to assesses the

strengths and weaknesses o CSPs as cloud

services providers to business customers.

CSPs have many strengths, such as a long

history o selling services to enterprises,

reliability, and a proven ability to scale services

to meet demand. On the other hand, they

need to tackle dicult issues such as gaining

sucient business agility and IT market

knowledge, and delivering cloud services at

low cost.

Some o these challenges could be achieved

through partnerships and several CSPs have

already established partnerships with apps

vendors, security sotware vendors, unied

communications vendors, and PaaS and IaaS

vendors to fesh out their portolios.

The second section o the report

summarizes primary research involving 20

Tier 1 CSPs including the status o their cloud

services programs, the perceived benets

o the services, target markets, the most

important services, and the biggest challenges

and critical success actors.

Some 65 percent o CSPs are oering

one or more services with most targeting

business markets initially. Respondents think

their largest revenue gains will come rom

cloud-related connectivity and computing-

related services to established customers.

They believe the primary benet o their cloudservices would be cost savings, better value

or the money, reduced capital expenditure and

greater fexibility o IT resources.

CSPs are most keen to oer services such

as collaboration and conerencing, connectivity,

applications, unied communications and

security, but acknowledge their biggest

challenges include managing service

quality and costs, providing good customer

experience, and security management.

They see the most critical actors to their

success as being operational excellence,

customer experience management, service

portolio management, and managing partners.

Section 3 explores our broad areas oocus or service providers in delivering cloud

services: security management; perormance

and service level agreement management;

usage metering and charging; and end-to-end

process automation.

These are just a ew o the areas that

require attention, but they are among the most

important and some have been neglected in

the past. CSPs need to address them i they

are to succeed with cloud.

Section 4 puts orward a series o

recommendations, ranging rom the need

to understand the big picture and crating

an eective strategy, to the importance

o ocusing rst on excellence in service

quality, leveraging partners and seeking top

management support.

It also advises CSPs to take advantage o

standards and rameworks: to assess and adapt

revenue management to the new services, or

their delivery mechanism and business models;

to test their own services; and to bolster and

emphasize security and perormance as key

issues or would-be customers.

Section 5 introduces TM Forums Enabling

Cloud Services initiative, which aims to

stimulate the growth o a vibrant and open

marketplace or the services by bringing

together the ecosystem o enterprise users

and cloud providers to remove barriers to

adoption through industry standards.

We hope you nd the report valuable.

Though cloud services scope is broad and the

models inherently complex, or the oreseeable

uture they will provide considerable revenueopportunities or service providers that can

ocus and execute.

CSPs have many

strengths, such as a long

history o selling servicesto enterprises, reliability,

and a proven ability to

scale services to meet

demand.



CLOUDSERVICES

INSIGHTS RESEARCH

Many question whether todays incumbent IT

delivery model is sustainable in the long run.

While hardware capital expenditure (CapEx) is

relatively fat, thanks to the eect o Moores

law, the cost o power and especially the

cost o systems and network management

is increasing markedly, with no end in sight.

Clearly, the worlds collective compute

inrastructure needs to be simplied i users

are to manage costs. This has given rise to the

cloud computing movement, which is probably

the most hyped topic in IT today.

Cloud services are a new approach to

planning, delivering and consuming IT and

network-enabled services or businesses and

consumers. Cloud is end-user ocused, with

little or no onus on the user to understand the

location or characteristics o the underlying

inrastructure.

To accomplish this, cloud requires ubiquitous

network access, resource pooling that takes

no account o location, rapid elasticity, fexible

pricing models, readily available sel-service,

and, most o all, economies o scale. The

implementation o cloud seems to be complex,

but it appears to address most i not all o the

issues in the incumbent IT delivery model.

The purpose o this report is to:

n outline the issues and opportunities relevant

to each o the players in the cloud services

ecosystem;

n discuss communications service providers

(CSPs) views o the potential, benets,

challenges and critical success actors o

cloud computing or them;

n introduce the TM Forums Enabling Cloud

Services Initiative.

Understanding opportunitiesor service providers

Section1: The cloud emerges

To accomplish this,cloud requires ubiquitous

network access, resource

pooling that takes no

account o location, rapid

elasticity, exible pricing

models, readily available

sel-service, and, most o

all, economies o scale.

Some view cloud services as a recent

phenomenon, others suggest they have a long

history and that the rst cloud was the PSTN.

The term cloud is believed to have been

coined in the 1990s in telephony, when it was

used to reer to the network in the context

o Virtual Private Network (VPN) services,

which at the time were or voice. Others argue

that the real origin o the concept behind

cloud computing dates back to 1960, when

pioneering computer scientist John McCarthy

suggested that computation may someday be

organized as a public utility

Certainly rom the end-users point o

view todays cloud computing shares some

conceptual characteristics with service delivery

models that date back to the 1960s. This is

especially true with service bureaus, where

subscribers used connected dumb terminals

to perorm computing tasks through very

expensive mainrames at remote acilities, and

never physically encountered the inrastructure

The advent o cheaper hardware

(minicomputers in the 1970s and PCs in

the 1980s) spelled the death o many o

these services bureaus, but ultimately

the prolieration o computing platorms

(including smart devices), the mushrooming omanagement costs and technological evolution

(such as virtualization, Service Oriented

Architecture SOA and so on) appears to

be bringing us back to more o a cloud-based,

service bureau-type approach, although

in a ar more fexible, robust, and scalable

environment.

Despite its rich history, cloud today is a

service delivery model and a market in its

relative inancy. It is buoyed by a collection o

capabilities and models that have emerged



Cloud looks to be a ar more sustainable

phenomenon than many other recently hyped architectures

INSIGHTS RESEARCH

Lower

operational

expense

Access to

broader

expertise

Decreased

downtime

Lower

capital

expense

Increased

standardization

Decreased

time to

market

Reduced

fnancial risk

Lower

upront

costs

over the last decade or so, and many observers

think it will enjoy annual revenue growth rates

greater than 20 percent, sustainable or the

oreseeable uture. In act, cloud looks to

be a ar more sustainable phenomenon than

many other recently hyped architectures and

technologies. It displays many characteristics

o other tsunami-like trends such as:

n early market leadership by web icons like

Amazon and Google;

n rapid emergence o new tools and

technologies or use and operations;

n strong endorsement by long established and

emerging technology companies;

n sizeable investment by service providers o

all types, including some o the largest and

most innovative CSPs;

n the attention o hordes o developers across

a very broad spectrum o markets,

applications and capabilities; and

n the attention o a broad variety o users,

including large enterprises, small and

medium businesses (SMBs), and early

adopter consumers.

These points notwithstanding, there are

many dierent views on the uture o cloudservices, due in large part to the diversity o

ways in which cloud services and computing

are perceived. In summary they constitute

an emerging computing and communications

paradigm that has the potential to change how

businesses, consumers, governments and a

variety o devices gain access to, generate

and consume inormation, content and

entertainment services.

Some think cloud will rise rapidly to become

the most important service delivery platorm

o the uture, while others say it will collapse

under the weight o expectation.

The lack o clarity (or even acceptance)

o denitions, the lack o standards, and a

healthy dose o skepticism create adoption

barriers. Concerns about security, availability,

perormance, unit costs, interoperability,

and fexibility and personalization raise those

barriers, and slow the adoption o cloud

services.

These concerns have been ueled by a

handul o events where access to services

have been lost or extended periods, and in

one case, a critical database storing inormation

rom thousands o mobile devices was lost

and largely unrecoverable. While these sorts

o disruptions are to be expected in early

stage deployments, they are not acceptable

in more mature production environments, and

customers condence must be bolstered to

encourage growth.

Figure 1.2: The potential

benefts o cloud services.



CLOUDSERVICES

INSIGHTS RESEARCH

Cloud clearly oers terric potential benets

to subscribers and providers alike (as shown in

Figure 1.2) including:

n lower upront costs. When introducing a

new application, hardware is an upront cost,

but cloud services allow the subscriber to

pay the provider or usage, avoiding advance

expenditure and allowing them to spread the

cost over time, and manage it closely. So the

ten servers required by an application can be

purchased incrementally.

n aster time to market. It typically takes a ew

months to get an application into production,

but in the cloud, applications could be

deployed and scaled in hours. O course,

rollout issues like training remain, but online

training and support acilities can help speed

rollout as well.

n reduced nancial risk. I an application is

not successul or whatever reason, or its use

within the business is or a limited time, it can

be discontinued without the user being let

with ownership o the inrastructure. The user

also avoids the nancial risk o technological

obsolescence.

n lower capital expense. Cloud computing

allows the user to avoid not only the expense

o the hardware, but also the expense o

setting up data centers, which may exceed

investment in the computing inrastructure

itsel. For large users, it also avoids the

potential limitations o power and cooling or a

single acility, as workloads are spread across

the cloud.

n lower operational expense. With economies

o scale, high levels o automation and

sel-service, users can avoid many o the

expenses o current operations, and the bestcloud providers may gain energy savings.

n decreased downtime and delays. Since the

workloads can be spread across many

acilities, and even across clouds, redundant

instances o applications can be used to

avoid downtime. In addition, data distribution

strategies can help address disaster recovery

and business continuity issues. Finally, larger

providers can aord to build hardened

acilities, with state-o-the art, backed up

power supply and cooling equipment.

n access to expanded expertise. Cloud service

providers can aord to oer more specialized

services and deeper expertise than many IT

departments, given their economies o scale.For example, advanced security techniques,

application perormance optimization, tailored

user support and business continuity services

may be available.

n Standardization. The use o cloud services

drives standardization among users, who

might not get every bell and whistle they have

in a proprietary world, but the overall benets

o cloud services oten make up or this.

Importantly, standardization o services can

also acilitate the simplication and alignment

o business processes, yielding urther

savings and enabling the scaling o processes

within an enterprise.

Oerings by pioneering cloud service providers

have demonstrated some o these benets

to some extent. The scale o benets is still

relatively small, but they are real and will only

increase as the market grows, along with

the maturity and experience o cloud service

providers. Yet it cannot be over-stated that

clouds potential will not be realized unless real

customers needs are addressed, and cloud

services deliver the eectiveness, variety, value

and security that they promise.

Defning the cloud

Beore dealing with cloud services in the

communications industry, it is useul to

introduce the baseline denition o what cloud

is. By ar the most accepted (and neutral)

denition is provided by the National Institute o

Standards and Technology (NIST).



By ar the most accepted (and neutral) defnition is

rom the National Institute o Standards and Technology

INSIGHTS RESEARCH

Here is what NIST has come up with:

Cloud computing is a model or enabling

convenient, on-demand network access toa shared pool o congurable computing

resources (or example, networks, servers,

storage, applications, and services) that can be

rapidly provisioned and released with minimal

management eort or service provider interaction.

This cloud model promotes availability and is

composed o ve essential characteristics, three

service models, and our deployment models.1

Essential characteristics o cloud computing:

On-demand sel-service. A consumer can

unilaterally provision computing capabilities

as needed, such as server time and network

storage, automatically (without requirement or

human interaction with each services provider).

Broad network access. Capabilities are

available over the network and accessed

through standard mechanisms that promote use

by heterogeneous thin or thick client platorms

(e.g., mobile phones, laptops, and PDAs).

Resource pooling. The providers computing

resources are pooled to serve multiple

consumers using a multi-tenant model,

with dierent physical and virtual resources

dynamically assigned and reassigned according

to consumer demand. There is a sense o

location independence in that the customer

generally has no control or knowledge over

the exact location o the provided resources

but may be able to speciy location at a higher

level o abstraction (e.g., country, state, or data

center). Examples o resources include storage,processing, memory, network bandwidth, and

virtual machines.

Rapid elasticity. Capabilities can be rapidly

and elastically provisioned, in some cases

automatically, to quickly scale out and rapidly

released to quickly scale in. To the consumer,

the capabilities available or provisioning oten

appear to be unlimited and can be purchased in

any quantity at any time.

1 Source: Peter Mell and Tim

Grance o National Institute o

Standards and Technology (NIST),

Inormation Technology Laboratory

Measured Service. Cloud systems

automatically control and optimize resource

use by leveraging a metering capability at some

level o abstraction appropriate to the type oservice (e.g., storage, processing, bandwidth,

and active user accounts). Resource usage

can be monitored, controlled, and reported

providing transparency or both the provider and

consumer o the utilized service.

Service models:

Cloud Sotware as a Service (SaaS). The

capability provided to the consumer is to use

the providers applications running on a cloud

inrastructure. The applications are accessible

rom various client devices through a thin

client interace such as a web browser (or

example, web-based email). The consumer

does not manage or control the underlying

cloud inrastructure including network, servers,

operating systems, storage, or even individual

application capabilities, with the possible

exception o limited user-specic application

conguration settings.

Cloud Platorm as a Service (PaaS). The

capability provided to the consumer is to

deploy onto the cloud inrastructure consumer-

created or acquired applications created using

programming languages and tools supported by

the provider. The consumer does not manage

or control the underlying cloud inrastructure,

including network, servers, operating systems,

or storage, but has control over the deployed

applications and possibly application hosting

environment congurations.

Cloud Inrastructure as a Service (IaaS).The capability provided to the consumer is

to provision processing, storage, networks,

and other undamental computing resources

where the consumer is able to deploy and run

arbitrary sotware, which can include operating

systems and applications. The consumer does

not manage or control the underlying cloud

inrastructure but has control over operating

systems, storage, deployed applications, and

possibly limited control o select networking

components (or example, host rewalls).



CLOUDSERVICES

INSIGHTS RESEARCH

Another useul extension

is communications as

a service (CaaS), which

provides a varietyo IP-based

communications and

collaboration capabilities

using a cloud service

model. CaaS is generally

targeted toward small

and medium businesses

(SMBs).

Deployment models:

Private cloud. The cloud inrastructure is

operated solely or an organization. It may bemanaged by the organization or a third party and

may exist on premise or o premise.

Community cloud. The cloud inrastructure is

shared by several organizations and supports a

specic community that has shared concerns

(e.g., mission, security requirements, policy, and

compliance considerations). It may be managed

by the organizations or a third party and may

exist on premise or o premise.

Public cloud. The cloud inrastructure is made

available to the general public or a large industry

group and is owned by an organization selling

cloud services.

Hybrid cloud. The cloud inrastructure is a

composition o two or more clouds (private,

community, or public) that remain unique

entities but are bound together by standardized

or proprietary technology that enables data and

application portability (e.g., cloud bursting or

load-balancing between clouds).

Note: Cloud sotware takes ull advantage o

the cloud paradigm by being service oriented

with a ocus on statelessness, low coupling,

modularity, and semantic interoperability.

Source, NIST 2009

It should be noted that there are various useul

extensions or additional components to the

denition that have been suggested by industry

players. These include service models like

Business Process as a Service (BaaS), wherebusiness process outsourcing providers might

provide services like travel, payroll/benets

administration, clearinghouse or procurement

services through a cloud delivery paradigm.

Another useul extension is Communications

as a Service (CaaS), which provides a variety

o IP-based communications and collaboration

capabilities using a cloud service model. CaaS

is generally targeted toward small and medium

businesses (SMBs).

TM Forum is also exploring the concept o

Database as a Service (DBaaS). There are a

handul o other emerging models as well, but

or the most part, we will stick with the NIST

denitions throughout the report.

Leveraging the cloud fnding workloads

that work

As stated earlier, cloud computing is a service

delivery model and a market in its relative

inancy. As such it should not be seen as a

panacea, but rather as a model able to deliver

some (but not all) important services and

applications. Users must be careul about which

sorts o services they choose to deploy initially i

they are to be successul and gain momentum.

Some initial services that are suitable or cloud

deployment include:

n Compute services and storage services

which could exploit economies o scale,

provide attractive nancial benets and get to

market aster.

n Development and test environments can

oten be provisioned ar more quickly,

as existing capacity can be used rather

than having to provision new servers and

development tools.

n Business continuity and disaster recovery can

also be provisioned more quickly, and oers

the advantage o instant, o-site, ubiquitous

access, as well as substantial CapEx and

operational expenditure savings.

n Audio, video and web-style collaboration can

be accessed almost immediately, again with

signicant savings.

n Select industry applications, especially those

or a distributed workorce (such as sales

orce automation) can be provided aster,and at lower cost. Also, resource intensive

applications that are run only periodically

(like invoice rendering) are good candidates.

n Analytics can be provisioned quickly as a

service, and provide additional horsepower

or in-house, compute-intensive, analytical

applications, or they might be used or real-

time results on cloud-centric inormation like

web or mobile advertising,

n Contact center services like IP-based

automatic call distribution (ACD) and



There are a number o areas that

cannot be easily accommodated by cloud

INSIGHTS RESEARCH

interactive voice response (IVR) can be

deployed in the cloud, especially or SMBs or

inormal contact centers that wish to avoid

the expense involved in a ull blown contactcenter. Collaboration tools also t in here.

n Data storage and archiving could be oered

relatively inexpensively by cloud, either as part

o a business continuity/disaster recovery

solution, or standalone.

n Desktop virtualization separates a PC desktop

environment rom a physical machine using a

client-server model o computing. The model

stores the resulting virtualized desktop on a

remote central server, instead o on the local

storage o a remote client. This can potentially

be done more eciently in a cloud model

There are also a number o areas that cannot be

easily accommodated by cloud, at least at the

present time. Some examples include:

n Highly customized applications since

some o the scalability and fexibility o cloud

inrastructure is dependent on standard

sotware, users should use caution in moving

these applications to the cloud.

n Sensitive data as concerns remain regarding

security in the cloud, users should be careul

about moving sensitive data there. This is

particularly true or data with geographic

storage restrictions i the cloud services

provider cannot guarantee the location o the

data to the user.

n Complex transactions may not be suitable,

given the latency and interoperability concerns

around current cloud implementations.

n Applications and data with regulatory

restrictions; given the relative immaturity o

cloud inrastructure, users should proceedwith caution here.

n Legacy batch applications which have already

been optimized or may have a relatively short

reaming lie may gain little rom transition to a

new delivery environment.

There may be exceptions to each o these

cases, but generally speaking services and

applications in the rst group will see more

value and less risk rom a cloud implementation.

Cloud service brokers an emerging concept

Among the most interesting roles emerging in

the market is that o the cloud services broker.One characteristic o rapidly emerging markets,

such as cloud services, is the prolieration o

new roles. There is a growing opportunity or so-

called cloud service brokers to serve as trusted

intermediaries between end-users and cloud

services providers.

There are many small and specialized rms,

each with their own characteristics, fooding

into this market. Cloud services brokers can

help customers select the right services, deploy

services and applications across multiple clouds,

and perhaps even gain by arbitraging services

across clouds to improve users pricing and

brokers protability. There are a number o

ways brokers can add value, including:

n One stop shopping: Brokers can ease the

selection process and add expertise;

n Expanded service portolios: Brokers can

expand the oerings to their customers,

increasing responsiveness;

n Cloud aggregation: Brokers can deploy user

services across multiple cloud inrastructures

and platorms, potentially improving

perormance and avoiding provider lock-in;

n Cloud service intermediation: Brokers

can build additional services on an existing

cloud providers platorm. Examples might

include beeng up security and management

capabilities, or building complementary

applications;

n Cloud service arbitrage: Brokers can acilitate

opportunistic choices driving competition

among cloud providers or the benet o the

broker or the customer.

CSPs would do well to explore the cloud service

broker opportunity, perhaps mixing some third

party services with their own and leveraging

their brand by marketing them to their customer

base.

CSPs would do well to

explore the cloud service

broker opportunity,perhaps mixing some third

party services with their

own and leveraging their

brand by marketing them

to their customer base.



CLOUDSERVICES

INSIGHTS RESEARCH

CSPs and cloud services

Many service providers have already announced

or deployed cloud services, a considerablenumber o them through partnerships. CSPs

must demonstrate business agility, market

knowledge, and cost leadership with their

own oerings. They can also do so through

partnerships with other providers. For example,

a CSP may choose to partner with a lower cost

supplier to provide cheaper inrastructure or

customers lower priority applications, or to gain

early access to a particular application. This gives

the partner access to a stronger distribution

channel and brand in return. The list o services

and partnerships is too long or the purposes o

this paper, but generic partnership types include:

n Apps vendors as a number o CSPs are

oering SaaS services, especially in the areas

o customer relationship management (CRM),

email, collaboration and conerencing. Some

have also augmented these oers with their

own sotware; or example, BT has coupled

its Ribbit sotware with a popular third party

sales orce automation suite.

n Security vendors are oering security services

in partnership with security sotware vendors.

These may be oered as standalone security

services, or in conjunction with another cloud

service, such as messaging.

n Unied communications providers have

oerings particularly or SMBs;

n PaaS is on oer through a number o CSPs

partnering with a variety o operating systems,

middleware and development tools vendors

which collectively act as PaaS suppliers.

A ew are partnering with other PaaS vendors

to sell their services.n IaaS is available rom some CSPs which

are making their own compute and storage

Inrastructure available as service oerings.

Some are also reselling the IaaS o other

players in specic circumstances.

CSPs have sti competition as cloud service

providers, and the number o competitors is

growing. CSPs have particular strengths though,

especially in what they can oer enterpriseand SMB market segments. CSPs advantages

include:

n Enterprise sales capability: Telcos have a long

history o selling to enterprises. Unlike their

consumer or very small business counterparts

or start-ups, enterprise CIOs expect dedicated

account teams collaborating closely with them

as part o a long relationship.

n Liecycle service and support: Enterprises

expect ater-sales service and support

throughout the service liecycle. This

includes liecycle management teams

ensuring successul service delivery 24/7;

advanced tooling or service monitoring

and management; sel-service portals or

network and application perormance; usage

monitoring; conguration and provisioning

changes; and in some cases e-bonding

between enterprise systems and service

provider systems. Many CSPs that deal with

enterprises already have these capabilities in

place.

n Scalable, reliable operations: CSPs have a

long history o engineering services or very

high availability, even as they scale up to

many millions o customers. This reliability at

scale is built into CSPs service culture, and

in some cases reinorced by regulatory policy.

Enterprises expect this o their applications

and service providers, especially or mission

critical apps.

n Service level agreements (SLAs) with nancial

penalties: Most enterprises expect meaningul

SLAs with clear metrics or evaluating theachievement o those SLAs, backed up by

monitoring and management systems, and

nancial penalties such as credits or reunds

i service levels arent met. A low-cost service

with best eort delivery quality is generally

not attractive to a CIO.



Service providers must move quickly and

decisively, leveraging their inherent advantages

INSIGHTS RESEARCH

In todays challenging economic environment, enterprises

are increasingly ocused on the fnancial stability, brand

and business viability o service providers which provide

key parts o their inrastructures.

n Broad enterprise solutions portolio: Many

enterprises preer to buy solutions rather

than put pieces together themselves.

Moreover, bundles o services may resultin additional discounting. Providers with

larger enterprise portolios oer a broad

range o services including network access

and transport, multi-protocol label switching

(MPLS) VPNs or backhaul to the enterprise

data center, application management,

global load balancing, asymmetric web

acceleration, network-based rewalls and

other network-based security services,

content delivery, Voice over IP, Video over

IP, managed messaging, web conerencing

and remote access. All o these services can

oer synergies when combined with cloud

applications, computing and storage.

n Vendor independence: CSPs tend to be

independent o sotware and hardware

vendors, as their customer base has a wide

range o requirements and preerences, and

CSPs tend to try to reach as wide a market as

possible. Consequently, lock-in to a specic

storage, server, operating system, hypervisor,

middleware, database or application vendor

would be sel-deeating by limiting market

penetration. This contrasts with some other

players, which may have proprietary elements

to their platorms. One note o caution here;

managing the number o oers rom the start

would be a wise move.

nGlobal ootprint: Many enterprises have a

global ootprint, and expect their strategic

partners to have the same. Some o the

largest CSPs are achieving this through

organic growth or acquisition and have

acilities to provide local services, in a

consistent way, across much o the world.

n Financial stability and market commitment:

In todays challenging economic environment,

enterprises are increasingly ocused on the

nancial stability, brand and business viabilityo service providers that provide key parts o

their inrastructures. Enterprise governance

will likely concentrate spending or cloud

services across a relatively small number

o providers which have demonstrated

proper handling o their IT services. There

will probably be some ad hoc purchasing,

but most enterprise expenditures will go to

nancially stable, trusted partners like CSPs.

CSPs can extend some o their advantage to

innovative partners through a service broker

relationship, as discussed above.

n Long term relationships and perormance:

Large scale networks, an experienced

skill base, long term enterprise customer

relationships, management tools, support

organizations, service culture, and local access

and regulatory relationships that deliver

services successully, at scale, are dicult

to replicate. Enterprise CIOs understand this

well, and tend to concentrate their purchases

with suppliers that have strong track records.

Clearly, CSPs are well positioned to benet

rom cloud services, both as users o cloud

services (which will be explored in the Quick

Insightsreport Cloud services: Looking rom

the users perspective, to be published in July

2010) and providers o them. To maximize

the benet however, they must move quickly

and decisively, choosing appropriate services

to deploy, selecting the right partners and

leveraging their inherent advantages.



CLOUDSERVICES

INSIGHTS RESEARCH

To investigate rsthand how service providers

are approaching cloud services, and to identiy

their goals, perceptions, learning and results,

TM Forum Insights conducted interviews with

senior executives at 20 service providers rom

around the world. While the goals, positioning,

perception o value and progress varied broadly

among the service providers, all had cloud

initiatives or at least management discussions

underway. All were ar enough along to talk

about drivers, barriers, target oers and delivery

priorities, positioning, potential, program

challenges and critical success actors.

Importantly, one can look at service providers

as both providers o commercial cloud services

and consumers o those services. In practice,

most service providers seem more concerned

with rolling out commercial services than

consuming them as an enterprise. This should

not be surprising, given the push or new

services revenues, and general reticence o

large corporations (and many service providers

are among the largest) to trust mission critical

applications to new delivery paradigms.

It became clear rom the interviews that

there are many dierent views o cloud

services rom almost every perspective. This is

an indication o the diversity o markets aroundthe world, but also a by-product o market

maturity, as service providers determine what

their customers require and how to deliver it.

A large majority indicated they needed to move

quickly, but at the same time recognized that

this is a market that will develop over a number

o years. Almost all said this was a visible issue

with their senior management, but not all elt

that top management had a realistic or even

clear view o the market.

Still, many providers are beginning to get

Service providers discuss presentand uture actions and plans or

delivery o cloud services

Section 2: Analysis

To investigate frsthand

how service providers

are approaching cloudservices, and to identiy

their goals, perceptions,

learning and results, TM

Forum Insights conducted

interviews with senior

executives at 20 service

providers rom around

the world.

their arms around the basics, and there are

enough early eorts out there or the industry

to start learning rom implementations.

Equally important is that most respondents

expect to begin to shit gears with a stronger

ocus on service enablement, and delivering

new services and business models. This should

help them dierentiate their oerings rom

those o competing players.

Respondent profles: views romacross the industry

The service providers we interviewed came

rom two segments. The largest segment,

representing 75 percent o our respondents,

were convergent suppliers, oering voice and

data, both xed and wireless, and in some

cases video services. Most o the converged

carriers operated primarily in a single country,

though a ew had a substantial regional

presence. Interestingly, a ew o them owned

divisions that were already oering hosting and

other IT related services beyond their usual

geographies.

Wireless mobile companies were the second

most common respondents, comprising

25 percent o the base. Most o the mobileproviders have multi-country operations. A

ew owned some xed inrastructure, but their

xed revenues were dwared by their wireless

operations.

The vast majority o our operators were

among the top ranked in terms o market share

in the countries they served, though in a ew

cases the mobile operators slipped below this

ranking in some countries. There was only one

case though where an operator was not among

the top three.



Determining just how committed

the industry is to cloud services

INSIGHTS RESEARCH

Question 1: State o the cloud initiative

Our rst question was intended to determine

how committed the industry is to cloudservices. We ound that almost every CSP has

a budgeted cloud program o some sort, and

most have launched at least a service or set

o services. O those CSPs that had not yet

launched, all were experimenting, or studying

the market.

Status o cloud services

nLaunched initial cloud services

nBudgeted but not ully launchednExperimenting but not budgeted

Question 2: Primary beneft to CSPs

o the cloud initiative

We asked this to determine how CSPs would

benet rom their cloud initiatives. While

opinions were split, the most requent answer

was gains in revenues rom connectivity

services. This was particularly true o those

service providers ocused on partnerships

to drive revenue. CSPs expect the move o

applications and computing services to the

cloud to drive big increases in connectivity

and transport services. They also believe that

much o the increase will be in higher quality,

managed communications services, and not just

best eort Internet trac.

The second most popular response was

revenue gains rom application services and

computing inrastructure services. A ew o

the service providers elt that by dierentiating

themselves with cloud services, they couldgain new customers which do not subscribe to

their core services currently. One CSP elt that

oering cloud services would make its portolio

sticky enough to impact customer retention.

Primary beneft o cloud

services to CSPs

nRevenue gains rom connectivity

services

nRevenue gains rom inrastructure

services

nRevenue gains rom application

services

nAcquisition o new subscribers

nRetention o current subscribers

65% 25%

10%

45%

5%

10%

20%

20%

A ew o the service providers elt that by dierentiating

themselves with cloud services, they could gain new

customers which do not subscribe to their core

services currently.



CLOUDSERVICES

INSIGHTS RESEARCH

Question 3: Target markets or cloud services

This question endeavored to establish which

markets were most important to CSPs as theydevelop their cloud services oerings. Only one

CSP said it was most interested in consumers,

but a slight majority was targeting all business

customers, rom small and medium businesses

(SMBs) to large and enterprise customers.

This is cause or some concern, as there will

likely be marked dierences in the services

consumed, delivery expectations and marketing

strategies among customers in each o the

segments. Such a broad ocus could dilute

service providers eorts. When we expressed

this concern to some o the respondents, they

replied that many o the services they will be

oering they already oer to these segments

(see question 5 or details), but they will be

delivered dierently.


SMBs. This has previously been viewed as a

potential strong suit or CSPs, and as SMBs

are currently leading cloud services adoption,

the response makes sense. There are myriad

challenges here though, especially in going

beyond basic cross-industry services, as each

segment will have some unique requirements,

particularly at the application level. Managing

sales and marketing costs is also a real

challenge in dealing with this segment. Only

a ew were ocused primarily on enterprise to

start.

Question 4: Primary beneft to customers

Our next question was about the value o

services to customers. We asked respondents

to give their opinions about the top threebenets to their customers through deploying

cloud services. Not surprisingly, most o

the responses ocused on cost. Almost all

responded rst with cost savings as the primary

benet, but they also cited reduced CapEx and

IT management eort as equally important.

A majority also cited improved service quality

and delivery. Most elt this was particularly

important or SMBs, where dedicated IT sta

were limited. Respondents also highlighted

greater fexibility o resources available to

55%

5%

5%

10%

25%

Target markets or cloud

services

nBusiness marketsnSmall-medium businesses

nLarge enterprise

nConsumers

nOther

users, especially in terms o scalability to meet

customers peak demands. Rapid deployment o

applications on inrastructure was proered by

35 percent o respondents, who elt this would

be important to customers with overloaded IT

organizations. Finally, 20 percent elt that access

to the latest technology will be important to

customers who may struggle to understand,

acquire or manage it.

Primary beneft to customers

nCost savings

nImproved service/value

nReduce CapEx

nIncrease resource flexibility

nRapid deployment

nLatest technology

nReduce IT management eort

0

20

40

60

80

100

80%

55% 55%

40%

35%

20%

15%



Service providers discuss which cloud

related services are most important to them

INSIGHTS RESEARCH

Question 5: Most important services

To get a more granular sense o where service

providers believe they might achieve thegreatest revenue gains, we asked which cloud

related services were most important to them.

We allowed respondents to name their top

three services.

Interestingly, most o the top responses

were services many are oering in some

orm, but that could be oered via cloud.

Collaboration services included voice, video and

web capabilities, as well as some web-related

content delivery. As mentioned previously, CSPs

expect connectivity services will receive a boost

rom cloud services adoption.

Enterprise applications were the third choice,

with customer relationship management/sales

orce automation dominating the responses,

but a ew mentioned enterprise resource

planning and helpdesk applications or the

SMB segment as being important as well. The

ourth most important category was unied

communications, again, especially or the SMB

segment. Security is also expected to play an

important role, with 20 percent o respondents

placing it in their top three choices. The rest o

the oers were spread airly evenly.

Perhaps most important here is that core

inrastructure and platorm services are not

viewed as the primary money makers. In act,

many service providers have partnered, at least

initially, to deliver these services. We believe

this is driven by CSPs desire to stick to their

knitting as well as recognizing the strength o

potential partners.

Most important oers or

service providers

nCollaboration/ conerencing

nConnectivity services

nEnterprise applications

nUnifed communications

nSecurity

nContact center

nComputing services

nData storage/archiving

nMessaging/email

nDesktop virtualization

nBusiness continuity/disaster

recovery

nDevelopment & test

0

10

20

30

40

50

6060%

55%

40%

35%

20%

15%

10%

5%

In act, many service providers have partnered, at least

initially, to deliver these services. We believe this is

driven by CSPs desire to stick to their knitting as well as

recognizing the strength o potential partners.


18/56

70%

65%

35%

60%

20%

15%

0

20

40

60

80

18 www.tmorum.org

CLOUDSERVICES

INSIGHTS RESEARCH

Question 6: Biggest challenges or cloud

services providers

This question dealt with the biggest challengesservice providers perceive in delivering cloud

services. Generally speaking, challenges

ranged rom highly strategic business

issues like portolio, partner and customer

management, to more operational issues o

service quality, cost, and security management.

We asked respondents to name their top three

challenges.

Not surprisingly, service quality, cost

and customer experience led the list by a

considerable margin. CSPs already understand

the importance and diculties o dealing

with this three-headed monster, just as they

struggle with it to deliver core services now.

Cloud services increase the complexity o each

o these challenges or CSPs, since there are

more services, devices, applications, platorms,

partners and competitors added to the mixture.

Managing delivery costs is particularly

important here, especially or inrastructure and

platorm services. Those who remember the

race to the bottom in hosting prices during

the dot com boom and bust will be prepared

or a real shakeout in the commodity services

market.

Standing alone as the ourth biggest

challenge is security management. Many

service providers are less worried about the

execution than customers perception. Indeed,

when those who did not select this as a great

challenge were asked why not, they responded

they elt that i they could simply match or

exceed a given customers required level o

security, the issue would all away. Many o

these respondents elt that competitors thatcould not demonstrate adequate security

would be among the early casualties, or

relegated to very low margin services.

Revenue management was cited by 20

percent o respondents. The concern here was

whether the billing and charging systems could

handle the myriad services and pricing models

in a timely and accurate ashion.

Managing partnerships was also viewed

as the most challenging by 20 percent o the

respondents, as many were using partners to

Biggest challenges or

service providers

nManaging service qualitynManaging delivery costs

nManaging customer experience

nSecurity management

nRevenue management

nPartner management

nManaging the service portolio

nApplications perormance

deliver at least some o their services. Thisincluded attracting the best partners, managing

partner perormance and implementing air and

accurate revenue sharing.

Several CSPs expressed concern about

top management commitment, and a ew

wondered whether their top management

had an adequate understanding o the cloud

universe, and what it would take to be

successul in this endeavor.

A handul o CSPs included managing the

service portolio as a key challenge. Those

respondents elt that it would pose a real

challenge to the marketing organization to

dierentiate a CSP through myriad new

services in an immature market.

Finally, a ew CSPs expressed concern about

their ability to guarantee the perormance o a

variety o applications, especially when those

applications would not necessarily reside on

their own inrastructure.



Wide agreement about the top

three critical success actors

INSIGHTS RESEARCH

Question 7: Critical success actors

As with biggest challenges, we asked

respondents to name their top three criticalsuccess actors. The leading response was

operational excellence. While many CSPs elt

they could oer a premium service, they were

sensitive about the number o competitors and

the specter o aggressive pricing. They elt that

cost leadership and eciency would be key to

competitiveness and protability.


customer experience. Most CSPs elt that

sel-service is extremely important, but simply

providing adequate capability in this area would

not be enough, especially or larger enterprise

customers and high touch SMBs. There was

also widespread recognition o the complexity

involved here, as refected in the biggest

challenges responses.

The third most popular response was service

portolio management. Oering a competitive

set o services and oers, cognizant o the

customer base and competition, was most oten

the actor rst mentioned by respondents even

though it was eclipsed overall by other issues.

Managing partnerships was viewed as critical

by 35 percent o respondents, as many were

using partners to deliver at least some o their

services. In act, i service providers are to

protably oer all the services their customers

are looking or, it is likely that they will need

partners.

As with challenges, revenue management

was cited by 20 percent o respondents. They

elt the billing charging system being able to

handle myriad services and pricing models, in

a timely and accurate ashion, was critical to

early success.Again several CSPs expressed concern about

top management commitment, and whether

their top management was truly committed to

Critical success actors

or CSPs

nOperational excellence

nCustomer experience

nService portolio management

nAbility to manage partners

nRevenue management

nTop management commitment

nSales/marketing abilities

cloud services. Again a ew wondered whether

their top management truly had an adequateunderstanding o cloud, and what it would take

to be successul in cloud services.

Finally, some CSPs ocused on the

importance o their sales and marketing

organizations ability to properly position

cloud services with their customers. These

respondents also stressed the importance

o proper tools and skills within the sales

organization to help the clients make the

right choices.

As can be seen by the responses, most CSPs

are on their way to delivering cloud services,

and eel they have a good sense o which

customers they need to target, what they need

to oer, their biggest challenges and critical

success actors. Increasingly, and especially orthe largest players, it seems that the remaining

questions are around ocus, commitment, and

execution.

0

20

40

60

80

100

80%

65%

60%

35%

20%

Most CSPs elt that sel-service is extremely important,

but simply providing adequate capability in this area

would not be enough, especially or larger enterprise

customers and high touch SMBs.



CLOUDSERVICES

INSIGHTS RESEARCH

While the scope o cloud services is huge,

there are a number o critical areas on which

service providers must ocus i they are to be

successul. Out o all o these, we have picked

our broad areas security management,

perormance management, billing and charging,

and process automation as being critical to

the success o any cloud service provider in

delivering a competitive set o oers.

Security management

Security has been identied in many instances

as a critical prerequisite or cloud services

adoption, especially among business

customers. This has been shown again and

again in studies, and has been highlighted

repeatedly at meetings o the TM Forums

Enterprise Cloud Leadership Council and

several Executive Roundtables on cloud at

Management Worldevents.

In act, we believe that providers that

are unable to demonstrate proper security

measures and recovery plans, at least or

services to business customers, will be among

the early casualties in the cloud services

market. Proper security management is table

stakes or business customers and savvyconsumers, and repeated inadequacy by

providers will not be tolerated or long.

Generally speaking, security management

and controls or cloud services are unctionally

similar to security management and controls

in any robust IT environment. This is an

advantage rom a market perspective, since

a knowledgeable customer will already

understand the relative importance o various

aspects o security, and thereore be able to

judge i a providers oer is good enough.

Critical areas service providersmust ocus on to succeed

Section 3: Key areas in providing cloud services

In act, we believe thatproviders that are unable

to demonstrate proper

security measures and

recovery plans, at least

or services to business

customers, will be among

the early casualties in the

cloud services market.

The dierences between ordinary enterprise

security and cloud security management reside

largely in the delivery and operational models,

and the subsequent division o responsibility

and labor or the provider and consumer.

The scope o security management or all

IT service providers is broad and complex. In

addressing IT operations, providers must ocus

on physical security (or example, acilities),

network security, IT systems security, data

security and privacy, and applications systems

security. In addition, there are many controls

necessary at the process level or each o

these areas, including identity management,

separation o unction and responsibility,

access control, change management

procedures, and so on.

Organizations must address all o these

aspects to be eective, and oten levels o

sophistication and maturity vary between

dierent areas, or may even vary among

dierent acilities in the organization. Since

the chain is only as strong as the weakest

link, each o these aspects must be examined

closely across all cloud and the usual delivery

and operational models.

Security management is urther complicated

by the delivery models, and the roles thatsuppliers and consumers must play in each

o them. So or an Inrastructure as a Service,

the responsibility or security might include

only physical security and virtualization

security, leaving the customer responsible or

everything rom the operating system up (such

as middleware, applications, data, and identity

management).

On the other hand, a Sotware as a Service

would need to provide security unctions up

through applications and data in addition to the



The key areas are divided into governance

and operational domains

INSIGHTS RESEARCH

inrastructure-related aspects since it provides

essentially a turnkey bundle o capabilities. This

still leaves the consumer with some aspects

o network, process and access security, but

alleviates a considerable amount o the overall

burden. Figure 3-1 illustrates the relative roles

and responsibilities or security related to

delivery models.

One o the greatest challenges o security

is providing services that are considered

fexible, and accommodating to a variety o

users, while maintaining adequate control.

This balancing act is a tall order or service

providers, as consumers may view industrial

strength security controls and practices as

overly restrictive. Security management must

be implemented fexibly, while retaining overall

integrity and providing an audit trail.

The Computer Security Alliance has identied

a number o critical areas o ocus. The areas

are divided into governance and operational

domains.

The governance domains include:

n Governance and enterprise riskmanagement the ability o an organization

to govern and measure risk induced by cloud

computing. This encompasses items such

as legal precedence or agreement

breaches, user organizations being able

to assess the risk o using cloud

providers services adequately, the

responsibility to protect sensitive data

when both user and providers may be at

ault, international boundary issues, and

others.

n Legal and electronic discovery extends

to potential legal issues such as protection

requirements or inormation and laws

concerning disclosure in the event o a

breach in security, regulatory requirements,

privacy requirements, international laws, and

others.

n Inormation liecycle management includes

identication and control o data in the

cloud, controls to compensate or the

loss o physical control when moving

data into the cloud, taking responsibility or

data condentiality, integrity and availability,

and so on.

n Portability and interoperability is about

being able to move data and services rom

one provider to another, including bringing it

back in-house, as well as Issues

surrounding interoperability between

providers.

The operational domains include:

n Traditional security, business continuity

and disaster recovery is about how cloud

services aects the operational processesand procedures currently used to implement

security, business continuity and disaster

recovery. Identiying where cloud services

increases or decreases security risks.

n Data center operations: How to evaluate

a providers data center architecture and

operations? Understanding characteristics

that could be benecial or detrimental to

short and long term stability.

n Incident response, notication and

remediation involves proper incident

Sotware as a Service

Platorm as a Service

Inrastructure as a Service

Inrastructure elements

Consumers

responsibilityor security

increases with

lower level

services

Suppliers

responsibility

or security

increases with

higher level

services

Figure 3.1: Security

responsibilities relative to

delivery models

Source: TM Forum, 2010

One o the greatest

challenges o security is

providing services that

are considered exible,

and accommodating to

a variety o users, while

maintaining adequate

control.



CLOUDSERVICES

INSIGHTS RESEARCH

detection, response, notication and

remediation, including an understanding

o the complexity that cloud services bring

to these processes.n Applications security covers securing

application sotware in the cloud, whether

in operational or development mode, and

assessing how appropriate the use o cloud

is or particular applications.

n Encryption and key management demands

the identication o proper encryption usage

and scalable key management.

n Identity and access management means

managing identities and leveraging directory

services to provide access controls, plus

assessing organizational readiness to

conduct cloud-based identity and access

management

n Virtualization the use o hardware and

system virtualization technology in cloud

computing gives rise to risks associated

with multi-tenancy, virtual machine

(VM) isolation, VM-co-residence, hypervisor

vulnerabilities and so on.

This alone demonstrates the complexity and

criticality o security management and control

in a cloud environment.

While the scope here may seem daunting,

service providers and consumers must

remember that dierent levels o security

are necessary or dierent workloads. Great

importance must be attached to balancing

security with fexibility, and the goal or service

providers should be to achieve at least the

level o security required or demonstrated by

their consumers, rather than perection at the

expense o business eectiveness.

Perormance management and SLAs

Perormance is among the most important

mentioned aspects o cloud service delivery,

eclipsed perhaps only by security as a

requirement. Perormance shares much o

securitys complexity in that consumers

expectations are end-to-end, a dicult

challenge or any service provider.

For cloud this cuts across at least network,

system and application management, and may

include actors such as device management

as well. Sophisticated customers look or

service level agreements (SLAs) with specic

guarantees o perormance against establishedmeasurements and customer credits i those

levels o service are not met.

SLA management strategy considers two

well-dened phases: contract negotiation and

the monitoring o contract ulllment over pre-

dened intervals (such as downtime per billing

period). Measuring, monitoring and reporting

on cloud perormance are based on an end-

users experience or the end-users access to

resources.

This can be dicult as determining the root

cause or service interruptions or degradations

are hindered by the complex nature o the

environment. The more complicated the

service, the more complex the determination

o SLA ulllment becomes.

Service providers vary greatly regarding how

granular the metrics o their agreements are,

as well as the measurement periods they use,

their credit policies or missing their SLAs and

deciding who is responsible or notication o

a violation o the SLA. Oten service providers

put the onus o notication on the customer,

which does not urther customer satisaction

or condence, but instead creates more

complexity or customers in evaluating and

comparing service providers.

Reporting and audit is an important area

o perormance management. Sophisticated

customers will require both periodic and

on-demand reports detailing usage, quality,

outages, provisioning intervals, incident

response and recovery, and so on across

a variety o services. They will also look to

be able to perorm periodic audits to insurethat service delivery, security management

and perormance are within the contracted

boundaries and their own corporate policies.

Finally, customers will look or ways to

manage service contracts over the lie o the

contract, attempting to correlate the technical

detail they receive rom suppliers with the

specic business goals stipulated or implied

in the contract. This emerging discipline o

service contract management will become

more important as customers move more

Finally, customers will

look or ways to manage

service contracts overthe lie o the contract,

attempting to correlate

the technical detail they

receive rom suppliers

with the specifc business

goals stipulated or implied

in the contract.



Flexible, accurate billing and charging are

critical prerequisites or success

INSIGHTS RESEARCH

unctions to the cloud, and as service providers

seek to expand, extend and renew contracts.

Usage metering, billing and charging

Flexible, accurate billing and charging are

critical prerequisites or success in cloud

services. Billing has long been a critical

component or CSPs, and has become ar more

fexible as new services, oers and business

models have emerged in recent years. Cloud

services however, combined with sel-service

capabilities and real-time processes, will

introduce a new set o challenges or billing,

charging and revenue management in general.

Not only are the services more diverse,

but the big rise in delivery components,

competitors, business models and unctions

will likely drive unprecedented creativity

into the service delivery, oer management,

order management, customer management,

settlement and revenue management

processes. Billing and charging will have an

important role in all o these processes.

For example:

n To handle increased transactions as

service providers introduce more

usage-based services;

n To work with order management,

provisioning systems and product catalogs

to ensure appropriate handling and provide

things such as quotations or advice o

charge;

n To help initiate new oers upon

achievement o certain thresholds

or example i a usage or spending

threshold is met, the billing system could

trigger a new oer or reward;n To work with product catalogs dynamically

to create new bundles and oers, or enorce

eligibility in real-time;

n To deal with a variety o new transactions

and ormats (through mediation);

n To support the SLA reconciliation process i

the service levels are not met;

n To support the settlement process with

partners or a variety o services;n To support real-time notications, alarms,

budget control, de-provisioning and

promotion management or both prepaid

and postpaid customers;

n To provide the customer with a single

source o usage and billing truth in

situations where the CSP is a cloud service

broker.

Clearly, billing and charging are key

components or any cloud services provider.

Process automation

Much has been said about the benets o

cloud, including rapid elasticity, ast time to

market, low expenses, eective sel-service

and decreased downtime. However, these

benets are only possible with a high degree

o automation, data integrity and operational

excellence. In act, operational excellence

was the single most popular choice among

our respondents when asked to name critical

success actors, and process automation is an

extremely important part o that.

While we have already discussed

the importance o automation in billing,

perormance, and security, there are a number

o other areas where automation is important.

They include:

n Oer management as service providers

must be able to create and communicate

oers dynamically, and drive them through

a variety o channels. While most enterpriseaccounts will require a sales team,

sel-service and messaging can supplement

personal interaction.

Not only are the services more diverse, but the big rise in delivery components,

competitors, business models and unctions will likely drive unprecedented

creativity into the service delivery, oer management, order management, customer

management, settlement and revenue management processes.



CLOUDSERVICES

INSIGHTS RESEARCH

Many smaller businesses and consumers

will use and even preer sel-service.

Moreover, the ability to generate real-timeoers based on usage will become more

important in consumer and small and

medium-sized business markets, so this will

increase in importance over time.

n Order management, because without

real-time order management and activation,

time-to-market and the cost o activation

are increased, which is a lose-lose

proposition or both customer and provider.

To succeed service providers must deploy

strong systems logic that can translate an

order to a set o services, and work with

the inrastructure, billing and customer

support systems to complete the order.

n Service catalogs are critical to the

sel-service experience as they house the

inormation needed to identiy and deploy

a new service. Catalogs also should be

able to describe and support the service

throughout its liecycle, ostering processes

rom services creation to retirement.

n Automated peering and settlement allows

service providers to improve their partner

relationships, gain better visibility o

costs and revenues, and scale the number

o partners they can work with.

n Conguration management is necessary

with so many new elements added to the

inrastructure. An automated way to manage

conguration parameters will reduce cost

and improve availability and perormance.

n Sel-service integration it is critical

that underlying applications and process

fows are designed to work well in a

sel-service environment. Without seamlesssel-service integration, it will be very

dicult or CSPs to be competitive rom a

cost perspective, and to provide an

acceptable customer experience.

These are just a ew o the o the process

areas that require automation, but they are

among the most important or those neglected

in the past. Service providers will need to

address them i they are to succeed with

cloud.

Service catalogs are critical

to the sel-service experienceas they house the inormation

needed to identiy and deploy

a new service. Catalogs also

should be able to describe and

support the service throughout

its liecycle, ostering processes

rom services creation to

retirement.



Trying to do too much too soon

can retard growth

INSIGHTS RESEARCH

Sharing with more than 20 service providers

and an approximately equal number o vendors,

the early direction o the cloud services market

is becoming clearer, even though we are in

the early stages o a market that will likely play

out over a decade or more. The ollowing are

our recommendations, gleaned rom these

conversations and the perusal o countless

documents:

1. Understand the big picture

At the outset o this report, we explored the

NIST denitions o cloud computing, including

service models, deployment models, and

essential characteristics. It is important or

service providers to understand the broader

market, including all these aspects, as well as

relevant competitive initiatives and attractive

emerging capabilities and business models

like the cloud service broker model. Service

providers must develop an enterprise-wide

vision o all aspects o cloud i they are to

deliver an appropriate experience to customers.

2. One size does not ft all

Understanding the possibilities within cloud,

market characteristics and their competitive

dierentiators, communication service

providers (CSPs) must crat a compelling yet

manageable cloud computing strategy.

The initial urge may be to try to provide

everything and go ater all markets

simultaneously, but this creates a huge

challenge even to the largest o players.

Developing a cloud services strategy does

not require the CSP to be world class at

everything or many service providers, that

would serve only to overwhelm them rom

the start, ensuring ailure. Rather, the CSP

must determine what is important to its target

customers in its serving domain, and prioritize

and ocus on those things that will dierentiate

it to the customers.

Focus, as determined by market needs

and dierentiated competencies, is likely the

best approach to quick success and building

momentum in cloud services markets. I you

must provide a broad variety o services,

consider partnering with various vendors to

deliver these services, or even becoming a

cloud services broker. For a service provider

in multiple countries targeting multinationals,

a consistent strategy regardless o geography

is oten the goal, so enterprises can know

what to expect and local operations can be in

compliance with corporate goals.

The overall concept here is that the cloud

strategy must be tailored and achievable. Trying

to do too much too soon can result in operational

problems, which could retard growth.

3. Focus frst on operational excellence

Operational excellence in service management

is key. CSPs have a long history o delivering

highly reliable, available services, and this has

gone a long way to strengthen their brands.

Most customers are likely to expect this kind

o service when extending their purchases to

cloud services. In addition, service providers

will need to ocus here to dierentiate

themselves rom smaller, agile players, and to

ensure their operational costs are as low as

possible.

Issues service providersshould consider frst

Section 4: Recommendations

Focus, as determined

by market needs

and dierentiated

competencies, is likely

the best approach to quick

success and building

momentum in cloud

services markets.



CLOUDSERVICES

INSIGHTS RESEARCH

4. Tailor your customer experience strategy

CSPs customer experience strategies must

be appropriate or their target audiences. Asdiscussed in our recent Insights Research Report,

Customer Experience Management: Driving

Loyalty & Proftability(available rom TM Forums

website) on managing customer experience,

programs must match the expectations o the

target market while remaining aordable to

t

cloud services - issues and opportunities for services providers

Documents