Service providers, customers share concerns

Service providers and enterprises can learn from each other

Regular readers of this column might have noticed that many of the topics raised – from reducing operational costs to developing effective service strategies – apply as much to enterprise organizations as to telecom providers. That’s no surprise, for several reasons.

First, the cost of raw materials continues to decrease for both kinds of organizations. Bandwidth now comprises less than 30% of the cost of delivery for telecom providers. In companies, routers, switches and other hardware pricing continues to drop 15% or more per year. Labor and operations costs are typically greater than capital expenditures.

Second, most companies are transitioning to a shared-services model in which infrastructure is provided as a service similar to telecom services, complete with internal service-level agreements and billing with flat-rate and usage-based components.

Finally, the definition of “services” continues to move up the stack (referring to the OSI model). That is, a decade or two ago, telecom service was primarily physical layer (dial-tone or the digital equivalent). With the advent of TCP/IP, services began to include packet routing and ultimately quality of service. Services now include many functions that happen at the application layer or even above: directory, security, identity, location. Building and maintaining these services requires a level of sophistication orders of magnitude beyond that required to transport bits.

Together, these trends blur the distinctions between telecom providers and the infrastructure arm of IT organizations. And each has plenty to learn from the other. As telephone companies struggle to master the subtleties of higher-layer services, they’re augmenting their organizations with technologists and operations experts from the largest organizations. One thriving international alternative provider has recruited a significant percentage of its senior management from the IT department of one of its largest shareholders.

Companies wrestling with implementing effective processes and organizational structures are deploying a similar strategy. One major, retail financial services firm with exceptional operational and service delivery recruited its head of infrastructure from one of the largest Internet providers.

The point is that to master the complexities of Layer 7 operations, service providers should think in terms of bringing on board veteran IT executives, particularly those with a background in infrastructure design or operations. Furthermore, once they are onboard, it’s imperative to listen to them. Several senior telecom executives with IT backgrounds have privately expressed frustration about their inability to challenge the calcified telecom culture – despite having been hired to do exactly that.

And companies shouldn’t neglect the opportunity to flesh out their ranks with some of the best operational, process and project-management personnel on the planet: former telecom employees. One corporate CIO recently complained to us, “My team is technically superb, but they really fall down when it comes to project management.” Companies with similar concerns should seriously consider hiring some of the talent that telcos have been forced to cut loose recently.