What do enterprises want from their service providers? That’s a question that the service providers are focused on to the point of obsession, and one that’s aroused a lot of speculation among the service planners. What’s interesting is that there doesn’t seem to be much of a correlation between what these planners are speculating on, and what enterprises are actually thinking. The places where correlation exists don’t offer a lot of hope for massive revenue gains, either.
The thing I found most interesting in talking about the issue of new services and service options with operator service planners (44 of them) is that they all start from the bottom. They have speculative services to consider, and what they talk about are the speculations that seem (to be uncharitable) the least outlandish. The most popular and long-standing is the “bandwidth on demand” service set, which 40 of the 44 planners liked.
The theory behind on-demand service opportunity is simple. Right now, enterprises have to pay for peak capacity. Their cost management concerns mean that they tend to decline support for projects that generate a high peak demand because most of the time that extra capacity isn’t needed. So whether we’re talking usage pricing or on-demand capacity control, offering a way of temporarily raising capacity when it’s needed and lowering it when it isn’t would help bring new applications to approval and generate more revenue.
What do enterprises think of this? They love it, sort of. Enterprises approach things from the top, which to them is the cost dimension. Of the 154 enterprises whose views I’ve culled through, 143 say that they are under pressure to lower network service costs. If usage pricing, on-demand bandwidth, or any other service with a similar variable-cost basis were offered, they’d jump to figure out how to use it to lower their costs. Even those who weren’t feeling cost-cutting pressure said they would use elastic-cost services to enable new projects to the extent that the result didn’t raise costs. To operator planners, then, this approach is a big revenue opportunity. To enterprise buyers, it’s valuable to the extent that it cuts their service spending or at least stabilizes it, so it’s a loss to their operators.
Another provider-planner hot-button is security. They know that security spending is perhaps the brightest spot in what’s otherwise a troubling trend of cost management. Only three of 154 enterprises said they were pressured to cut spending on security. The planners also hear that there’s enterprise interest in substituting expenses for capital spending, and that while few want to cut security, many think they spend too much on it. Therefore, they reason, offering network-based security is a great way to raise revenues.
Not so, say enterprises. Of the 154, none believed that network security services would be cheaper than their current approach. Only 48 believed that shifting security focus from capital-purchased elements to expensed elements would be interesting to their CFOs. The fact is that the same thing that’s been impacting cloud provider revenues would impact network security services. The notion that as-a-service is cheaper than self-hosted is increasingly discredited.
But let’s not give up hope. The next notion for provider planner dream-weaving is edge computing. Everyone knows that the edge is the next hot piece of the cloud. Everyone knows that latency-sensitive applications can’t be run in the cloud, and so their increased growth can only be supported by edge services. Of our 44 planners, 40 said their companies would have a “significant” revenue opportunity from edge services.
Well, maybe, according to enterprises. Of our 154, 112 say that they have at least one application that could benefit from edge computing services, and 48 say that they already self-host software elements in a real-time, edge-oriented, mission or two. Of that group of 48, 29 say that they would consider an edge computing service to replace their current self-hosted model. Of the other 64 interested-but-not-committed, the odds are better, with 44 saying that they would “prefer” edge services and another 11 saying they’d “consider” them. The only problem is that the 29 who’d be willing to consider switching from self-hosting say they’d need more than a 30% TCO advantage to take the step. Of the 55 who are edge-service-positive but not currently implementing an edge-specific mission, they’re only slightly more cost-tolerant; the average TCO advantage for this group was 22%.
I don’t have good data on the attitudes of these groups prior to the great cloud disillusionment of 2023, so I can’t say for sure that this shift in attitude has colored edge planning as well, but I believe it has. Over time, I’ve found that enterprises have generally been more comfortable with the notion of building their own compute and network services, and have shifted to an as-a-service model only when they believed their preconception would be too costly.
Cost is what this all comes down to. Of 154 enterprises who offered views, only 4 had identified and budgeted for new applications that could justify more network service spending. Only 38 had identified new applications that might justify more network service spending but which had not been budgeted, and 32 of this group said the reason was that they didn’t have a developed vision of what those applications would require and how much they would cost, not only for the network service but for software, hosting, and so forth.
What this is telling me is simple; new applications with business cases that could justify more network spending aren’t being broadly considered, and the likely reason is that enterprises don’t plan for applications when there’s no accepted model for their support and no provider offering the necessary tools. And guess what? Of the 154 enterprises, none believed that telcos would be the providers who offered those necessary tools. Cloud providers were credible for 72 of them, but even for these cloud-believers, almost all doubted that the development of those tools for new missions was a cloud provider priority. The remainder admitted they had no idea where the tools could come from.
“Startups” should be the answer, but it’s been ages since any startup would target something like that. Open-source projects of a scale large enough to address building the infrastructure model for new applications that could justify new services would typically have to be staffed by big companies, none of which are interested in paradigm-changing technologies that could threaten their own sales. We’re back to the point I’ve raised before, which is that we need a new way of looking at technology. Maybe that means we need a new cast of lookers.
