Discussion Paper Changing The Game D 1

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The future of #telecom is a \'Networked Society\'

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Discussion Paper Changing The Game D 1

  1. 1. ericsson discussion paperGeoff Hollingworth, Ericsson North America,Ericsson Evangelist, in collaboration withJason Hoffman, Founder and CTO JoyentChanging the GameBefore the GameChanges YouMore will change in the next 10 years than in the previous 100. This paperdescribes the foundational changes and attempts to explain how we canmanage them to our advantage1.1 The paper references various online thought leadership articles and visuals and links to the original material whereverpossible. Please contact the author if any of these references need updating or removing. We hope we increase visibilityfor all.
  2. 2. Table of Contents Introduction This paper attempts to place the massive business changes we are currently experiencing into a simple and understandable framework, that allows us to feel more comfortable with the future. The paper does this by presenting a series of insights and impacts.Introduction ………………….................................................................................................................................... 3 Today large industry leaders are power of a human brain by 2025. industries is being disrupted. being challenged, seemingly over- By 2045 it will have the equivalent This paper articulates a series ofInsight: “Device to Power” ...................................................................................................................................... 4 night, powerless to control their computing power of the total hu- insights and impacts that we be- own destiny despite their legacy, man population. It sounds like sci- lieve will drive a future state ofInsight: “Industrial Scale Compute” ........................................................................................................................ 5 strength and footprint. Change is ence fiction but the world we live in change, a future state of real timeInsight: “Information Explosion” .............................................................................................................................. 6 happening at an exponential rate today looks like the science fiction collaboration and connectivity be- and humans are not naturally engi- of the 1960’s. tween human and machine, whereInsight: “De-Materialization” .................................................................................................................................... 6 neered to cope with such exponen- frictionless interaction and scalabil- tial rates of change. Before the This means the impact of technical ity shall deliver a re-engineering ofInsight: “Ubiquitous Network” ................................................................................................................................. 7 Industrial Revolution, technological revolution starts to enter the im- how we live, work and play. change over a normal human life mediate business planning cycles.Impact: End of the Factory Mentality ...................................................................................................................... 9 span of about 40 years was almost There is a need to embrace the Ericsson also acknowledges that nonexistent. We now live in a world fantastic as part of the immediate all said in this paper applies equallyImpact: “New Businesses” ...................................................................................................................................... 9 that is very different from even just future. Those who do will find com- to Ericsson and telecom.Insight: “Economics of the Future” .......................................................................................................................... 10 five years ago. petitive advantage. Those who do Ericsson must also embrace the not will be challenged to maintain same future challenges as others.Insight: “Traditional Businesses Can Transform” ..................................................................................................... 11 Ray Kurzweil [ref]2 predicts we their status quo. will witness approximately 20,000 We hope you find it enlighteningConclusion: A Real Time World ............................................................................................................................... 12 years of technological advance There are opposing views. Technol- and appreciate any feedback at in the next 100 (when measured ogy progress will slow. Impacts will http://facebook.com/ericssonWhat Does it All Mean? ........................................................................................................................................... 13 by the rate of progress in the year not be as dramatic as predicted. 2000). Or to put another way, we All future statements have to be Presentations of the material canWhat the Networked Society Means to the Network Operator ............................................................................... 14 will see more change in the next observed in a balanced and rea- be made on request.Definition of Information and Communication Technology (ICT) ............................................................................. 15 10 years than we have seen in the sonable manner. previous 100.ICT Operator Core Business ................................................................................................................................... 15 However it appears we are on an 2 Kurzweil is a well known inventor who has received As the chart shows a $1000 com- accelerating journey where the 17 honorary doctorate degrees, awarded to him by various universities, acknowledging his extraordinaryThe Interdependent Needs of the End User, Application and ICT Operator ........................................................... 17 puter will have the computational status of business today in all accomplishments.Core ICT Operator Capabilities ............................................................................................................................... 18Key Capability: Next Generation Operations .......................................................................................................... 18Key Capability: Performance Infrastructure ............................................................................................................ 18 Exponential Growth of Computing “We will see moreKey Capability: Agile Service Delivery - Cloud ........................................................................................................ 19 1060 1055 change in the next Calculations per Second per $1,000 10 years than we 1050Key Capability: Compliance and Guarantee ........................................................................................................... 19 1045 1040Key Capability: Anticipatory Pro-action ................................................................................................................... 20 1035 1030 have seen in theOverall Business Transformation ............................................................................................................................. 20 1025 1020 All Human Brains previous 100” 1015 One Human BrainIn Summary …...............……………...................................................................................................................... 21 … 1010 One Mouse Brain One Insect Brain 105Who is Ericsson? ..................................................................................................................................................... 22 1 10-5Who is Joyent? ........................................................................................................................................................ 22 10-10 1900 1920 1940 1960 1980 2000 2020 2040 2060 2080 2010 Year2 Changing the Game Before the Game Changes You Changing the Game Before the Game Changes You 3
  3. 3. Insight: Insight: “Industrial“Device to Power” Scale Compute”A birthday card that sings “Happy Birthday” to you the less power they use and the longer the battery lasts In parallel to the changes seen on the device side,has more computer power than all the Allied Forces of [ref]. there is a revolution happening in IT on the server1945. The card (and chip) is commonly thrown away. side. Commonly referred to as cloud computing it “ It took AOL 9 years to hit 1 millionYour cell phone today has more computer power than Note the devices we have today are the least powerful is now possible to “rent” vast amounts of computerNASA had back in 1969 when it landed two astronauts devices we shall ever carry. They are the equivalent of capacity and/or software services on demand, users. It took Facebook 9 months.on the moon. Video games, which consume enormous Ford Model T’s when compared to today’s cars. and only pay for what is used – at greatly reduced It took Draw Something~9 days”amounts of computer power to simulate 3D situations, cost and lead time compared with traditional ITuse more computer power than main frame computers As power increases and price decreases the following deployments. This has completely changed theof the previous decade. The Sony Playstation of today, effects will be seen: economic landscape and removed barriers to entrywhich costs $300, has the power of a military super- for anybody wishing to bring a service to market.computer of 1997, which cost millions of dollars [ref]. • More powerful device applications It has also created a whole new industry of cloud The net combined effect of all these is drastically lower • Greater ubiquity of devices everywhere infrastructure providers. Traditionally any company production costs of compute capabilities combinedAs the chart shows, device CPUs have advanced from would have needed to buy hardware, install software, with time to market. Two backend engineers can now • Devices that are in reality disposableabout 58 KHz as of 2000 to about 1.5GHz in a little and find somewhere to run it then employ people to scale a system to support over 30 million active usersover a decade. Each enhancement of device capabili- manage it. Enough hardware and software would have [ref].ties begets a high-powered expansion of apps and had to have been bought to cope with a peak trafficapps complexity. There is now a desktop computer in level, irrespective of how often this traffic level was This allows a service mania environment where veryyour pocket. In a few short years it will be the equiva- experienced (the classic online retail dilemma for Black few people can deliver many services very quickly andlent of a super computer. Processors have moved from Friday). Now “cloud service providers” remove that very cheaply, that can scale in terms of users and us-single core to dual core to now quad core planned to burden from the software developer’s realm. age faster than ever seen before. People can now letbe mainstream in 2013. The continuous play between “… NASA launched a man to the the market decide success on a scale that was notcompute power and battery life shall continue causing The three disruptive effects of cloud computing are: possible to consider even 10 years ago. It took AOL 9innovation to drive superior performance. Transistor moon. We launch a bird • Removal of the need to install and operate comput- years to hit 1 million users. It took Facebook 9 months.size continues to decrease where silicon production into pigs” ing equipment, support software and hosting facilities, It took Draw Something~9 days [ref].processes are moving from the 28nm standard of today requiring less people, saving money and acceleratingto 20 nm and even 14nm. The smaller the transistors, time to market (one person can now manage upwards By 2011 “the industry had reached a point where of 10,000 servers) it was realistic to form a start-up and launch an internet tech based product for less money and in • Only pay for what you use, very low up front invest- less time than it would have taken to simply launch ments required the website for such a company in 1997” [ref]. • Scale (up and down) as slowly and/or quickly as your It is the very early days of cloud computing. market dictates, the only worry left being a business Looking forward, never again will cloud computing plan that makes sense for the service provided (avoid- capability be this hard to use, expensive or slow ing the Priceline “Internet bubble” scenario, where despite its already disruptive attributes in these the more customers they created, the faster they lost spaces. money…) [ref]Figure 1 - Heavy Reading4 Changing the Game Before the Game Changes You Changing the Game Before the Game Changes You 5
  4. 4. Insight: “InformationExplosion”In the next 48 hours more data will be created than New skill sets that can manage and analyze such orders. There was no concept of common size since tory Mentality”). Many companies likely feel safe frompreviously in the past 30,000 years [ref]. Users are now data shall be required inside the corporate structures there was no concept of mass production. With the the disruption of digitization, especially those involveduploading 72 hours of video every minute to YouTube, of tomorrow. As Google’s Chief Economist Hal advent of steam and industrial capacity the world in the manufacturing of physical parts. The advice tocompared to 48 hours just a year ago [ref]. In the Varian is quoted saying “the sexy job in the next 10 entered a phase of mass production. Normalization these companies is to research the latest in 3D printing5 seconds it has taken you to read the above 3 sen- years will be statisticians” [ref]. around sizes, shipping of products based on anticipat- and re-visit those assumptions [ref].tences, an additional 6 hours have been stored. ed demand became the normal mode of operation that Big data is only just beginning. Looking forward, has been constant for the last 200 years. Our wholeA scarcity of data has been replaced with an over- never again will big data be this hard to understand, society, education and even organizational structurewhelming abundance. However, the data is only instrument or put into operation. have been optimized to maximize the potential successvaluable if interpretations can be gathered from it in a of any company operating in the status quo. This is no “De-materialization forces compa-timely fashion and if the generated interpretations are longer true. The transformation from physical to digital nies (who want to survive) to re-visitpossible to use in the ongoing business process. This is completely disrupts the traditional constructs of massa reversal of previous generation’s problems where in- production and replaces it with mass customization, we their true core business is rathersights had to be extrapolated from a limited set of data. once again live in a market of one, and the only differ- than focusing on what they physi-Insight - “Information Explosion” Peter Sondergard, ence being each market of one can be delivered to withHead of Global Research, said “Information will be the scale and efficiency. The compromises of the industrial cally deliver.”Oil of the 21st Century. It will be the resource running revolution no longer apply.our economy in ways not possible in the past” [ref]. Of all of the insights so far listed, this is the mostAnticipatory businesses will be able to adapt their disruptive and the most important for all companiesbusiness operations in “as close to real time” as to understand. The largest mistake a company couldpossible, to maximize their customer understanding currently make is to consider their product not possibleand best position their core business value proposi- to digitize and thus could not be disrupted. The secondtion towards them. Customers are more empowered largest mistake would be for a company to understandfrom their access to information and big data provided their product could be digitized but fail to change be-by other businesses and service providers. It will be cause of misunderstanding their true core business,impossible to survive in the future without integrating confusing it with profit pools that had appeared duethe wealth of global knowledge into everyday business to the required physical requirements of delivery frompractice and procedures. the earlier phase (see chapter “Impact: End of the Fac-Insight: Insight:“De-Materialization” “Ubiquitous Network”The world is being transformed from a physical repre- 2. A digital product re-defines the base product The end result of all insights to this point is a height- unauthorized persons have had access during thesentation to a digital representation. This is the insight through a new wave of innovation. Removal of the ened dependency of society, business and individuals journey. This is fundamental to people, businesseswe all see around us, yet seems to be the most invis- physical limitations of the material the product was on a fully functioning real time connectivity fabric. and society as more dependency is placed on theible to the naked eye. When it happens the effects being distributed upon enables a new round of product What makes cloud truly transformative is mobile; the digital eco-system.tend to change industries and the leaders inside them, regeneration and discovery. ability for any cloud based service using any device tounless the leaders dematerialize first. There are three be connected anywhere at any time. For example, the upside to the connected car is a bet-massive implications when digital representation of 3. Speculative production is removed thus producing ter experience for the owner while giving an opportu-physical product happens: the ultimate efficiency of supply versus demand, reduc- The networks of the future shall focus on perfor- nity to transform the life time value of the car ownership ing waste and saving the planet’s resources. mance based execution of digital asset shipping from the perspective of the car manufacturer and the1. Ability to deliver on demand anywhere moves into when the integrity, reliability, security and transpar- car dealer. However, there needs to be guarantees thatreal time. A digital product can be delivered immedi- Our challenge is to understand what we no longer even ency (real time introspection) of operation guarantees cars cannot be “hacked”, insurance details cannot beately when requested. think about. Before the Industrial Revolution, produc- when something is shipped it gets there when it is modified in transit, performance is as specified and the tion was local and everything was tailored to individual suppose to , it is the same as when it started and no operation is guaranteed to function.6 Changing the Game Before the Game Changes You Changing the Game Before the Game Changes You 7
  5. 5. Impact: End of the Factory MentalityThe digital transformation is very similar to an earlier Large leaders of industries are being challenged as 70% of today’s cost structure lies in paper, printing,journey that happened in the physical shipping indus- the physical fulfillment model of the last 200+ years distribution. This can all be saved. A revenue stream istry, that led to the transformation of the physical global is replaced with its digital children. Kodak is one such required, however.supply chain. Before 1954 the global shipping industry example. In 1976, Kodak commanded 90% of filmwas an ad-hoc orchestration where the cost and relia- sales and 85% of camera sales in the U.S and at its For the music industry the same is already true for CDs.bility of shipping was best effort. In 1954 the revolution peak Kodak had a market capitalization of 31 billion For the film industry the same is true for DVD’s.of the shipping container began. Transport executive USD (1997) [ref]. It also invented the world’s first digitalMalcolm McLean had watched teams of dock workers camera in 1975, the invention that would lead to its The key lesson for all to understand isunloading goods from trucks and transferring them to ultimate demise. the difference and dependenciesships and came up with a more efficient way of doing between core business and physicalthings. The new era of the shipping industry and the Kodak filed for bankruptcy in 2012 with a market production.shipping container was born. value of only 145 million USD [ref]. It failed to Impact – “where did my business go?” remember its coreMcLean’s true innovation was to understand the core business of enabling mass market photography. It hadbusiness of the shipping industry was not operating replaced its reason to be with the delivery mechanism “Physical realization of the coreships but delivering cargo and delivering cargo with it had created to deliver on the promise – that of film.the best performance possible. Before the container Physical realization of the core business promise will business promise will not survive thecame along a typical ship might spend a week tied up not survive in the transformation of physical and digital, transformation of physical and digi-at dock. “A typical cargo ship in the 1950s might have and companies that cannot disconnect their future200,000 individual items to be loaded. It was a hugely from their physical representation of the past will fail. tal, and companies that cannot dis-labor intensive business and hugely costly. What the connect their future from their physi-container did was get rid of all that” [ref]. The story is true for newspapers. Their core business is journalism. The question is how to monetize such cal representation of past will fail”Loading loose cargo onto an average ship in 1956 cost reporting, not to protect a paper printed representation.$5.86 per US ton. Container ports could load vesselsfor just under 16 cents per US ton. Ultimately “It costsless to ship a container between China and Felixstowe(England) than it does to then send it on the road toScotland” [ref].But more efficient use of shipping assets was not the Impact:only change the shipping container initiated. It becamepossible to start to guarantee delivery times. In digitalterms this is the same as latency. Since the contain-ers are secure, the items inside were guaranteed to be “New Businesses”secure (digital equivalent – data security) and also the Some companies seem to be doing very well. Account- tries and companies. Through this paper we will showcontents of the container were guaranteed to be the “McLean’s true innovation was to ing for now more than $960 billion in market capitali- the most important differentiator is to understand coresame as when the journey started (physical equivalentof data integrity). This changed what products could understand the core business of the zation, the Four Horsemen of Mobility have divided business and then to understand how the core busi- into three groups: Amazon and Google are all making ness can move into the next generation of competitionbe shipped and delivered globally, opening up com- shipping industry was not operating billions each year from mobile devices, Facebook is still by leveraging new technology.pletely different global markets. Containers could startto be monitored and thus the contents inside could be ships but delivering cargo and de- trying to figure out how to get there, and Apple is mak- ing more money from mobility than all three combinedtracked in real time to monitor delivery and give trans- livering cargo with the best perfor- [ref].parency to the product owners. mance possible.” These companies are all executing with growth be-The advent of the shipping container also initiated cause they understand where their core business lieschanges required at the port to re-engineer the on- and what adjacencies (or complements) their core busi-loading and off-loading of containers through crane ness growth depends upon.infrastructure (a complementary business where breakeven business models drive the market efficiency of the Apple sells premium hardware platforms. Google sellscore business of performance based cargo delivery – advertising. Amazon’s core business is retail. Face-see “Insight: Economics of the Future”). book’s core business is their social graph. These com- panies are all examples of companies that, of course, are closely associated with the digital age (yet you could argue Apple is a legacy PC provider). However, later we will give other examples of traditional indus-8 Changing the Game Before the Game Changes You Changing the Game Before the Game Changes You 9
  6. 6. Insight: “Economics Insight: “Traditionalof the Future” Businesses CanTwo economic laws exist, the “economics of comple-ments” and the “economics of network effects”. Both application store as a complement to increase the value of their hardware platform experience. Amazon Transform”existed previously but in the world of the very low fric- prices the Kindle at a loss to drive their core retail busi-tion digital society, they increase in importance. ness in the future. Facebook (still the most challenged Many industries are undergoing transformation. One to build their pricing based on the actual, real-time from a real business point of view, despite already example is the insurance industry, specifically vehicle behavior of drivers, PAYD redefines entirely the wayUnderstanding core business enables the economic exceeding Amazon’s revenues) publishes its social net- insurance. to charge for motor risks. Underwriters must adaptlaw of complements, which accelerates rapid market work via API’s to drive the reach and insights they can to the new connected way of doing business.”adoption. The law of complements explains why generate from their social graph. The core business of insurance is the managementsome companies may give away services that other of risk. The traditional way (and the only way to manage After Italy, the wave is now reaching the UK and thecompanies use to drive direct revenues. This is very Understanding core business enables a company risk in the past) has been statistical analysis of previous US, where Moody’s recommended underwriters “adoptclearly seen in the space of new communication servic- to understand its business complements, and place behaviors to manage financial coverage of behavior in it sooner than later”. We expect all developed countrieses where some companies are giving away voice and into execution a total strategy with awareness of what the future. If the statistical calculation of risk exposure to embrace the new model, with local technology- andvideo communications for free (Google) while others needs to be core and closed and what needs to be is wrong then the results are financial failure for those business variants” [ref].are charging their customers in very traditional models complementary and “open.” issuing the coverage [ref].for very high margins (carriers). This clearly is creating Insuring the drivers of vehicles will never be the sametension in the marketplace. Network effect states the more people taking part in The new market offering of usage based insurance has again. a network the exponential increase in the value of that changed this paradigm. For the first time insuranceThe simple understanding of the law of complements network. The traditional model for network effect was can be issued based on monitoring real time (driving) This is one example of an industry under businessstates a good’s demand is increased when the price of the telephone system where more people who have behaviors through connected cars. process transformation where the competitiveanother good is decreased. Conversely, the demand for telephones increase the value for everybody who has landscape has changed due to the adoption of thea good is decreased when the price of another good is a telephone. This is a one sided network effect. The The Pay as You Drive (PAYD) market already has over next era of capability and growth.increased [ref]. current network effects are two sided and driven by 2 million customers and has reached a tipping point. software platforms (Microsoft, Apple, Google, among The expectation is that the market will be multiplied by Other industries such as healthcare (“Why do I need toA simple example of a complement is that of the rela- others). The more people using a platform, the more 50 by the end of the decade. Telematic-enabled policies be in hospital to be monitored? Why do I need acutetionship between the car and fuel (or gas). The Hummer attractive it is for a developer to develop their applica- will then generate €50 billion in premiums to insurers symptoms before treatment starts?”), energy, retail, etc.car was tremendously popular when gas in the USA tions for that platform. The more applications that exist who have seized the opportunity. will follow. All aspects of society, business and peoplewas under $1 a gallon. When the cost of gas stayed on a platform, the more valuable it is to the people will transform. Companies have to choose whether toabove $3 a gallon for a long time, the Hummer car using the platform. This is good news for consumers worldwide. Low lead the process of transformation or to follow the leadstopped being manufactured. They were exposed to a mileage and safe drivers will stop subsidizing fraud- of transformation started by competitors. Our recom-complement that was beyond their control. sters, road warriors and dangerous drivers, translating mendation to all companies is to lead the transforma- savings to them of up to 50% on their car insurance tion process.Successful companies will clearly understand their core premiums.business and thus clearly understand their comple-mentary businesses. Google’s core business is adver- “Successful companies will clearly Frederic Bruneteau, Managing Director, describestising. Everything they do is to drive revenue to their the impact for insurers:core business. What will make customers spend more understand their core business “Everybody has a plan until they get punched in thetime with their inventory, how will they maximize the and thus clearly understand their face”, famously said Mike Tyson. Well, this is whatrelevance of their inventory. This is why they are giving could happen to numerous motor insurers if theyAndroid away, to ensure an “openness” of mobile, they complementary businesses” do not reshape their strategy swiftly. The Internetare giving away communication services so people is revolutionizing all sectors and this is now the turnspend more time on their properties. Apple runs their of the auto insurance industry. By enabling insurers “The core business of insurance is the management of risk”QX QX Py Py Time Time10 Changing the Game Before the Game Changes You Changing the Game Before the Game Changes You 11
  7. 7. What Does it All Mean? The world is changing and the speed of change is A performance driven delivery shall be the match of accelerating. There will be a transformation from delivery + security + integrity + transparency to industrial revolution led behaviors to information led business need and price point. behaviors. This will change individuals, businesses and society overall. In the business world changes The most successful businesses of the future shall be are already visible as can be seen from new disruptive the ones that execute with the greatest clarity on the companies (Google, Amazon, Facebook) as well as tra- above and can make the best data driven decisions as ditional companies and industries re-discovering their close to real time as possible. core business (insurance, Xerox [ref]). We call this end state the Networked Society. Successful business transformation, irrespective Wecome… of industry, will depend on the same set of basic understandings and capabilities: • Understanding of core business and complements • Containment of existing business operations and processes (if existing)Conclusion: • Creation of new business operations and processes (“Agile Framework”) • Rapid execution capability that maximizes the disrup-A Real Time World tive value, cost structure and time to market created by the exponential technical advances happening (“New Business Factory”) • A resulting real time data driven business operationThe parallels between the physical shipping industry and business processesand the digital shipping industry are clear to see. The “There will be a transformation frompaths of the connectivity cables in the world of today “The paths of the connectivity All businesses will construct a digital business opera- industrial revolution lead behaviorshave the same deployment patterns as the traditional tion that will be the replacement of the traditional ITglobal trade routes. The second part of this paper cables in the world of today have organization of today. Predictable performance driven to information lead behaviors”describes the core business model opportunities for the same deployment patterns as delivery of digital capability shall be a foundationalthis space, the required operational capabilities and the building block for next generation competitiveness.complementary businesses that will drive the growth. the traditional global trade routes”The promise of the Networked Society depends on the ITC Stages of Transformationperformance based operational delivery of the underly-ing network. As seen with the revolution of the physical Public Hybrid Privateglobalization revolution, the same shall be seen in the Cloud Cloud Clouddigital space going forward. Realize Welcome to the New Efficiencies and New Businesses Networked Society BUILD Digital Logistics Performance PREPARE From chaos of Today12 Changing the Game Before the Game Changes You Changing the Game Before the Game Changes You 13
  8. 8. What the Networked Definition of Informa-Society Means to the tion and Communica-Network Operator tion Technology (ICT)The future is changing quickly. New capabilities are engineering their own “Fedex” operation – not What is Information and Communication Technology The expression was first used in 1997 in a report byrequired to maximize and to ensure competitiveness something a company would ever do. (ICT)? Dennis Stevenson to the UK government and promotedand relevance. Using the insights presented in the first by the new National Curriculum documents for the UKhalf of this paper; a proposal for core carrier business The second alternative is network operators architect As defined by Wikipedia: in 2000.and required capabilities shall be presented. Traditional horizontal capability, to enable the performance ship- Information and communication technologies, usu-high margin services such as voice and messaging are ping of any goods in an open and flexible, but depend- ally abbreviated as ICT, is often used as an extended Ericsson believes the ICT sector is leading a globalunder threat by disruptive players due the enabling ca- able and predictable manner. We believe this is the synonym for information technology (IT), but is usually transformation. Billions of connections between peoplepabilities described earlier while at the same time there future foundational opportunity for the carrier service a more general term that stresses the role of unified and devices across the world are creating informationis a larger growing dependence of all players on the provider market. communications and the integration of telecommunica- societies in which learning and the ability to transactnetwork operator. tions (telephone lines and wireless signals), computers, “as close to real time as possible” represents the key to Digital shipping does not limit service providers from middleware as well as necessary software, storage and success.The digital shipping network today is the same as the choosing to also ship their own digital products and audio-visual systems, which enable users to create,shipping industry pre-1954 and before the introduction moving further up the value chain. They will, however, access, store, transmit, and manipulate information.of the shipping container. The network is still man- be able to do that, on the same foundational knowl- In other words, ICT consists of IT as well as telecom-aged as a wholesale capacity provider. Every day the edge of guaranteed performance as others, transform- munication, broadcast media, all types of audio andequivalent of 200,000 “loose objects” are loaded into ing their industries. video processing and transmission and network basedthe system in the hope they are delivered as required. control and monitoring functions.The future high performance networked society cannothave foundation on such a system.One of two scenarios will evolve. Those shippinggoods that require guaranteed delivery will engineertheir own operations on top of the wholesale besteffort network. While not impossible, it is extremelyexpensive, complicated and time consuming, ICT Operatorespecially over wireless. In the physical world thiswould be the equivalent of all industries/companies Core Business We introduce the concept of the future service pro- “Openness is not a strategy, vider being known as an “ICT Operator”. This is service providers that will target the ICT markets that are cre- it’s a tactic”Networked Society ated as a result of the impacts and insights presented Platform companies are closed around their coreUnderstanding carrier core business and delivering on the value creation previously. The Networked Society will depend on the business and open around their complements. performance and delivery of the ICT operators. ICTand capture operators will combine all their assets to create seam- less operation from a total end-to-end operation point of view (combining network plus compute). To follow the economics of complements the core busi- ness of the network operator will remain closed while the complements shall be curated/open. The ICT operator shall deliver the best performance digital logistics for its customers. Core business is “dig- ital logistics customer delivery”. Note core business is not “running networks”. The network operations shall be engineered to enable best application delivery to meet the core business needs as effectively as possible (see next section). Courtesy of Vision Mobile [ref]14 Changing the Game Before the Game Changes You Changing the Game Before the Game Changes You 15
  9. 9. The InterdependentITC Operator Core Business Needs of the End User, Application and ICT Operator All players, including the end user, have very similar capability the ICT operator should be able to indemnify needs from their digital logistics providers: any customer from loss of data, failures in data integ- rity, security breaches, performance guarantees. The • “Make the business model as favorable as possible largest barrier for enterprises to adopt next generation for me” ICT solutions is one of risk management and risk expo- • “Maximize my end user experience” sure. The removal of this barrier will be the number one accelerator for adoption, given the proven cost • “Minimize my cost” benefits. • “Make sure it works the way it is suppose to” 3 Note in reality in the new P2P mesh era of web development, both client and server end points may be have many “API endpoint The end user has this expectation from its application dependencies” that make the routing and correct positioning of compute capability much more complex and application service provider. The application ser- vice provider cannot afford to not deliver on its cus- tomer promise and therefore has the same request toThe ICT operator will deliver OTT services, both its own Platforms are simple to understand, yet are rarely ex- the ICT operator. By exposing capability from its coreand from others. These will use the interoperable ser- ecuted well. A successful platform must do three things operations, the ICT operator can enable the applica-vices available via API’s from its platforms to maximize well tion provider to not only meet the needs of their endthe application delivery quality and yield management customers but also maximize the use of the networkof network as much as possible. The ultimate customer • Give something away for free, ideally the free assets to increase margin and revenue while positivelyservice however shall be available to the “on net” offerings are what the competition is charging for improving utilization of the underlying network fromcustomer where life time value and relationship can be and considers to be their core business, a yield management perspective.maximized through investments in both next generation • Have a group of customers that pay directlynetwork and operational capabilities. The network exposure layer can be seen as the digital • Generate payment for partners equivalent of the physical shipping container, whereThe new core business requires the operators to be- each container can be customized to meet the needs The last point, getting partners paid, is frequently over-come a platform and reclaim their original position as of the application’s content inside. looked or not executed. To use Google’s advertisingthe center of gravity for the overall industry. Because network as a simple examplethey have not made this shift to date they are currently The application (client and server) can be seen asa commoditized component of platforms that are oper- • Google offers free search the digital equivalents of the original and destinationated by OTT players. • Adwords is where people pay them end ports in the physical world3. • Adsense is how they get people paid The core business of the ICT operator is high perfor- Adsense is part of the full circle offering that really mance digital logistics. The ultimate business model allows the Google advertising network to ramp as a is one of indemnification. With the correct operational successful platform.16 Changing the Game Before the Game Changes You Changing the Game Before the Game Changes You 17
  10. 10. Key Capability: Core ICTAgile Service Delivery Operator Capabilities– Cloud The purpose of this paper is not to cover in detail the required capabilities to deliver on the core opportu- nity of the ICT operator and digital logistics. The core KEY ICT capabilities are already covered in whitepapers and OPERATOR CAPABILITIESCore operational capabilities require managed expo- The real time operational model requires the ability to workshops that can be provided upon request. The purpose of this paper is rather to place them all in the Performance Infrastructuresure via API’s to enable the building of the digital ship- be able to operate very flexible agile business support context of the changing landscape and resultant busi- Network as a Platformping container. solutions that enable rapid introduction of new capa- ness opportunity. Real Time Introspection bilities and the self service management of customers. Real Time ManagementThe Interdependent Needs of the End User, Application Different business processes and business models Anticipatory Pro-actionand ICT Operator) that will deliver the required perfor- must be easy to introduce and integrated into the othermance. The right capabilities need to be exposed. The operations to enable effective offering of differentiatedcore business needs to be protected. Scale (up and capabilities that can be monetized while maximizingdown) delivery of own API’s (and any inter-operable yield management of the underlying capability set in Key Capability:API’s), own network and own compute needs to be parallel.managed. Usage needs to be monitored and used toenable anticipatory pro-action. This is becomingly Next Generationcommonly known as “Network as a Platform”.Control and operations of deployment should be in the Operationshands of the customer. The customer should be able to:• Manage what is deployed where• Observe performance on demand• Change deployment on demand• Be in real time control of cost to performance The networks of today are no longer being constructed be guaranteed in terms of performance to need, the to carry voice and messaging. They are being con- yield of network is as effective as possible and the cus- structed to deliver the digital assets of people, busi- tomer’s cost structure versus required performance is nesses and society. Existing planning, operations and as lucrative as possible. This is the construction of the models do not work. A transformation of operation is high performance digital delivery operation.Key Capability: required to ensure the business of digital logistics canCompliance Key Capability:and Guarantee PerformanceAs businesses become more dependent on digital as-set management and delivery it must be guaranteed If there is any debate or question on the above then it will slow down adoption. Ultimate business opportunity Infrastructurethat performance and any regulatory compliance is is for an ICT operator to indemnify any client againstsatisfied. risk for the above, if the correct technical and opera- Infra-structure of the future will require to be allocated • Speed of spin up, spin down tional support can be placed in execution dynamically depending on performance requirements • Efficiency of virtualization• Is my data secured? (bandwidth, jitter, latency requirements). Cloud is the • Distribution of compute throughout the network• Is my data the same as when I put it there? existing virtualization of compute infra-structure. Soft-• Is my data the same as when I put it there 10 years ware Defined Networking is the virtualization of network Operations should be as secure as possible from an ago? infrastructure. The combined dynamic operation of both architectural perspective as well as an auditor, stand- aspects, dependant on demand and status, will lead• Is my data stored in a legally compliant location? ards perspective. Data integrity should be guaranteed to much better return on investment of the underlying• Am I still compliant with any regulatory or business – that data will be there and it will not be compromised capability. Cloud virtualization should be as efficient as requirement? without knowledge – now and ten years from now. For possible in terms of: both data security and data integrity, indemnification is • Throughput to footprint the ultimate business model and accelerator. • Vertical scaling18 Changing the Game Before the Game Changes You Changing the Game Before the Game Changes You 19
  11. 11. Key Capability:AnticipatoryPro-action In SummaryDeployment of applications in the virtualized environ- The successful operation of the real time ICT operator The world is changing faster than ever before. The com- Ericsson believes this is a pre-requisite for the success-ment is extremely complex. With hundreds of thou- will be driven from the utilization of the operational data bined forces of devices, computing, dematerialization, ful deployment of the next generation of businesses,sands of virtual servers operating millions of applica- generated both directly and indirectly. This will be used big data and network will change the landscape of next societies, and us as individuals, where operation can-tions across distributed compute (or data) centers to further optimize performance for the ICT operator, generation competitiveness. We already see companies not be best effort due to the mission critical nature ofleads to challenges in answering performance issues: also to generate new business offerings of value and that are failing to change alongside companies that are what is being delivered. also as a value add service to customers who also re-inventing their businesses. The clock is ticking for• Why is my application down? could derive business value from the operational data all companies to understand their true core business, Ericsson is in active dialog around the world about• Why is my application slow (worse)? contained. their complements and what they need to drive the what is required to successfully transform the service• Is it the network? next level of business differentiation in the “Networked provider business model as well as the business model• Is it the storage? Society” of tomorrow. Business models will change and of the service provider’s customers.• Is it the compute? business operations will need to transform.• Is it the application? For more information about detailed whitepapers and/ Carrier Service Providers are no different from any or interest in workshops to discuss what is contained inThe ability to investigate performance in real time is other businesses. Core business must be understood this paper, please contactcrucial to managing high performance SLA require- and business operations changed to reflect the needments. Operational margins and customer satisfaction to deliver on the new core business requirements. http://www.ericsson.com/feedbackwill depend on the ability. Ericsson believes we are on the brink of a “Networked Society” where real time performance digital logis- An Ericsson representative will contact you back. tics will become the core delivery of the networking industry.Overall Technological changeBusinessTransformationUltimately we are discussing business transformation Pace of changeof the operator of today who delivers voice and mes-saging to the ICT operator of tomorrow who deliversperformance digital logistics. As seen in the physical Gapworld of performance shipping (for example Fedex),optimization of internal capabilities will also translateinto optimization of customer capabilities that will leadto their differentiation in their own marketplace anddeep ICT operator, customer relationship and depend-ency. Perceived technological change Time Changing the Game Before the Game Changes You 20 21 Changing the Game Before the Game Changes You

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