Telco Cloud Vendor Strategies: Product-Based versus Open-Source

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By Dimitris Mavrakis | 2Q 2017 | IN-4598

The annual gathering of the telco OSS/BSS market took place during May (2017) in Nice, France, where the industry gathered to discuss a variety of topics including virtualization, Big Data, analytics, and customer experience management, as well as how these support systems can help telcos innovate and implement leaner operations. This domain of the telco network is a relatively closed, slow-moving market, where technology advances are slow due to the business-critical nature of these systems: network control and monetization. This contradicts the nature of these systems, which are driven by software and commoditized IT platforms, something that telcos are attempting to implement across their networks. Virtualization, software-defined networking (SDN), network function virtualization (NFV), and cloud-native concepts are changing the market, telco-vendor relationships, and business models. Additionally, they are paving the way for the introduction of open-source in the telco network.

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TM Forum Live Highlights Divergence of Vendor Strategies

NEWS


The annual gathering of the telco OSS/BSS market took place during May (2017) in Nice, France, where the industry gathered to discuss a variety of topics including virtualization, Big Data, analytics, and customer experience management, as well as how these support systems can help telcos innovate and implement leaner operations. This domain of the telco network is a relatively closed, slow-moving market, where technology advances are slow due to the business-critical nature of these systems: network control and monetization. This contradicts the nature of these systems, which are driven by software and commoditized IT platforms, something that telcos are attempting to implement across their networks. Virtualization, software-defined networking (SDN), network function virtualization (NFV), and cloud-native concepts are changing the market, telco-vendor relationships, and business models. Additionally, they are paving the way for the introduction of open-source in the telco network. 

Network orchestration and automation is an area of great interest to the telco community, as it is the control software for the software-based network. As written previously in the ABI Research Insight “ONAP is Set to Redefine Telco Network Orchestration,” open-source has become very relevant—even the de facto standard—in the telco cloud domain. Open-source is now changing vendor strategies.

A Tale of Two Competitors: Amdocs and Netcracker

IMPACT


Two vendors in this domain are Amdocs and Netcracker, which are the two largest independent companies in the field, excluding OEM vendors Ericsson, Huawei, and Nokia. The business models of these two vendors are two polar opposites: Amdocs relies mostly on professional services, while Netcracker has a strong product-driven business model that relies on continuous improvements and updates of its core software suite. The emergence of ONAP has now created an even bigger gap between the strategies of these two competitors:

  • Amdocs scaled down its strategy around its own developed orchestrator called the Network Cloud Services Orchestrator (NCSO) for telco networks and is primarily focusing on ONAP, which is the combination of Open-O and OpenECOMP that Amdocs helped create. Additionally, Amdocs will focus mostly on selling ONAP-related professional services for network orchestration and automation, rather than deploy its own products. Amdocs will sell an enterprise version of ONAP, which will be a hardened version of the open-source software.
  • Netcracker, on the other hand, announced the twelfth version of its software, simply named “Netcracker 12” at TM Live.It is a comprehensive suite that includes business, operational, infrastructure, cloud administration, and analytics layers, and was developed solely by Netcracker. The vendor claims it will work with ONAP if a client requires it but will naturally prefer deploying its own technology.

These two vendors are now competing in the same market but have completely different deployment strategies. Can open-source truly disrupt the established vendor business models?

Open-Source in Telco Is Not as Easy as It Sounds

COMMENTARY


For a company like Amdocs, and any company that focuses on selling professional services, open-source seems like a natural fit, and given the interest in ONAP, a solid strategy. However, open-source business models are not as simple as they look on the surface and require different levels of commitment from vendors. Some analogy can be drawn from the Big Data domain, where Apache Hadoop, also open-source, is one of the most popular frameworks being used on the Web. Two of the most popular vendors providing Apache Hadoop distributions are Cloudera and Hortonworks, both of which have different business models for offering Apache Hadoop.

Cloudera offers a hardened version of Apache Hadoop, which includes its own proprietary management software to automates several functions. On the other hand, Hortonworks offers the “vanilla” open-source version of the software and generates revenues through support, training, and professional services. An important differentiation for Hortonworks is that it committed a large percentage of its engineers to develop the open-source version of Apache Hadoop and implement new features that are upstreamed in the new versions of the open-source software.

Both Cloudera’s strategies and Hortonworks’ strategies use elements of what can be used in the telcos value chain. However, an important metric that clients may benchmark is how many developers each vendor has committed to the open-source project. In the context of this Insight, this means the number of developers committed to the ONAP open-source project. But, is this an important, and even relevant, metric? For example, Huawei may be able to commit hundreds of developers to ONAP overnight, where other vendors may not be able to do so. Does this make Huawei the leading ONAP vendor? Or will Amdocs, the co-developer of OpenECOMP (and now, ONAP), be the most relevant vendor? How will these vendors generate profit out of ONAP? Will it be professional services (with the vanilla ONAP distribution) or hardened versions of the software?

These questions will be answered in the following year, as it is not yet clear how ONAP will be deployed and which companies will commit developers to this open-source community. As it stands, scaling down in-house developed product lines in favor of open-source software is a big risk, but may be a good strategy for professional services-focused vendors.