Public versus Private Networks: Two Ways to Approach Enterprise Digitization and How the Telco Industry Should React

The global momentum for enterprise digitization (accelerated by the global response to the outbreak of COVID-19) is gaining more and more traction, and we are seeing the number of players presenting their commercial offerings for enterprise connectivity increasing almost exponentially. This, in turn, attracts additional players to the market and leads to a changing competitive landscape, in which hyperscalers, network operators, infrastructure vendors, and System Integrators (SIs) are aiming to address a similar market.

A closer look at the proposed connectivity solutions underlines the heterogeneity of the enterprise market, as different options for deploying a cellular network emerge. On one hand, standalone 5G allows deploying a private network on the enterprise premises. Hyperscalers like Amazon Web Services (AWS), Microsoft, and IBM, as well as network infrastructure suppliers like Nokia and Ericsson are among the most prominent advocates. On the other hand, using 5G network slicing enables network operators to offer renting out a slice of their public network to enterprises for connectivity. Despite distinct differences in their network architectures, early experience suggests that both offerings are appealing to enterprises.

In order to maximize revenue potential in addressing this heterogenous market, it is important for the telco industry to design appealing offerings for both deployment options. In order to do this, however, requires a thorough understanding of key considerations that drive enterprises for either deploying a private network with all equipment on-premises or renting a virtual network slice from a public network.

Enterprises wishing to deploy a cellular connectivity solution, from an operational point of view, recognize that the two deployment options differ in two key aspects: data integrity and customizability of the network.

A fully private network means that all components and, therefore, all network functions will be deployed on the premises of the implementing enterprise. Networking data will always remain within the enterprise and do not need to be transferred to a public network for processing. Furthermore, deploying a private on-premises network offers the implementing enterprise full customizability of the network through network slicing. This allows enterprises to address both mission-critical and non-mission-critical use cases within the same physical network infrastructure.

Renting one (or more) network slices (which function as logically independent virtual networks), on the other hand, is particularly interesting for enterprises aiming to automate only a select number of uses. Furthermore, the synergy effects with the public network infrastructure enable network deployments, even in small enterprises (e.g., retail units) that do not have space for deploying a full core network on-premises. In addition, renting a slice from a public network drives down the upfront investment in network deployments and could be more appealing to enterprises facing tight budgetary controls that would prevent investment in a completely private network.

In order to maximize the addressable market for enterprise digitization using cellular connectivity, network operators, infra vendors, and SIs need to provide appealing offerings for both network slicing and private network deployments. In doing so, the telco industry needs to understand the key characteristics of enterprises deciding on either option.

A network slicing approach will be more interesting for small and medium-sized (SME) enterprises with reduced means for investment, so offerings should lower the entry barrier of high upfront investments and target a subscription-based monetization. Instead, these solutions should be offered as a service-based model, creating revenue through subscriptions. Given that ownership of network infrastructure is not a requirement for enterprises renting a slice from a public network, a commercial offering would not require any Capital Expenditure (CAPEX) component, because small cells and other equipment could be supplied in an Infrastructure-as-a-Service (IaaS) model.

In designing offerings for private network deployments, where all parts of the network are deployed on-premises, the telco industry needs to account for two considerations. On one hand, even large enterprises opting for a completely on-premises private network deployment see upfront infrastructure investment as the main barrier to entry. On the other hand, large enterprises may opt for a private network deployment to ensure full customizability of the network. To reconcile these two requirements, the telco industry needs to be prepared to design Service-Level Agreements (SLAs) in collaboration with the enterprise, allowing enterprises to customize and service the network autonomously to a certain extent, while ownership of the infrastructure remains in the hands of infra suppliers, which would allow private network offerings in an Operational Expenditure (OPEX)-intensive, service-based business model.

At the heart of this, the telco industry needs to internalize that their success in the enterprise vertical requires close collaboration with the respective enterprises to understand them as partners, rather than mere consumers of services.