DTW (Digital Transformation World)
DTWS: Beyond connectivity – growth at the edge
In this final, invitation-only CXO Summit for DTWS 2020, industry leaders debated the complex but critical issue of deriving revenues other than from connectivity, and especially growth at the edge from enterprise customers.
DTWS: Beyond connectivity – growth at the edge
Revenues other than from connectivity, and especially growth at the edge from enterprise customers, is a complex but critical issue for the telecoms industry in the era of 5G. It was the topic for debate in the final, invitation-only CXO Summit at Digital Transformation World Series 2020. Here are some anonymized highlights of a fascinating exchange of varied views. TM Forum Chief Analyst Mark Newman, who acted as moderator, kicked the session off by confessing that after spending several months researching the Forum’s recent Benchmark Report How to build and operate at the edge, he still has more questions than answers. Panelists included Camille Mendler, Chief Analyst, Enterprise Services at Omdia; Jason Hoffman, President and CEO of MobiledgeX; Shawn Hakl, Partner at Microsoft; and Juan Carlos Garcia, Senior VP Technology & Ecosystems at Telefónica. One contributor pointed out that the fastest growing part of the market for the next five years will be edge cloud, with a compound annual growth rate of 30-35%. This is because enterprises have specific use cases they will invest heavily in.
There is urgency: Enterprises are much more digital and tech savvy than they used to be and have their own way of doing things, rather than waiting for operators to develop services that will do it for them. Also, big tech companies like Microsoft and IBM are very keen to get into and dominate this market.
The vexed issue of scale
This was disputed by some. One executive argued that the reason for the excitement around edge is because it is about increasing the size of the market for everyone rather than just sharing:
“This is a unique opportunity to partner and together to serve our customers better, to give them a better experience. They want flexibility and they want control. This is the mechanism to get there.”
Another speaker stressed that in “the old days”, hyperscalers’ margins were 40% and anecdotally are as low as a tenth of that in some cases as the economics are predicated on higher volume. However, selling edge services to enterprises is a different kind of deal. The issue of scale was threaded through the discussion. There was broad agreement about a set of common, horizontal capabilities enabled by 5G and edge computing, but attendees noted that each CSP has a different set of customers in varied markets that require deep local and other specific knowledge, resulting in CSPs tailoring optimal solutions for each client.
Telecom as a global platform
One suggestion put forth for how to get around this is to use customers’ starting experiences and hyperscalers’ requests to develop open standards for edge services. The argument is that if the definition is sufficiently clear, enterprises will be able to do what they want with what is on offer, and the hyperscalers will find it easier to partner with telcos wherever they are in the world and whatever their size.
“The telco industry can almost act like a global platform, rather than individual national operators,” the speaker explained. “We could take the same kind of approach as TM Forum has done with the Open APIs, and this should be in the Forum’s plans for 2021.”
On the subject of scale, Newman asked how operators are aligning their 5G build out strategies with addressing the edge market. One attendee noted that public cloud companies build minimum viable products that are software-based, so they can afford to fail fast versus the more traditional massive capital investment that takes to construct a telecoms’ access network. Another recommended that telcos approach the market by building the edge out in an agile, incremental way rather than “blowing a huge amount of CapEx” – starting in big cities or for specific customers, for example. Much could be learned from those small deployment for bigger scale instances later. A senior executive from a Tier 1 operator pointed out that 5G was developed with services that would benefit society and enterprises in mind, adding that multi-access edge computing is central to their company’s 5G strategy. They view it as being a “platform that can enable a two-sided business model.”
Addressing opportunities
One of the applications attracting the most interest, by a big margin, is intelligent video, resulting in what was described as a “Goldilocks trade-off” between bandwidth versus edge processing. This attendee noted that while there is considerable interest from manufacturing, the operator community is slow at getting to grips industrial controls. There is a high degree of interest from a sector the same speaker described as “single control plane deployments” by which they mean users who are looking to replace Wi-Fi, LAN and LP-WAN with 5G as a single infrastructure.
“This a very attractive case, especially where connectivity isn’t available for the macro network, in places like oil rigs and mines, and agricultural facilities,” they said. “There is a lot of interest in private 5G networks.”
It was agreed that the private 5G network opens possibilities for operators large and small, but that the killer question in looking at whether 5G and edge computing is needed boils down to: will edge deliver better experience?
“That’s what customers want and what they are prepared to pay for,” said one executive. “Enterprises are investing in the edge because they want performance and reliability, security, and fast insights – and to save money, although that’s further down the list.”
The speaker also stressed customers are demanding accountability from one party, hence among other things, far smarter orchestration across different environments, end to end, is essential to progress.