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Migrating from legacy services and systems to new all IP-networks is a core business objective for many communication service providers (CSPs).
Craig Farrell, IBM
The dilemma of transformation
Transformation to migrate from legacy services and systems to new all IP-networks is a core business objective for many communication service providers (CSPs).
As part of the service and network transformation, CSPs often take the opportunity to reduce the complexity by rationalizing multiple equivalent systems for standard functions such as ordering, fulfillment, inventory, assurance and billing. Despite this desire to transform into cloud-based, all-IP operators, many CSPs have struggled to implement successful transformation programs, despite the best intentions and execution plans.
In studying some of these projects it is apparent that a number of common issues and business decisions lie at the heart of these transformation initiatives and collectively these decisions, problems and issues and are known as ‘the dilemma of transformation’. I believe the decisions posed by the dilemma of transformation have a profound impact on the eventual achievement of the outcomes desired from any telecommunications transformation project.
To highlight the dilemma of transformation in action, consider the following business decision that is often necessitated by telecom transformation projects:
This question can be an insightful barometer of both the culture of the operator and the appetite for significant change. In working with operators on transformation strategies, it is always a difficult moment when discussing the seemingly insane idea of cannibalizing a legacy system or solution that is generating significant (albeit declining) revenue at high profit margins.
This question is particularly germane for operators that still have highly profitable legacy voice services when they are confronted with the suggestion of replacing this service with a VoIP equivalent. The whole idea seems counter-intuitive.
As operators contemplate the desired future state after transformation, an insightful exercise is to think of a world where voice, text and data are all free. Consider how that would change your business. This is not as far-fetched as it sounds. Free WiFi is already widely available as are zero-rated data plans, give-to-get services, sender pays services and operators that plan to utilize advertising and other mechanisms as alternatives to standard subscription models.
This question quickly brings into focus one of the difficult issues with transformation. At its heart, transformation is designed to reduce complexity which in turn improves efficiency and drives cost savings, but often does so at the expense of less efficient, but still profitable, legacy services.
This, of course, is the essence of disruption but it does not make it any easier to take the tough decision to change, particularly when short-term revenue and profits are impacted. For many operators the realization that transformation to reduce complexity may result in reduced revenue and margins in the short-term is cause for hesitation.
An example of the dilemma of transformation at work can be seen in the desire of many operators to transform to use software-defined networking (SDN) with specialized network functionality provided on generic hardware using network functions virtualization (NFV). The tantalizing promise of SDN and NFV is that it will allow CSPs to purchase network functionality without the need for expensive proprietary hardware, thereby providing significant cost savings and reducing the time to innovate new services.
In recent years many operators have done various trials, proof of concepts and demonstrations but we still do not see many systems in production. I believe the dilemma of transformation is at the heart of a reluctance by telecommunications operators to move cloud and NFV-based services into production.
I believe the dilemma predicts two major factors that can cause telecom NFV transformation projects to stall. The first, as we have discussed, is that moving to cloud-based SDN and NFV networks may necessitate a transformation that cannibalizes legacy systems, services and solutions that are generating significant revenue at high profit margins.
The second factor is that transforming to NFV requires a migration strategy that maintains existing service and customer satisfaction levels so that the move to SDN and NFV production services does not precipitate an increase in churn during the changeover.
The strategy to migrate production workload over to NFV is a critical factor to the success of transformation projects. The usual method to move legacy services to newer IP-based services is the ‘cap and grow’ approach. In cap and grow, a complete replacement NFV-based service is built for a given legacy service and a ‘cut over” occurs. At the cut-over, all orders for the old service are sent to the new service for fulfilment. Existing customers are moved to the new NFV service as they complete their service contracts or as the result of a campaign to migrate legacy subscribers. This approach has a number of disadvantages including the risk of having to build an entire new service that completely replaces the old service before any production workload is migrated. This strategy can have significant up-front work and costs, which in turn translates to a higher risk.
A new approach being used by leading CSPs is the technique of ‘strategic redirection’. In strategic redirection every individual service order is examined to see if this specific service order can be substituted by an equivalent replacement service. If an equivalent cloud-based NFV service exists and the order can be substituted with a new service equivalent offer, then the order can be redirected to the new service. If the order cannot be substituted for some reason, for example a lack of coverage, or a feature not yet implemented, then the order is processed as before.
This approach allows an operator to gradually move specific orders over to the new service on an individual order basis, without affecting other orders in the system. Strategic redirection is a much lower risk approach to transformation that does not require the complete replacement service to be available before production workload can be transferred.
Strategic redirection results in a start small and grow approach to transformation which is a far less disruptive, lower risk approach that address one of the biggest inhibitors to success, highlighted by the dilemma of transformation.
