Ovum

Ericsson delivers a welcome update to its carrier Wi-Fi portfolio

Daryl Schoolar — Mon, 20 May 2013 23:00:00 +0000

OVUM VIEW

Summary

On May 21, Ericsson announced several significant updates to its carrier Wi-Fi portfolio. The updates included a new indoor access point (AP) that supports the latest Wi-Fi standard 802.11ac, integration of Wi-Fi network management on the same platform Ericsson uses for 3GPP network management, two new Wi-Fi network controllers (WIC 8100 and WIC 8030), and two different traffic-steering solutions that can select the optimal wireless network (Wi-Fi or cellular) for end users. The primary difference between the two traffic-steering solutions is that one is based on historical data while the other uses real-time data. The traffic-steering solutions benefit from not needing any device-side software clients, so they can work with devices already on the market. Overall, mobile operators should be pleased with Ericsson’s Wi-Fi portfolio updates, but the proprietary nature of the network access solutions could limit their impact.

Ericsson’s update helps balance cellular and Wi-Fi traffic

Carrier Wi-Fi in practice should provide congestion relief to the mobile network and give end users a better experience, but that is not always the case. Mobile operators have very little control, beyond user credentials, over which subscribers connect to their Wi-Fi networks and how. This can lead to significant congestion on the Wi-Fi network, as everybody with valid credentials automatically moves from the cellular network to the Wi-Fi network with no consideration for the quality of the Wi-Fi network. Basically this just takes the congestion problem off one network and puts it onto another. Ericsson’s traffic management solutions address this problem.

What the vendor calls access selection is part of its overall self-optimizing network (SON) offering. Access selection balances the traffic between the cellular and Wi-Fi networks based on historical network data that is refreshed every 15 minutes. The other option, real-time traffic steering, provides a more dynamic network selection solution and can also help prevent users from unnecessarily bouncing between Wi-Fi and cellular networks. Both traffic-steering solutions require the use of Ericsson’s wireless AP, network controller, and network management platform. As these two traffic-steering solutions are completely network-based, device support is not a bottleneck for operators wanting to add this to their networks.

This update signals that Ericsson remains serious about carrier Wi-Fi

The launch of the new AP for indoors helps improve an area where Ericsson has not been the strongest. BelAir, the company Ericsson acquired in 2012 to get into the carrier Wi-Fi market, was much better known for its outdoor APs than for its indoor radios. Both of the new network controllers, along with the traffic-steering solutions, also bring increased capacity support to Ericsson’s portfolio. The WIC 8100 and WIC 8030 can support 10,000 access points and 500,000 users. The WIC 8030 fits on a blade inside Ericsson’s existing Evo radio network controller.

This announcement is clearly the largest portfolio upgrade since Ericsson purchased BelAir and signals that Ericsson remains very serious about the carrier Wi-Fi market. As the market becomes more competitive, with companies such as Alvarion shifting their focus from WiMAX to Wi-Fi, regular portfolio updates are needed to keep up with mobile operators’ expectations and to be considered a thought leader in this area. The innovativeness of Ericsson’s traffic-steering techniques certainly qualifies as thought leadership.

The proprietary nature of network selection has its shortcomings

Traffic steering has great potential for improving the end-user experience. However, Ericsson is offering a proprietary solution. While it has similarities with, and is complementary to, the ANDSF (access network discovery and selection function) standard, which Ericsson also supports, it isn’t a standards-based solution. It does have the advantage of being both real-time and per-user, which ANDSF is not.

Ericsson’s traffic-steering offering requires the mobile operator to use Ericsson’s APs, wireless controller, and mobile radio access network (RAN). That means mobile operators that use multiple Wi-Fi networks will not be able to support traffic steering across their entire service footprint. As this would lead to inconsistent performance, mobile operators may hesitate to deploy the Ericsson solution. Furthermore, most carrier Wi-Fi networks primarily use indoor APs, an area where Ericsson isn’t as well-known as competitors such as Cisco and Ruckus Wireless. These issues could limit the market reach of Ericsson’s traffic-steering solution.

Mobile operators may be more inclined to wait until Ericsson and others make ANDSF-based products commercially available, which Ovum expects will happen in 2014, instead of deploying a proprietary network solution. ANDSF, however, requires software support on the device, so its true benefit could take several years to be realized, giving Ericsson a window of opportunity to exploit the clientless nature of its traffic-steering solution.

APPENDIX

Author

Daryl Schoolar, Principal Analyst, Network Infrastructure

daryl.schoolar@ovum.com

Disclaimer

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior permission of the publisher, Ovum (an Informa business).

The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the findings, conclusions, and recommendations that Ovum delivers will be based on information gathered in good faith from both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such Ovum can accept no liability whatever for actions taken based on any information that may subsequently prove to be incorrect.

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NSN building on its LTE and CEM success

Clare McCarthy — Mon, 20 May 2013 23:00:00 +0000

OVUM VIEW

Summary

On May 13, 2013, Nokia Siemens Networks (NSN) held its 2013 analyst event in Nice, France. The mood at the event was upbeat and confident, with two customer case studies providing evidence of the business benefits offered by NSN’s solutions. The event focused on the outcomes of the vendor’s transformation initiatives over the past two years, which have been both swift and tangible. During this period, NSN made seven divestments, which raised €124m in 2012 and is expected to raise a further €130m following the disposal of optical assets in May 2013. This has helped the vendor to increase its net cash from zero to $1.5bn over the past five quarters. NSN has also reduced its workforce by 57,000 employees.

Enabling telcos to improve customer experience and efficiency metrics at a network, service, and customer level

While the event started with the network, it swiftly moved on to cover the areas that Ovum has previously identified as part of a “transformation trinity”: improving customer experience, delivering operational efficiency, and identifying areas for innovations.

Over the past two years, NSN has focused on the technical implementation of LTE and it now has 80 LTE networks in operation. With the next task for telcos being the migration of existing 3G users to LTE, LTE upsell has become one of the strongest use cases for NSN’s customer experience management (CEM) solutions. However, given that 2G to 3G migration requires the same business processes as 3G to LTE migration, it can also be used in this arena. NSN’s “CEM On-Demand” solution is now in place at Zain, Telkomsel, China Mobile, and a number of other operators.

Geographic Information System demonstration focuses on high-value customers

NSN’s CEM solution and strategy dovetails with its efforts to provide high capacity and high quality in the network while managing opex. At the event, Zain Kuwait presented the business benefits that it had gained by working with NSN. Zain uses NSN’s CEM On-Demand solution to obtain customer insights for upsell opportunities, observe group VIPs, and monitor the experience of inbound data roamers. “Serve atOnce Traffica” monitors Zain’s network performance and service quality while “Serve atOnce Intelligence” is deployed for customer insights that feed in to the telco’s acquisition strategy and marketing campaigns.

NSN also demonstrated its Geographic Information System, which showed how telcos can obtain a cell-level view of network performance or service quality problems, locate their most valuable customers in those problem areas, and configure the service parameters to minimize performance issues.

Services remained in the background

In previous years, NSN has been vocal about its services business, which accounted for as much as 47% of the vendor’s total revenues in one recent quarter. On the day of the analyst event, NSN announced that it had opened a Global Delivery Center (GDC) hub in China. This brings the total to seven hubs, which report to two central GDCs in Portugal and India. Professional services are clearly still important to supporting NSN’s CEM portfolio, but its messaging was muted. Managed services were not highlighted and more than one NSN executive said that the company now positions itself as “a product company with services attached”. This shows that products and solutions will remain at the core of the business, with services now seen as less of a growth driver.

Pushing standards forward

The final part of Ovum’s “transformation trinity” is innovation. Some of the innovation that NSN will deliver to telcos will come from the greater flexibility provided by its CEM tools. However, NSN’s innovation activities and time to market will also be boosted by the announcement that the vendor has signed a memorandum of understanding (MoU) to join the Operational Support Systems interoperability initiative (OSSii) along with Ericsson and Huawei. The MoU aims to deliver multivendor interoperability between the operational support systems (OSS) of the three vendors. It covers fault, performance, configuration, and basic network event and trace management for northbound interfaces from radio access, circuit, and packet core network management systems. Participants in the OSSii will bilaterally cross license and share specifications (upfront) for OSS interfaces. This will result in vendors avoiding the difficult process of obtaining specifications between suppliers via the telcos for systems integration, which will lead to faster time to market for telcos.

Overall, the event was upbeat, constructive, and forward looking, and NSN is set to remain a major player in the network equipment provider landscape.

APPENDIX

Author

Clare McCarthy, Practice Leader, Telco Operations

clare.mccarthy@ovum.com

Disclaimer

The post NSN building on its LTE and CEM success appeared first on Ovum.

A year on from its IPO, Facebook must work hard to keep users engaged

Eden Zoller — Mon, 20 May 2013 23:00:00 +0000

OVUM VIEW

Summary

May 2013 marks Facebook’s first year as a public company and the publication of its 1Q13 results. It is a fitting time to assess the social network’s progress since its frenzied IPO, and to identify the key challenges it needs to address.

Facebook has made solid if not spectacular progress over the last 12 months, with mobile proving its biggest success. However, a closer look at the service initiatives and investments undertaken during this period reveals a more uneven picture. Although its advertising revenues are growing, Facebook needs to improve the quality and sophistication of its advertising, and must do so in a way that does not conflict with user privacy. The social network must also work harder to keep users engaged; it must ensure it can compete with the range of alternative social platforms and applications vying for consumers’ attention.

Mobile is Facebook’s rising star

Facebook’s 1Q13 results show that mobile use is continuing to rise. The number of mobile monthly active users reached 751 million in 1Q13 (out of a total base of 1.11 billion users), up from 488 million in 1Q12. This growth in mobile will only accelerate going forward, particularly in emerging markets, where mobile will be the primary (if not exclusive) way that many users interact with the social network. In this context it is critical that Facebook is able to monetize mobile, and it has made good progress on this front since its IPO. In 1Q13 mobile advertising accounted for 30% of its total advertising revenues, up from 23% in 4Q12. Prior to its IPO, mobile advertising contributed almost nothing to Facebook’s revenues.

Facebook’s mobile advertising performance was boosted by its App Install Ads product, which it launched in October 2012, and which allows app publishers to pay for adverts to appear in users’ mobile news feeds. It will be interesting to see how Facebook Home affects mobile usage and advertising going forward. The Android home-screen application, launched in April 2013, is designed to make Facebook’s services better, more immediate, and easier to use on the fast-growing base of Android devices. It will also allow Facebook to track users’ behavior on devices at a deeper level, which will provide more advertising opportunities.

It will also be interesting to see how the social network’s April 2013 acquisition of Parse assists its mobile efforts. Parse is a mobile development platform that, among other things, supports freemium business models that can in turn incorporate advertising.

Service developments produce mixed results

Facebook has invested heavily in service development over the past 12–18 months, including through acquisitions such as its high-profile purchase of Instagram. These investments are necessary: Facebook must keep unveiling new services and features in order to keep users and advertisers engaged, and thereby prevent the migration of users and advertising dollars to rival platforms. However, its product investments have eroded margins, putting the new acquisitions and services under scrutiny, and the results have been mixed.

On the plus side, Facebook Exchange, the revamped News Feed, the Custom Audiences targeted advertising tool, and the aforementioned App Install Ads are all making positive contributions to advertising revenues. However, high-profile consumer-facing initiatives have proved disappointing or have had little impact; the revamped Timeline has not excited users, Facebook Gifts had a muted response, and Graph Search was barely mentioned in the company’s latest results. The number of Instagram users is rapidly increasing (it reached 100 million monthly active users in 1Q13), but any concrete progress on monetizing the service remains vague.

Facebook needs to work harder on advertising and keeping users engaged

Facebook’s approach to advertising needs to be more sophisticated. For all the talk about – and fear of – targeted advertising on Facebook, what is actually served up is often poorly targeted, meaning it is irrelevant to users and ineffective for advertisers. By this stage in its development, Facebook’s advertising should be a lot better than this. We would also like to see the social network articulate the advertising opportunities around Graph Search, particularly sponsored search.

A particular challenge for Facebook in the longer term, and one that is critical for advertising, is to keep the momentum behind active use. The social network had a total of 1.11 billion monthly active users in 1Q13, a modest increase from 1.05 billion in 4Q12. Active use has been erratic over the years, and is not as high now as it has been in some previous quarters. A danger for Facebook is that people might start spending less time on its network as they find other social experiences to engage with. These could be popular, free OTT VoIP and messaging apps such as WhatsApp, blogging and content sharing sites such as Tumblr, or more private social networks such as Path. In fact, one of the key reasons that Facebook acquired Instagram was that younger users were flocking to it, while the launch of Facebook Home was also in part a response to the rise of rival OTT applications.

APPENDIX

Author

Eden Zoller, Principal Analyst, Consumer

eden.zoller@ovum.com

Disclaimer

The post A year on from its IPO, Facebook must work hard to keep users engaged appeared first on Ovum.

Competition in the mobile point-of-sale market is unsustainable

Gilles Ubaghs — Mon, 20 May 2013 23:00:00 +0000

OVUM VIEW

Summary

The mobile point-of-sale (mPOS) market is growing at a rapid rate, with an ever-increasing number of products and services on offer. However, the growth in suppliers has led to the commoditization of mPOS technology, with few differentiators among vendors. As a result, most have little choice but to compete on price, with larger players using their resources to dramatically undercut their rivals. This level of competition is unsustainable in the long term: in the short to medium term, the number of vendors in the market will inevitably drop. Those that survive will be those that are capable of moving their mPOS services away from the “micro-merchant” space to compete more directly in the established POS market.

The mPOS market is now commoditized

The global mPOS market emerged seemingly out of nowhere after the launch of Square in 2010, and it has grown at staggering rates in terms of the number of products and services available. Although the demand for mPOS remains sizeable, the glut of similar “me-too” products means the market is rapidly becoming commoditized and is now impacting the established POS sector.

Since the launch of Square’s eponymous dongle device for accepting card payments, a plethora of vendors have entered the mPOS market, from start-ups to established payment processors and merchant acquirers. The impressive growth and development of Square, which is now the primary processor of all payments in US branches of Starbucks, is serving as a template for these companies. The fact that Square does not comply with the Europay, Mastercard, and Visa (EMV) standard and is effectively restricted to the US market means that mPOS providers are desperate to quickly fill what they perceive as a gap in this emerging payments space outside the US.

Understandably, existing acquirers and processors are keen to avoid losing out on what they see as a new revenue stream within the micro-merchant space, particularly as interchange rates continue to come under growing regulatory pressures.

However, as products continue to be launched, the unique selling points of the technology underpinning the market are rapidly becoming less unique, with seemingly little difference between different types of plug-in device dongles, and dozens of products on the market. End users and payment service providers may struggle to identify the benefit of one product over another, facing only confusion in this heated market. Technology alone is no longer a differentiator.

Competition on pricing models is a race to the bottom

With the technology becoming commoditized, mPOS providers, including both white-label manufacturers and full providers to end users, have little choice but to compete on price. A combination of price competition, which is sometimes extreme, and a glut of similar products suggests that the market is likely to see consolidation at the most basic end of the market and further diversification into the existing POS space.

Most of the initial appeal of mPOS to SME merchants is in its lower cost of hardware and initial setup and its simplified pricing strategy – it typically costs around 2.7% per transaction. While players have tinkered with this pricing structure for some time, competition recently reached its highest level of intensity when PayPal announced that it is offering free payments processing for the rest of 2013 for all US merchants that use its PayPal Here service. This includes not just free PayPal payments, but all debit and credit card transactions. It appears that PayPal is aware that the market is saturated and is making a substantial effort to expand its base as wide as it can, as quickly as it can, before the mPOS bubble bursts.

The economics of the mPOS market mean that the number of products and services available is unsustainable in the longer term. Micro-merchant SMEs are the core target market for providers, so transactions are more likely to be low value and infrequent. With such pressure on mPOS providers to keep processing fees competitive, they have little scope to gain significant revenue, let alone profit, on each transaction. The only way to create a financially viable business model is to rapidly gain economies of scale and ensure a significantly large end-user base.

The number of players in the market will inevitably drop as a result of this pressure on pricing. Verifone, most notably, has already left the market; it abandoned its Sail mPOS product, claiming that the high customer acquisition costs could not be justified by the thin margins from merchants with infrequent volumes and extremely high attrition rates.

Diversification is critical to long-term mPOS success

While mPOS is typically seen as a relatively straightforward card-acceptance method that turns the handset into a POS device, the services that have the greatest chance of long-term success are those that are capable of being diversified into more complex offerings. It appears that low-end mPOS services, like those of PayPal and Square, are being used to gain a foothold in the market before being developed into wider POS services and products.

Square, likely with an eye on the difficult economics of offering only a card-acceptance device based on a device dongle, has been diversifying into new product streams. Its new products include a mobile wallet for consumers that allows for “empty handed” payments and, for merchants, a full replacement for more standard POS hardware and services. As Square is now able to interface with printers and cash registers and provide complex inventory and business analytics capabilities, it is seemingly shifting its attention away from the sole trader market and toward the larger-scale merchant POS ecosystem.

PayPal also views in-store POS payments as key to its longer-term growth, and its willingness to slash its own revenues from mPOS to gain a foothold in this area highlights its eagerness to grow beyond the online space. Rather than simply opening a new market for card payments, Square and PayPal are now competing with players in the wider POS market.

Existing POS players (both vendors and enterprises) need to implement mPOS technology in their offerings to ensure their long-term growth. The mPOS market is rapidly evolving beyond just micro-merchant transactions; it now represents a distinct threat to the wider POS market.

APPENDIX

Author

Gilles Ubaghs, Senior Analyst, Financial Services Technology

gilles.ubaghs@ovum.com

Disclaimer

The post Competition in the mobile point-of-sale market is unsustainable appeared first on Ovum.

FTTH Council Asia Pacific: snippets from Auckland

Julie Kunstler — Sun, 19 May 2013 23:00:00 +0000

OVUM VIEW

Summary

The annual FTTH Council Asia Pacific Conference got under way on May 19 in Auckland, New Zealand, with a series of workshops followed by the official opening ceremony on May 20. It is the eighth conference for this Council and, as in the past, this conference is influenced by the status of FTTH deployments in the host country. There is positive energy here due to New Zealand’s Ultra-Fast Broadband Initiative, which is making good progress.

First, fairness pays off

There were grumblings in May 2012 when Auckland was announced as the Council’s host city for the 2013 conference. After all, New Zealand is far to travel for many council delegates. But in fairness, the Council’s board of directors believes that every country with active members should have a chance to host.

The event is packed. Council members from Japan, India, China, South Korea, Indonesia, Malaysia, Thailand, Australia, Taiwan, and the Philippines are here in force. Add vendors from North America, Europe, and Asia along with many delegates from New Zealand, and we have standing room only in some venues.

New Zealand’s Ultra-Fast Broadband Initiative is happening

New Zealand’s Ultra-Fast Broadband Initiative is a government program to expand and develop New Zealand’s broadband services. By 2020, 75% of New Zealanders will be connected to ultra-fast broadband. Crown Fibre Holdings monitors the deployment and contracts with local fiber companies that are rolling out the new network in partnership with the government. According to Graham Mitchell, Crown Fibre’s CEO, 98% of all schools should be fiber-connected by May 2014.

New Zealand’s Ultra-Fast Broadband Initiative is based on separation of the fiber pipe builders from the services providers, also known as a wholesale-retail model.

The pipe builders

The workshops held on May 19 focused on FTTx network deployments – the pipe building. These workshops were very well attended by New Zealand’s local fiber companies and delegates from many other countries where FTTH networks are under way.

While the presentation titles were not simple or sexy – JDSU’s workshop was called “Testing Skillset for FTTx Deployment: Knowledge Required to Optimize Field Testing Efficiency to Lower Opex Without Cutting Corners” – they reflected real issues facing FTTx network deployments, such as skilled technicians, the use of OTDR in the field, and the handling of fiber-optic cabling.

The workshops and many of the first day’s sessions were not for those seeking high-level fluff around FTTH. The focus was on the practicalities of deployments and services.

Retailers must focus on services

In the wholesale-retail model, retailers have to differentiate around services since the access network becomes a level playing field. This reality requires service providers to retool, transforming from a network operator into a service organization.

Successful service providers must be able to provide consistent quality of experience for customers while enabling real-time service differentiation. A simple example is supporting a subscriber’s desire to upgrade bandwidth and do away with advertisements while watching a football match, but only for that particular match.

The role of SDN in FTTH

So how does software-defined networking (SDN) fit into FTTH? SDN supports elastic service creation in distributed cloud-based data center networks. As presented by Cisco, SDN can help harness the network’s value, enable business agility, and support operational simplicity, thereby freeing the provider to focus on services.

APPENDIX

Author

Julie Kunstler, Principal Analyst, Components

julie.kunstler@ovum.com

Disclaimer

The post FTTH Council Asia Pacific: snippets from Auckland appeared first on Ovum.

Amazon expands its e-commerce domain with a virtual currency

Eden Zoller — Sun, 19 May 2013 23:00:00 +0000

OVUM VIEW

Summary

Amazon has launched its Coins virtual currency in the US for Kindle applications sold via its Appstore, and is hoping to get Kindle Fire owners hooked by giving them $5 worth of Coins for free. As a further incentive, Amazon is also offering discounts of up to 10% on bulk purchases of Amazon Coins, which in turn will allow consumers to save money on app purchases.

Amazon has spent “tens of millions of dollars” depositing free Coins in Kindle users’ accounts, a sign of its serious intent for the virtual currency. The challenge it faces is to persuade those users that Coins provide value and convenience beyond existing ways to pay for applications. This will not be easy, and if Amazon fails then Coins will fall by the wayside, as other online virtual currencies have done before.

The drive behind Amazon Coins

The initial objective of Amazon Coins is to help strengthen the application ecosystem for Amazon Kindle devices. Amazon no doubt hopes that providing users with an alternative, novel way to purchase applications – along with the opportunity for cost savings – will encourage them to buy more. This would in turn mean greater monetization opportunities for developers.

There are other potential benefits from Coins in terms of customer loyalty; Amazon intends to use it as a promotional tool to create lock-in. Some multi-player, online social games already use virtual currencies as a way to reinforce the gaming brand and enhance the sense of community among players. Amazon has already dipped its toe into social gaming with Game Connect and GameCircle, and Coins can be seen as part of this experiment. But gaming is context specific, and so far virtual currencies have struggled to gain traction outside of this environment.

Users can still pay for digital content with Amazon’s existing 1-Click payment system. The 1-Click checkout is fast and easy to use, which raises the question of why anyone would want to use an alternative. The answer depends on whether Amazon Coins offers consumers additional value of some kind; at the moment the value premise is based on novelty and the prospect of discounts on bulk purchases of Coins. This might be enough to tempt some Kindle users, but Ovum believes that the majority will want more going forward – otherwise they will simply use the free Coins allocation and then forget about it.

Can Amazon succeed where others have failed?

Virtual currencies have a poor track record outside of gaming communities, and are actually a harder undertaking than is often presumed. Several big online players have launched virtual currencies, only for them to fail – think Facebook Credits and Microsoft Points. With the exception of Bitcoin, none have really taken-off. Virtual currencies are linked to real monetary value, and can be just as hard to manage as real-world currencies – Bitcoin’s fluctuating price is a case in point. Virtual currencies also present the same challenge to consumers that they experience when swapping between different real-world currencies.

Virtual economies need scale and reach to flourish and drive significant revenues, and in this respect Amazon is well positioned. Facebook also has scale, but it does not have Amazon’s established commerce expertise and huge base of registered accounts – Amazon had 209 million active accounts as of 1Q13. It is a credible, trusted commerce brand, which will help it expand into the provision of a virtual currency. Facebook’s move into virtual currency was a leap, whereas for Amazon it is a small step. However, there are no guarantees that Amazon will not trip up, just as Facebook and so many others have done.

For now, Amazon Coins should be viewed as an experiment that will either be scrapped or ramped up depending on how consumers respond. Amazon is not afraid to take risks, and is always seeking new ways to enhance its commerce ecosystem – a virtual currency is consistent with this approach. If users take to Coins, there is little doubt that Amazon will expand the currency’s scope beyond its app store. At the launch of Coins, Mike George, Amazon’s vice president of apps and games, noted: “We will continue to add more ways to earn and spend Coins on a wider range of content and activities – today is Day One for Coins.” What could be interesting in the longer term is whether Amazon will move to position Coins as a wider Internet virtual currency.

APPENDIX

Author

Eden Zoller, Principal Analyst, Consumer

eden.zoller@ovum.com

Disclaimer

The post Amazon expands its e-commerce domain with a virtual currency appeared first on Ovum.

Bloomberg’s snooping will hasten change in the market data world

Rik Turner — Sun, 19 May 2013 23:00:00 +0000

OVUM VIEW

Summary

The revelation that Bloomberg used its clients’ movements around the pages of its market data feeds as a source of information for its news reporters is embarrassing for the company, provoking an apology from its CEO to all its customers.

Beyond that, however, Ovum believes that the revelation will contribute to a gradual move by those customers to other means of acquiring and distributing market data. Some major banks will develop their own infrastructure for this purpose, with companies that develop low-latency messaging systems and ticker plants standing to benefit. Other, smaller institutions will begin to explore alternative data providers, such as Xignite. Either way, there will be technological implications.

News is not profitable, but it is key to Bloomberg’s image

It is ironic that while so much ink (and ether) has been devoted to worrying, quite rightly, about the ability of companies such as Google and Facebook to misuse information about their customers in the name of profit, all the time such misuse has been going on in a sector of the business world such as the capital markets, where the customers themselves have far more financial muscle and, in fact, pay $20,000 a year for each Bloomberg terminal on their network.

With hindsight, though, it is also perfectly understandable, because the impact of the information being misused is considerably greater than that of the general public. Bloomberg was, in fact, using data about how often investment banks such as Goldman Sachs were looking at particular stocks and bonds as leads for the reporters in its news organization, enabling it to gain competitive edge over rival news agencies.

News is, in fact, a loss leader for Bloomberg. It costs a lot to run a global network of journalists, while the lion’s share of actual revenue and profit comes from the sale of market data, not news. It is an important complement to the prices that flow across the Bloomberg screens, however: it fills out the story, provides context and, of course, raises Bloomberg’s overall profile as an information-gathering organization. Getting the story ahead of other sources of news is thus of great importance in maintaining the firm’s reputation, and it is no coincidence that the company has expanded by buying such prestigious news titles as BusinessWeek to further enhance its image of having its finger on the pulse of economic and business trends.

This is a crack, though not quite a fissure, in Bloomberg’s empire

Over the last three decades, Bloomberg has built a seemingly unassailable position in the market data terminal business, which is estimated to be worth around $8bn a year. Its nearest rival, Thomson Reuters, takes a distant second position: it has enjoyed only limited success with its own terminal offering (Eikon) and has been shedding underperforming divisions as it refocuses to do battle with the market leader. So great is Bloomberg’s customers’ reliance on its data, the company was even able to put its prices up at the beginning of this year, amid market volatility and global downturns.

Still, history teaches us that no empire is eternal, and the hubris that comes from running one can often contribute to its eventual demise. For some time, Ovum has been watching new start-up companies bringing alternative forms of market data provision into the arena, and this mistake by Bloomberg will only hasten the changes that were already detectable, albeit in a very incipient way.

This is not the end, or even the beginning of the end, of Bloomberg’s hegemony in the market data terminal business. It may, however, be the end of the beginning.

Tier-1 firms may opt for DIY, while smaller firms will seek alternative vendors

Goldman Sachs, the first Bloomberg customer to have gone public in the snooping scandal, has already let it be known that it is considering building its own market data provision platform to reduce its dependence on the company and maybe replace it altogether. While there is clearly an element of posturing here to scare Bloomberg into tightening up its internal procedures, Goldman has the financial clout to implement such a development, and if it does, this will be good news for the likes of low-latency messaging vendors (such as Informatica and IBM) and ticker plant vendors (such as Exegy, Activ, and Redline), all of which are certain to be in the running to provide pieces of infrastructure.

Other tier-1 institutions may well follow suit. JPMorgan has so far limited its reaction to instructing its lawyers to find out exactly what Bloomberg was accessing by way of behavioral data on its traders. However, with its notorious penchant for do-it-yourself projects, one could imagine it financing a project to develop something to substitute Bloomberg here and there in its organization.

Smaller sell-side organizations will be more reluctant to enter into such a hefty investment, so if they, too, are keen to decrease their reliance on Bloomberg over time, this is where some of the upstart providers such as Xignite may come into their own.

APPENDIX

Author

Rik Turner, Senior Analyst, Financial Services Technology

rik.turner@ovum.com

Disclaimer

The post Bloomberg’s snooping will hasten change in the market data world appeared first on Ovum.

Acquisitions are driving Dell deeper into BI and analytics

Fredrik Tunvall — Sun, 19 May 2013 23:00:00 +0000

OVUM VIEW

Summary

Dell has issued a new wave of releases aimed at the business intelligence (BI) and analytics market. Dell’s goal is to chase mid-market firms where BI is a greenfield opportunity. Winning market share in this highly competitive space will be a challenge for Dell (like any other BI vendor), but its hardware business already has a foothold in the mid-market and it could generate some cross-sell opportunities for software and vertical industry-oriented professional services.

Dell is going after BI and analytics market share

Dell has driven the expansion of its software offering with an aggressive M&A strategy, the most noteworthy being Quest Software for $2.4 billion in 2012. BI and information management have also been targets of Dell’s acquisitions, including Toad, for database management; Kitenga, for Big Data analytics; and Boomi, for data integration.

Dell is targeting a potentially lucrative mid-market segment of the analytics and BI space. The company brings a deep portfolio of solutions, not just for information management but also in the areas of mobility, security, and hardware, that can help IT manage BI and analytics deployments in unison with other IT-driven projects. This could be a differentiator compared to the likes of MicroStrategy, QikTech, and Tableau, which cater almost exclusively to departmental business users with products that are mostly focused on the front-end.

Kitenga for Big Data analytics on Hadoop

Earlier in 2013 Dell launched Kitenga 2.0, positioned as a Big Data analytics solution, which acts as a wrapper of libraries on top of Hadoop, with a drag-and-drop interface to query, search, and analyze data directly against HDFS, without the need to create and script MapReduce jobs. With this 2.0 release, Kitenga added support for the Predictive Modeling Markup Language (PMML), sentiment analysis, and enhanced search and data visualization capabilities. By combining search and analytics in a single, unified environment, Kitenga aims to help organizations to process data and provide appropriate context and analysis to solve business problems.

Kitenga eases the use of Hadoop by removing the complexity of writing MapReduce code, which is certainly needed in a still immature, but fast-moving, Big Data market. Unlike Toad, Kitenga is targeted at mid-market to large enterprises, but at $50,000 per seat, this is clearly a tool aimed at a select group of data analysts who deal with large sets of data and understand analytic processes and the output. Organizations can start small and expand if needed, but broad distribution to everyday business users will be difficult; this class of user will be better off with the Toad BI suite, in particular Toad Data Point.

Toad is already in IT – and can grow from there

When Dell acquired Quest Software it took over control of Toad, a popular relational database management product. Dell has now evolved Toad into a full BI suite. Dell announced the release of Toad Business Intelligence Suite 2.0, with added modules for virtual mash-ups and collaboration (Intelligence Central), query and analysis (Data Point), and visualization (Decision Point). While the tools are integrated, each is aimed at different users, ranging from developers and data analysts to business users.

Dell is heavily touting its self-service capabilities and ease of use, which is meant to appeal to business users. This is a common theme among today’s BI vendors and it will be difficult for Dell to differentiate itself from the likes of Tableau, QlikTech, and Spotfire with data visualization, in-memory engines, and other end-user features.

Instead, Ovum believes Dell should focus its efforts on selling to IT. Dell already has a large installed base in IT departments that use Toad for database management, and it will be vital for Dell to attract these users to expand Toad’s database management capabilities to other BI needs, such as query, analysis, and data visualization. This is a differentiator compared to many mid-market self-service BI players, such as Tableau and Qliktech, with strategies that are reliant on the ability to get individual business users to champion the product and use that as a proven base to grow within the enterprise, often department by department. However, the issue with the land-and-expand model is that as it grows it can be difficult for IT to manage and this can easily lead to an uncoordinated BI mess. Often the organization ends up turning to service providers for strategy, which can be at a significant cost. Although both Tableau and QlikTech are working to expand their IT-driven capabilities, such as improved administration features, Dell has a headstart with deeper IT management capabilities. To win larger bids, it will be vital for Dell to tout these capabilities.

The mid-market will also find value in professional services and verticalized solutions

Dell employs a service arm that can help with organizations’ analytics projects. However, Dell’s service division does not possess the analytic depth and manpower that the likes of IBM and Oracle have acquired over the years.

IBM and Oracle also offer vertical-specific solutions (both technology and services), which Dell lacks. Dell faces the same challenge as Microsoft in BI and data warehousing; they primarily provide technology, not consulting or applications. It will be crucial for Dell to build out its professional service division for analytics and BI as well as spend R&D dollars to continue to create verticalized solutions. This could be another differentiator compared to other mid-market players mostly offering horizontal solutions.

APPENDIX

Author

Fredrik Tunvall, Analyst, Information Management

fredrik.tunvall@ovum.com

Disclaimer

The post Acquisitions are driving Dell deeper into BI and analytics appeared first on Ovum.

Service virtualization provides a practical approach to delivering DevOps

Roy Illsley — Sun, 19 May 2013 23:00:00 +0000

OVUM VIEW

Summary

Even today’s most successful organizations will not survive the converged business future by merely doing the same things they currently do only differently. What is needed is a shift to do different things. Ovum believes that rapid, assured, and sustained business innovation is imperative to an organization’s success. IT leaders therefore need to effectively harness technological advances, cut time to market, and improve quality and performance.Many organizations are facing significant changes in the application development process, particularly with intelligent computing now in nearly every piece of equipment shipped. This is driving the world toward environments that are becoming so complex that operations needs to be taken into consideration before the first line of code is written. The need to build and deploy applications quickly is significantly blurring the traditional boundaries between development and operations. Ovum believes that the move to agile brings developers, testers, and business closer together, and that DevOps is driving the rise of experience-led design aimed at getting more IT and business services to market faster and with higher quality.

Changes in operating models require new thinking about the role of IT

The financial crisis of 2008 changed the way businesses operate, and for CIOs this means getting the cost levers and service quality more aligned and responsive. As markets rise and fall, micro-level changes will be applied under the umbrella of a macro-level strategy. This represents a fundamental shift in the commercial landscape that is rapidly introducing more uncertainty into the operating models of many organizations and will extend across entire industries. Paradoxically, while convergence and the mobile cloud are influencing and accelerating this shift, the influence and relevance of in-house IT leadership appears diminished. Ovum research has consistently found that culture is the biggest barrier, which is demonstrated by IT infrastructure and operations managers being rooted in the past because they prefer to operate within a comfort zone of technology they know and understand. The result of this is that many organizations are overwhelmed by the pace of change and waste a large proportion of resources on tactical projects. Organizations everywhere urgently need to achieve and sustain far greater levels of dexterity if they are to succeed in a changed business ecosystem, and the widening gap between traditional IT operations and the expectations of business must be bridged.

CA Technologies has developed its new management solutions based on addressing four mega-requirements that these new business models will demand. First, organizations must retain existing customers by improving service quality and speed. Second, new customers must be attracted as cost-effectively as possible. Third, organizations need to achieve the first two objectives by differentiating how they compete for business, and making this differentiation hard to copy or mimic. Finally, organizations need to innovate so that they can sustain the previous three objectives. CA Technologies sees the role of IT as moving from that of the gatekeeper of the technology to that of the enabler of innovation. Ovum believes that management software and tools represent the ideal layer to support this shift in thinking and acting.

Service virtualization represents a practical approach to delivering DevOps while process and structural change continues

The DevOps movement is more than just having some solutions that allow collaboration, it is also about changing perceptions and ways of working. Service virtualization is an approach that provides all those involved in the DevOps operation with the environments they need, when they need them. Ovum believes that this solution will help accelerate the cycle, but cautions it must be performed in an envelope of process and procedural control. Typically, constraint happens in the end-to-end development and delivery cycle at some point, particularly when it comes to testing. This is especially true of complex applications that combine components from internal and external sources, partners, cloud systems, and legacy platforms. Not everyone can have all of these systems at once (you can’t “steal” capacity from production to do testing, for example). Ovum research indicates that capacity constraints in terms of the resources and the people needed to configure the environments are the two biggest barriers. The result is that organizations end up in a stalemate position where time does not allow testing of all the code before it goes live. The result is high error rates, SLA failures, and cost overruns, even though it may be on time.

With service virtualization, however, IT departments can clone the behavior of these constrained systems, package them up, and create a simulated version of the whole application, or parts of it, including the components and the load patterns. Once set up these environments can then be delivered as simulated service containers to developers, to acceptance testing, to unit testing, and so on. Ovum believes that this approach provides a practical solution to the DevOps problem. It does not address the process and structural changes that DevOps will need if it is to evolve, but it can improve the existing situation to provide faster and higher quality delivery of applications.

APPENDIX

Author

Roy Illsley, Principal Analyst Ovum IT

roy.illsley@ovum.com

Disclaimer

The post Service virtualization provides a practical approach to delivering DevOps appeared first on Ovum.

Nvidia’s FS pitch expands from capital markets to retail and corporate banking

Rik Turner — Thu, 16 May 2013 23:00:00 +0000

OVUM VIEW

Summary

Nvidia has begun to market its ability to offer a rich graphics experience to remote users of virtual desktop infrastructure (VDI) technology, among them bank employees. In the financial sector, this represents a significant expansion of its remit, beyond the GPU computing capability it has been pitching to the capital markets for some time. Ovum sees clear potential in retail and corporate banking.

Nvidia is expanding its addressable market in the sector through VDI, which appeals to banks with its promise of lower total cost of ownership and simplification of endpoint management. Indeed, the market opportunity for the company with this technology is actually bigger than the one for GPU computing in investment banks and brokerages.

VDI expands Nvidia’s addressable market in financial services

Nvidia has been targeting investment banks and brokerages for several years with its graphics processing units (GPUs), its argument being that the highly parallel calculations in computational finance run more efficiently (i.e. faster and on less hardware) on them than on central processing units (CPUs) from the likes of Intel and AMD. Now, however, a new opportunity opens up in the broader financial sector, and particularly in retail banking, namely in virtual desktop infrastructure (VDI) deployments.

The new front in Nvidia’s FS marketing opens up thanks to the company’s work over the last couple of years with the leading VDI vendors VMware and Citrix to enable the deployment of its technology in data centers along with their hypervisor technology. The results are delivered to endpoints over wired or unwired networks, and the company refers to the capability as remote graphics.

VDI appeals to banks for its ability to lower TCO and simplify endpoint management

Banks are already managing estates of tens and even hundreds of thousands of desktops and laptops, a situation that stands to get more complex with the advent of smartphones and tablet computing in the enterprise and the desire on the part of some firms to adopt bring-your-own-device (BYOD) policies. In such a scenario, the attraction of VDI is obvious, offering the possibility of secure remote working from anywhere, not to mention hardware costs that can be lowered or, if BYOD is adopted, potentially even zeroed, with the employee themselves making the capital expenditure. In addition, the management of the estate is centralized, reducing operating cost and simplifying processes.

Until recently, this capability has been restricted to the more text-oriented types of task, the need for rich graphics to be processed on the endpoint representing something of a limitation for VDI. Thanks to Nvidia’s work with the hypervisor vendors, however, that situation has changed, and at its recent GPU Technology Conference, in San Jose, California, the company was showing GPU cards with hypervisors that can be slotted into servers to deliver rich graphics remotely.

Banks have been virtualizing their servers for over a decade, but in recent years they have also woken up to the potential savings from desktop virtualization. An early enthusiast was Merrill Lynch, which prior to its acquisition by Bank of America in 2008 unveiled plans to virtualize half its 63,000 desktops over a period of five years. A number of other institutions told Ovum they had similar plans at the time.

Back then, however, VDI was all about the CPU and the kind of functionality that could run on it, such as the office productivity suite, but the advent of GPU virtualization opens up VDI to a wider range of employees. Users of sales and/or advisory applications such as financial planning software can benefit from the enhanced graphics capabilities now available. So too can users of systems delivering visualization or analytics to front-end staff, and any compliance and risk management staff traveling around the enterprise using virtual applications.

The market opportunity here looks larger for Nvidia than in capital markets

So, how extensive will the demand for remote graphics capabilities within the banks be? Certainly some task-based workers will not require rich graphics, while at the other extreme, high-end knowledge workers certainly will. In Ovum’s opinion, the likelihood is that banks will start out deploying graphics-enabled VDI for the latter but there will be a trickle-down process. In any case, this is clearly a significantly larger business opportunity for Nvidia than the more restricted world of GPU computing within investment banks and brokerages.

The overwhelming majority of Nvidia’s $4bn annual revenues still comes from selling GPUs for installation in desktop and laptop devices, and that is not likely to change any time soon. GPU computing delivers higher margins, however, and if the boards for delivering remote GPU functionality in VDI environments can be more profitable than regular GPUs, they should be in a position to make a major contribution to the company’s top and bottom lines.

APPENDIX

Author

Rik Turner, Senior Analyst, Financial Services Technology

rik.turner@ovum.com

Disclaimer

The post Nvidia’s FS pitch expands from capital markets to retail and corporate banking appeared first on Ovum.

Nvidia’s CUDA-on-ARM work holds promise for HPC

Rik Turner — Thu, 16 May 2013 23:00:00 +0000

OVUM VIEW

Summary

Nvidia is readying its first commercial offering of a chipset combining one of its GPUs with an ARM CPU, with the GPU supporting its CUDA extensions to the C programming language. This will make the product suited to general-purpose computing rather than just graphic processing. Ovum sees this as a significant development for high-performance computing (HPC) generally, and even for computational finance, once 64-bit ARM processors become available.

ARM is advancing towards the data center

There is a perception among IT industry observers that ARM processors will soon be in a position to mount a serious challenge to the hegemony of the x86 architecture in the data center. In their favor, of course, they have the fact that they are low-power devices (hence their prevalence in the mobile device market). The downside to ARM for the world of servers, of course, is that they are “wimpy” compared to x86, which is where the GPU comes in.

While the beefier x86 currently reigns supreme in the data center, the combination of an ARM processor and a CUDA-enabled GPU could become a more serious competitor. The GPU itself is power-hungry, but for certain kinds of massively parallel computations (Monte Carlo simulations are a classic case), its huge core count means that calculations can actually be carried out much faster than on CPUs, resulting in a lower power-per-FLOPS performance.

Software must be parallelized to run efficiently on GPUs

Clearly, this depends on the software that will run on the system being parallelizable, which not all applications are. At Nvidia’s recent GPU Technology Conference, an annual event it holds in San Jose, California, CEO Jen-Hsun Huang unveiled the Kayla, a proof-of-concept board developed in conjunction with Italian embedded tech developer Seco. He also previewed the first commercial product in this line of development, the Logan, which should hit the market in the first half of 2014.

The company’s developments with ARM have evolved already, from its first proof-of-concept, the CARMA (“CUDA-on-ARM Architecture”) to Kayla and on to Logan. The major change has been that the bulk of the processing now actually goes on within the GPU, with the ARM CPU reduced to boot functions and controlling MPI messages. In other words, the ARM’s wimpiness is not only countered by the presence of the GPU; it is effectively neutralized by more efficient programming.

Obviously, there are relatively few applications which will be able to rely exclusively on the GPU. Computational finance in particular likes to have beefy CPUs for its number-crunching routines, even when they are farming out the more parallel parts of the work to attached GPUs. Furthermore, any code written for the x86 will need to be recompiled and tested, when not fully rewritten, for an ARM platform. Both these factors are barriers to adoption of ARM+GPU devices in HPC generally, but more particularly in the capital markets, which has traditionally been able to afford to prioritize performance over all else, including cost.

If you’ve already parallelized your code, ARM+GPU looks interesting

The equation changes, however, if a bank has already gone through the process of enabling its software to run on GPUs, i.e. it has already parallelized it. For that scenario, the move to ARM+GPU may become more attractive, particularly once 64-bit ARM chips become available: that won’t be a performance improvement per se, but rather a major increase in the addressable memory space compared to 32-bit, which will appeal to the HPC community as many of their applications use a lot more than the 2GB of RAM available on 32-bit ARM.

APPENDIX

Author

Rik Turner, Senior Analyst, Financial Services Technology

rik.turner@ovum.com

Disclaimer

The post Nvidia’s CUDA-on-ARM work holds promise for HPC appeared first on Ovum.

BlackBerry takes aim at emerging market enterprises

Richard Hurst — Wed, 15 May 2013 23:00:00 +0000

OVUM VIEW

Summary

Device vendor BlackBerry has recently held a number of events around the world to showcase its enterprise solutions, highlighting its intention to build on its existing enterprise presence. The company has enhanced its enterprise mobile device management and security offerings, launching the BlackBerry Enterprise Server 10 (BES10) and the BlackBerry Z10 mobile device. Although vendors such as Samsung are venturing into the enterprise market, BlackBerry retains an edge over the competition due to customer perceptions around the relative security and vulnerability of different manufacturers’ devices.

BlackBerry is well positioned in the emerging markets due to its existing footprint across consumers and the enterprise, which is based on its robust messaging and Internet access platforms.

The initial signs are positive

In January 2013 BlackBerry renewed its aim on the smartphone market with the launch of the BlackBerry 10 operating system and the BlackBerry Z10 device. In addition, the BlackBerry Balance feature allows users to divide their devices into corporate and personal applications and content. This will win back some mind share in the corporate and end-user markets, particularly given the rise of bring your own device (BYOD).

BlackBerry’s enterprise focus is re-energized

The launch of BES10 offers enterprises mobile device management, mobile application management, and secure mobile connectivity, while capitalizing on the company’s legacy of reliable business solutions.

BES10 takes into account the growth of BYOD, allowing enterprises to manage professional and personal content and applications on BlackBerry, iOS, or Android devices while maintaining business security. This cross-platform approach will allow BlackBerry to retain its relevance in the enterprise segment and fend off advances from competitors that have not yet developed a robust product set.

BlackBerry is strong in emerging markets

Ovum estimates that 43 million of BlackBerry’s 76 million current users are in emerging markets. During 2013 we expect to see approximately 15% of users in these markets upgrade to the Z10 and Q10 devices, as and when they become available.

BlackBerry’s success in the emerging markets has been based on its BlackBerry Internet Services (BIS), an “all you can eat” offering that has been popular with the consumer and enterprise segments. In the emerging market context the “all you can eat” approach to mobile Internet access, and in particular push email, has been a unique selling point for BlackBerry. This is due to the high barriers to entry for basic services such as email and Internet access, which often revolve around cost and a lack of supporting infrastructure.

A further advantage over competitors in the emerging markets will be the BlackBerry Messenger social messaging service, which operates on the legacy 2G networks as well as 3G.

BlackBerry devices and services retain a lead in the emerging markets of South Africa, Nigeria, Columbia, Mexico, and Indonesia, and it is unlikely that these markets will witness a massive change over the next 12 to 18 months. However, BlackBerry cannot be complacent; in South Africa, for example, limited bundled data packages are starting to diminish the BIS value proposition.

Embracing enterprise applications

BlackBerry has realized that it needs to be able to create both consumer and enterprise applications ecosystems in order to remain relevant in the enterprise space.

The platform will not gain traction if popular applications are not available. There are a handful of “must have” applications on the consumer side, including WhatsApp, Facebook, Twitter, Angry Birds, and number of local applications. Everything over and above this list is a bonus. Consumer apps are available via the BlackBerry World app store.

For the enterprise, BlackBerry has created applications such as BlackBerry Remember, Documents to Go, BlackBerry Work Drives, and Print to Go. All are available via BlackBerry World or BlackBerry World for Work, an enterprise version of BlackBerry World that allows administrators to provision business specific applications. Enterprise IT administrators are able to deploy, manage, and secure mandatory or recommended apps for the end user.

BlackBerry is seeking opportunities to support local mobile software app developers in emerging markets in a bid to attract more customers and claw back market share. The company has supported developer labs in India and South Africa, and has plans to expand to Nigeria and Egypt in the near future.

Enterprise competition is on the rise

The uniqueness of BlackBerry’s offering in the enterprise segment has been diminished with the recent launch of Samsung Knox, which is available on the Galaxy S III and Galaxy Note II devices. This service allows clients to divide their devices between business and personal use, and is much like the BlackBerry Balance feature.

CIOs and IT managers have been hesitant to adopt Android due to a number of concerns, particularly around their security and their vulnerability to malware, but Samsung is hoping that Knox will go some way toward addressing these issues. Although Knox represents a challenge for BlackBerry, Samsung will have to submit its enterprise software to network operators and enterprise IT departments for testing, meaning that BlackBerry will have at least several months to capitalize on its position.

APPENDIX

Author

Richard Hurst, Senior Analyst, Enterprise

richard.hurst@ovum.com

Disclaimer

The post BlackBerry takes aim at emerging market enterprises appeared first on Ovum.

Huawei Global Analyst Summit 2013: IP infrastructure and a growing industry role

David Krozier — Tue, 14 May 2013 23:00:00 +0000

OVUM VIEW

Summary

Huawei’s annual Global Analyst Summit has grown over the years as Huawei continues to invest in improving its corporate messaging. At the event, executives from Huawei’s Carrier Networks business acknowledged the difficulty of achieving future double-digit hardware product growth when service provider capex is relatively flat. So Huawei is looking for more opportunities in consulting, software, and services as it migrates from a reliance on box sales to helping global operators achieve business success. This is a reasonable, though not unique, approach to adapt to the changing market environment, but without a roadmap it is difficult to assess how committed Huawei is to this strategy. Huawei did provide an early view into products in development, such as capacity enhancements to its router products and a roadmap for software-defined networking (SDN) solutions. One thing is clear: with 358 analysts and reporters at the event, Huawei continues to march full steam ahead.

Evolution from equipment manufacturer to strategic partner

Huawei has been steadily broadening its carrier network strategy. The company sees its industry position as having progressed from low-cost equipment manufacturer, to infrastructure vendor, to solution provider, and now to strategic partner, helping carriers achieve business success. At its 2011 analyst event, Huawei’s corporate goal was to expand its product space: build an enterprise equipment business, grow its consumer device business, and enhance an already strong carrier networks business. At its 2012 analyst event, Huawei recognized that carrier networks were becoming more software-focused, and its plan was to build up its network software and professional services capabilities. This year, at its 2013 event, Huawei’s expressed strategy was to develop its ability to help operators achieve business success. Unfortunately, the company did not present a well-defined roadmap to accomplish this; it simply noted a plan to grow its consulting and services business.

Software will be a large component of supporting business solutions at carriers, and software innovation has not been a particular strength at Huawei. While competitors are acquiring technology and building partnerships and ecosystems, particularly for software, Huawei plans to rely on internal innovation to introduce new solutions and software; there was little mention of partnerships or acquisitions. In fact, in discussing its “Dig-in and Widen-out” strategy (scaling up with vertical integration and scaling out horizontally across technology segments), the company reaffirmed self-reliance as its path forward. It remains to be seen if Huawei’s controlled and managed approach to software can deliver the innovation needed to support business transformation in a rapidly changing market.

IP infrastructure product announcements focus on SDN and scale

After introducing its SoftCom architecture in the fall of 2012 and its LTEHaul SDN solution for automated provisioning of mobile backhaul networks, Huawei used this year’s Global Analyst Summit to present two additional SDN solutions under its SoftCom architecture: SDN for flexible service creation in broadband networks, and SDN-enabled IP core routers to maximize resource utilization. (Ovum will provide an analysis of Huawei’s SDN plans in an upcoming report.) LTEHaul is expected to be in field trials at the end of 2013, but Huawei’s other SDN solutions are still early in the development process.

Huawei continues to invest in its routers and presented several enhancements to increase the bandwidth capacity of its products. A new central switching fabric will support multi-chassis configuration of its NE5000E routers equipped with 4x100GE line units (available at the end of 2013). Huawei introduced multi-chassis core router configurations to the market in 2006 and at this event expressed interest in being the first vendor to bring support for multi-chassis edge router configurations using its NE40E. In addition, Ovum was shown a prototype 1Tbps line card (24x40GE ports) for the NE5000E expected to be in trials early in 2014.

Huawei is getting comfortable taking a leading role in network development

Clearly Huawei understands the value of promotional activities in achieving its business objectives. Over the past few years the company has become much better at making product information available, it is now a regular at industry events, and it has even run corporate branding campaigns in regional markets. In addition to its annual analyst event, Huawei has made other recent communication improvements as it works to nurture close working relationships with analysts. For example, the company has become more aggressive in scheduling calls and now runs well-structured, regular quarterly briefings with Ovum. On the technical side, the company participates in over 160 global standards-setting bodies, including key positions at the IETF, ITU, IEEE, MEF, and Broadband Forum. In short, Huawei has become more aggressive and adept in presenting its viewpoint and will have a larger voice in the future direction of networks.

APPENDIX

Author

David Krozier, Principal Analyst, Network Infrastructure

david.krozier@ovum.com

Disclaimer

The post Huawei Global Analyst Summit 2013: IP infrastructure and a growing industry role appeared first on Ovum.

Acacia raises $20m, capitalizes on 100G coherent

Daryl Inniss — Tue, 14 May 2013 23:00:00 +0000

OVUM VIEW

Summary

Acacia Communications Inc. announced on May 15 that it raised $20m in new financing to continue delivering 100G coherent transceivers and to position itself for long-term growth. This funding is at the high end of what optical component (OC) companies typically raise, a sign of Acacia’s strength in capitalizing its first-mover advantage.

100G coherent demand in 2012 exceeded expectations and the outlook is strong. Demand for merchant modules is not as clear since a part of the 100G market can be addressed by discrete components. Nonetheless, Ovum believes OC vendors drive cost out of modules and, similar to what happened at 10G, expects over 60% of the 100G slots to be filled by merchant modules when the market reaches maturity after 2017. Acacia can yet lose the race for the mass market; it must cost-reduce to retain the current socket and add new products to expand its opportunity.

Acacia is enjoying first-mover advantage

Acacia has been shipping Optical Internetworking Forum (OIF)-compliant 100Gbps coherent modules since 2011. It was among the first to commercially deploy 100G, a feather in its cap because this is a distinction usually dominated by equipment vendors.

Acacia confirmed its leading position in the 100G coherent module segment when it announced it had shipped more than 1,000 modules cumulatively, in every region of the world, as of March 2013. The volumes and far-reaching geographic deployment suggest broad market acceptance, which is partly related to numerous technical accomplishments. For example:

the module power consumption is below the OIF recommendation
the module includes soft-decision forward error correction (FEC), which supports longer-distance transmission
the digital signal processor (DSP) is in 40nm complementary metal-oxide semiconductor (CMOS) technology – particularly impressive given that most of the market waited for 28nm CMOS to introduce soft-decision FEC.

These are significant accomplishments given the challenging product and the significant investment required to bring the DSP to market.

Ovum estimates Acacia holds over 50% of the merchant 100G coherent transponder market, especially noteworthy for a company that started in 2009. Other 100G coherent module vendors are Fujitsu Optical Components, Finisar, Oclaro, JDSU, and NEC’s Fiber Optic Devices Division, all established transceiver suppliers. The new funding helps provide the resources Acacia needs to continue delivering in today’s hot market and preparing for tomorrow’s mass adoption. Ovum expects carrier demand for 100G to grow at over a 40% compound annual growth rate from 2012 and reach over 100K ports annually by 2018. Acacia has planted the seeds to advantageously attack this opportunity.

Acacia will need to release new products that help cost-reduce 100G coherent

Acacia is well positioned to support today’s demand, but new products will be needed for the mass market. 100G is only a small fraction of the total DWDM ports currently deployed, and even by 2018 Ovum estimates that it will only represent 10% of DWDM ports at or above 10G. Crossing the 10% threshold and 100K units annually puts 100G at the entrance of mass deployment.

The cost-reduction path for 100G includes using hot-pluggable transceivers and increasing the number of 100G ports per line card. Acacia’s current product, a 5-inch-by-7-inch module with 168 pins, meets today’s market needs, and while its price will surely come down, it is not the ultimate mass-market product. The solution that Acacia developed, therefore, is not an endgame but provides an early advantage to move to the next stage.

Numerous vendors at OFC 2013 discussed and showcased CFP and CFP2 transceivers with and without the digital signal processor in the module to support 100G coherent transmission. The DSP option gives system vendors the opportunity to maintain control of the “secret sauce” in their DSP chips. Pluggable modules align well with the goal of lowering transmission cost. Early success provides Acacia with the chance to compete with new solutions that will support the market.

Acacia needs to decrease its dependence on discrete components

Acacia currently purchases optics from the merchant market to support its module. The components include lasers – two per unit – plus multilevel modulators, and perhaps even the integrated coherent receiver. This model will not work long-term due to the high cost of purchasing merchant components for its products. Acacia needs to own some of the critical pieces of the optics to support a lower-cost product.

Acacia will be challenged by other OC vendors such as Finisar, JDSU, Oclaro, Sumitomo, and Fujitsu that have optical parts and partnerships to support competitive 100G products. Suppliers purchase parts from competitors in the OC market, and we expect this to continue. But suppliers need to keep these purchases at a minimum to be competitive. The integrated coherent receiver is one low-hanging fruit that Acacia will likely bring in-house in the near future.

APPENDIX

Author

Daryl Inniss, VP and Practice Leader, Components

daryl.inniss@ovum.com

Disclaimer

The post Acacia raises $20m, capitalizes on 100G coherent appeared first on Ovum.

Oil & gas producer benefits from dual technology organizations

Warren Wilson — Tue, 14 May 2013 23:00:00 +0000

OVUM VIEW

Summary

In the upstream oil & gas industry, as in most, IT departments tend to play supporting rather than strategic roles. Exploration and production (E&P) company Apache is an interesting exception: it has one technology organization for support and another for strategic advantage. Each can be optimized for its stated purpose; neither function compromises or shortchanges the other. More E&P companies should consider Apache’s approach. It will not only serve it well in the present, when oil prices are high enough to support significant investment, but also when – not if – conditions change, investment funds are scarce, and E&P companies need every advantage they can get.

Most companies spend more on IT to “run the business” than to “change the business”

In a recent Business Trends survey of IT decision-makers and influencers in upstream oil & gas, Ovum found that respondents spend nearly 60% of their IT budgets on running and supporting existing systems and applications, and only about 40% on new IT projects. Of that 40%, a significant portion goes to projects such as IT consolidation and modernization, leaving only a small budget for projects to achieve competitive advantage. This imbalance is nearly unavoidable when IT functions are lumped together, as they are in most organizations. In that situation, “keep the lights on” functions trump everything else. Longer-term projects, no matter how promising, are not critical at any given moment, so they inevitably get short shrift.

Apache avoids this conflict with dedicated staff for each

Things are different at Apache, an independent producer based in Houston, US, which posted record figures for oil and gas production and record revenues of nearly $17bn in its last fiscal year. At Apache, the “run the business” IT department reports to the CFO and can focus on fulfilling its support function: optimizing IT operations for performance, reliability, and efficiency. But a separate technology department reports to executive vice president and CTO Mike Bahorich, who reports to the CEO. Bahorich and his staff have a different mission: finding, testing, and developing technology that will help the company find and produce more oil and gas, and/or reduce operating costs, risks, and instability.

Embracing Big Data and prescriptive analytics is one example

In one example of this approach, Apache’s technology team has begun working with Austin-based startup Ayata, a pioneer in the emerging field of prescriptive analytics – analytics that go beyond predicting what will happen to recommend what actions to take to achieve a stated goal. Ayata’s technology can manage thousands of variables, including some that the customer can influence and others that are fixed, and it learns as it goes by assessing the effects of its recommendations and adapting its algorithms to produce better ones.

In their initial project, Apache and Ayata are focused on electric submersible pumps (ESPs), which sit at the bottom of many oil wells to lift oil to the surface. An ESP failure is not merely inconvenient; it halts the flow of oil – and revenue – from the well until the ESP can be replaced. This can cause the producer to fall short of the guidance it has given to financial analysts (to name just one of the negative effects). ESPs can fail for a host of reasons, ranging from factors outside an operator’s control, such as high downhole temperatures, to bearings and bushings that can be controlled or at least detected in advance.

An experienced pumper might rely on “feel” to estimate when a given ESP might fail, but this is not likely to be as accurate as an analytical tool using multiple streams of structured and unstructured data, including realtime feeds from downhole sensors. Furthermore, there is no way that even the most experienced or luckiest pumper could manage ESPs across an entire field. Even reliability data such as mean-time-to-failure for a given model of ESP falls short, failing to predict breakdowns due to downhole conditions that are harsher than normal, or calling for ESP replacement too soon if conditions are more benign.

This project is just getting started, and it will take some time to measure its results (although the due-diligence process suggests they will be significant), but it represents just one of many potential uses of prescriptive analytics, and innovative IT more broadly, in E&P. Beyond the project itself, however, is the larger point that Bahorich is free to pursue it without worrying that he or his staff will be distracted by some important but less strategic need, as such needs can be handled by the CFO’s IT department.

It is desirable, but not strictly necessary, to have different reporting lines

Apache benefits not just from separate technology organizations but also from the CEO’s enthusiastic support for technology projects that promise competitive advantage. Not every E&P company has that advantage, and not every CIO or CTO will be willing to set up separate organizations that report to different executives. We do not view that arrangement as strictly necessary; the important thing is to separate the “run” and “change” functions so that each can operate independently, with its own KPIs, and not be distracted by the other’s priorities. But separate reporting lines ensure that a single IT executive will not face the temptation to shift resources from “change” to “run,” sacrificing future competitive advantage to keep the business operating today.

APPENDIX

Author

Warren Wilson, Lead Analyst, Energy/Oil & Gas Technology

warren.wilson@ovum.com

Disclaimer

The post Oil & gas producer benefits from dual technology organizations appeared first on Ovum.

BlackBerry Messenger is set to go cross-platform

Neha Dharia — Tue, 14 May 2013 23:00:00 +0000

OVUM VIEW

Summary

BlackBerry has announced that its popular social messaging service, BlackBerry Messenger (BBM), will be offered on the Android and iOS platforms as well as on Blackberry devices. BBM was previously restricted to BlackBerry devices, and the number of BBM users was negatively impacted as the handset manufacturer lost smartphone market share. BBM’s cross-platform ambitions will allow it to reach a wider audience, and also raise important issues around monetizing the service. The untethering of BBM from BlackBerry devices has made the social messaging battle a lot more interesting.

A twist in the social messaging tale

The social messaging landscape is transforming at a rapid pace. BBM, WhatsApp, and Skype were the early disruptors of the SMS market; following closely on their heels were Facebook Chat and Google Chat. Other handset developers also joined the race, with services such as Samsung’s ChatON, but they failed to gain a significant user base. Adding to the crowded landscape are regional giants such as Line, KakaoTalk, and WeChat, which have made solid inroads into overseas markets and are now becoming formidable global players. Meanwhile, BBM began to slowly decline as BlackBerry gradually lost device market share.

This was the story until now. However, just when many thought BBM would slowly fade away and attention would shift to other players, there has been a twist in the social messaging tale. BBM is back, with a new strategy that divorces the messaging service from the handset, and can now be seen as a stronger player in the social messaging market.

BBM is trying to keep up with messaging evolution

The move by BBM highlights the fast pace of evolution in the messaging market. In order for services to survive, not only do they need to be free or cost efficient (BBM can be accessed for free on the latest BB10 handsets), but they also need to go beyond messaging and begin the transition to a social content platform. Messaging services will find it increasingly difficult to survive without complementary services such as gaming, mobile commerce, and even screen and location sharing. BBM is not only offering its service on other platforms but is also including a range of additional services such as calendar sharing and voice notes. Messaging will remain the core foundation and the anchor service, but most players will need to slowly move towards becoming a social content platform in order to be competitive and successfully monetize their services.

BBM creates “Channels” of monetization

The introduction of BBM Channels sets the foundation for monetizing the service without relying on subscription revenues. With the introduction of the BB10 range of handsets, BBM could be accessed without paying for the BIackBerry Internet Service subscription plan, which essentially cut out the main revenue stream for the service. BBM Channels is a social platform that allows users and brands to connect, and where users can subscribe to newsfeeds from celebrities and brands. The details of this service are not yet available, but it seems to follow a similar business model to the B2C marketing channels of Line (Official Accounts) and KakaoTalk (Plus Friend). KakaoTalk has not released detailed financial results for Plus Friend, but it did estimate that the service drew approximately $11m in 2012. This suggests that the introduction of BBM Channels is not only a service enhancement to drive engagement on the platform, but is also laying the foundation for a strong monetization strategy.

APPENDIX

Author

Neha Dharia, Analyst, Consumer

neha.dharia@ovum.com

Disclaimer

The post BlackBerry Messenger is set to go cross-platform appeared first on Ovum.

BT looks to break Sky’s bundle

Jonathan Doran — Tue, 14 May 2013 23:00:00 +0000

OVUM VIEW

Summary

BT has announced its intention to offer access to its two new sports channels (in which it has invested over £1bn in distribution rights alone) and ESPN free to its broadband customers. As these channels will also be available via the BSkyB satellite platform, this means that Sky TV customers will be able to receive BT’s sports offering – which includes premiership football and rugby – for free, as long as they keep using or migrate to BT broadband. Sky is currently the most aggressive of BT’s competitors in the fixed voice and broadband markets, and this is a judicious strategic move by the operator. If it is backed by a substantial TV marketing campaign it could prove a successful ploy for BT.

BT innovates around content packaging and service bundling

The new sports offer marks a significant departure from BT’s previous TV service positioning, and brings a new packaging concept to the table. The unbundling of affordable access to premium sports content from regular pay-TV subscriptions is a move that will be attractive to many consumers. BT placing its sports offering free of charge on a rival platform as well as its own is a particularly audacious move. Add to this the fact that BT Sport is not exclusive to BT customers, and the announcement represents a significant innovation – a shift away from the traditional walled garden and enforced bundling historically employed to lock consumers into taking multiple services from a single provider. These measures, coupled with the subsidization of premium sports viewing for its own broadband customers will certainly help BT consolidate its leadership in the retail access market.

As well as defending its broadband business, it is also important for BT to increase its own TV market share, as this will drive much-needed additional ARPU growth. The telco will be hoping that its new sports channels, backed by a big marketing campaign, will drive greater take-up of its pay-TV offering. Acquiring some exclusive sports content will not be enough to dislodge Sky as the number-one TV content provider in the UK, and so the big question for BT at this point is whether there is a substantial “middle market” for TV sports coverage. This would be consumers who are willing to pay a little extra for some additional content, but do not wish to pay for the full Sky TV package. BT is clearly banking on a positive response to its innovative value proposition from such a segment.

The sports challenge will not overturn BSkyB’s UK pay-TV hegemony

BSkyB, the UK’s market leader in pay-TV and premium sports coverage, is unlikely to take this aggressive challenge lying down. The company has already taken steps to tap the refusenik subscription TV segment that BT is going after; its Now TV off-net VoD proposition and standalone (albeit expensive) Sky Sports option are aimed at these consumers. Sky still controls the most desirable Premiership football rights, and Ovum believes this will enable it to hold on to the majority of its sports-enthusiast customers. Moreover, Sky has by far the most compelling non-sports offering of the three UK pay-TV players – it is the country’s sole distributor of HBO programming, and has direct access to Fox content. BT is well aware that it is unlikely to win in a battle of exclusives.

BT scores against Sky on broadband rather than TV

Where BT Sports is likely to hit Sky hardest is in broadband rather than TV. Sky has rapidly grown its retail broadband market share, with its acquisition of O2′s broadband services making it the UK’s second-largest ISP after BT. Much of this growth occurred on the back of competitive broadband pricing, with discounted subscriptions offered as an up-sell to pay-TV subscribers. Since 2006 BT has taken a similar approach to Sky, offering cheap TV as an add-on to its core (and relatively high-priced) broadband offering. To date, however, BT has had limited success in growing its secondary business line, pay-TV being a much tougher market for late entrants to crack than broadband.

Now BT is hitting back, using TV to counter Sky’s broadband challenge. Ovum believes that by aligning TV more closely with broadband, both through the sports subsidy and by pushing YouView rather than the “me-too” BT Vision pay-TV proposition, BT is playing to its core strengths. The telco has learnt some valuable lessons from Sky, which has always positioned its secondary broadband and voice services as value-adds to its core (and undiscounted) pay-TV offering. Rather than staging a futile attempt to go head-to-head with the pay-TV incumbent, the operator is using its sports assets to consolidate the value of what remains its strongest retail business line – BT Broadband.

APPENDIX

Author

Jonathan Doran, Principal Analyst, Consumer

jonathan.doran@ovum.com

Michael Philpott, Practice Leader, Consumer

michael.philpott@ovum.com

Disclaimer

The post BT looks to break Sky’s bundle appeared first on Ovum.

An Agile Cisco is an innovative Cisco

Keith Dawson — Tue, 14 May 2013 23:00:00 +0000

OVUM VIEW

Summary

At Cisco’s recent contact center analyst conference, executives from its Collaboration Technology Group (CTG) gave insight into the success of the company’s current product segmentation mix, and the thinking behind some of its market movements of recent years. Cisco asserts that it is making progress in its drive to overtake Avaya as the leading call routing vendor. Part of this is due to the 2012 rollout of the Packaged Contact Center Enterprise offering, which had made its way into 47 enterprises (with 6,720 seats) as of early May 2013, and which Cisco says is replacing Avaya or Nortel systems in most cases. Cisco has, by most accounts, edged upward in market share over the last few years, taking advantage of market confusion around Avaya’s plans and capabilities.

But one real element of Cisco’s rise – at least in the last 12 to 18 months – does not get as much publicity as new product rollouts or more aggressive market positioning. That factor is product quality and the methodology Cisco has enforced to get better contact center systems out the door faster.

Agile development brings rapid cycles of innovation right to the customer

Within its Collaboration Business Applications (CBA) business unit, the subgroup of CTG responsible for contact center, Cisco has adopted the Agile method of software development. Agile changes the process for Cisco by speeding coding into very tightly defined timescales (two-week “sprints”) that end with the team presenting the results to an actual client for real-world feedback. One software engineer described this as a way of staying grounded in actual customer needs, rather than force-feeding tweaks and features into a product because they seem innovative or “cool.” It brings the question of success or failure down to the basic level: would a customer buy this feature today? If not, why not? If so, stop developing and ship.

It allows teams to stay focused on making improvements that have a strong business case, and speeds them toward that goal. Where traditional development would have meant months between client-level views of and feedback on ongoing software, Agile puts Cisco’s customers in the driving seat when it comes to new features, interface design, and the real utility of the software Cisco ships.

The quality difference has been remarkable. Customer satisfaction ratings for the CBA unit have risen sharply since 2011. For Unified Contact Center Enterprise, the open defect backlog shrank from 819 at the point of first-customer shipment in version 7.0 (prior to Agile) to 104 in 8.0 (the start of the Agile method), and to 50 in 9.0. The overall code base has become leaner, reduced from 20 million lines of code to just 9 million, even as Cisco has added products such as Finesse, SocialMiner, the Packaged Contact Center Enterprise, and Hosted Collaboration Solution for Contact Centers (HCS for CC).

The focus on quality and agility is also evident in how Cisco is presenting its services portfolio to its customers and partners. The goal seems to be to give Cisco an edge in the marketplace by emphasizing rigor in all phases of design through testing, feedback, and improved efficiency in deployment and migration.

Cisco executives noted that the development teams working on the contact center product family were currently being evaluated as a model within the company, with some of the best practices learned there to be percolated out into other product areas. It is possible to see that effort as a signifier that Cisco’s corporate leadership might continue to invest in the contact center as a growth driver for the company. Agile is a widely used methodology that is not unique to Cisco, but that does not diminish the impact it has had on the company’s product development.

Success seen in targeted contact center products

Cisco reported that HCS for CC is building momentum. There are currently 2,500 agents on HCS for CC, with as many as 190,000 seats at major service providers in the migration planning stages from older hosted models. The average customer win is 250 seats; the product is targeted to service providers and very large enterprises.

Cisco shipped more than 600 Contact Center Express deployments in the second quarter of FY2012–13 and 2,000 in 2012, and gave some indications of where it plans to take the next iteration of that platform. In release 10 it will be adding the Finesse desktop and introducing realtime and historical reporting via a single source. The company also says it is signing on 50–100 new customers for the high-end Contact Center Enterprise platform each quarter, with the majority taking the advanced precision routing option.

By segmenting the marketplace with targeted platform options, and by placing the packaged version of Enterprise squarely in the middle (in terms of size and affordability), Cisco is cementing its stature as a top tier ACD/call routing provider.

Will the “Internet of Everything” affect contact centers?

When Cisco strays away from product value and performance, some of its messages become a little muddier. Video, for example, remains as distant a prospect for most real-world contact centers in 2013 as it did in 1993, yet Cisco still talks about it as if it is the next big interaction channel waiting in the wings. And of late the company has also been talking up the importance of the “Internet of Everything,” a blend of Big Data analytics, networking, and smart devices “embedded” in cars, homes, and other contexts. Cisco argues that connected objects combined with business process engines are going to revolutionize the service environment. It may be right, but this proposition is quite a way off from a practical, call-centric point of view.

It is possible that this digression into the Internet of Everything and pervasive video contact represents an internal attempt by Cisco’s collaboration team to speak the language of the rest of the company – an appeal to other internal stakeholders to view contact center as a critical part of the company’s networking and infrastructure future. At this moment it is hard to see how the Internet of Everything and its extension into industrial process control, not to mention video interactions, can make it onto the priority list for most contact center decision-makers.

The venture into futurism, however, does not diminish at all the very real and impressive strides Cisco has taken to become not just a premier contact center vendor, but one with a measurable commitment to quality and innovation.

APPENDIX

Author

Keith Dawson, Principal Analyst, Customer Experience and Interaction

keith.dawson@ovum.com

Disclaimer

The post An Agile Cisco is an innovative Cisco appeared first on Ovum.

Teradata’s unified data world is evolving

Tony Baer — Mon, 13 May 2013 23:00:00 +0000

OVUM VIEW

Summary

Traditionally identified with the enterprise data warehouse, Teradata has significantly broadened its product portfolio and positioning. With enterprise analytics no longer a monolithic world, Teradata offers an array of models optimized for different types of workloads, and increasingly, new styles such as exploratory analytics. Yet the goalposts keep moving. The same price/performance trends are creating similar opportunities and challenges for Teradata and its rivals. These trends are enabling Hadoop, for instance, to offload some of the batch-refining compute cycles sometimes performed on Teradata platforms. The true value of Teradata is shifting more toward optimizing all facets of analytic execution, and to the deep portfolio of analytic functions and solutions that the company has delivered over the years.

Fewer trade-offs in running analytics today

Analytic workloads were long considered cut and dry; the options were typically standard reporting or ad hoc query. Yes, other variations were possible – some analytics involved more complex, compute-intensive calculations, while others consumed larger pools of data. When hardware costs were steep, IT organizations had to make depth versus breadth trade-offs. The equivalent of Moore’s Law is changing the price/performance equation across all facets of hardware. Enterprises no longer have to make such either/or choices on account of today’s multicore processors; growing expanses of Flash, DRAM, and cheap disk; and increasingly affordable high-throughput connections.

Teradata’s platform evolution in a multi-polar world

History has come full circle for Teradata, which initially sold its data warehouse systems exclusively on its own hardware. Appliances or optimized systems are coming back in vogue given the extreme demands on data warehouse scale and performance.

In other ways, the world has shifted for Teradata, which was initially identified with highly centralized enterprise data warehouses. It now embraces a more diversified ecosystem of analytic environments, offering a selection of models that are respectively aimed at “tactical” (e.g., fast), “discovery” (e.g., interactive or “iterative” and often more compute-intensive), “strategic” (typically long-running batch), and mixed workloads. Each Teradata platform has a different architecture (e.g., ratio of processor to disk, interconnect speed) depending on whether the workload tends to be more complex (compute-intensive) or high-volume (IOPS-heavy). In recent years, Teradata has added more options by

acquiring Aster Data, which supports exploratory or “discovery” analytic workloads and provides many pre-packaged analytic functions which take advantage of SQL, MapReduce, and statistics;
introducing new columnar data options with Teradata 14, optimized for data-intensive queries involving only a handful of fields;
announcing “Intelligent Memory” options that extend tiering practices to DRAM (as opposed to just caching the latest retrieved data sets there).

Everyone is taking advantage of hardware innovation

Hardware innovations are providing rope to Teradata’s rivals as well. When we tweeted about Teradata’s Intelligent Memory announcement, a consultant countered that SAP HANA got there first. Actually, a growing number of data platform providers are exploiting Flash, DRAM, high-capacity (e.g., “fat”) disk, and high-speed interconnects (e.g., 10GbE Ethernet or 40Gb Infiniband). Whoever is first to exploit DRAM or Flash is not important; instead, the issue is who offers the most cost-efficient options for specific workload types. This has been and will continue to be a core pillar of Teradata’s value-add.

But as Teradata is hardly the only player innovating on hardware, it must look at the balance of system and “soft” features for delivering value. It must assume that some innovations may cannibalize some of the workloads that are now run on Teradata platforms. A prime example is Hadoop, which offers the prospect of a much lower-cost platform for running some workloads, such as data transformations or exploratory analytic queries that today would be run on Teradata (or Teradata Aster) – assuming current trends that tooling and training will ameliorate requirements for new skills.

Analytic execution is the key

Teradata built its reputation with very large SQL data warehouses. Its largest install at eBay was reportedly 20 petabytes as of 2011. So how does Teradata as a Big Data warehouse platform maintain its value in an era when there is an even bigger guy on the block?

The secret sauce is that Teradata engineered its platforms for specific types of analytic workloads; it offers a stable, mature, highly managed analytic platform environment; and it offers a wide portfolio of vertical-industry analytic solutions and common analytic functions.

Nonetheless, what happens when this cheaper platform – Hadoop – matures? The conventional – and not completely correct – wisdom is that Hadoop will steal workloads from more expensive platforms like Teradata. For now, Teradata and most (but not all) of its SQL data warehouse rivals place Hadoop at arm’s length, treating it as a “data lake.” It’s based on a notion that Hadoop contains minimally processed data, and that (correctly) Hadoop cannot process structured data as well as SQL platforms do.

Yet, on the horizon, Hadoop will add higher-performance processing frameworks beyond MapReduce, and some of the rough edges of the platform will be smoothed out gradually. Teradata responded by acquiring Aster Data, which took a hybrid approach, applying the power of MapReduce and the speed of the SQL platform. It is also expanding its processing engine to support additional forms of analytics and storage, such as advanced columnar, graph processing, and intelligent memory.

Nonetheless, third-party tooling is enabling division of labor with Hadoop. For instance, Informatica PowerCenter now runs natively within Hadoop’s distributed file system (HDFS). In the long run, lower-value workloads, such as data transformation, or early stage analytics such as exploratory analysis, will run on Hadoop. Diverse workloads (including new ones like graph processing) will get divided up by economics, performance requirements, and other factors such as data security (e.g., some data will remain inside the SQL platform because of its stronger protections).

Teradata’s value is to become the “mayor” of the expanding analytics environment. It has already taken a step in this direction with Teradata Unity, which directs analytic jobs to different Teradata platforms based on the type of workload, location of data, and required service level. Hardware-optimization, software solutions, and analytic functions are key variables for allocating workloads. Teradata Unity works on Teradata’s various data warehouse appliances and will be extended to Aster. Ultimately, the brass ring will be extending such governance across non-Teradata platforms, both SQL and NoSQL. Although a tall order, such a step would reaffirm Teradata’s value in the analytic food chain in an increasingly multi-polar environment.

APPENDIX

Author

Tony Baer, Principal Analyst, Software – Enterprise Solutions

tony.baer@ovum.com

Disclaimer

The post Teradata’s unified data world is evolving appeared first on Ovum.

Oracle puts applications in the Fast Data lane

Tony Baer — Mon, 13 May 2013 23:00:00 +0000

OVUM VIEW

Summary

With the X3 generation of the Oracle Exadata and Exalogic engineered-systems platforms significantly upping the amount of Flash (SSD) and memory (DRAM), Oracle is now cranking up the speed on its applications portfolio. With Flash and DRAM prices plummeting, it is now cost-effective to persist, rather than temporarily cache, data. Oracle claims that much of its existing application portfolio can run up to 16x faster, unmodified, on the X3-2 Oracle Exadata and Exalogic models. Oracle is now taking the next step in optimizing portions of its application portfolio to take full advantage of the new X3-2 line. Oracle’s Fast Data approach to enterprise applications follows SAP’s release of SAP Business Suite and CRM on the in-memory HANA platform. Ovum believes that Oracle’s approach is a logical first step, and would like to see this eventually yield a new generation of application-specific, single-appliance engineered systems.

Fast processes dictate a Fast Data approach to applications

Back in the heyday of MRP II, we wrote an article discussing whether enterprise applications should run in realtime. Back then, realtime meant interactive, rather than batch processing. The conventional wisdom 20–25 years ago was that running planning processes in realtime would be destabilizing; for instance, just-in-time operation meant delivery on a specific day.

Today, the speed, immediacy, and ubiquity of connectivity has enabled (and forced) business to operate faster. Globalization, the increasing fragility of supply chains, and an increasingly interconnected world are spawning scenarios where isolated events can quickly disrupt markets. For instance, false reports of natural or man-made disasters quickly ricochet around the world. It can drive the trajectory of stock or commodity prices, and in turn, force all players in a global or regional supply chain ecosystem to change their sourcing and logistics decisions. Thought leaders’ opinions on social networks can grow viral, changing consumer behavior, sometimes within hours.

The Ovum report What Is Fast Data? outlined business scenarios and technology enablers that are making Fast Data applications a necessity. Running multiple what-if scenarios in response to disruptive events is becoming the norm for many applications.

The unsung hero of Fast Data: Silicon storage pricing

Flash and DRAM are getting cheap. Oracle doubled the DRAM and quadrupled the Flash in the current X3 generation of the Oracle Exadata and Exalogic engineered systems, without raising prices. Oracle’s rivals have also been taking advantage of cheaper Flash and DRAM.

Traditionally, DRAM cached transactions prior to writing them to disk, cushioning the lag that comes with heavy disk I/O. Today, both DRAM and Flash are cheap enough that application logic and transactions can run without having to touch disk (or relegate disk only for “cold,” rarely used data). Over the next five years, Ovum expects Flash to become the primary storage medium for OLTP (online transaction processing) applications.

Introducing Oracle in-memory applications – A Fast Data approach to applications

Oracle has announced a new series of “In-Memory” applications that aggressively leverage the age-old approach of tiering data. These applications pair a varying mix of its Exadata, Exalogic, and/or Exalytics engineered systems that are optimized for those offerings.

As a Fast Data approach to optimizing applications, this is a welcome step for Oracle. It responds to the need for applications that support critical realtime or near-realtime processes, and enables embedded analytics that help enterprises couch their decisions in an increasingly volatile world.

Oracle “In-Memory” applications put their logic in, and write transactions straight to, Flash storage; disk is only used for cold data. In-memory applications include selected offerings from the PeopleSoft, JD Edwards, Oracle E-Business Suite, Siebel, and Hyperion portfolio. Oracle also claims that existing applications not part of this release will run up to 20x faster on the X3-2 systems and promises more “In-Memory” applications in the pipeline.

Oracle wasn’t first here; SAP recently released in-memory versions of Business Suite and CRM that are optimized for the HANA platform. Oracle, like SAP, has followed similar scripts – starting off with analytics, and then releasing applications to run on these high-speed platforms.

A logical first step for Oracle

A key Oracle message for engineered systems is that they simplify IT by eliminating the need for customers to deploy software. With In-Memory applications, Ovum believes that Oracle should take the next step and consolidate them onto a single applications appliance. Oracle has already accomplished that with several analytic-oriented offerings from PeopleSoft, Siebel, and Hyperion, but hasn’t indicated any plans to do so with the rest of the In-Memory portfolio. The fact that Oracle requires two appliances for many In-Memory applications allows SAP to claim that its approach is simpler for Enterprise Business Suite and CRM; Ovum believes that Oracle should put such consolidation on its product roadmap.

Admittedly, while such a move is clearly feasible (a rack can be configured with Oracle Exadata and Exalogic modules inside), the size of Oracle’s business applications portfolio makes this a logistical challenge: of its portfolio, which applications should get a specialized SKU? The answer is those applications that clearly benefit from a Fast Data approach and that are most in demand.

Fast Data Applications would be better branding

Oracle has heavily promoted the “Fast Data” branding for a broad cross-section of its event processing, transactional data grid, and analytics tooling portfolio. So we’re surprised that it did not brand this new set of releases as “Fast Data Applications.” Ovum believes this is more consistent with Oracle’s branding, and is less ambiguous.

The term “In-Memory” may draw attention, but in this case, it is confusing. Today, common usage is that memory refers to DRAM, whereas Flash is often considered storage. Flash has different performance and write characteristics than DRAM. It may perform slower. But more importantly, it is less volatile than DRAM; when the power goes down, the data remains on Flash but disappears from DRAM. That is actually an important benefit that Oracle could trumpet.

These are minor distractions from the main messages: Oracle’s business applications are riding trends toward Flash storage. They are leveraging the more abundant silicon-based storage capabilities in the Oracle Exadata and Oracle Exalogic engineered systems to address a growing range of Fast Data business use cases.

APPENDIX

Author

Tony Baer, Principal Analyst, IT – Enterprise Solutions

tony.baer@ovum.com

Disclaimer

The post Oracle puts applications in the Fast Data lane appeared first on Ovum.

BT steady for now

David Molony — Mon, 13 May 2013 23:00:00 +0000

OVUM VIEW

Summary

BT is steady as she goes, even if it not showing much market leadership. The revenue growth horizon has receded, but investment in sports TV offers the tantalizing prospect of a challenger to BSkyB. The strongest focus at BT’s final results presentation in London last week was on a cost reduction program that has graduated from a desperate remedy to a services improvement program. BT Global Services (BTGS) is no longer the problem child in the global telecoms sector, and other global telcos should follow BT’s example in financial transparency.

Cost management pays off, but growth is missing

Overall, BT full-year results were steady at the group level. Top-line revenues were down 5% for the year to March 2013, and the business is generating enough cash to pay a better dividend. There is, however, not enough of a growth story. CEO Ian Livingston is honest enough to admit that for a global market leader it is not taking enough of the market right now. Two years ago, BT set out a roadmap for revenue growth, which has since been delayed and is now looking more remote. BT has a continuing strong story in cost management. It has shown that a cost reduction program can help a telco focus on what it does well and actually improve product delivery and customer service. Costs have been reduced by £4.7bn ($7.2bn) in four years, but CFO Tony Chanmugam is already targeting the next £1b ($1.5bn) of cost savings. This strategy is no longer desperate remedies; it has produced results. After four years of scrupulous cost management, BT has a sharper multichannel product in the broadband consumer business and a range of new supplier and network management skills in global and wholesale services. In particular, BT has been able to take on services previously provided by third-party suppliers. This not only enables cost reduction, but also ensures that BT in closer touch with its customers. This could bring it one step closer to ensuring an improved customer experience.

BT Sport heralds a bold move

At last week’s results presentation, BT divisional chiefs took turns to present their own reviews of the past year. Retail CEO Gavin Patterson had the easiest slot, with a 48% share of net adds in the broadband market, 1.5 million superfast broadband users, and 810 thousand TV subscribers. BT’s decision to show its new sports TV at no extra cost to the subscriber is a stroke of genius, because it at once avoids a bundling price war in programming that only BSkyB knows how to win, and at the same time it keeps all the value of the service in the broadband network subscription. This is BT’s big asset and where the cost management program will pay even greater dividends. It certainly throws the ball back to BSkyB and Virgin Media, although both are capable of returns with interest.

BTGS is off the sick list

At least BTGS is no longer the bad boy in the class. Two and three years ago BTGS was first up before the headmaster, but this year chief executive Luis Alvarez was the last of the divisional CEOs to have to make their case. It was understandable that he kept things low key and concentrated on what the division has been doing consistently, rather than looking for a silver bullet. Although order intake has been good the past year, BTGS has suffered in the eurozone and from its higher-than-average exposure to banking and finance. The CEO highlighted new vertical solutions in life sciences, retail, and transport and logistics, but these are mostly partial solutions: they may make life a bit easier for some customers in these sectors, but they do not do enough to persuade global MNCs to hand over their end-to-end ICT to BT or to turn an industry into an anchor vertical for BT. It is also not clear what impact cloud computing and other on-demand services are having in the managed services business. Again, we heard good examples of contracts in which new customers are buying tactically, but it will perhaps be some time before we know whether established enterprise accounts are going to migrate to full software-as-a-service with BT or take the default route with a global systems integrator (SI).

Global services sector needs a benchmark

A financial analyst at the event claimed that the problem with BTGS is that it is so very hard to benchmark. BTGS and its competitors in global markets sit between telecoms and IT. In fact, among Tier-1 rivals, only T-Systems offers a financial performance benchmark, and that is against IT services players. However, it is not complexity that hinders the rating. The real problem is that US players do not give out their numbers, so there is no opportunity to compare. European telco watchers know the operating margins of the managed services divisions of BT, Deutsche Telekom, and France Telecom because these telcos publish their numbers. AT&T and Verizon on the other hand do not record the financial performance of their respective Business Solutions and Enterprise Solutions units. More financial transparency across the sector would give enterprise CIOs and procurement managers a better idea of who is best managing costs and how these cost savings are being passed on to customers. BTGS has become world class in driving deals with its suppliers, and this deserves more attention from corporate buyers.

APPENDIX

Author

David Molony, Principal Analyst, Enterprise

david.molony@ovum.com

Disclaimer

The post BT steady for now appeared first on Ovum.

How to drive workplace reform using mobile technology

Kevin Noonan — Sun, 12 May 2013 23:00:00 +0000

OVUM VIEW

Summary

Mobile technology has already had an enormous impact on the wider community. Indeed, it is now being described as one of the most significant changes since the Internet. It is therefore hardly surprising that smartphones and tablets are now having a big impact in the workplace. Mobile technology has become a much bigger issue than just the technology it runs on. It is now having a transformational impact on the workplace, as an emerging driver of workplace reform.

Mobile is creating one of the big enterprise paradigm shifts of our time

In times long ago, the desktop PC inspired employees to think differently about the workplace. Word processing replaced old typing pools. Spreadsheets redefined the way employees undertook personal data analysis. Even more importantly, the PC changed the way they thought about work. Staff became empowered to focus on job outcomes, rather than having to navigate complex bureaucratic processes.

Today, mobile is again set to challenge some of the long-held assumptions about the workplace and how government services are delivered. This is not the first time we have heard claims of big changes from an emerging technology, but unlike other claims, mobile is coming to the enterprise with a ready-made community of committed converts.

Given such fundamental shifts already happening in the broader population, it would be unreasonable to expect that enterprise IT services should remain unaffected, or that employees might suddenly lose interest in mobile technology the moment they enter the workplace.

Indeed, the reverse has been the case. In Ovum’s recent series of government senior executive interviews, most reported that “Mobile requests were coming from everywhere.” Many government agencies are experiencing a strong “pull factor” for mobile-based change.

There is a growing feeling of frustration with clunky old PCs and laptops. These commodity devices are now worn out, excessively standardized, and locked down. They offer little potential for additional productivity and innovation.

Mobile technology has created some strange allies and role reversals across government agencies

“Generation Y” workforce entrants were widely expected to drive requests for modern workplace technology. However, few expected that Generation Y would find a strong ally in government senior executives, who have also become enthusiastic mobile advocates.

In a tight labor market, Generation Y has proved to be more compliant with rules and processes through necessity, even if it did result in less productive outcomes. This was not the case with senior executives, who are more adept at managing their way through bureaucracy. One CIO related the following story: “Who do you think might have brought in a tablet device to work, downloaded some corporate data because it was judged to be more productive, and then proceeded to lose the tablet on public transport?” After a moment the CIO answered: “It was the senior executive, not the Generation Y staffer.”

Another government agency, this time in the emergency services sector, reported a story about discussions with its frontline staff. The CIO explained that these staff members had long referred to themselves, somewhat jokingly, as technophobes. This was until a recent review of mobile technology, where it emerged that just under half of them owned smartphones and were already using them for both personal and unapproved business apps.

Employees are tired of juggling multiple devices and keeping them synchronized. They want one phone, one diary, and one set of personal productivity tools, without the difficulties of some artificial boundary line. Against this setting, it makes sense that employees would want to bring their own mobile devices into the workplace.

BYOD has already become a worldwide phenomenon

Ovum research indicates high take-up in the workplace. Despite this, it would be a mistake to simply write off enterprise mobile as a discussion just about BYOD. Enterprise-strength mobile apps are breathing new life into tired legacy systems. Mobile has provided a wake-up call for outdated management practices. People are no longer content with commodity devices that just entrench outdated work practices. The time has come to restart the discussion on enterprise mobile, but this time starting from the perspective of business process redesign, workplace reform, and service delivery reform. Indeed, the phrase “workplace reform” may need to be focused more on better ways of doing work, and less on the place where it happens.

APPENDIX

Author

Kevin Noonan, Research Director, Public Sector

kevin.noonan@ovum.com

Disclaimer

The post How to drive workplace reform using mobile technology appeared first on Ovum.

Cyan goes public as investors wake up to value of networks

Ron Kline — Sun, 12 May 2013 23:00:00 +0000

OVUM VIEW

Summary

Cyan Inc., a manufacturer of converged packet optical (CPO) networking equipment and software based in Petaluma, California, raised $88m in its initial public offering (IPO) on May 9th. The company was founded in 2006, came out with its first products in 2009, and had $96m in revenues in 2012. Cyan currently has over 125 customers globally with most of its revenues from North America–based operators. This is the first IPO by an optical start-up since Infinera went public in 2007. IPOs have been rare for network infrastructure companies in general over the past few years after investors got burned in the 2001 telecom crash. Investor interest in the sector is reviving, though, centered on mobile broadband, Big Data, and the cloud. Vendors positioned well in software-defined networking (SDN), like Cyan, are among the ones benefiting.

Cyan’s value proposition resonates with customers

While Cyan manufactures and markets CPO networking equipment, most of its strategic focus is on the software that controls the network. Key networking applications supported by the company’s hardware and software include mobile and broadband backhaul, business Ethernet, cloud connectivity, wholesale transport, and private networking applications.

We have written extensively lately about the growing importance of software to network operation. Cyan recognized this trend early and has built an extensive suite of capabilities designed to help its customers solve their business problems. The company’s Blue Planet was arguably the first purpose-built metro SDN platform designed for virtualization and control of multivendor optical networks.

Cyan is unique in that it offers its software in a cloud-based environment, which means customers do not have to build a separate back-office infrastructure to support operations. Currently more than 10% of the company’s customers are for software only, however most revenues reported to date are for hardware sales. Still, we believe the strategy is sound and will support material revenues for the company as it grows.

Not so easy this time

Cyan is headquartered in Petaluma, California, an area that has spawned several networking companies. These include Advanced Fibre Communications (sold to Tellabs in 2004 for $1.9bn), Calix, Cerent (acquired by Cisco for $7bn in 1999), Mahi Networks (acquired by Meriton in 2005), Optilink Corporation (acquired by DSC in 1990 and later sold to Alcatel for $4.4bn in 1998), and Turin Networks (merged with Force10 in 2009 and sold to Dell in 2011).

Cerent is the poster child of successful start-ups due to its high acquisition price and its role in launching Cisco into the optical market, where it has booked billions in sales over the years. However, the telecommunications and optical markets have changed dramatically since Cerent launched, and the prospect of any start-up driving billions in revenues is highly unlikely.

Cyan’s IPO reassures investors that exits are possible

Venture capital support for network infrastructure start-ups has been weak over the past several years, partly because of crowding out from other sectors, i.e. the Facebook effect. It’s also due to the relatively high investment, low growth prospects, and long payoff horizon commonly assumed for networking companies, especially those building hardware.

Network infrastructure plays into the investment themes of mobile broadband, cloud, and Big Data, though, and new networking vendors tend to be much more software-centric than in the past. With IT vendors buying into the telecom sector (see “The Oracle juggernaut keeps rolling, picks up Tekelec”), exit opportunities are opening up. A public exit through an IPO is just as attractive, making Cyan’s recent offering good news for the sector.

APPENDIX

Author

Ron Kline, Principal Analyst, Network Infrastructure

ron.kline@ovum.com

Matt Walker, Principal Analyst, Network Infrastructure

matt.walker@ovum.com

Disclaimer

The post Cyan goes public as investors wake up to value of networks appeared first on Ovum.

Digital citizens need a new approach to the delivery of emergency services

Kevin Noonan — Sun, 12 May 2013 23:00:00 +0000

OVUM VIEW

Summary

Every year, the world community faces a variety of natural disasters including earthquakes, fires, floods, storms, and droughts. In response to these realities, many nations have developed sophisticated emergency response capabilities. These continue to be maintained at peak levels through ongoing programs of review and reassessment. However, continuous improvement alone does not always provide sufficient answers in a changing world. Sometimes there is a need for some deeper reflection to consider the emerging needs of a changing community. Today, personal technologies raise significant opportunities that go beyond existing services.

Emergency services need to embrace online technologies

Personal technologies are changing the way people find information and communicate with others. Gone are the days when press releases were taken as the primary source of information, or when governments could vet information before release. Today, official announcements are debated, supplemented, and reassessed through blogs, social media, and other online forums. The community has access to a vast array of information, and can increasingly undertake action based on its own assessment.

Mobile services and social networking have already started to become part of the standard emergency services arsenal. However, these services are typically seen only seen as supplementing existing facilities, and often rate only a passing mention in strategy documents.

The best disasters are ones that don’t happen

Quite understandably, media attention typically focuses almost exclusively on heroic efforts involved in dealing with a disaster. However, there is a growing recognition that emergency services need to be considered in a much broader context so the disaster response is just one part of a much bigger cycle of activity. In Australia, for example, this change of thinking was clearly spelt out in the Council of Australian Governments’ December 2009 National Strategy for Disaster Resilience. The document laid the groundwork for a much more sophisticated form of grass roots engagement with the community by covering prevention, preparedness, response, and recovery. The key focus moved from a response-based strategy to a strategy that builds disaster resilience into the fabric of the community. The 2009 document laid the foundation for significant policy and strategy developments at both state and federal government levels. The most recent is the December 2012 Victorian Emergency Services Whitepaper. This builds on earlier work by simplifying administration to make way for broader community thinking. The document recognizes “a new understanding of shared responsibility [where] individuals, communities, emergency services organizations, business, industry and government all have a role to play”. The document goes on to note “the conventional top-down approach to emergency management is changing. Governments in Australia and around the world recognize the importance of local involvement in emergency management, particularly in planning and mitigation”.

This broader view of emergency services opens the door far more readily for new and innovative applications of digital technology.

It is time to think more deeply about the changing needs of a digital society

There are many examples worldwide that provide a glimpse into how digital technologies can be used in novel ways, when other government services have not been available. In the aftermath of the New Zealand earthquake, citizens again banded together to fill information gaps in formal government services. For example, the Christchurch Recovery Map provided dynamic information to the public on areas of devastation. This map was constructed entirely by volunteers using open source tools available freely over the Internet, with data updated by general public using personal mobile technology. In the aftermath of the 2010 Haiti earthquake, resources from government and United Nations workers were stretched to the limit. Citizens began to mobilize their own response, using mobile phones to call people trapped under the rubble. Citizens also began to use social networking to organize their own relief effort, and to call for funding support from overseas.

Digital technology is a core part of the ecosystem of modern society, not just a peripheral activity or optional extra. The challenge now is to build government services that take account of these realities.

APPENDIX

Author

Kevin Noonan, Research Director, Public Sector

kevin.noonan@ovum.com

Disclaimer

The post Digital citizens need a new approach to the delivery of emergency services appeared first on Ovum.

British smart meter delay – better late than never

Stuart Ravens — Sun, 12 May 2013 23:00:00 +0000

OVUM VIEW

Summary

The British smart metering deployment is led by retail companies, unlike the rest of the world where distribution network operators have responsibility for meters. This unique situation has led to insufficient trials of different communications technologies for smart meters. The Department for Energy & Climate Change’s (DECC’s) tendering process for smart meter communications failed to identify the communications technologies that work best for British metering. It has now delayed the smart meter deployment by a year to find this out. This last-minute delay, while welcome, is further evidence that the DECC lacks the skills to manage such a complex deployment.

The DECC’s smart metering tender process could have been better

Ovum has for some time been critical of the selection process for smart meters. Giving retailers such as British Gas and EDF responsibility for the smart meter rollout created some unique issues. In all other deployments worldwide, metering is the responsibility of network operators, not retailers. So each network operator is responsible for discrete geographic areas and able to select the right communications technology for its area. In practice, this is usually a hybrid of different communications.

In the British deployment, retailers have no geographic constraints, nor have they historically shown much interest in trialing and testing a variety of communications technologies. With very few exceptions, the smart meters deployed in Britain so far have relied on cellular-based communications, with mixed results.

There has been insufficient testing of communications technology

The DECC decided, in its wisdom, to divide Britain into three regions and invited tenders for each of these regions. These regions are an arbitrary top, middle, and bottom division of Britain. The whole premise of this division was to protect the DECC from accusations of creating a communications monopoly. However, a more sensible division of communications contracts would be to select the optimal communications technology for particular geographies: urban, rural, flat, hilly, and so on.

Unfortunately, no one knows what these technologies are, because in-depth testing has not been carried out. Part of the DECC’s tendering process was to request proof that each communications technology would work in the British deployment. It did not commission any trials itself, relying instead on results from the retailers’ own trials. However, retailers paid little attention to different communications technologies, choosing to go with cellular – the cheapest option.

The DECC should be applauded for delaying the deployment

If the deployment were to have proceeded as previously planned, Britain could have commissioned a communications network for over 50 million meters that had not been properly tested. The risks were immense, yet it is only now, just weeks from the end of a two-year tendering process, that the DECC has decided that all was not well.

The DECC’s decision to delay the deployment by at least a year to perform more tests is welcome, but it does beg the question: why did it take the DECC so long to recognize its previous folly?

When the DECC took control of the smart metering rollout from energy regulator Ofgem in 2011, it did so because it believed Ofgem was not best placed to manage such a complex deployment. This latest retrenchment suggests that the DECC suffers from the same deficiency for which it criticized Ofgem. One thing is for sure: this embarrassment would not have happened if the British deployment was distributor led.

APPENDIX

Author

Stuart Ravens, Principal Analyst, Energy and Sustainability Technology

author@ovum.com

Disclaimer

The post British smart meter delay – better late than never appeared first on Ovum.

Capgemini strengthens its smart grid capabilities with Alstom Grid alliance

Stuart Ravens — Sun, 12 May 2013 23:00:00 +0000

OVUM VIEW

Summary

Capgemini’s Smart Energy Services has so far focused on advanced metering infrastructure (AMI). However, its recently announced alliance with Alstom Grid extends its Smart Energy services capabilities into the smart grid, particularly in demand response and distribution management. Success in this area will strengthen Capgemini’s go to market proposition and help sell its Digital Utilities Transformation framework, and the analytics services that are vital to the industry.

Capgemini’s historic emphasis has been on smart metering

Capgemini has a two-pronged approach to the utilities market: Smart Energy Services, which focuses on advanced metering infrastructure (AMI), and Digital Utilities Transformation, which focuses on how utilities can better use customer and asset data.

Smart Energy Services is the older and more mature of these streams. Capgemini has followed its advice to utility clients: deploy AMI before smart grid. Capgemini did not chase any of the US stimulus-funded grid projects, and focused its efforts on large-scale AMI projects. It expects that its existing AMI customer base will represent 80 million end points, once these customers have deployed all their meters. Capgemini’s short-term target is to reach 100 million potential end points, with a few more large client wins.

Digital Utilities Transformation was launched in October 2012. At the time, we felt Capgemini’s messages lacked substance, as there were few extant projects to demonstrate Capgemini’s capabilities. However, six months later the company has honed its communication surrounding Digital Utilities Transformation. It reports a number of alliances that will help drive the initiative, and growing interest from utility customers.

Capgemini’s alliance with Alstom Grid strengthens its distribution network capabilities

Although Capgemini’s Smart Energy Services has historically focused on AMI, it is committed to expanding its presence in distribution networks. Its principal targets are in distribution management and demand response technologies, where it believes there is a clear and present business case.

In January 2013 Capgemini announced its global alliance with Alstom Grid to pursue joint distribution management and demand response opportunities. The companies’ relationship dates back to 2011 and the alliance follows Capgemini’s strategy to partner with leading vendors to target specific areas of the utility industry.

The two companies have launched a realtime, cloud-based Integrated Distribution Management System and a new cloud-based Demand Response Management System. Both products are based on Alstom Grid’s e-terra 3.0 network management platform. Capgemini will provide cloud-based, realtime distribution and demand response management.

Capgemini and Alstom recognize that distribution management systems are difficult and expensive to deploy. While large utilities may be sophisticated enough to succeed, mid-tier utilities with fewer than a million end points may well struggle. These utilities have a greater need for an out-of-the-box solution. The cloud-based option offers what Capgemini says will be a lower cost solution for a utility of any size trialing demand response or distribution management systems.

The product is being deployed by one client, but there is also a healthy pipeline. The numbers are not huge, but it is still early for the alliance. Alstom Grid has a large number of existing SCADA clients, and one would hope that at least some will be converted to distribution management and demand response customers. These customer wins will certainly help add further substance to Capgemini’s capabilities in smart grid projects.

Analytics is the next logical step for Capgemini

Analytics is central to Capgemini’s Smart Energy Services and Digital Utilities Transformation. Capgemini’s next challenge is to build on its existing strength in AMI and its growing experience in smart grid, to create a world-class analytics offering. Despite the industry’s conservatism, cloud-based data storage and analytics are starting to gain interest, particularly for utilities trialing smart grid technologies. There are enormous opportunities in the market. Capgemini must demonstrate its ability to win them.

APPENDIX

Author

Stuart Ravens, Principal Analyst, Energy & Utilities Technology

stuart.ravens@ovum.com

Disclaimer

The post Capgemini strengthens its smart grid capabilities with Alstom Grid alliance appeared first on Ovum.

Telcos must balance identity-broker opportunity and privacy challenge

Shagun Bali — Thu, 09 May 2013 23:00:00 +0000

OVUM VIEW

Summary

In today’s networked world, personal identity information and privacy have gained crucial importance. All online services require identity-related data, and as a result, consumer concern is growing regarding security and privacy and the adequacy of current identity solutions. Business trends in the telecoms industry illustrate that telcos need consent and privacy management tools. As a result, identity management (IDM) and privacy enhancing technologies (PETs) must become essential parts of telcos’ systems.

A recent Ovum report, “Telcos: Leveraging Trust Through Privacy Management”, examines privacy and identity management opportunities for telcos, and how new solutions can unlock these opportunities. The report provides insight into emerging opportunities on the supply side, outlines pending market changes, explains which trends will have the biggest impact, and highlights how technology vendors can exploit the rapid changes under way across the telecoms market.

Telcos can leverage trust and avoid being “big brother” through privacy management

Telcos are working to unlock additional value by using subscriber identity data in more sophisticated ways. Telcos’ natural market position is already highly consumer-centric. They collect personal data through registration and billing, and do not rely on the tracking of customers’ specific usage data to feed targeted advertising. Much of the personal data telcos collect is actually under-utilized. In addition, telcos are already considered among the most trusted entities (perhaps after banks) with which customers are willing to share personal data. However, in order to develop new services that leverage this data, telcos need to stop the “big brother” approach in which subscribers have no control over how and by whom their data is analyzed and used. Instead, telcos need to provide more transparency and give customers greater control over how their data is used and shared. For example, seeking customers’ permission about how they wish to engage with the telco could build trust that increases the amount of personal data customers will provide and the ways in which they will allow it to be used. Also, telcos often express concern about regulations that impact their access to customer data. Rather that viewing these regulations as anti-innovation, telcos can use the “ask for permission” model as a key differentiator against the over-the-top (OTT) providers, which tend to use anything they can collect and “ask for forgiveness” if criticized. In other words, if telcos ask permission, and customers trust them, telcos will get customers to share more information, and more accurate information, than they already do. In this way, telcos can build trust by putting solid security and privacy controls in place, and they can make their relationships with subscribers stronger and stickier.

UnboundID’s new Privacy Suite is the first in what will become a critical new solution category

Today, several large vendors are offering telco-specific identity management (IDM) products and solutions. Among these, some are working closely with telcos to explore the two-sided business model in which they act as trusted brokers of information between e-commerce providers and customers. IT vendors must view IDM projects along with privacy management as big-ticket, long-term, and strategic. These projects will help vendors build stronger relationships with telcos and improve the customer experience. UnboundID is one of the first vendors to offer a solution that addresses data privacy to help telcos monetize identity data and build new revenue models around this information. UnboundID’s Privacy Suite is a tool that telcos can use to collect and control the use of personal data inside and outside of their organizations. With these governance capabilities, telcos can more confidently use subscriber data to upsell and cross-sell product offerings, market personalized services or products, and improve the customer experience. Larger vendors such as NSN, IBM, Oracle, CA, and others have broader overall IDM solutions for telcos, with mature capabilities in areas that UnboundID doesn’t address. However, it is important to highlight that UnboundID is ahead of the pack in this important new area of consent management and privacy control.

UnboundID’s recently launched Privacy Suite allows service providers such as telcos, high tech, and financial services companies to effectively and securely collect, manage, and share customer identity data while respecting customers’ privacy wishes. The suite provides the technology foundation for telcos to ensure compliance with their stated privacy practices, and enables them to build business models that leverage customer identity data. As data privacy issues come to the fore, and as telcos move toward the identity-broker model, a new market will emerge for solutions that address the related opportunities and challenges. UnboundID is first to market these critical new capabilities, but other vendors are sure to follow.

APPENDIX

Author

Shagun Bali, Analyst, Telecom IT

shagun,bali@ovum.com

Disclaimer

The post Telcos must balance identity-broker opportunity and privacy challenge appeared first on Ovum.

A fourth Australian MNO emerges from spectrum auction

Nicole McCormick — Thu, 09 May 2013 23:00:00 +0000

OVUM VIEW

Summary

The auction of the 700MHz (the so-called “digital dividend” band) and 2.5GHz spectrum bands in Australia concluded on May 7, 2013, raising A$1.96bn. The major talking points to come out of the auction were Vodafone’s decision not to bid for spectrum and Australia’s largest MVNO, TPG Internet, potentially emerging as a fourth MNO in the country.

In the auction, Telstra, Australia’s largest operator, set itself up to preserve its LTE network lead in both metropolitan and regional/rural Australia. The second-placed operator, Optus, secured enough spectrum to enable it to launch targeted LTE services in regional/rural areas in competition with Telstra. However, Vodafone – which is the smallest of the existing MNOs – did not bid for spectrum in the auction, despite initially applying to participate. Instead, Australia’s fourth-largest ISP, TPG Internet, secured a nationwide license to use spectrum in the 2.5GHz band and announced plans to build a network. Should Vodafone’s current turnaround strategy fail to please its shareholders, TPG could emerge as a buyer.

Telstra scoops up largest spectrum pool at auction

Telstra secured 2×20MHz of spectrum in the 700MHz band in the auction, which was just shy of the maximum allowable bid of 2×25MHz for a single bidder. It sees network supremacy as a significant differentiator, not only in terms of the network’s extensive breadth and depth, but also in terms of spectrum. Telstra believes that a key success factor is ensuring that it has sufficient spectrum to serve regional/rural Australia with high-speed broadband services, and acquiring 2×20MHz of spectrum in the 700MHz band will help it to guarantee that. Telstra also secured the maximum allowable spectrum allocation of 2×40MHz in the 2.5GHz band. Its total bid amount was A$1.3bn.

Optus will pay A$649.1m for 2×10MHz in the 700MHz band and 2×20MHz in the 2.5GHz band. The fact that it acquired spectrum in the 700MHz band is encouraging because it cannot afford to give Telstra too much of a LTE head-start in regional/rural areas. Optus also has enough spectrum in the 1800MHz band and high-bandwidth spectrum in the 2.3GHz, 3.5GHz, and now 2.5GHz bands to support a metropolitan LTE strategy. Now that it has also acquired spectrum in the 700MHz band, it can target key regional/rural areas with LTE. The onus is now on Optus to successfully bring its TD-LTE service to market, which is due to launch in early 2H13 alongside its existing LTE1800 service. However, if it is to close the gap on Telstra, Optus will need to ensure that its entire business proposition – including customer service, pricing innovation, retail strategy, and marketing – matches its improved network speed, performance, and reach.

Spectrum sold marginally higher than the reserve price in the auction. While all spectrum in the 2.5GHz band was sold, a 2×15MHz block of 700MHz spectrum failed to sell. This is not surprising given that the government’s reserve price of A$1.06 per MHz of the population for 700MHz spectrum was estimated to be approximately 30% higher than similar spectrum prices in other countries. The leftover 700MHz spectrum will likely be auctioned in one to two years’ time. However, there is no guarantee that the government will get the same price that it got at this auction; pricing will depend on several factors, including the demand for 700MHz spectrum at the time. In Europe, for example, recent auctions of LTE-suitable spectrum have raised significantly less than earlier auctions of spectrum in the same band.

Uncertainty hangs over Vodafone’s future in Australia

Vodafone failed to bid for any spectrum at the auction. The operator already has abundant spectrum holdings in the 1800MHz band (including at least 15MHz of contiguous 1800MHz spectrum in all capital cities), which it plans to use to launch LTE services in metropolitan areas from June 2013. It could also refarm its spectrum in the 850MHz band (which is currently used for 3G services) for LTE. However, Ovum believes that Vodafone – which is a joint venture between the Vodafone Group and Hutchison – took a considerable risk by not bidding for spectrum in the 2.5GHz band as it originally planned. Compared to the 700MHz band, the spectrum in the 2.5GHz band was very affordable and would have been useful for long-term capacity expansion.

On the other hand, TPG Internet, which is Australia’s largest MVNO with approximately 300,000 mobile customers, paid just A$13.5m for 2×10MHz of spectrum in the 2.5GHz band. Currently, TPG sells mobile services as an add-on to its existing fixed broadband customers, with the revenues going straight to its bottom line.

TPG plans to incrementally build out a LTE network in heavy usage areas. Customers will be able to use this network while they are in the area that it covers. When outside of these specific areas, customers will continue to use Optus’s network on a wholesale basis.

A more aggressive option for TPG could involve it targeting new and existing value-seeking customers as it seeks to recover its network costs. This could force some MVNOs out of business and would put more pressure on Vodafone, which has a considerable price-sensitive subscriber base.

In the long term, Ovum believes that something has to give in the Australian mobile market. We expect Optus and Vodafone to engage in closer network co-operation in an effort to bridge the gap between themselves and Telstra. Alternatively, if Vodafone does not achieve its desired turnaround strategy and its shareholders decide on an exit strategy, Optus and TPG may look to collaborate more closely. Should the Vodafone Group or Hutchison look to sell out of the joint venture, TPG is relatively well placed to make a bid for Vodafone.

APPENDIX

Author

Nicole McCormick, Senior Analyst, Industry, Communications, and Broadband.

nicole.mccormick@ovum.com

Disclaimer

The post A fourth Australian MNO emerges from spectrum auction appeared first on Ovum.

Vectoring takes off to prolong the life of copper

James Robinson — Thu, 09 May 2013 23:00:00 +0000

OVUM VIEW

Summary

German incumbent Deutsche Telekom (DT) has received conditional approval from the telecoms and utilities regulator BNetzA to upgrade its copper network using a process called vectoring. DT would have to give its competitors access to the new technology, but it could deny access in areas where alternative networks are available. The decision by BNetzA (and similar decisions by other regulators) will be good news for vendors, which are likely to see demand for their goods increase significantly in the coming years.

Rolling out a nationwide fiber network is very expensive for incumbents, and some have been reluctant to make such investments. However, vectoring provides a cheaper way to offer superfast broadband and, in turn, extend the life of copper. Although it has been described as a “stopgap solution,” vectoring is likely to become ever more popular. The EC is slowly recognizing its potential to assist countries in meeting the Digital Agenda targets, while incumbents have noted that it could help them to compete more effectively in the next-generation broadband market.

Deutsche Telekom gets provisional regulatory consent to use vectoring technology on its network

On April 9, 2013 BNetzA, the German telecoms regulator, published its draft decision consenting to DT’s use of vectoring. The decision gives conditional approval for DT to upgrade its copper network using vectoring to offer faster Internet access. Vectoring is a technology that makes it possible to double bandwidth by removing electromagnetic interference between lines with “distribution boxes.” For the process to work, the technology can be installed by only one operator, but once it is in place the infrastructure can be used by all other operators. DT currently owns approximately 330,000 of these boxes in Germany, with competing providers connecting to roughly 8,200 with their own lines.

While the decision is conditional, it will surely be a boost to the vectoring market. BNetzA’s decision states that DT must continue to allow its competitors to access the local loop from previously unused sub-loop distribution frames. DT is able to prohibit access to this local loop, although this requires a second fixed network to already exist in the area, there to be more DT sub-loop distribution frame loops than competitor ones, and the offer of an appropriate bitstream product to be in place as an alternative to access to the loop. Consultation closed on May 10, 2013, but the decision must be submitted to the EC and other European regulators for comment before it officially comes into force. Nevertheless, DT’s endorsement could be a catalyst for other telcos, and will certainly be welcomed by their suppliers due to the volumes involved.

Vectoring is becoming a popular way for telcos to extend the “limited life” of copper

VDSL2 vectoring can be used to provide consumers with superfast broadband over copper at comparable speeds to those offered over fiber. This process is likely to become more and more popular as operators look to extend the life of their copper networks in the face of costly fiber upgrades. On April 19, 2013 Orange France announced that it had begun deploying vectored VDSL technology to deliver speeds of over 110Mbps to its consumers of video, content, and games. The EC has recognized the huge cost of rolling out high-speed Internet access and in its “less digging = cheaper broadband” draft decision of March 2013 it proposed new rules aimed at cutting this cost by up to 30%. Even so, vectoring is a cheaper process than building a brand new fiber network; incumbents have, in some countries, been reluctant to invest in fiber, citing unstable regulatory and economic environments.

Incumbent operators will also be keen to use vectoring in order to compete more effectively with the alternative providers that have consistently gained market share in recent years. As Ovum’s report Germany (Country Regulation Overview) explains, DT now has a retail broadband market share of only 45% due to increased competition from other DSL providers and a marked rise in the uptake of cable broadband. Some cable operators have been able to offer faster speeds at lower prices and are not subject to the same regulation as telcos, nor must they cope with a declining legacy business in the form of fixed telephony.

Meeting the EC’s Digital Agenda coverage targets will involve technologies other than just fiber

According to a recent EC report on broadband coverage, EU countries are now, as a whole, over halfway to realizing the Digital Agenda for Europe target of EU-wide coverage of 30Mbps broadband by 2020. The general consensus was that this objective was to be achieved using predominantly fiber – in particular fiber-to-the-home (FTTH) – technology, which is capable of delivering much higher speeds. However, as the report points out, DOCSIS 3.0 cable, the latest generation of cable, is currently the most widely available technology in the EU for providing next-generation broadband. At this point in time, FTTH is the third most important with just 12% coverage of EU households.

While some groups, including the FTTH Council Europe, have claimed that allowing vectoring to upgrade copper networks could delay the rollout of fiber, the process presents operators with an opportunity to offer high-speed broadband without the costs involved in laying fiber (most of the cost is often in the civil works). It should be recognized that in the medium term providing consumers across the EU with download speeds of up to 100Mbps, and in turn achieving the Digital Agenda coverage targets, will involve technologies other than fiber. While vectoring is not a completely future-proof solution, it is becoming a popular choice for telcos. Furthermore, the ambitious plans of some cable companies will result in several technologies competing in the next-generation market as we reach 2020.

APPENDIX

Author

James Robinson, Analyst, Policy and Regulation

james.robinson@ovum.com

Disclaimer

The post Vectoring takes off to prolong the life of copper appeared first on Ovum.

VMware sees the software-defined data center as the future for IT-as-a-service

Roy Illsley — Wed, 08 May 2013 23:00:00 +0000

OVUM VIEW

Summary

The recent VMware Forum 2013 in London provided a platform for VMware EMEA chief technologist, Joe Baguley, to reveal how VMware is addressing the challenges of transforming IT to an as-a-service paradigm. The company’s transformation is based on three key pillars. First, it is about making the entire data center more agile, with the software-defined data center (SDDC) the vehicle that VMware sees as being a major disruptive technology to enable the delivery of IT in this way. Second, it is about open standards to support the hybrid cloud. Finally, it is about the way in which customers access these services is changing. For VMware this signals a shift from a virtual desktop policy to a multi-device strategy that supports the concept of enablement, not control. Ovum believes that this shift does not represent a radical rebirth for VMware, but instead is the result of a maturing organization that is evolving and recognizing what the market needs. VMware has been transformed from the $1bn company that Diane Green ran as CEO to a $4.6bn company run by new CEO Pat Gelsinger.

Organizations are not run by IT but by people who hire and fire IT departments

The virtualization revolution started in 1998 and has not really moved beyond the virtualization of the compute resources in the data center. However, the SDDC concept extends this so that the different layers (compute, storage, security, and network) are all virtualized and separated as components. Customers of IT not only demand the ability to obtain services faster than traditionally delivered approaches, but they also want to customize the services to their particular needs. The analogy used by Baguley was that of a coffee shop where customers come in and order from what seems like a bewildering array of drinks, from a chai crème frappuccino to a skinny latte with a double shot of espresso, for example. These drinks are actually made by assembling standard components, but to the customer they offer choice and flexibility. SDDC with its separation of the technology layers begins this “late assembly” process where the components can be assembled quickly and easily to make what appears to be bespoke solutions for customers.

Ovum believes that automation is the key technology to being able to assemble the different parts of a customer’s request and delivering it when needed. If we go back to the coffee shop analogy, being able to make a custom drink for a customer must be performed as fast as delivering a standard coffee, so processes and procedures are critical. This is where automation can deliver, because if IT departments do not, or cannot, perform this then the business will find a partner that can.

VMware sees the hybrid cloud as an inside-out evolution

According to Ovum’s research, the hybrid cloud looks set to become the dominant approach used by organizations as they deploy cloud computing. According to Ovum’s Tech Trends survey, in 2010, 19% of respondents stated they plan to adopt hybrid cloud, but by 2012 this number had risen to 38%. The research shows that planned public cloud adoption rose from 33% to 47% and private cloud adoption increased from 29% to 46% over the same time period. The challenge now is how this hybrid cloud will work with the existing workloads that organizations have. This workload perspective represents the crux of the dilemma because most traditional applications are developed to scale up with the necessary resources managed and made available, while cloud applications are designed to scale out and take responsibility for the resources themselves.

Traditional applications are run in private clouds because these applications need to be associated with the infrastructure, while cloud applications can run anywhere and are infrastructure-agnostic. VMware believes that most organizations will look to move to a hybrid cloud model by transitioning existing applications to an environment that enables them to scale out, and this means that the move from on-premise to hybrid cloud will be driven from an inside-to-outside approach. Baguley announced that VMware is working closely with OpenStack, a shift for VMware, which has been closely associated with proprietary technology. Ovum believes that VMware’s acknowledgement that in order to get greater cloud adoption, standards are needed so workloads can be portable between different cloud technologies, represents a significant change in approach for the company.

With its Horizon suite, VMware has delivered a suite of solutions that provide the capability needed to operate in a multi-device environment. Ovum believes that many vendors claim to operate a multi-device strategy, but in reality are missing significant elements, but with Horizon, VMware covers the physical, virtual, and mobile device aspects, as well as managing the workspace. Ovum considers the workspace to be the most important because only by separating the application and data, and allowing these to be combined to match the particular use case needed by the customer, can a multi-device strategy be implemented and supported.

APPENDIX

Author

Roy Illsley, Principal Analyst, Ovum IT

roy.illsley@ovum.com

Disclaimer

The post VMware sees the software-defined data center as the future for IT-as-a-service appeared first on Ovum.

Ovum’s innovative service of the month: O2 UK’s Help at Hand and Health at Home services

Carrie Pawsey — Wed, 08 May 2013 23:00:00 +0000

OVUM VIEW

Summary

As part of Ovum’s ongoing Telco Services Innovation Radar project, Ovum reviewed more than 100 telco service launches from around the world in April 2013. We have selected O2 UK’s two healthcare-related services as the most important innovation of the month. Although the buying audience for each service is very different, they are both related to the healthcare sector.

Help at Hand is not unique, but it is unusual as it is a consumer-focused product

Help at Hand is a small handset with a prominent “help” button, four speed dial buttons, an accelerometer-based fall detector, and a GPS receiver. It has a webpage that allows service options to be configured by either a carer or the care recipient. The webpage allows users to set up alerts and define how these will be handled. It is also possible to create a “geofence” using the GPS, which alerts the call center and the next of kin if the device moves outside of a pre-determined “safe zone”. This is especially useful for patients with early dementia who may become confused or lost when out alone. However, it is not only aimed at the elderly and frail, but also at people of all ages suffering from multiple sclerosis, epilepsy, and dyspraxia. The service offers a certified telecare call center.

The device itself has a one-off cost of £99 and a £20 per month cost for ongoing service. If a user wants to make calls via the device’s four speed dial buttons, they will need to purchase a separate package as only voice calls to the call center are included. The call center does not offer medical or care advice, but is able to route calls and alerts to emergency services or pre-designated carers/family members.

Other operators have launched similar products in the past; GreatCall has its Gitterbug product in the US, and DoCoMo has previously had a similar product. However, this is the first time we have seen a European operator develop such a product. It is also interesting as it is an operator-branded telecare product that is aimed at the consumer market, rather than a B2B or B2B2C service.

We believe the service will appeal to a niche segment of carers and elderly people within a certain income bracket. Essentially, it builds on the existing telecare solutions used in the UK, which to date have been restricted to use within the home. In the longer term, these kinds of services have good growth prospects. Across the EU, 80% of care for the elderly is provided by families. Therefore, any services that can help to relieve the care burden and increase independence have considerable potential. O2′s Help at Hand solution is off-the-shelf, available to buy in supermarkets and pharmacies, and its ease of use is an attractive selling point. The main barriers will be branding and marketing (consumers are not used to associating telcos with care services), user-acceptance, and affordability.

Health at Home is a more traditional telehealth solution aimed at health authorities

Health at Home is a remote health monitoring service. It is targeted at health authorities as a way to remotely gather a patient’s health information while still at home. The readings from the devices sync by Bluetooth to a tablet computer, which sends the data to the O2 server. Health officials can then read the data, and they are alerted if an irregular reading is received. This removes the need for patients to make visits to doctor’s surgeries or hospitals, or for health officials to make home calls for relatively routine checks. O2 claims that the service will make substantial cost savings and personalize remote care. The service is currently being trialed by National Health Service Lothian and North Somerset Community Partnership.

O2 is attempting to penetrate an already competitive marketplace

Although telehealth is a relatively new revenue stream for mobile operators, this does not mean that it is not a crowded marketplace. There are a number of telehealth providers in the UK, ranging from Bosch to Tunstall, and other telcos such as BT are ramping up their activity in this space. The major hurdle is getting telehealth services beyond pilot and small-scale projects to mainstream healthcare pathways. We believe vendors need to work more closely with the NHS and other healthcare providers to increase their chance of success. In O2′s favor is the benefit it will gain from the Telefonica Group’s significant investment, activity, and expertise in e-health in other geographies.

APPENDIX

Author

Carrie Pawsey, Senior Analyst, Industry, Communications, and Broadband.

carrie.pawsey@ovum.com

Disclaimer

The post Ovum’s innovative service of the month: O2 UK’s Help at Hand and Health at Home services appeared first on Ovum.

Services move closer to center stage at Huawei’s 10th Global Analyst Summit

Clare McCarthy — Wed, 08 May 2013 23:00:00 +0000

OVUM VIEW

Summary

Ovum analysts recently attended Huawei’s 10th Global Analyst Summit in Shenzhen, China. The event was the largest to date, with over 500 analysts attending to hear about the company’s strategy. At previous Huawei analyst events, technology and network rollout contracts were the dominant topics, while services and software received little attention. In addition, customer examples largely focused on China Mobile and Vodafone. However, at this year’s event, services and customer experience management (CEM) were more central to the company’s messaging. There was also a greater international flavor, a wider range of customer case studies, and demonstrations of the company’s dedicated services stream.

Huawei shows greater confidence in its services and CEM strategies

In the past, Huawei’s messaging on services hasn’t quite hit the mark. However, now that the company is winning more business in developed markets, its messaging has become sharper. The company’s increasing growth and confidence mean that it is now happy to share that its Global Services unit is a $6.9bn business. Unsurprisingly, the majority of these revenues is still network-centric, with just $953m coming from assurance and managed services. The remainder is generated through the Carrier business group, where services now account for approximately 29% of total revenues.

Defining future direction

Over the last three years, Huawei has consolidated 350 services in to a leaner portfolio. It has also recently restructured its Global Services unit to encompass seven solutions areas: network rollout, network interaction services, business-to-business customer support, SmartCare, managed services, learning services, and consulting services. While the 330 managed services contracts that are currently active favor mobile, Huawei’s intention is to extend and deepen the support for fixed managed network services and telco IT services such as operating support systems, business support systems (BSS), and customer relationship management services.

Huawei’s CEM activities, which are based on its SmartCare platform, are led by the Global Services unit. The program draws on the core, software (BSS), and wireless units, and uses service operations centers to support its telco clients. The company is making a significant play in this area, and has taken the lead in the Telemanagement Forum’s CEM metrics project and announced a customer experience blueprint called “Delivering the Integrated Customer Experience” (DICE).

However, headlines about acquisitions to fill in these areas will not be forthcoming. Huawei has stated that it will continue with its strategy of organic growth and will look to acquire talent through staff transfers from managed services deals.

Caution is needed

So what does Ovum make of Huawei’s confidence across its software and services business? Clearly, the company is intent on taking the second position among network equipment providers (NEPs) in the professional services market. However, while its financial standing is strong, there are a couple of points to note.

Huawei’s fixed portfolio is weak outside of mobile backhaul, which is in stark contrast to the strength of its mobile positioning. While Nokia Siemens Networks (NSN) has divested its fixed assets to concentrate on mobile, such a strategy doesn’t fit with Huawei’s stated goal of providing an end-to-end offering. However, we believe that Huawei should be cautious of making an unchecked run in to managed services.

NSN and Alcatel-Lucent have backed away from these areas, particularly the managed services deals and multivendor spare parts and maintenance contracts where the cost to serve often outstrips the revenues gained. Huawei has signed a number of these types of contract to date, but we expect to see fewer signings of this nature over the next 12–18 months as the numbers deliver slimmer margins. These are not the only types of services contracts secured by Huawei. It has also signed a number of high-profile contracts, including an ICT service management managed services contract with Hutchison in the UK and a contract to manage Swiss operator Sunrise’s full fixed and mobile network operations.

For software and customer experience within the Carrier business group, Huawei has identified 83 use cases and developed a balanced and thoughtful CEM approach. CEM is just one part of its objective to deliver an enhanced value ownership, and will help to enhance revenues and improve customer experience and operational efficiency metrics.

Overall, Huawei has made considerable progress in defining and developing its services business, including CEM. As a result, it is a matter of when, not if, Huawei moves into second position among NEPs in the professional services market.

APPENDIX

Author

Clare McCarthy, Practice Leader, Telco Operations

clare.mccarthy@ovum.com

Disclaimer

The post Services move closer to center stage at Huawei’s 10th Global Analyst Summit appeared first on Ovum.

Oracle reveals bold plan for translational medicine

Andrew Brosnan — Wed, 08 May 2013 23:00:00 +0000

OVUM VIEW

Summary

During Oracle’s eighth annual Health Sciences Forum in Parsippany, New Jersey, Neil de Crescenzo used his keynote address to discuss how the company was developing innovative technology to turn data into information. Two of these innovations, namely the Translational Research Center (TRC) and Oracle Health Sciences Network (OHSN), are representations of the company’s commitment to furthering personalized medicine and value-based care. The two products, when used in conjunction, seek to aggregate, centralize, and disseminate massive amounts of patient data to provide a comprehensive view of the patient. This will give care organizations greater insight into the determinants of effective value-based care and enable trial sponsors to streamline costly drug development processes. While the promise and potential of this ambitious project is tremendous, significant challenges exist in its realization, sustainability, and ability to deliver value.

Oracle’s strategy is to drive insights by aggregating and centralizing data to provide a 360 degree view of the patient

As part of its strategy to provide the technological tools to further personalized medicine and value-based care, Oracle highlighted the capability of the TRC and OHSN to acquire, centralize, and disseminate patient data from multiple and diverse siloed sources into a single comprehensive data model. The TRC acts as a centralized data platform that aggregates patient data from internal sources, including whole genome sequences, and it combines it with genetic information from publically available repositories such as Swiss-Prot and The Cancer Genome Atlas. The TRC is an organization-specific product that can be deployed on-site or in a cloud-based environment, while the Oracle Health Sciences Network is a distributed network that seeks to connect and foster collaboration between professionals from across the larger healthcare ecosystem. Oracle is also enabling care organizations to become a node on this network, which will allow their patient-level data to become discoverable using Oracle’s cohort explorer: a tool that allows trial sponsors or their agents to identify appropriate candidates and correlates genotype and phenotype for biomarker discovery. Oracle hopes that the centralization of this data will drive benefits for individual care organizations that host these systems, as well as for patients and the wider healthcare community by providing greater insights into effective care. Aggregated patient data can also help organizations to streamline reporting for meaningful use, accountable care metrics, and patient engagement, as well to help identify disease-related biomarkers.

Achieving a critical mass of patient data will be key to success

Oracle has begun this ambitious project with leading medical centers such as UPMC and Moffitt Cancer Center, but it will need to achieve a critical mass of patients and related data if biopharmaceutical companies are to benefit from the Oracle Health Sciences Network. In other words, a sufficient number of patients need to be discoverable in a more efficient manner than traditional methods for the network to be successful. However, achieving this critical mass comes with increased technical and administrative challenges, and the network will need to provide an acceptable level of performance when leveraging cohort explorer to support adoption by trial sponsors. This could become increasingly difficult to deliver as more and more care organizations subscribe to the network. The network will also be taxed by the sheer volume of data that is being continually updated, and that data will need to be checked for accuracy and reliability to maintain the integrity/usefulness of the solution. Furthermore, the data model will need to be sufficiently flexible to evolve in parallel with the evolution and proliferation of personal medical wellness and diagnostic devices and their related apps. Managing patient consent at the individual level to include these sources of personal device data will add yet another layer of complexity to the equation.

Costs of trials and testing are impediments to personalized medicine

Cost is another concern associated with the push toward personalized medicine. Even in the wealthier nations, payer organizations are reluctant to pay for genetic and proteomic testing. This is because the number of tests continues to increase and there is a dearth of longitudinal data that identifies which tests and treatments are effective and capture long-term savings. As Kris Joshi, Oracle Global VP, rightly states, “The promise of personalized medicine is held hostage by the cost of clinical trials.” By creating the Health Sciences Network, Oracle is seeking to connect different stakeholders within the ecosystem in a mutually beneficial way to reduce the cost and cycle times required to recruit patients for clinical trials.

High stakeholder investment bodes well, but privacy issues could hamper globalization

Given these challenges and complexities, to say the project is ambitious would be an understatement. However, out of all the IT vendors who have taken on such a project, Oracle is well positioned given its level of industry-specific expertise and arsenal of technology at its disposal. Ovum is cautiously optimistic for this juncture, as many of the stakeholders, including Oracle, have invested significant sums into these technologies, and that very fact may give the project some room to run. However, these remain treacherous waters, as governing bodies around the world grapple with the thorny issues of sharing personal medical data and coping with the escalating costs of advanced therapeutic interventions.

APPENDIX

Author

Andrew Brosnan, Senior Analyst, Health Sciences

andrew.brosnan@ovum.com

Disclaimer

The post Oracle reveals bold plan for translational medicine appeared first on Ovum.

Undersea networks: enough business to go around?

Matt Walker — Tue, 07 May 2013 23:00:00 +0000

OVUM VIEW

Summary

Undersea cables are rarely talked about nowadays, unless one breaks. One reason is that the photo ops of new cable being laid are few and far between. Market data reflects this; the global market for submarine line terminal equipment (SLTE) hit a five-year low in 4Q12, amounting to just $419m in annualized vendor revenues. Installed cables are lasting longer, reducing investment needs at landing stations and/or city POPs to light the cables and link them with terrestrial networks. The cause of this longevity is improved ease of upgrades. The commercialization of coherent WDM has enabled cables with an initial maximum line rate of 40Gbps to reach 100Gbps, and allowed 40Gbps upgrades on a wider range of cables. Moreover, more suppliers are able to sell into this upgrade market than just the subsea specialists. That’s good for the cable users – all of us – but not great for some vendors. And we need them in the long term.

Coherent WDM changing cable economics with 100G

The 100Gbps market on land and undersea has been pushed along by coherent technology. As we discuss in High-Speed Optics: Global 40G/100G Market Outlook, coherent detection helps correct for optical impairments electronically using digital signal processing. For WDM suppliers, coherent support has become table stakes, especially in long-haul 100G. 40G-based coherent linecards and uncompensated line systems have also been developed. Undersea cable operators are now able to, at least in theory, upgrade networks planned initially to reach 40Gbps up to 100Gbps by simply swapping out terminals. In practice, a careful study of the specific fiber types installed, distance between repeaters, technical metrics of repeaters (e.g. noise, gain, bandwidth), and other issues must be done first to ensure the upgrade is feasible.

In addition to lowering cost/bit, coherent terminals also, per the vendors, come with lower footprint due to a simpler design, and carry lower maintenance costs over time. These benefits have made it much harder to make a business case for a new cable system. Transoceanic projects are still getting built, in part because many installed transoceanic cables simply cannot support 100G. But upgrades are increasingly common on smaller systems. Recent upgrade examples include GlobeNet’s Bermuda-US cable (100G); Tata Communications’ New York-London TGN-A system (100G); Pacnet’s East Asia Crossing-C2C (100G and OTN); the Maya-1 cable between Florida and Colombia (100G); India-Middle East-Western Europe (I-ME-WE) cable (40G); and Telefonica’s SAM-1 cable.

Top three vendors: two turnkey suppliers and an upgrade specialist

As part of its optical networks research, Ovum tracks SLTE revenues for all vendors selling into this segment. Some of these vendors have turnkey capabilities, i.e. the ability to plan, install, and maintain a submarine cable network. That requires either internal or partnered strengths in several complex areas, such as ships, cables, repeaters, route surveys, permitting, and finance. Alcatel-Lucent and TE SubCom are the only big turnkey suppliers, with $165m (ranked number one) and $79m (ranked second) in 2012 SLTE revenues, respectively. Some vendors just do upgrades, selling technology made for terrestrial networks, with a twist. The most successful of these is Ciena, with $59m in 2012 revenues, making it third in the market. Infinera also does upgrades only, but is much smaller with just $6m in 2012. Other suppliers of note include:

Xtera: Between Infinera and Ciena in size, it started with upgrades but announced officially its turnkey capabilities last month at SubOptic 2013 in Paris. It is clearly investing to become larger in the market, as it also announced a new (undersea) optical repeater at SubOptic, differentiating it from the pure upgrade players.
NEC and Fujitsu: Both do turnkey projects, but have limited regional strengths. Their 2012 revenues in the SLTE space were just $33m and $18m, respectively.
Huawei: Huawei made a much publicized entry into submarine several years ago by launching its “Huawei Marine” (HWM) joint venture, also with turnkey capacity. But it has failed to get very far, partly for political reasons, partly due to the slow-moving, relationship-based nature of submarine projects. HWM’s 2012 SLTE revenues were $23m. For a vendor hoping to hit $100bn by 2020, submarine isn’t going to help much.

Small club of undersea vendors looks set for a reshuffling

Turnkey suppliers need more than just terminal revenues to justify their massive investments in submarine. For a typical new cable, total project costs range from 3–5 times the cost of the SLTE alone. Upgrade revenues alone aren’t enough.

Given the small scale of the business, its corporate restructuring, and need to raise cash, Alcatel-Lucent is considering an exit from submarine. FT Orange, the French government, and various private equity shops have been floated in the press as potential buyers. Coriant, created out of NSN’s old optical assets, could even be an acquirer, though Alcatel-Lucent might prefer a different outcome.

TE SubCom seems less likely to exit than Alcatel-Lucent, since its parent makes cabling and it is in stronger financial shape. But rumors have circulated here, too. As with TE SubCom, cable projects undertaken by Japanese vendors benefit from some group synergies, and are unlikely to be abandoned.

As all this happens, the hype surrounding Big Data and cloud continues – both of which require more data center investments, which are scattered across the globe. Strong inter-data center connectivity is required to turn the hype into a reality. The telecom market needs a healthy supply chain at all levels, and global connections are among the most important.

APPENDIX

Author

Matt Walker, Principal Analyst, Networks & Technology

matt.walker@ovum.com

Disclaimer

The post Undersea networks: enough business to go around? appeared first on Ovum.

Actian goes on a Big Data acquisition spree

Tony Baer — Tue, 07 May 2013 23:00:00 +0000

OVUM VIEW

Summary

Actian, the vendor formerly known as Ingres, has suddenly put itself on the map through rapid-fire acquisitions of Pervasive Software, ParAccel, and Versant Software. The die was cast more than two years ago with its acquisition of Vectorwise, a fast, single-node analytic database. Actian’s goal is to assemble a mini-stack that includes a data integration engine and different data platforms for different transactional and analytic use cases. With the acquisitions, Actian winds up with a mix of mature, maintenance-oriented businesses that can contribute cash flow towards developing emerging data platforms for harnessing Big Data. While Actian has bought its way to a $150m business – big enough to be noticed – its challenge is building critical mass in at least one or two of its product segments.

Deep heritage

Actian, the outgrowth of the Ingres business, has been in search of a high-growth engine since the company changed its name in 2011. Capitalizing on the Vectorwise acquisition, its initial focus was cloud-based “Action Apps” that would be triggered through realtime changes in data. While the company still harbors cloud-based aspirations, the current focus is more on diversified data platforms united by an integration technology stack.

The company’s business originated around the venerable Ingres relational database, an engine that originally used a different query language that competed with and ultimately lost the battle to SQL in the 1980s. (Ingres eventually added SQL support.) Through a series of acquisitions, Ingres wound up in CA’s portfolio, and in 2005, CA spun it off as an independent company with the technology available in open source and enterprise versions. Since then, Ingres, now Actian, survived on license and maintenance revenue from a sizable legacy installed base.

In 2010, the company bought Vectorwise, an SMP (symmetric multiprocessing) columnar analytic database that competes with Sybase IQ, but with an added twist: it “vectorizes” processing at the chip level, and is capable of applying a single instruction set to multiple data points (also known as “Single Instruction, Multiple Data” or SIMD). With its high-speed SMP architecture, the sweet spot for Vectorwise is data sets between 1–10TBytes. As such, it is sandwiched in the market between the better-known Sybase IQ (which has been around for nearly 20 years) in the SMP columnar space and, at the other end, by more scalable MPP platforms (e.g., Aster Data, now owned by Teradata; Greenplum, acquired by EMC and now spun off as Pivotal; and Vertica, acquired by HP).

Among recent acquisitions, the ParAccel deal at first glance appears to be redundant; our initial question was why Actian needed yet another columnar analytic data store. Ultimately, the answer was that ParAccel and Vectorwise each provide missing pieces that the other lacks. Combine Vectorwise’s on-chip, SIMD process capabilities with ParAccel’s scale-out, and you have a lightning-fast platform that could conceivably scale out to petabyte levels. Prior to the acquisition, ParAccel was the last of the first wave of Advanced SQL analytic players that had not been acquired by deep-pocketed IT household names. Amazon used a subset of its engine to power the new Redshift MPP analytic database service now on AWS, but didn’t publicize the ParAccel connection. Despite receiving tens of millions in venture backing (including a sizable investment from Amazon), ParAccel’s market presence remained fairly static.

The hidden gem of the recent acquisitions is Pervasive, which already had an established data integration business that competed with Informatica in the midmarket. The $162m deal held little mystery, having been negotiated since the middle of last year. Pervasive’s data integration and data cloud (integration services that are available on AWS) potentially form the glue between Actian’s increasingly diverse array of data platforms. Pervasive also had another budding asset that is the key to Actian’s future Big Data strategy: DataRush, a patented framework that automatically multi-threads processing jobs based on the number of cores that are detected at runtime. Pervasive Software claims that DataRush has higher benchmarks than MapReduce, and promotes it as an alternative, high-performance framework for processing data on Hadoop and as a data pipeline for Actian’s SQL analytic platforms.

Capping off the recent spree of acquisitions was Versant, an age-old, object-oriented database (OODB) provider that has survived on a niche market with telecom clients. Back in the 1990s, OODBs were hailed as the logical successor to SQL databases because they overcame the “impedance mismatch” between multi-tiered software architectures and the data. But SQL was too entrenched, relegating OODBs as a footnote in database history. But OODBs have resurfaced, not as enterprise data platforms, but as specialized data stores such as the Java-based in-memory data grids that provide workarounds to I/O database bottlenecks for high-traffic, web transaction apps; and the new generation of web developer-friendly document-oriented NoSQL data stores. They include MongoDB, CouchDB, and Riak, which rely on JavaScript Object notation, or JSON objects that are well known to web developers. Versant was an anticlimactic acquisition; its addition to the portfolio will provide some of the license and maintenance revenue stream to balance out cash flow.

Making 1 + 1 = 3 is the challenge

On paper, Actian has achieved critical mass in terms of overall revenues and now is diversified enough to become a one-stop provider of OLTP, operational, and analytic data platforms. But that skips over the reality that Actian’s data platforms are niche offerings, none of which have critical-mass presence in their respective markets, and that enterprises are more likely to rely on Actian to provide alternatives to incumbents such as IBM and Oracle. Actian is competing in a database market that is newly receptive to upstarts and populated by plenty of competition for Fast Data and Big Data use cases for transaction processing and analytics.

Actian needs focus; it must forge critical-mass presence in one or two key product markets. That dictates converging some of its products, as maintaining a proliferation of niche platforms is simply not viable for a $150m company (product proliferation will stretch the company’s finite product development and go-to-market resources). The most promising opportunities are:

building off Pervasive, which has an established data integration presence in the midmarket and an emerging one with cloud computing and Hadoop; and
fusing the ParAccel and Vectorwise technologies to produce one wickedly fast and scalable analytic platform that can complement Hadoop.

APPENDIX

Author

Tony Baer, Principal Analyst, Software – Enterprise Solutions

tony.baer@ovum.com

Disclaimer

The post Actian goes on a Big Data acquisition spree appeared first on Ovum.

What’s next for outsourcing in the Philippines?

Margaret Goldberg — Tue, 07 May 2013 23:00:00 +0000

OVUM VIEW

Summary

The Philippines continues to be one of the most attractive destinations for outsourcing. We expect this trend to continue for the next several years, in large part due to supportive government policies and the quality of its agents’ English-language skills and familiarity with western culture. However, the Philippine outsourcing industry faces the challenge of maintaining price points and service quality in light of saturation and continuous heavy demand. Furthermore, outsourcers operating in the country need to explore the viability of moving toward higher value BPO horizontals, to both diversify risk and drive higher margins. Following an on-the-ground visit to contact centers across the country in the coming weeks, Ovum will further examine the Philippine outsourcing market in an upcoming report.

The Philippines remains an attractive option for CRM outsourcing

The Philippines remains among the most sought-after locations in the world for outsourced contact center delivery. In Ovum’s latest CRM Outsourcing Business Trends survey, this location emerged as one of the four most favored offshore sites by contact center managers in North America, Western Europe, and Australia. This is quantified in the growth rate of the Philippine offshore contact center outsourcing sector, which according to Ovum estimates has been in double digits annually for some time (and this is likely to continue). An abundance of English-language speakers, strong familiarity with western commercial/popular culture (especially that of the US and Australia), and government support for this sector have all contributed to the success of the Philippines during the past several years. The fact that leading outsourcers, including Teleperformance, Sykes, Convergys, and Sitel, have leveraged this location for their offshore servicing speaks to its established reputation. However, going forward, it is unclear how ongoing heady growth in demand will impact on the ability of vendors in the Philippines to continue offering what by all accounts has been high-quality service at a price point significantly more competitive than that found in western locations.

Saturation and heavy demand are largest challenges for outsourcing in the Philippines

While vendors continue to look to the Philippines as a front-office outsourcing destination, the industry may start feeling the impact of saturation due to growing demand, particularly in the greater Manila area. As vendors try to keep up with outsourcing’s upward trajectory in the country, they will see a continued rise in competition for the same agent pool, from both inside and outside the sector, and this could drive up agent pricing in Manila and beyond. In particular, demand from English-speaking countries such as Canada, the UK, Australia, and New Zealand, whose proportion of total markets served from the Philippines is projected to increase from 1:5 to 1:4 between 2013 and 2017. More research needs to be done to evaluate the current and future impact of this on agent pricing (which Ovum plans to conduct in part through our upcoming on-the-ground visit). In addition to competing for the same agent pool, outsourcers will also have to compete for mid-level managers. The Philippines’ education levels, driven in part by its growing economy, suggest that the pool of qualified workers is not shallow, but ongoing coordination among the industry, government, and education sectors to ensure agent training will be crucial. In addition, options exist for other destinations outside the capital, such as Davao, and the price differentials and relatively comparable labor pool sophistication in these regions should help to offset saturation challenges.

Outsourcing in the Philippines beyond contact centers remains unclear

A logical question for outsourcing vendors in the Philippines is “what’s next?” The current pace of contact center delivery growth is unlikely to slow anytime soon, but margins in this space are showing signs of shrinking. With a large population of agents associated with western business processes, a logical next step for outsourcers would be to scope the viability of delivering targeted back-office BPO and IT service functions from the Philippines. This will require some selling to prospects, given the country’s reputation with contact center functionality, but we believe that outsourcers seeking to diversify their horizontal footprints in the Philippines should explore the potential of non-contact center delivery alternatives. This would improve profitability and diversify risk away from an area of outsourcing that is becoming increasingly vulnerable to attrition-related challenges and lower profitability. To date, there have been some efforts to move outsourcing in this direction, but it is still too early to determine if this will gain traction.

These questions and more will be answered in Ovum’s upcoming report on outsourcing in the Philippines, which is due to be published at the end of 2Q13.

APPENDIX

Authors

Margaret Goldberg, Associate Analyst, IT Services

margaret.goldberg@ovum.com

Peter Ryan, Lead Analyst, IT Services

peter.ryan@ovum.com

Disclaimer

The post What’s next for outsourcing in the Philippines? appeared first on Ovum.

South Africa’s award for offshoring location of the year makes sense

Peter Ryan — Tue, 07 May 2013 23:00:00 +0000

OVUM VIEW

Summary

The announcement that South Africa has won the European Outsourcing Award for best offshore location should come as little surprise to those that have watched the resurrection of the services space in the country over the past two years. South Africa has re-established its offshore delivery credentials by laying the foundations for vendors to operate in the country, and it has made efforts to evangelize the country’s value proposition. To retain and build on existing momentum, all stakeholders in South Africa’s outsourcing space will need to continue to work together to develop this sector.

South Africa continues to make offshoring strides

South Africa’s offshore value proposition remains one of the strongest in the outsourcing domain, and the recent award, which it won despite strong competition from Serbia and Russia, was confirmation of that.

Ovum’s research places South Africa’s outsourced price point for contact center services roughly 40–50% cheaper than the UK and Australia (Trends in CRM Outsourcing: Pricing), and Ovum’s most recent CRM Outsourcing Business Trends Survey ranked South Africa among the top four offshore locations for outsourced contact center work among respondents in North America, Western Europe, and Australia (CRM Outsourcing Business Trends 2013)

The country’s infrastructure has seen significant investment over the past few years (due primarily to the 2010 FIFA World Cup), and Business Process Enablement South Africa’s (BPeSA’s) championing of improved industry-focused incentives (especially around taxation) has started to pay off. The plethora of vendors that maintain or have recently invested in operations based in South Africa over the past 24 months is testament to the value of South Africa’s outsourcing proposition. These vendors include Serco, Capita (via acquisition), Aegis, Genpact, Merchants, and Teleperformance (among others). We also believe that it was wise of BPeSA to target enterprise clients primarily in the UK, Australia, and New Zealand, as this approach allows South Africa to attack locations with which it shares significant cultural similarities and enables it to spend marketing resources optimally. In addition, unlike other offshore centers, there is a concerted effort by South Africa’s industry leaders and government officials to develop the back-office and IT services markets. While it is still early days, if BPeSA can aggressively pursue alternative higher margin services (finance and accounting outsourcing and legal process outsourcing are notable sweet spots), then ongoing success in offshore delivery is likely.

Continued dialog between industry and government essential to success

For South Africa’s offshore value proposition to remain solid and pertinent to targeted Western markets, it will be essential that the outsourcing industry continues to work closely with public policy decision-makers at the national, municipal, and provincial levels. There is every reason to believe that this will occur, given the recent elevation of Western Cape BPeSA head Gareth Pritchard to head of the national organization (see Ovum’s opinion Pritchard BPeSA appointment good for South Africa’s outsourcing value proposition). However, now is not the time for complacency in South Africa’s outsourcing sector, and vendors operating in the country must work with industry bodies and lawmakers to ensure that incentives are maintained (and improved where needed) and that current investors maintain and expand their investment.

In addition, South Africa’s strong country brand needs to be used effectively, and this can only be done if all outsourcing stakeholders work together cohesively, as has been the case over the past two years. Vendors and BPeSA must coordinate a realistic roadmap that will enable a steady evolution to non-contact center outsourcing work. This will diversify the South African services value proposition, in terms of the functions that can be delivered from the country, and it could contribute to the country’s ongoing social development.

APPENDIX

Authors

Peter Ryan, Lead Analyst, IT Services

peter.ryan@ovum.com

Disclaimer

The post South Africa’s award for offshoring location of the year makes sense appeared first on Ovum.

Gallup results bring a dose of reality amidst the MOOC hype

Navneet Johal — Mon, 06 May 2013 23:00:00 +0000

OVUM VIEW

Summary

The findings of a recent Gallup survey have rained on the MOOC parade by suggesting that few college and university presidents consider massively open online courses, or MOOCs, as an effective strategy for improving student learning or addressing the fiscal crisis facing many institutions. Ovum has long held the position that it was only a matter of time before the practical limitations of MOOCs became apparent. The Gallup findings underscore the importance of institutions taking cautious steps by considering whether MOOCs fit within their long-term strategy and, if so, whether a delivery, consumption, or mixed model is most appropriate. If institutions jump in prematurely or without an execution plan, they risk losing their focus and possibly reputation in what continues to be an exceptionally turbulent trend in the higher education industry.

College presidents are skeptical about MOOCs

Given the hype and the speed with which many higher education institutions (specifically elite institutions) have embraced MOOCs, one would assume that presidents and provosts were fully on board. The Gallup results, however, paint a very different picture and suggest that most higher education leaders are skeptical about the financial and pedagogical potential of MOOCs. A large percentage of respondents disagreed strongly with statements that MOOCs could improve the learning of all students, solve financial challenges, and reduce tuition costs.

Some have suggested that the driving forces behind MOOCs are boards of trustees who typically come from outside of higher education. After learning about MOOCs in the press and seeing the involvement of top-tier institutions, they too want to be a part of it. Many trustees believe MOOCs could be a solution to the current cost crisis, and as a result presidents are facing pressure to make them work. But trustees may underestimate the challenge of executing a MOOC strategy, which requires delivering instruction to tens of thousands of students, especially since a return on investment is by no means certain. This leaves presidents stuck between the proverbial rock and a hard place, with trustees on one side and faculty on the other.

Pedagogy is more important than publicity – but do trustees agree?

Building a brand is important in higher education, and many institutions and trustees view MOOCs as part of their overall brand strategy. Ovum believes this makes sense for a large institution seeking to build a global brand to attract more highly qualified students and position itself as a global research university. This would have implications for faculty recruitment and capturing research grants. An example of this type of institution would be The National University of Singapore.

However, for a small elite liberal arts institution such as Amherst College, brand building and large-scale participation in online courses are not the focus. Amherst supports the use of colloquia as a part of its pedagogical strategy, which is part of the reason it recently rejected an offer to join MOOC provider edX.

On the other hand, some institutional consumers believe that MOOCs can add to the quality of education when used in hybrid or blended courses. The availability of high-quality online lectures, in whatever format, is an opportunity to rethink how time is spent in the classroom. If an online lecture presents the material or walks students through an argument, faculty have more time to discuss the aspects of the material that are most difficult or most interesting.

To MOOC or not to MOOC – that is the question

The MOOC is essentially an online facsimile of the traditional university lecture-hall experience. It offers the promise of transforming the fiscal calculus for higher education, but not yet the reality of it. Elite institutions such as Harvard, Stanford, and MIT are delivering MOOCs and have first-mover advantage. Therefore, they are likely to remain the dominant force given their brand, faculty, and how students and institutional consumers of MOOCs select courses.

However, the dominance of the elites has met with resistance at institutions such as San Jose State University. Faculty at SJSU are expected to use the MOOCs in blended/hybrid courses, but they recently expressed concern about their long-term impact on the US university system. Namely, they argued that MOOCs will create two classes of institutions: one with well-funded colleges and universities in which privileged students get their own real professor, and the other consisting of financially stressed private and public universities in which students watch videotaped lectures with some interaction on their home campuses. This would perpetuate an “information dispensing” model of teaching and lead to a centralized system of higher education that weakens middle- and lower-tier institutions. While it is beyond the remit of this piece to consider the validity of these positions, the rising level of rancor in the MOOC discussion is likely to slow industry uptake as institutions seek to avoid contentious public debates.

Ovum believes that effective online instruction requires a different set of pedagogical skills from teaching face to face. Despite the clear analogue with the traditional university lecture hall, there remain challenges for MOOCs even in the large university environment. Institutions must carefully consider whether they need to offer or consume MOOCs and, if so, for what purpose. To do this, boards, presidents, and academic staff must engage in candid and ongoing communication. Not only will these conversations benefit students, they will also help to retain the focus and reputation of the institution.

APPENDIX

Author

Navneet Johal, Associate Analyst, Education Technology

navneet.johal@ovum.com

Disclaimer

The post Gallup results bring a dose of reality amidst the MOOC hype appeared first on Ovum.

Huawei seeks partners for enterprise growth

Brian Riggs — Mon, 06 May 2013 23:00:00 +0000

OVUM VIEW

Summary

Huawei held its annual industry analyst conference in Shenzhen, China, in April 2013. For the second year in a row, the event, which had previously focused on service providers, included an enterprise track. Huawei’s Enterprise Business Group (EBG) is a $1.85bn organization that operates internationally and whose portfolio extends from telepresence and a very mature contact center platform, though IP telephony systems and data center solutions, to BYOD solutions and GSM and LTE technologies. As Huawei expands its market presence outside China, it is finding that it cannot necessarily be the sole provider of enterprise solutions. Rather, it needs to integrate easily with third-party technology and rely more heavily on strategic alliance partners that can offer multi-vendor solutions in which Huawei products are only a part. This will provide an opportunity for service providers and systems integrators seeking an eager new technology partner with which to do business.

Expanding channels and alliances

Huawei has long preferred to present itself as a one-stop shop for its enterprise customers’ communications, networking, and storage needs. This is especially true in China, where it is a trusted, top-tier developer that enterprises often turn to first. However, outside of China, the company is often less familiar to potential enterprise buyers. To get on their shortlists Huawei invested $80m in marketing in the past year, about half of which was dedicated to enterprise marketing initiatives. The company has also invested heavily in its global channel program. It now has more than 3,500 resellers and distributors around the world, a 60% increase on the number of channel partners it had last year. In 2012, 55% of Huawei’s enterprise sales were via resellers and 11% via service providers. Its reseller sales are expected to grow to 65% in 2013, and the company’s goal is to grow that figure to 80% in time.

Huawei has signed up only a handful of distributors in the US (Arrow and Synnex are among the most recent), and it continues to encounter a climate of distrust. However, Telefonica, SingTel, MTN (Nigeria), and Airtel (India) may find greater opportunities in other regions where the company is viewed more favorably. Where Huawei wins an enterprise customer’s PBX business it also wants to provide other elements of the overall solution, as it tends to do in China. It is therefore in the process of building a corporate alliances program, and in late 2012 hired Michael Lee Thomas, formerly director of strategic alliances at Cisco, to spearhead this initiative. Throughout 2013 he will establish a strategic alliance framework that is intended to make Huawei an easier company for service providers, systems integrators, and large consulting firms to do business with. Huawei hopes to create corporate alliances with high-profile firms such as Accenture and IBM. The company will need to adjust its corporate culture to effectively partner with large, top-tier firms in the enterprise space, allowing others a slice of a pie that it has tended to want to keep for itself.

Slower than expected enterprise growth

EBG was a US$1.46bn business in 2011, increasing to $1.85bn in 2012. This is not bad growth, but it is short of the optimistic forecast of $4bn figure that Huawei previously expected EBG to generate by 2012. Going forward, Huawei expects EBG to bring in $2.7bn in 2013 and approximately $10bn in 2017. These figures are considerably lower than the $15bn–$20bn previously predicted for 2015.

At the analyst event Huawei executives were not entirely clear as to why they had ratcheted back their expectations for EBG growth. They cited a “deeper understanding” of the enterprise market as the motivation behind the change, as opposed to market conditions or political sentiment in specific regions. Huawei says that more than 50% of its unified communications sales, more than 40% of its contact center sales, and more than 50% of its telepresence solution sales are now outside of China. So even with the more moderate expectations for EBG growth, Huawei’s partners in Europe, South and Central America, and Asia-Pacific should expect growing opportunities for the resale of Huawei enterprise products as the company seeks to expand its presence around the world.

APPENDIX

Author

Brian Riggs, Principal Analyst, Enterprise

brian.riggs@ovum.com

Disclaimer

The post Huawei seeks partners for enterprise growth appeared first on Ovum.

Revolution, not evolution, required to redefine the customer experience in financial services

Daniel Mayo — Mon, 06 May 2013 23:00:00 +0000

OVUM VIEW

Summary

As financial institutions look to restore consumer trust and respond to the new service expectations wrought by the impact of smartphones and digital commerce, delivering a stronger customer experience has become a top business imperative. Significantly, it has shifted from being a strategy to which business executives largely pay lip service to being one that they recognize and genuinely want to deliver on.

Unfortunately for most financial institutions, strategic intent is blunted by operational reality. Short-term cost management, with misaligned incentives and structures, often drives counter-productive outcomes. In particular, operations and IT functions are primarily focused on cost and efficiency, with processes and systems that inhibit rather than enable a strong customer experience. Institutions are investing to address this, but investment is often tactical, for example in email management or user-interface design. To fulfill their customer experience aims, institutions need to think much more broadly; for most, a full transformation of business and IT will be required.

The need for strong customer experience has been recognized at the executive level

A renewed focus on the customer has been a consistent theme across the financial services sector since the financial crisis, with executives gradually realizing that institutions need to rebuild consumer trust. Initially, institutions attempted to do this by reassuring customers that they would act in the customer’s interest, but they have since spearheaded their efforts with a focus on improving customer satisfaction, to demonstrate that they genuinely have changed.

This shift has coincided with wider technology and social changes, catalyzed by the rapid growth of mobile apps, digital commerce, and social media, which have reshaped customer expectations. Consumers now demand far more immediacy, usability, and consistency in their business interactions; enterprises that can provide the “wow” factor in their customer experience have a major advantage when it comes to customer loyalty and advocacy. Importantly, these customer demands are presented throughout the customer lifecycle, including during the sales, origination/fulfillment, and customer servicing stages, and they also apply across channels.

The executive level has slowly become aware of this new, digital-led marketplace, and this awareness is translating into a focus on customer experience and, importantly, investment. Ovum’s recent Business Trends study of 100 banks in Europe (Business Trends: European Retail Banking Technology Investment Strategies) found that customer satisfaction and investment in digital banking (particularly mobile) are top executive investment priorities for 2013.

Operational silos mean steps taken to enhance customer experience are largely tactical

While enhancing the customer experience is becoming a prevalent strategy, turning it into an operational reality remains a huge challenge. Most institutions are now at least nominally organized around customer segments to drive customer-centricity, but operational structures between channels, products, and back-office functions remain siloed. A complex matrix of P&Ls across divisions along with different incentive schemes tend to reduce co-operation or drive a difference in focus, particularly in the back office, which is often targeted primarily on efficiency and cost.

Trying to create a consistent, seamless, and responsive face to the customer across channels, combined with the use of multiple IT platforms and heterogeneous business processes, can seem like cutting the head off the Hydra. Most institutions are investing in improving the customer experience, but their complex structures and cost pressures means this tends to focus on a specific business process or problem area. For example, email management is a major focus area for many institutions, particularly on the wealth management side, but implementing a specific solution here can paradoxically result in lower customer satisfaction if higher responsiveness is not seen equally in other channels.

Improved customer experience will require transformation of culture, structure, and platforms

If the customer experience is to be improved to meet raised expectations, institutions need to consider the wider picture and think more in terms of revolution than evolution. While institutions should look to create a transformation roadmap, and incremental improvements can accumulate over time (if directed toward a common vision), addressing demands relating to the customer experience represents, for most, a change of mindset. Institutions need to change culture across the organization, with staff who are incentivized, empowered, and focused on driving a strong customer experience. In the main, achieving this purely through incremental change is a challenge; it needs to be led from the top to drive necessary organizational transformation.

Institutions must accompany this with an examination of their IT platforms. These need to be able to support a customer-centric organization, allowing staff to understand the customer rather than the product and be responsive in supporting customer demands. Importantly, they must be highly adaptable so that institutions can quickly respond to changing customer demands. For many institutions, IT platforms will also require transformation, particularly as piecemeal development to improve customer service can actually end up reducing flexibility over time.

APPENDIX

Author

Daniel Mayo, Practice Leader, Financial Services Technology

daniel.mayo@ovum.com

Disclaimer

The post Revolution, not evolution, required to redefine the customer experience in financial services appeared first on Ovum.

There will be no big bang for mobile payments

Gilles Ubaghs — Sun, 05 May 2013 23:00:00 +0000

OVUM VIEW

Summary

The mobile payments market has long been gestating in developed markets, and is now finally starting to gain momentum in terms of product launches and levels of investment from significant players across the financial services, IT, and telco markets. However, it is clear that the market is unlikely to reach a big bang moment, and will instead continue to evolve on several fronts at once. What this also means, however, is that market entrants must think beyond existing business models to find a means of creating a financially viable mobile payments ecosystem for all parties involved.

Key to this is understanding that mobile payments are not a vertical market. Players must understand how the different participants in a payment system – the merchant, issuer, and consumer – can all benefit through mobile. Only through a combination of established payment technology and the new world of mobile can mobile payment players hope to reach their true potential.

Mobile payment growth is now irreversible

Mobile payments have seemingly been on the verge of mainstream success for a long time now. Following numerous false starts and stops in most developed markets with an established payments infrastructure, consumer-facing, commercially viable mobile payment systems are now live and in growing day-to-day use. Although not occurring as rapidly as initially hoped, mobile payments are finally shifting from a hype phase to a growth phase across various products and services in these developed markets.

In the 15 years since the launch of the world’s first mobile payment service – an SMS-enabled Coca-Cola machine in Helsinki – mobile payments have remained frustratingly far away for many potential players in this emerging payments ecosystem. However, while the big bang moment of mass consumer uptake has not occurred, mobile payments have instead developed and will continue to develop in more of an evolutionary rather than revolutionary style on multiple fronts simultaneously.

From a consumer viewpoint, mobile payments, particularly in the form of mobile commerce, have crept into common popular use and prove that consumers are willing to use their mobile devices as payment tools. Major retailers such as Amazon and Wal-Mart report a huge shift in growth in transactions through mobile channels, and are making mobile an increasingly central platform for retail.

Although mobile payments are still not yet a common sight in the real world, barring a few key regions such as Japan and South Korea, large players with considerable clout and resources are now launching major products and services.

Not all of these programs will be successful, but with some products doing extremely well, such as Starbucks’s prepaid mobile wallet app, which reportedly now accounts for 10% of all US revenue for the coffee giant, the mobile payment market finally has momentum and will continue to grow.

But market entrants need to think beyond existing models

Although the momentum in the mobile payments space is seemingly irreversible at this point, the overall structure of the market, and more critically the future revenue streams, remain extremely unsettled. In a market that is noteworthy for more failures than outright successes, many payment providers are now jockeying for position in the hope of being in the right place when mobile payments finally reach critical mass.

The differing forms of mobile payments, including m-commerce, P2P, and NFC (near field communication) or cloud-based proximity payments, each operate on different models, with the potential to disrupt various aspects of the traditional four-corner payments model. Alongside this, many potential stakeholders in a wider mobile payments ecosystem are trying to position themselves as the central component of the business model and retain any advantage they can.

However, the core tenets of payments remain unchanged, with most transactions requiring an issuer, merchant acquirer, and payment network to authorize, clear, and settle any payment. In most instances mobile payments act as an overlay of this, and while potentially replacing aspects, are not capable of fully replacing the overall payments infrastructure.

As a result, mobile payment players are having to think beyond existing models and focus on how they can generate revenue. These potential revenues can vary from a slice of the interchange fee, to merchant and consumer fees, or even peripheral services such as location-based advertising and couponing services. The revenue model of any mobile payments platform will inevitably have an impact on the overall design and attractiveness of mobile payments to consumers, merchants, and issuers alike. This will have a major impact on the types of services and products needed from vendors.

Mobile payments are not a vertical market

With mobile payments entering a growth phase, and the overall market structure remaining embryonic, it is a mistake to think that any individual player, or even market vertical, can own the mobile payment space outright. Central to the successful rollout of any mobile payment service is an understanding of the needs and roles of telcos, issuers, card schemes, merchants, and consumers alike.

With the broad range of existing and potential players in mobile payments, many are now attempting to claim a dominant position often to their own detriment. Telcos who don’t have the full support of merchants or payment schemes will face the same problems as issuers who do not have the support of telcos.

While disintermediation is a risk for many, a lack of cooperation will only slow overall market growth. Consumers are gradually shifting to mobile payments, but there are no guarantees of what shape the market will take in the future. Only by understanding the potential and needs of all potential links, can market entrants to mobile payments hope to remain nimble to these evolutions in payments. Would-be successful mobile payment players will need to combine the deep merchant and consumer penetration, scalability, reliability, and infrastructure of established payments infrastructure with the user experience, mobility, and seamless integration of digital commerce functionality of the mobile world.

APPENDIX

Author

Gilles Ubaghs, Senior Analyst, Financial Services Technology

gilles.ubaghs@ovum.com

Disclaimer

The post There will be no big bang for mobile payments appeared first on Ovum.

More wireline players see value, add Wi-Fi to bundle

Kamalini Ganguly — Sun, 05 May 2013 23:00:00 +0000

OVUM VIEW

Summary

Dutch cable operator Ziggo recently announced that it would make 1 million Wi-Fi hotspots available to its Internet customers within its territory by September 2013. Ziggo is but one of many cable and telco providers investing in and expanding their Wi-Fi coverage and capabilities. At the “WiFi & Small Cells” show held in Boston last week, Ovum found continuing development in the Wi-Fi provider and vendor ecosystem. The show largely focused on the intersection of Wi-Fi and mobile operators, for whom the stakes are much higher. But Time Warner Cable and AT&T provided interesting insights into their developing Wi-Fi strategies. If their experience is typical, wireline service providers will continue to invest in Wi-Fi coverage and capabilities to provide a degree of mobility (or more accurately portability) to their customers and keep them tethered to their anchor wireline services. The advent of Hotspot 2.0 later this year will bring greater Wi-Fi roaming capabilities, better business models, and possibilities of monetization.

Initial focus on customer retention and acquisition, then revenues

Exclusive Wi-Fi players such as Boingo make money off Wi-Fi hotspots while mobile operators use hotspots to improve the network experience and to lower capex. But for wireline players, the value proposition is different and evolving. In April 2013, a US cable consortium announced the beginning of an expansion of Wi-Fi coverage. The number of cable consortium Wi-Fi hotspots has doubled from last year to more than 100,000, of which Time Warner Cable (TWC) has about 13,000, which it makes available to its own Internet customers. TWC is tracking a correlation between its Wi-Fi capabilities and an increase in customer acquisition, retention, and upgrades, resulting in lower churn costs and incremental revenues. In other words, customers sign up for higher-speed tiers, more services, and stay longer when they know they will have access to Time Warner Cable’s hotspots. Customer retention will be particularly important in the US and other markets facing fixed broadband saturation. In addition, high adoption of triple-play bundles in the US has raised the stakes and the churn costs.

Clearly, monetization of Wi-Fi beyond customer retention is still in very early stages for wireline carriers. The incremental revenues from TWC customer upgrades are probably not too significant yet. The backhaul business is promising. The cable consortium’s deal with Verizon last year extended to providing backhaul for their Wi-Fi hotspots. TWC is exploring other opportunities – venue-specific coverage for places like malls and stadiums, and targeted advertising.

AT&T echoed TWC and stated its current Wi-Fi/hotspot strategy of providing its own customers with Internet access away from home, with the goal of improving user satisfaction rather than generating incremental revenues.

QoE will increase adoption and use of public Wi-Fi, whose share of mobile traffic is low

One statistic discussed at the conference was the low proportion of mobile traffic that actually flows through public Wi-Fi hotspots, such as those in Starbucks and stadiums. But it is also true that hotspot availability and convenience of access (such as single sign-on, thanks to Hotspot 2.0) and bundled billing (where Wi-Fi is part of a fixed bundle) have been limited so far. With greater hotspot coverage and the spread of these services should come higher adoption rates and eventually incremental revenues. Ad-supported and multi-tiered-use business models will help with monetization – for example, a “premium” Wi-Fi user experience that customers would pay for.

Private Wi-Fi usage much higher but monetization prospects limited

A much higher proportion of mobile traffic flows through private Wi-Fi networks such as in homes and offices. Mobile offload via Wi-Fi in these locations has been a boon for mobile operators, leading to savings in infrastructure costs that would otherwise have been spent on backhaul upgrades and additional cell sites. Wireline operators will, and should try, to capitalize on their contribution to backhauling mobile traffic from homes.

The advent of small cells (being touted everywhere as the next evolutionary step for mobile networks) may be a driver of Wi-Fi and a possible route for monetization of Wi-Fi within the home beyond a “premium” experience. For example, a Fon-like device would open up the home network/small cell to additional users while keeping traffic separate and maintaining security. The short hop required for traffic to be backhauled is suitable for Wi-Fi (versus macro-cells, for example).

Adoption of Hotspot 2.0 to make monetization easier for wireline players

The introduction and certification of Hotspot 2.0 equipment this year will make it easier for telcos and cable companies to monetize their Wi-Fi investments. The technology and ecosystem upgrades will take time to be adopted. Boingo and others at the conference spoke of a typical upgrade cycle of three to five years. However, about 30 operators are apparently in trials and some are expected to deploy this year.

But once a tipping point in adoption is reached, these upgrades are expected to provide the customer with greater ease of use, security, and interoperability among devices and networks, driving further adoption and new types of services. Roaming agreements and partnerships with global Wi-Fi players will be key for telcos and cable companies to providing greater portability and value for their customers outside their own footprints.

APPENDIX

Author

Kamalini Ganguly, Senior Analyst, Telco Strategy

kamalini.ganguly@ovum.com

Disclaimer

The post More wireline players see value, add Wi-Fi to bundle appeared first on Ovum.

UK G-Cloud to champion public cloud

Joe Dignan — Thu, 02 May 2013 23:00:00 +0000

OVUM VIEW

Summary

The third iteration of the UK government’s cloud store is about to go live, so what has changed and what is likely to happen next? The good news is that we appear to have reached the end of the beginning for G-Cloud, with the Cabinet Office reporting sales of £18.2m going through the first two procurement frameworks, G-Cloud i (Gi) and G-Cloud ii (Gii). The delay in getting G-Cloud iii (Giii) up and running is apparently due to there being 50% more suppliers and a much greater diversity of offerings. The increase in volume has caused the small G-Cloud team issues in sending out award letters.

However, the government has finally agreed on a “public cloud first” policy. This policy is something that the G-Cloud team, led by Denise McDonagh, has championed and it is a game-changer in a number of ways. The default position of the public sector is to be risk averse, which is, to some extent, the right position to take with some of the data that it deals with. However, there is a mass of data that would work perfectly well in a public cloud model, and from now on, public sector CIOs, particularly those in central government, will have to justify why they do not adopt this model.

Progress to date: Gi and Gii

The G-Cloud team should be applauded for progressing from a standing start to achieving £18.2m in sales by running two on-boarding exercises (Gi and Gii) over a six-month period. Some early issues have been addressed with increased ease of application and due diligence, and there is a greater diversity of services and solutions on offer. There are 462 suppliers, of which 75% are SMEs offering 3,185 services through four lots. However, the majority of contracts that have gone through have been for consultancy, and the main focus of these are Agile and cloud enablement. Given the nature of the framework, it is perhaps understandable that the early focus has been on consultancy for cloud adoption, but G-Cloud will need to be seen as the government’s primary procurement engine across the various themes, and not a consultancy framework ghetto. The exception has been the success of enterprise content collaboration company Huddle, which was an early adopter of G-Cloud’s CloudStore and is reaping the rewards in sales.

The next iteration: Giii

Giii is not yet live, but Ovum understands from Cabinet Office sources that it has a “bumper crop” of suppliers coming through, with an anticipated 50% increase in successful applications. This means there is a concomitant increase in the diversity of solutions and services on offer, but it is critical that the G-Cloud team ensures that the increase in the number of offerings does not mean a reduction in standards. It attributes the increase in applications to G-Cloud gaining traction in the marketplace, a greater understanding of the benefits on the demand side, better marketing and communications, an easier application process, and the support of senior ministers. This support has resulted in the closure of a number of frameworks, such as Service Integration and Management (SIAM), to force procurement to be directed toward G-Cloud.

We have yet to see what suppliers are on Giii, but Ovum has been told anecdotally that a number of the large systems integrators (SIs) such as TCS have now taken a position. However, the G-Cloud team has still not managed to snare the two biggest cloud providers: Amazon Web Services (AWS) and Google. There is growing frustration with these providers’ reluctance to join one of the UK government’s flagship programs, perhaps reflected in the diminishing number of photo opportunities with UK Prime Minister David Cameron and Deputy Prime Minister Nick Clegg. Ovum understands that both companies cite the USA Patriot Act as a reason for not engaging with G-Cloud, but both Microsoft and Salesforce, which receive as much legal advice as they do, have signed up to it. Perhaps the reason for their reluctance is that they have a business model with which they are comfortable and no plans to develop value propositions specific to the public sector. Another possible reason is that the contracts that are currently going through G-Cloud are not yet of a large enough scale to attract their attention. It has also been suggested that the biggest difficulty is the need to sign up to offering an unchanging product for two years. Companies such as AWS pride themselves on the continuous development of their products, with new functionality being added all the time. It will be interesting to see if the new “public cloud first” policy changes their position.

What is needed for G-Cloud iv?

What should we be looking for in G-Cloud iv? Firstly, in addition to opening up the marketplace to SMEs, there need to be contracts going through that are of a large enough scale to tempt larger suppliers. Secondly, the government needs to maintain pressure on the demand side by extending its current policy of winning hearts and minds through effective communication and by removing alternative methods of procurement. Thirdly, the G-Cloud team must continue to reduce the barriers to entry, for example by allowing a painless rollover process for successive iterations.

Now the start-up phase has passed, the government is sitting on a wealth of data about the market, which could be converted into information that provides the insight needed to identify gaps in provision. Sharing such insight would allow the G-Cloud team to target their marketing efforts to ensure that there is a match between what enterprises require and what vendors are offering on the framework. With the information that surfaces through the procurement process, the G-Cloud team could provide the bridge between what the public sector wants to buy and the products and services that the vendor community invests in developing.

G-Cloud is not going to go away; it will increasingly become the procurement mechanism of choice. Ovum does not believe government support for G-Cloud’s CloudStore is a political decision, but rather one based on cost and efficiency, so it is likely to survive beyond the next election regardless of the outcome.

APPENDIX

Author

Joe Dignan, Chief Analyst, Public Sector Technology

Joe.dignan@ovum.com

Disclaimer

No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, Ovum (an Informa business).

The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the findings, conclusions and recommendations that Ovum delivers will be based on information gathered in good faith from both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such Ovum can accept no liability whatever for actions taken based on any information that may subsequently prove to be incorrect.

The post UK G-Cloud to champion public cloud appeared first on Ovum.

A new broom at CA Technologies signals a shift in focus, a drive to change the IT management market

Roy Illsley — Thu, 02 May 2013 23:00:00 +0000

OVUM VIEW

Summary

Michael Gregoire, new CEO of CA Technologies, made three key announcements at CA World 2013 in Las Vegas. Firstly, Gregoire wants to refocus CA Technologies to more effectively use its arsenal of products and solutions. Ovum believes CA Technologies holds a pivotal position in the management market and agrees that better product classification and integration is needed. Secondly, Gregoire emphasized the importance of DevOps for driving business innovation and the velocity of business change that is needed. Ovum believes the positioning of DevOps goes beyond application development and needs to extend into the line of business. Finally, Gregoire said the role of the CIO will become that of a broker of IT services, and that CA Technologies must provide the CIO with the tools to perform this role. Ovum’s overall impression of Gregoire’s keynote is that CA Technologies is looking to transform its distributed business and drive growth, while maximizing the strength of its position in the mainframe arena.

CA Technologies announces organic development will drive its business

In his keynote, new CA Technologies CEO Michael Gregoire stated that CA Technologies recognized that many of its customers need to manage an estate that consists of technology of different ages. The solutions that CA Technologies offers are from both organic development and acquisitions; although they work together, this does not make integration a simple task. In Ovum’s view, CA Technologies can use integration to exploit new business opportunities by appealing to a wider audience. To help organizations with this heterogeneous mix of infrastructure, a new approach from CA Technologies will be to develop a platform that it will use for building its applications. Gregoire announced that in the last three months three new applications have been built on the CA Technologies platform: CA CloudMinder, CA Application Performance Management (APM), and CA Nimsoft Service Desk.

Gregoire made much of the need to utilize the 6,000 engineers that CA Technologies employs and maximize the $600m it spends on R&D. The company released its CA LISA 7 Suite at the conference, which upgrades its service virtualization and data-mining assets from its 2011 ITKO acquisition. He also announced two acquisitions: Nolio, which joins the application delivery solution under the name “CA Release Automation,” and Layer 7 (signing of the definitive agreement was announced), as part of the company’s security suite, although it also plays a key role in securing APIs for mobility and DevOps uses.

While these two recent acquisitions are small in scale and clearly provide CA Technologies with some additional coverage in the DevOps and security space, it was strange to have them in the same keynote where organic development was a key message of the future for CA Technologies. The modernization of the CA Technologies products and solutions goes beyond the simple platform layer integration and, according to Gregoire, will enable CA Technologies to deliver improved customer experience. This will be achieved by enabling product upgrades to be delivered quickly and without significant IT involvement. Ovum considers this last point to be particularly relevant and it represents a perfect segue into the DevOps message of CA World.

CA Technologies identifies DevOps as critical to the velocity of application deployment and business innovation

The DevOps movement is touted as the answer to business innovation for large, complex enterprise IT environments. Proponents believe that DevOps enables getting new applications and services to market faster, at lower cost, and with an improved quality compared to the traditional waterfall and ITIL operations process currently used. CA Technologies has clearly identified the critical components of DevOps within its CA LISA Suite as service virtualization, continuous delivery, and data mining. Service virtualization represents the starting process of the DevOps cycle, solving the problem of building testing environments that represent all the dependent downstream activities associated with a new application. Service virtualization is a way to containerize the environments and then make this container available to the developers on a self-service portal, to select as and when they need it. Capturing all the configuration and infrastructure elements in a predefined container will speed deployment and testing as it reproduces the production environment without availability constraints. Continuous delivery is the second facet and automates the staging of an application through the different environments. Nolio’s technology will help CA Technologies meet this challenge; CA Technologies didn’t address how this will be integrated with service virtualization. Data mining is the final aspect of the DevOps cycle; working with log files and data feeds from monitoring tools such as CA APM in production environments provides the closed feedback loop that presents virtual test data, performance profiles, and test scenarios from live applications, allowing comparison to the design criteria and test results to improve quality.

CA Technologies is at a crossroads as IT becomes a commodity capability

The acceptance by CA Technologies that the role of the CIO will move beyond the guardian of infrastructure to the broker of services shows it is evolving in line with the market. This new set of capabilities means that CA Technologies’ differentiator as the independent management vendor will be eroded as the traditional management vendors are only just beginning to operate at the cloud platform level; CA Technologies obtained its cloud platform from the acquisition of AppLogic in 2010. Ovum considers that the gap in the market for this broker role fits perfectly with CA Clarity and the linkage of financial characteristics to business demand. CA Clarity performs this capability now, but linking this to service assurance would enable greater insights to be extracted. Ovum contends that the CIO will need access to this broad wealth of information, but it must be presented in a logical and connected manner.

APPENDIX

Author

Roy Illsley, Principal Analyst, Software – IT Solutions

roy.illsley@ovum.com

Disclaimer

The post A new broom at CA Technologies signals a shift in focus, a drive to change the IT management market appeared first on Ovum.

Big Data must become a first-class citizen in the enterprise

Tony Baer — Thu, 02 May 2013 23:00:00 +0000

OVUM VIEW

Summary

Few topics have lately drawn more hype and scrutiny than Big Data. Having originated with Internet firms, Big Data has captured enterprise attention with examples that show how organizations, from public sector to financial services firms, telcos, and media derived insights that improved customer retention, operational efficiency, and risk mitigation. Big Data has drawn media attention with examples that touch people’s lives, such as the massive data hunt that occurred in the wake of the Boston Marathon bombing. Yet few technology trends have also drawn so many myths – such as that Big Data is a special project that can only be undertaken by uniquely skilled professionals, requiring its own dedicated infrastructure. Although that was the model for early Big Data projects among Internet firms, that model is not sustainable for the enterprise. To hit the enterprise mainstream, Big Data must become a first-class citizen with IT, the data center, and the enterprise.

SWAT team origins of Big Data

Big Data – as defined by huge volume, wide variety, and in some cases, extreme velocity – overwhelmed traditional enterprise databases. SQL databases required that data be modeled ahead of time based on expected query patterns. That model broke down for Internet companies seeking to build search indexes, optimize ad placement, or enhance online gamer experiences. As a result, Internet firms created their own technology, open-sourced it, and required special expertise and dedicated infrastructure to run Big Data (primarily, but not exclusively Hadoop). There were few concerns over security, capacity utilization, data stewardship, or information lifecycle management, as the stakes for market dominance were high and resources deep.

This model is clearly unsustainable for mainstream enterprises, which cannot afford to replace their SQL developers with new talent; run Hadoop clusters as separate islands; or treat every question as a unique data science exercise. Enterprises are clearly interested in tapping Big Data, but to do so, Big Data systems must:

become accessible to the existing IT organization bank of talent, while requiring some acquisition of new skills;
respect existing data center policies, practices, and constraints; and
address familiar enterprise business issues.

Becoming IT-friendly

The Ovum report Where Are the Big Data Skills? revealed a need for people proficient in underlying technology platforms, infrastructure management, and domain expertise, plus analytics, statistics, and programming skills. Yet, as previous experience with data warehousing and business intelligence (BI) revealed, over time, packaged applications or higher-level tools supplanted the need for programming, scripting, and in some cases, statistics.

But enterprises are not about to trade in their SQL developers for programmers who know MapReduce or other emerging frameworks. Convergence of SQL and NoSQL (especially Hadoop) worlds is ongoing; as such, many of these frameworks (or Hadoop data) are becoming accessible through SQL tools. Additionally, there is a large bank of developers – primarily Java, but increasingly, groups embracing JavaScript and other popular web scripting languages – who are looking for programmatic access that utilizes their talents (e.g. manipulating data as JSON objects).

Big Data will spawn demand for some new specialties such as data science. However, the predominant theme will be to address existing talent pools, which will in turn have to extend their skills to deal with new platforms and new processes for managing and analyzing data.

Support practices and obey constraints of the data center

Inside the data center, Big Data platforms will have to support or become consistent with established practices in terms of infrastructure management, capacity utilization, and information lifecycle management. For instance, Hadoop clusters will have to be managed under the same tools and practices that currently govern existing server infrastructure. These platforms must support existing identity and access management systems along with data security policies (e.g. for redaction, masking, or encryption). Data quality will also become relevant, although – as stated in the Ovum report, Data Quality and Big Data: From Discovery to Precision, approaches to quality must be adapted to the type of data and purpose for using it. Furthermore, CIOs will not tolerate the 15–20% capacity utilization rates that were common with early Hadoop users, such as Yahoo; consequently, virtualization will become a sleeper issue. Ultimately, data has a finite lifecycle; although the cheap, commodity disk associated with Hadoop and other Big Data platforms will allow “active archiving” (where some archival data is kept live on Hadoop for analysis), Big Data platforms must also address ILM.

On the other hand, there are few technological obstacles for Big Data platforms being supported by cloud service providers. In this area, the Big Data decision mirrors that of any other enterprise application – although some of the data types involved with Big Data (especially originating from outside sources) may force enterprises to revisit their policies for what data they are willing to keep in the cloud.

Address the enterprise

A key advantage of Big Data is that it enables organizations to attack analytic problems differently, adding a “discovery” phase. This will drive enterprises to revise and extend their analytic lifecycles to allow discovery and iteration – but only to a point; enterprises will need to learn new best practices for keeping the process disciplined to avoid endless experimentation.

More to the point, most enterprises will not be able to retain (or afford) the rather limited crop of “data scientists.” Enterprises will require a new breed of analytic application providers that can prepackage the data science and unique algorithms into off-the-shelf tools. More to the point, these tools should apply advanced, more sophisticated techniques to problems that are highly familiar. In our research, Ovum has found that the most common enterprise use cases for Big Data analytics fall into three buckets: customer focus (e.g., retention, churn analysis, upsell/cross-sell); operational efficiency; and (especially for financial services industries) risk mitigation. Enterprise adoption of Big Data will require a third-party analytic solutions ecosystem as there won’t be enough data scientists to go around.

Note: A keynote covering this topic will be presented at the upcoming Ovum Industry Congress.

APPENDIX

Author

Tony Baer, Principal Analyst, Software – Enterprise Solutions

tony.baer@ovum.com

Disclaimer

The post Big Data must become a first-class citizen in the enterprise appeared first on Ovum.

Ofcom probes possible abuse of dominance in BT’s superfast broadband pricing

James Robinson — Thu, 02 May 2013 23:00:00 +0000

OVUM VIEW

Summary

Ofcom, the UK’s national regulatory authority for the communications sector, has announced that TalkTalk has lodged a complaint against BT in relation to the latter’s pricing for superfast broadband, its next-generation access (NGA) product. TalkTalk alleges that BT has applied an abusive margin squeeze regarding wholesale charges for fiber broadband access. Ofcom has opened an investigation into the matter under Section 25 of the Competition Act (1998), and will decide whether to proceed further with the complaint in the second half of 2013.

A margin squeeze by a dominant upstream firm could negatively affect its competitors at the downstream level. Yet under current UK regulation, the functional separation of the two entities means that BT’s subsidiary Openreach is free to set the price for its virtual unbundled local access (VULA) product. Ovum’s benchmarking of wholesale fiber bitstream prices shows that BT is charging below cost in relation to one of its retail bundles. However, it does charge above cost for its two other packages, meaning that this finding may not be sufficient to prove any abuse of a dominant position.

A margin squeeze by BT could affect TalkTalk’s ability to compete in the retail market

On May 1, 2013 Ofcom announced that it had received a complaint from TalkTalk against BT regarding an alleged margin squeeze in superfast broadband pricing. TalkTalk alleges that BT is abusing its dominant position in the market for superfast fiber broadband, and is in breach of Chapter II of the Competition Act (1998) and Article 102 of the Treaty on the Functioning of the European Union (TFEU). In particular, TalkTalk believes that BT has failed to maintain an acceptable difference between its upstream and downstream prices, thereby abusing provisions contained within both UK and EU competition laws.

A vertical margin squeeze can occur where a firm is dominant in an upstream market and supplies a key input to undertakings that compete with it in a downstream market. To this end, the dominant firm (i.e. BT) may have discretion as to the price it charges for the input, and this could have an effect on the ability of firms such as TalkTalk to compete with it at the retail level. In 2003 the EC imposed a fine of €12.6m on Deutsche Telekom for imposing a margin squeeze in relation to access to its local networks. A full investigation into the BT matter has officially opened, and Ofcom will now collect information in order to decide whether to proceed further in late 2013.

Openreach is free to set wholesale charges for virtual unbundled local access to its fiber network

Despite TalkTalk’s allegations of a margin squeeze, the current regulatory situation in the UK permits BT, via Openreach, an element of freedom in setting wholesale fiber access charges. As the Ovum report Regulating NGA: Remedies in Wholesale Broadband Access explains, following its latest wholesale local access (WLA) market review Ofcom did not impose upon SMP players a requirement for fiber unbundling. Instead it imposed VULA on BT; the operator must provide VULA wherever it deploys its NGA network. The regulator also decided that pricing flexibility should be given to BT in relation to the offering of this product. Due to the functional separation of BT and its infrastructure division Openreach, competition from rival providers such as Virgin Media, and the risks of stifling investment and reducing consumer benefits, Ofcom concluded that regulated prices for VULA would be disproportionate at that time.

With Ofcom having recently stated its support for a more flexible approach to NGA pricing within the EU, it is not guaranteed that the regulator will feel that the allegations warrant a further phase of investigation. Ofcom and its predecessor Oftel have investigated several cases of margin squeezing, but have always reached the conclusion that no abuse had occurred. In a previous investigation into UK mobile operators, the regulator found that, even if there was a margin squeeze, there was no evidence of an adverse effect in the downstream market. Nevertheless, the €151m that the EC fined Telefonica in 2007 for a margin squeeze in residential broadband access in Spain illustrates how seriously regulators have taken such abuses in the past.

Openreach’s regulated fiber bitstream charges are both above and below BT’s retail prices

Ovum’s Wholesale Broadband Access Benchmarks: Q1 2013 provides a comparison of fiber bitstream and physical unbundling charges, including and excluding connection fees, for several EU member states. According to this piece of research, Openreach’s fiber bitstream price is £21.29 (excluding connection fee) for a 100Mbps download and 15Mbps upload connection. This is higher than BT’s cheapest fiber broadband bundle, which is available for £18 per month to retail customers. However, it is below the monthly retail price for BT’s two more expensive packages, which cost £23 and £26 respectively.

Openreach’s fiber bitstream prices for 220Mbps and 330Mbps download speeds are set to fall considerably from June 1, 2013, although TalkTalk is still calling for tighter regulation, similar to that governing BT’s copper network. Following its initial observations, Ofcom has found that there are reasonable grounds to suspect that an infringement of the Competition Act or Article 102 could have occurred. There is, however, no direct precedent, certainly in the UK, for TalkTalk to draw upon, which means that a high burden of proof could be required. Should Ofcom pursue the case it is not expected that a final decision will be reached before 2015; the regulator is also due to commence a review of the WLA market in June of this year, which will address the issues raised in TalkTalk’s complaint. The pressure is certainly now on Ofcom to regulate price.

APPENDIX

Author

James Robinson, Analyst, Regulation and Policy

james.robinson@ovum.com

Disclaimer

The post Ofcom probes possible abuse of dominance in BT’s superfast broadband pricing appeared first on Ovum.

Huawei invests in core router technology for the terabit era

David Krozier — Thu, 02 May 2013 23:00:00 +0000

OVUM VIEW

Summary

The role of the core router revolves around high-performance, high-capacity packet processing. With service providers focused on investment at the network edge, core router vendors have been challenged to increase the capacity of their products to accommodate exploding bandwidth demand. Vendors have two paths to accomplish this: they can increase per-slot switching capacity and offer higher-speed ports, and they can increase the number of physical ports via router clustering. At its 2013 Global Analyst Summit, Huawei told analysts that it is investing in both approaches. In conversations with Ovum, Huawei said it spent $150m to develop its Solar 3.0 network processor chipset, and it expects to spend twice that on its fourth-generation Solar 5.0 chipset, which will support 1Tbps. Ovum believes the steep investment required to develop core routers at 400GE and higher rates is a financial hurdle that will limit the number of vendors competing in this market, perhaps even challenging the status quo in market share.

Huawei delivers network capacity with 400Gbps and 1Tbps line cards

To support higher network capacity and improve the bandwidth density of core router platforms, vendors have been evolving their products to support higher line rates, increased port counts, and higher bandwidth capacity per interface slot. All major router vendors currently offer dual 100GE line cards on their core routers. Ovum expects continued growth in bandwidth demand will push open the commercial window for 400GE ports over the next few years. In fact, the first operational 400Gbps optical link was deployed by France Telecom in February 2013, and Verizon has talked about 400GE deployment in 2014.

Some IP core products are already capable of supporting 400Gbps. Alcatel-Lucent’s 7950 XRS core router, announced in May 2012, offers a line card with four 100GE ports. In September 2012 Huawei joined Alcatel-Lucent in offering 400Gbps of port capacity in a single slot with a new 400Gbps line processing unit (LPU) for the NE5000E containing four 100GE ports. This line card incorporates a pair of Huawei’s new 240Gbps Solar 3.0 network processor chipsets manufactured in 40/32nm silicon technology. Huawei is already investing in the next step. At its April 2013 Global Analyst Summit, Huawei showed analysts a prototype 1Tbps line card for the NE5000E. This card uses four Solar 3.0 chipsets and has 24 x 40GE ports. Huawei expects to demonstrate this card in 3Q13, with customer trials early in 2014.

Other vendors are lagging in supporting 400Gbps and higher slot capacity. Juniper’s MPLS optimized core switch, the PTX, is ready to provide 480Gbps per slot, but line cards to take full advantage of the available capacity are not yet available. Juniper’s T4000 router only delivers 240Gbps bandwidth per slot and Cisco’s CRS-3 only 140Gbps per slot. Ovum expects Cisco to introduce an upgraded core router with 400Gbps capability late in 2013, but we are unaware of similar plans at Juniper.

Huawei provides massive port and switching capacity with multi-chassis cluster configuration

Multiple interconnected routers can function and be managed as a single network element in a cluster configuration, increasing the port count and total capacity of a managed device. A central switch fabric chassis is typically used to interconnect multiple routers. A back-to-back configuration was first commercialized by Huawei in the NE5000E in 2006, and later adopted by Cisco and Alcatel-Lucent, for increased capacity without the cost, space, power, and interconnect complexity of deploying a fabric chassis.

Huawei, ranked third by Ovum in service provider core router market share (behind Cisco and Juniper), says it has over 3,000 NE5000E core routers deployed worldwide, with more than 310 of these deployments in a multi-chassis cluster configuration. In conversations with Ovum, Huawei said it sees router clusters as such an effective solution for increasing capacity that it plans to be the first vendor to add a cluster configuration capability to its edge router platform.

Also at its Analyst Summit, Huawei introduced a new fabric chassis capable of operation with the 400Gbps and higher slot capacities now available in its NE5000E. This means an 8+2 cluster configuration can switch over 100Tbps of bandwidth when used with 400Gbps LPUs. For comparison, the CRS-3, from market leader Cisco, in an 8+2 cluster configuration provides 25Tbps of switching capacity.

APPENDIX

Author

David Krozier, Principal Analyst, Network Infrastructure

david.krozier@ovum.com

Disclaimer

The post Huawei invests in core router technology for the terabit era appeared first on Ovum.

Watch these Chinese optical transceiver vendors

Daryl Inniss — Thu, 02 May 2013 23:00:00 +0000

OVUM VIEW

Summary

The recently published Ovum report, China Is Hotbed for OC Industry Change, highlights Chinese optical component supplier growth, the drivers leading to their ascension, and the problems transceiver vendors are facing. The analysis identifies Accelink (WTD), Hisense, and Innolight as the highest-rated Chinese transceiver vendors. Although they were rated below global leaders, Ovum believes they can disrupt the status quo. Single-mode transceivers for data centers represent the next big opportunity; we estimate the market will reach about $2bn by 2018, gaining at a 20%-plus compound annual growth rate from 2012. The expansion is being led by demand for single-mode laser arrays at 10Gbps and above, a product that requires innovation to deliver high-volume, low-cost solutions. These vendors have the toolkit to pursue the opportunity, but their challenge is to take leadership technology positions as this market emerges.

Transceiver vendors seeking new opportunities as China PON deployment peaks

Ovum estimates that China’s huge passive optical network (PON) buildout peaked in 2012; while the total PON transceiver market posted 2012 revenues around $0.8bn, it will decline going forward. There are no other economies as large as China to support the volumes experienced during the buildout, so vendors that supplied deployments in China are seeking new opportunities. This includes Accelink and Hisense, two of China’s leading transceiver vendors.

The China PON buildout delivered a significant single-mode laser accomplishment that prepares the vendors to attack other markets: It drove the annual volume of single-mode lasers above multimode volume and it brought the price of single-mode transceivers below that of multimode transceivers. A robust ecosystem developed to support the deployment of tens of millions of single-mode transceivers annually, while the suppliers delivered double-digit annual price reductions on ONT/ONU transceivers.

The results are surprising because they are counter to industry conventional wisdom. It is well accepted that the highest volume and the cheapest optical communication transceivers are multimode. They are primarily used in data centers to connect switches, servers, and storage devices. Their low cost is a consequence of the high volumes and a mature supply chain. Thanks to PON, there are now equivalent single-mode transceiver suppliers.

Attacking the data center is a next logical step

Accelink and Hisense already have parts to compete in the data center market as they can deliver GbE transceivers. They are identified as transceiver vendors to watch partly because of their contribution to the China PON buildout. Each has laser design capabilities, and Accelink manufactures its own lasers (see China Is Hotbed for OC Industry Change for brief company profiles). Both manufacture transceivers and have experience delivering high volume and low cost. But they need to look for bigger opportunities that utilize their single-mode manufacturing expertise, because GbE is a mature market with established suppliers so the competition will be fierce and the opportunity limited.

The market trend is for larger data centers and higher data rates; each factor contributes to single-mode transceiver demand. Ovum believes transceivers for 40 and 100G should be the product target because they represent over 60% of the datacom single-mode transceiver market after 2015, but 10Gbps should not be ignored because it is more than 50% of the market today. The data center is moving to a new platform where 10Gbps is the new foundation data rate. Servers with 10G ports are shipping today, which means high demand for transceivers at 10G and above. 40 and 100G transceivers built by co-packaging 10G lasers are shipping now, and we believe this represents a long-term opportunity.

The parallel single-mode laser is a key element. Suppliers who are able to design, manufacture, and deliver these lasers in high volumes stand to do well in this market. Suppliers are trying to deliver high volume products today. 40G using four lasers at 10Gbps is progressing well, but four lasers at 25Gbps for the 100G transceiver is proving to be more challenging.

Strategy is key tool needed

Strategy rises to the top of the tools list because Chinese transceiver vendors do not typically lead the market in technology development, but enter once high volumes are achieved and a mature product established. Innolight is bucking this trend; it is already focused on the data center opportunity and developing 10, 40, and 100Gbps transceivers. It is attacking the market through packaging, a good idea because this is one of the most expensive parts of the transceiver. Accelink has a history of introducing high-data-rate products but not delivering high volumes for these products. Hisense has internal laser design capabilities through its Archcom acquisition and a vertical integration strategy. Both Accelink and Hisense need to decide and proactively attack this market – notwithstanding the challenges, they need to be mindful that the data center opportunity is the largest one for single-mode transceivers.

APPENDIX

Author

Daryl Inniss, Practice Leader, Components

daryl.inniss@ovum.com

Disclaimer

The post Watch these Chinese optical transceiver vendors appeared first on Ovum.

Barranquilla emerging as Colombia’s new CRM outsourcing hub

Peter Ryan — Wed, 01 May 2013 23:00:00 +0000

OVUM VIEW

Summary

Ovum analysts were recently afforded a first-hand view of one of Colombia’s emerging secondary locations for contact center outsourcing, the city of Barranquilla. With investments by both local and global vendors in the city continuing at a strong pace, it is clear that the Colombian CRM sector has room to grow beyond Bogota. However, it is also clear that Barranquilla’s existing vendor base needs to work closely with local authorities to ensure a manageable level of expansion to prevent short-term industry saturation.

Barranquilla’s value proposition is strong for outsourcers

Apart from being the birthplace of much-lauded superstar singers and US network television actors, Barranquilla’s demographics place it in an advantageous position in the Latin American outsourcing space. Coupled with an impressively modern transport and communications infrastructure, Barranquilla’s metro population of more than two million gives it the scalability to compete with regional contact center delivery hubs of a similar size, including Guadalajara and Managua. Importantly for nearshore opportunities, there are multiple universities and technical schools in the locality, meaning a steady flow of educated agents that can service end users. Vendors interviewed by Ovum in Barranquilla indicated a relatively high sophistication of spoken-English on the ground, requiring minimal vernacular/accent training prior to taking calls from US consumers. All of the vendors visited in Barranquilla also noted that attrition in the city was somewhat lower than the levels found in Bogota (which houses the bulk of Colombia’s outsourced contact center workstations).

Existing deployments validate Barranquilla’s potential

Perhaps the best testament to the value of Barranquilla’s contact center delivery is the different outsourcers that have housed themselves in the city. Global vendors such as Sykes, Transcom, and Sutherland Global Services have set up shop, determining that the possibilities for delivery are solid. Further, domestic outsourcers such as Bilateral and Interactivo are also working out of the city, servicing both Spanish- and English-speaking end users. The presence of these global and domestic players indicates that this city is well placed to expand its influence, not just in Colombia, but also in the Americas’ nearshore market. However, for this to happen, astute watchers will need to be vigilant to ensure that this location does not hit saturation in the short term.

Challenges remain in managing growth

In Ovum’s view, it will be vital for outsourcers considering Barranquilla (as well as those already there) to watch for signs of over-saturation. On the face of it, this does not currently appear to be a major issue, with vendors stating that application volumes are steady and that tightening of the labor market has not become problematic. In addition, the incentives offered by the local government are realistic, and they are designed not just to attract customers, but also to retain them. The “Gente Estrategica” learning initiative pioneered by cooperation between the outsourcing industry and the government has also ensured a steady stream of contact center talent, and it is likely to do so for some time. The outlook could change quickly, however, given the ongoing influx of investment and the continued success of Barranquilla’s world-class promotion agency in gaining attention among prospective developers. But, until saturation becomes a reality, Ovum feels that contact center vendors are likely to benefit from what is one of the most dynamic urban markets in Latin American outsourcing, and they should not be deterred from exploring Barranquilla as a nearshore delivery option.

APPENDIX

Authors

Peter Ryan, Lead Analyst, IT Services

peter.ryan@ovum.com

Disclaimer

The post Barranquilla emerging as Colombia’s new CRM outsourcing hub appeared first on Ovum.

BI bites into a bigger slice of Oracle’s Red Stack

Madan Sheina — Wed, 01 May 2013 23:00:00 +0000

OVUM VIEW

Summary

Oracle recently held its third annual Industry Analyst World conference at its Redwood Shores headquarters, and it came as no surprise to Ovum that business analytics featured as one of six major track themes (aligning nicely with our Big Data and Analytics Super Theme for 2013). Oracle’s business intelligence (BI) and enterprise performance (EPM) portfolio is undoubtedly impressive in both breadth and depth. Having spent much time and effort rationalizing and updating its product set, Oracle is also planning innovative new analytics offerings through the convergence of new products, notably its Exalytics in-memory engine and Endeca-powered information discovery environment. This will inevitably present product development, integration, and marketing challenges, but Oracle has the necessary engineering resources and budget to address all three. However, it needs to do so quickly.

BI and analytics now pivotal in Oracle’s Red Stack

Business analytics is a significant component of Oracle’s attempt to provision an entire end-to-end corporate IT stack that extends beyond software into its engineered systems strategy. Oracle has an embarrassment of riches when it comes to BI and EPM, thanks to a combination of home-grown development and a series of astute acquisitions. BI and EPM now sit as a core software value proposition for broader Oracle applications (E-Business Suite) and infrastructure (Fusion) solutions, both horizontally and vertically implemented.

Analytics also continues to have an increasing influence on Oracle’s platform strategy. Oracle Exalytics, Oracle Exadata, and Oracle Big Data Appliance are all engineered hardware-software systems born from BI and analytics data-processing needs. Ovum expects Oracle to engineer more analytics smarts into these platforms that are hardwired to take full advantage of the hardware processing potential.

Ovum also expects BI and analytics to deepen in Oracle’s newer customer experience (customer 360), personalization, and social initiatives, forming a key component of the business value and transformation proposition.

This will resonate well for companies that view Oracle as a strategic business investment. BI and analytics could certainly be a seed for further expansion and growth, particularly for customers that are looking at Oracle as less of an infrastructure technology supplier and more as a value generator across various business operations. BI and analytics certainly help shift the debate from technology “boxes” to business enablement and improvement, a subtle trend from Oracle that Ovum has noted over the past couple of years.

Oracle’s strategy goes broad and deep

Oracle’s BI and analytics product strategy is aligned to both a broad continuum of business use cases and needs, ranging from the simple (operational reporting) to deepening analytic sophistication (added multi-dimensionality). A third alignment, which can be layered across both use cases, is real-time performance.

Meeting all of these alignments can be achieved in two ways technologically, with a set of point tools or a unified platform approach. Oracle is clearly angling for the latter, a flexible analytic server, with extensions and integrations based on tight metadata sharing and exchange between different BI, EPM, predictive, and unstructured analytic use cases. This includes, for example, allowing users to shift from traditional Oracle Business Intelligence Enterprise Edition (OBIEE) dashboarding and reporting to EPM planning, predictive analytics, or Oracle Information Discovery (Endeca) mode of analysis.

Innovation is being driven through product convergence and integration

Oracle’s business analytics strategy clearly points to convergence, pulling together cleverly engineered combinations of new and existing tools, applications, and platforms that are already well-developed divisions within Oracle. For example, many of its in-memory capabilities are derived from Oracle Exalytics, Oracle TimesTen, and OLTP product development teams. Internally, this could be Oracle’s biggest challenge, but Oracle has the resources to invest heavily in engineering and R&D to pull the solutions together, and in 2012 it spent nearly 13% of its revenue on this area.

Oracle has had a very active product cycle over the last year, culminating, curiously, to coincide with the end of Oracle’s fourth quarter, which is always a busy time of year. New versions of OBIEE, Exalytics, and Endeca are in the process of being developed and released, and Oracle is also ramping up its cloud and mobility offerings. Aggressive release cycles across multiple products show there are still plenty of integration points across the Oracle BI stack that need to addressed in order to present a unified platform, as well as more opportunistic integrations enabling innovative BI and analytics, such as the recent OBIEE integrations into Oracle Essbase and Oracle Information Discovery.

However, the integrations will not be straightforward and will require some work, and as more disparate systems are straddled and connected, some will also raise non-trivial technicalities. One immediate challenge is to ensure that data lineage is maintained across OBIEE and unstructured Information Discovery environments, particularly from social sources.

However, the signs are that Oracle is starting to rationalize its overlapping BI and analytics products, and is standardizing on a particular application or platform. It is also re-architecting some of its core products to run on a single core base.

APPENDIX

Author

Madan Sheina, Lead Analyst, Information Management

madan.sheina@ovum.com

Disclaimer

The post BI bites into a bigger slice of Oracle’s Red Stack appeared first on Ovum.

Ovum

Ericsson delivers a welcome update to its carrier Wi-Fi portfolio

OVUM VIEW

Summary

Ericsson’s update helps balance cellular and Wi-Fi traffic

This update signals that Ericsson remains serious about carrier Wi-Fi

The proprietary nature of network selection has its shortcomings

APPENDIX

Author

Further reading

Disclaimer

NSN building on its LTE and CEM success

OVUM VIEW

Summary

Enabling telcos to improve customer experience and efficiency metrics at a network, service, and customer level

Geographic Information System demonstration focuses on high-value customers

Services remained in the background

Pushing standards forward

APPENDIX

Author

Further reading

Disclaimer

A year on from its IPO, Facebook must work hard to keep users engaged

OVUM VIEW

Summary

Mobile is Facebook’s rising star

Service developments produce mixed results

Facebook needs to work harder on advertising and keeping users engaged

APPENDIX

Author

Further reading

Disclaimer

Competition in the mobile point-of-sale market is unsustainable

OVUM VIEW

Summary

The mPOS market is now commoditized

Competition on pricing models is a race to the bottom

Diversification is critical to long-term mPOS success

APPENDIX

Author

Disclaimer

FTTH Council Asia Pacific: snippets from Auckland

OVUM VIEW

Summary

First, fairness pays off

New Zealand’s Ultra-Fast Broadband Initiative is happening

The pipe builders

Retailers must focus on services

The role of SDN in FTTH

APPENDIX

Author

Disclaimer

Amazon expands its e-commerce domain with a virtual currency

OVUM VIEW

Summary

The drive behind Amazon Coins

Can Amazon succeed where others have failed?

APPENDIX

Author

Further reading

Disclaimer

Bloomberg’s snooping will hasten change in the market data world

OVUM VIEW

Summary

News is not profitable, but it is key to Bloomberg’s image

This is a crack, though not quite a fissure, in Bloomberg’s empire

Tier-1 firms may opt for DIY, while smaller firms will seek alternative vendors

APPENDIX

Author

Further reading

Disclaimer

Acquisitions are driving Dell deeper into BI and analytics

OVUM VIEW

Summary

Dell is going after BI and analytics market share

Kitenga for Big Data analytics on Hadoop

Toad is already in IT – and can grow from there

The mid-market will also find value in professional services and verticalized solutions

APPENDIX

Author