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Telco Business Forecasts Call for Cloud Billing

Cloud services are a natural extension for telcos’ managed services

With all the talk of "clouds" within the telecom industry, analysts have begun to sound like weathermen, each offering their own forecast on the business potential of offering cloud services. Regardless of who you listen to, the overall message is clear: cloud services should be on every telco's radar.

Cloud services are a natural extension for telcos' managed services, which is why Gartner has ranked cloud computing the fifth largest revenue opportunity for the industry - behind mobile and consumer voice, mobile data, and IT services, but ahead of fixed broadband. Not only do telcos have the built-in advantage of existing relationships with business and enterprise customers, but those operators who own the network also have the added benefit of being able to provide quality of service (QoS), as well as end-to-end SLAs, two key features that give them an edge over their non-telco competition.

With huge investments in the network, telcos are under extreme pressure to make a profit. Even though the market for cloud computing is large, cloud services can have margins in the low single digits, according to some industry analysts. In many cases, the improved brand positioning and reduced customer churn that accompany cloud offerings will be just as significant as the revenue generated; therefore, it's extremely critical for telcos to keep costs under tight control. In order to enhance efficiencies and realize the full potential of a cloud-based offering, operators need to have a robust monetization engine that is capable of:

  • Supporting a wide variety of metering capabilities (CPU utilization, bandwidth use, per user/seat, ect.)
  • Scaling to meet demand
  • Elastic provisioning
  • Self-service and reporting
  • Billing accuracy
  • Delivering a consistent customer experience

Above all else, flexibility in the back office is key. In addition to being able to handle fluctuating demand levels and a variety of usage charges for both telco and cloud services, cloud billing systems should also be able to accommodate various billing models.

It is as yet unclear what business model will emerge as the preferred billing method for the cloud. Some initial business models are in place, but we can see that those are far from nailed down and will be subject to change over time as cloud computing becomes a more established service offering. A big reason for this is because we don't know how sophisticated these models are going to get. For example, a simple subscription-based retail business model for cloud quickly becomes complex when you factor in the requisite sophisticated bundling and cross-service packages with existing telco services that will be necessary to attract consumers/enterprises and reduce churn. Similarly, when you consider the current level of sophistication that exists with wholesale and partner settlement business models - pricing plans, guarantees of service, stringent SLA requirements - there's no reason to assume these models would be any less sophisticated with cloud services. To leverage the benefits of a cloud service offering, billing systems must be capable of supporting an evolving business model.

Clouds are rolling in. Non-telcos like Google and Amazon already have developed cloud service offerings, and many others are positioning themselves to compete in the market. Telcos currently have an advantage with their network infrastructure and existing relationships, but it's not an advantage that will last for long without timely market entry and capture. However, the last thing telcos want to do is rush to launch a service without the right support in the back office. Doing so would be like leaving the house without an umbrella on a cloudy day - chances are you're going to end up all wet.

To learn more about billing for the cloud, click here.

More Stories By Mohammed Sha

Mohammed Sha is the Director of Product Marketing at AsiaInfo-Linkage, the supplier of the world's most advanced software solutions and IT services to the telecommunications industry.

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