For as much buzz as cloud computing is generating in the telecom industry these days, it has created an equal number of questions. Many of these have to do with the complex and demanding application of cloud in relation to business support systems. The following are seven questions regarding cloud billing that my colleague, Fiona Fulton, and I addressed during a webinar (Billing Brightens in the Cloud) and follow up podcast conducted with TM Forum.

1.  Is Cloud really being adopted by operators around the world?

The short answer to this is, absolutely. While cloud may not be seeing the traction of some forms of technology, like 4G, it has outpaced others, like fixed mobile convergence. There has been a lot of attention paid to cloud and many major telecom operators – including Deutsche Telekom, AT&T, Verizon, British Telecom, and France Telecom, to name a few – have  already rolled out cloud-based service offerings. It may have taken a while for this particular cloud to rain down, but it is certainly being adopted.

2. What’s the difference between the existing billing system and billing in private cloud?

This is a question we get asked quite a lot. It might be helpful to first explain the difference between private and public cloud. A private cloud is really a dedicated cloud environment for a single enterprise. They have complete control over that resource, and it’s theirs to do with as they wish. A public cloud is a cloud resource that’s shared between all paying users. Because of the shared nature of the public cloud it is more difficult to demand certain levels of latency and availability and discuss SLAs with your provider. This is why people don’t think that public cloud is going to be used for billing services. While this may be true today, I think we may see that opinion change as we move into the future and cloud technology advances.

As for the difference between existing billing systems and billing in a private cloud, it really comes down to the way you’re deploying the system. In an existing billing system, you deploy on dedicated hardware. In a private cloud environment you’re going to deploy in a virtualized environment. By deploying in the cloud, what you are really doing is maximizing the use of your hardware resources. This virtualization layer allows you to do lots of things with dynamic management and the dynamic allocation of resources, which helps maximize the use of your resource and drives down your costs.

3. Do cloud services really need sophisticated billing models?

Yes. If you look at the consumer business models that we might see for cloud, they seem very simplistic on the surface, and there’s a good reason for that. Consumers don’t like things to be complicated. When they don’t understand what they are paying for, they get frustrated and start to call customer care. But behind the scenes there needs to be a higher degree of sophistication. Certainly at the consumer level billing systems will need to be able to seamlessly facilitate complex service bundles. The SLA and QoS requirements of the wholesale and partnership models will also give way to enhanced sophistication. Basically, you’re going to see the same levels of sophistication that telco’s have built up in their traditional service being applied to cloud.

4. Margins are expected to be tight for cloud. The more flexibility we build into the billing systems, the more operations cost we have and the lower the margins become. Yet, you strongly suggest telcos run out and grab a share of this market. Why?

This is a very, very good question, and one not just specific to this opportunity. Any venture comes with its own set of risks. The only thing that does not have any risk is doing nothing. Most businesses would rather be active and take the risk to build a strong positioning than sit idle.

In cloud, just as in other opportunities such as M2M, the margins are extremely low and the revenue opportunity is limited. However to be a player in the market, you have to have a sound portfolio of offerings for two reasons: 1) to establish and secure your competitive positioning within the market; and 2) to add a level of “stickiness” to your offerings. Specifically for the SMB and enterprise sector, it’s important to have really strong and appealing offerings. Indeed, you will have the challenge of balancing that strategic positioning with tight margins and the need to maintain low costs, but you can combat these issues by finding relevant solutions and infrastructure deployment models that are able to help you achieve a decent margin.

5. How will different systems like mediation, CRM, and billing interact in the cloud environment? Do all systems need to be deployed in the same cloud?

These systems are going to have to continue to interact in the same way they do today. Cloud is not about recreating the application it’s about deploying it in a different way. Whether systems need to be deployed in the same cloud really comes down to factors such as latency, availability and security. If you look at a tightly coupled system like mediation and a rating engine, for example, the latency and the need for communication is very tight. You can’t have a 10 second delay between those two systems. So, it really comes down to your own cloud infrastructure to determine whether or not you can deploy these systems in different clouds. Will your latency be good enough? Will your ability to communicate between systems be good enough? In many cases, the answer may be, no. But, if you look at something like CRM, where the communication isn’t so immediate, it’s much more feasible that this system could be sitting somewhere else. It really comes down to the organization to look at the cloud infrastructure it has in place to see what’s possible within that infrastructure.

6. How can offering cloud services reduce customer churn?

By offering cloud-based services telcos stand a very good chance of improving revenues. However, as I stated before, margins will be small and the revenue benefit is going to be limited. The significant benefit of offering cloud services will be seen in improved brand positioning within the target market, and this will have a considerable impact on reducing churn. Just as triple- or quad-play offerings have a higher rate of customer retention when compared to the individual service offerings, operators who include cloud-based services in their portfolios will have an edge with a new bundling opportunity to provide SaaS access alongside their telecommunications services. The bundling effect would help customer stickiness for the traditional services whilst increasing revenue from the cloud services.

7. Is there any implication of cloud on mergers and acquisitions in the telecom sector?

Actually, I think cloud should actually enable smoother mergers when compared to non-cloud infrastructures. It should be easier to move subscribers of one company to the other’s systems residing in cloud, because these cloud-based systems are not only scalable, but they also provide open interfacing technologies that allow easy access to data enabling migration. On the other hand, non-cloud-based systems force the acquirer to maintain the two subscriber bases separate for a considerable amount of time, which leads to long delays in realizing the benefits of these acquisitions.

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