Network vs. IT: The Right Way to Look at Things?

Peter Jarich
Peter Jarich

Last year, my team and I had a chance to sit down with the CTO of a major U.S. mobile operator.  We’d just officially launched our Service Enablement practice looking at OSS/BSS market dynamics, so one of the things we were hoping to learn was how much of a focus this was for him.  Having built the reputation of a carrier committed to service and pricing innovation, we expected OSS/BSS – and IT generally – to be a significant, growing part of his budget.  Instead, he ballparked RAN spending to be 80%+ of his spend.

In other words, IT and service innovation considerations are important, but the RAN is where real money gets spent.

I was reminded of this conversation recently when looking at Orange’s 2013 financials.  Network spending outpaced IT spending by more than threefold and was nearly eight times the spending on Orange’s “service platform.”  Network spending for Orange grew from 2012 to 2013.  Other than for CPE, it declined everywhere else.  Orange’s network supports more than just mobile voice and data, but it does nothing to dispute the idea that the network is where major spending occurs today.

nm-orange-2013(Source: Orange)

None of this should be surprising.  Network gear – particularly in the access layer – is expensive, if only because it needs to be so widely distributed.  At the same time, operators continue to compete on network quality, making network investments a critical part of simply keeping up with everyone else.  We’re talking Finance 101 and Marketing 101 material.

It goes without saying, however, that no operator can hope to be successful if their network strategy is being driven by entry-level thinking.

Forget for a moment that service agility and service creation will be key to driving new revenues going forward.  Actually, let’s not forget that; after all, “my network is faster than yours” is unlikely to be a long-term, sustainable advantage against traditional competitors and it will do nothing to help stave off OTT competition.  Specific service creation tools aside, there’s another reality at play here.  To reap all their individual benefits, we need to see a collapsing of an operator’s IT, network and service layers.  In a full-on SDN/NFV implementation, for example, where would it make sense to split each of those out?

I get it.  From an accounting perspective, operators may find that it makes sense to segment spending in a very specific way.  Yet, while I love my accountant at tax time, I wouldn’t want him building my service provider’s network.

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