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Key takeaways:
Operators' digital business transformation starts with network reconstruction. As well as network cloudification, it requires upgrading equipment, networks, services, and operations, where all network functions and service applications run in data centers.
The Cloud 2.0 era has arrived. Over the next 10 years, an estimated 85 percent of enterprise applications will migrate to the cloud. Some operators are responding to market forces as their walled gardens are being smashed down, while others are actively embracing the future, speeding up evolution towards integrated intelligent information services providers.
Network reconstruction with data centers at the core is a prerequisite for successful digital transformation. Providing digital services and innovating business models depends on flexible architecture, agile network O&M, and having the right organizations and capabilities to support them. Pipes that can meet consumer demand for a ROADS experience and move with the cloud are a core capability that operators need to be competitive in vertical industries and restructure the value chain.
However, network cloud evolution is a lengthy process and virtualization is just the start. Transformation involves both IT and CT as it will require constructing open-source IT systems, maintaining carrier-grade reliability, and protecting operators' existing investments. New, challenging issues are emerging such as long integration times for multiple vendors and complex cross-layer fault location.
The entire industry will need to come together to explore how operators can re-activate network infrastructure to unleash the true power of the pipe.
Many leading operators have set transformation plans in motion, including AT&T (Domain 2.0), Telefonica (UNICA), Deutsche Telekom (PAN-EU), China Mobile (Big Connectivity Strategy), and China Telecom (Transformation 3.0). All the major technology providers are developing technology plans and customized solutions for digital transformation.
The transformation trend has arisen from real-world pressures faced by operators and customers' changing requirements. With integration between the digital domain and the real world accelerating, the communications market is currently in a stage of growing pains.
Challenges threatening the industry include dwindling demographic dividends, the decreasing prominence of traditional services, and declining traffic revenues. For example, figures from the Ministry of Industry and Information show that people in China sent one-third less text messages during the 2016 Spring Festival compared with 2015, but mobile users consumed 2.6 times more Internet data.
Society is undergoing a process of informatization. Services and applications that were originally defined in terms of computers and network ecosystems are now described in terms of user experience. Consumption methods and behaviors are changing profoundly, with a growing reliance on the Internet.
Huawei embodies customers’ demands as ROADS: Real-time, On-demand, All Online, DIY, and Social. To meet ROADS requirements, operators need greater capabilities for agile operations; they need to build open, collaborative ecosystems to open network capabilities, accelerate service TTM, lower OPEX, and innovate digital services.
Thanks to video and cloud computing, operators have a chance to return to the top of the value chain. Video now accounts for over 50 percent of network traffic, which will grow to 80 percent over the next three to five years. If operators don’t embrace this change, video will become a huge burden. But if they do, the opportunity exists to turn it into a new basic service.
Then there’s the vertical industry sector, which is set to grow into a new blue-ocean market worth trillions. A new industrial revolution is upon us, as evidenced by initiatives like Industry 4.0 and Made in China 2025. This evolution will be defined by how industries adopt Internet models to upgrade, rather than by the penetration of the Internet into industry. By 2025, the market value of digital transformation in vertical industries will reach an estimated US$150 million. The application of video in vertical industries will also grow rapidly, promising to be part of daily experience.
When it comes to verticals, operators have many natural competitive advantages like branding, nationwide network infrastructures, data centers in the areas they serve, and a wealth of government and enterprise customers. Moreover, numerous operators, such as Deutsche Telekom, BT, and Orange, run their own separate enterprise businesses.
Statistics show that the Internet-based enterprise service market in China has skyrocketed since 2015. While investors, innovators, and tech giants are already competing in this highly competitive market, operators will still have an opportunity to provide enterprise customers with a number of carrier-grade B2B services such as cloud data centers; public, private, and hybrid clouds; cloud leased lines; and cloud security. Deutsche Telekom, for example, recently joined forces with Huawei to launch Open Telekom Cloud, a public cloud IaaS offering.
Operators’ traditional siloed network architecture doesn’t enable the service innovation and growth required in the cloud and video age. By 2019, for example, predictions hold that traffic will total a massive 10.4 ZB. Equally, network traffic models are also changing because content is now centralized in data centers, while new applications like IoT require more diverse network service capabilities.
The user- and application-centric networks that will mature by 2020 will help safeguard the position of operators as digital enablers. Huawei's All Cloud strategy proposes that operators upgrade their equipment, networks, services, and operations models, and cloudify their networks. They can then create hardware resource pools, achieve fully distributed software architecture, and automate their systems. Data centers will form the core of the network and run all network functions and service applications. SDN and NFV will drive transformation into Network 2020 architecture. SDN will open network capabilities, providing flexible and dynamic support for service requirements. NFV will integrate basic service infrastructure and allow physical resources to be flexibly allocated. Transforming the network into a software-defined, cloudified network using SDN/NFV will create an efficient enabling platform for services.
AT&T developed an extensive network reconstruction plan called Domain 2.0 as early as 2013. The operator's aim was to transform its traditional hardware-centric network architecture into an SDN/NFV-based virtualized network. As part of the plan, the operator hopes to virtualize 75 percent of its network by 2020.
In 2013, Vodafone announced its Everything Moves on Cloud strategy, embodying its vision to migrate everything to the cloud, including network functions, consumer and vertical industry applications, and internal IT systems. The operator aims to reduce costs, enable agile operations, cut service TTM, and compete in more markets. In July 2015, with Huawei's full support and assistance, Vodafone Italy announced the launch of the world's first cloud-based commercial VoLTE network.
The three major Chinese carriers also view SDN/NFV-based network architecture transformation as the key to digital transformation. China Mobile announced NovoNet 2020, an ambitious vision for combining SDN and NFV technology, to build a next-gen network that features global resource scheduling, fully open functionality, scalable capacity, and flexible architecture.
China Unicom released its CUBE-Net2 white paper, outlining its vision for future network evolution. The strategy proposes using SDN, NFV, and cloud tech to reconfigure its network to cut OPEX and boost service capabilities. Similarly, China Telecom’s Transformation 3.0 strategy will integrate network and IT integration resources on a simplified, integrated, agile, and open network using SDN, NFV, and cloud tech.
Operators are already using NFV to standardize and virtualize ICT network hardware. However, virtualization is just the beginning, as cloud evolution won’t happen overnight. It’s a long-term, phase-based process involving open-source IT systems coupled with CT reliability.
Cloudifying network layers will run from control to forwarding, core to edges, and from new to existing infrastructure. Huawei divides operator network cloud transformation into three main stages: Virtualization, Cloudification, and Cloud Native.
Virtualization is characterized by software and hardware decoupling in which IT and generalized hardware increase resource utilization and reduce costs network-wide. However, as virtualization only allows basic hardware and software decoupling, E2E elasticity and flexibility isn’t possible.
Virtualization alone doesn’t fully utilize cloud tech in communication networks, so operators must consider reconfiguring and decoupling their entire software systems and enhancing automation and scheduling coordination. Doing so will maximize the flexibility and elasticity of the entire network and improve system resource utilization and performance.
In 2015, operators and technology providers started to further decouple software systems into more granular software services like load balancing, stateless service logic processing, and distributed databases. These smaller discrete software services are scheduled flexibly and deployed separately, improving resource utilization network-wide.
The cloud native stage will begin in 2017 at the earliest. Based on cloudified networks, cloud native will feature disruptive technologies such as network slicing, agile infrastructure, micro services, and containers. Cloud native will feature a new ICT operating model that will enable agile business and create mutual success for operators, third-party developers, and end-users.
Digital transformation is a high-risk, uncertain, and very expensive long-term endeavor, and not something that operators should undertake alone.
Huawei’s SoftCOM and All Cloud strategies set the direction for network architecture transformation, and Huawei has already partnered with 60 operators worldwide in over 30 SDN and 130 NFV commercial projects.
Its CloudVPN solution helps operators develop enterprise digital services in three major service scenarios: cloud data center, cloud leased line, and cloud VAS. With the help of leading technology providers like Huawei, operators can achieve cloud native, cross-domain capabilities and reap the commercial rewards of both their legacy investment and digital transformation.
