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1 Aalto University School of Science Degree Programme of Computer Science and Engineering Rushil Dave Mobile Virtual Network Operator Systems on Cloud: An Architectural and Cost-benefit Study Master s Thesis Espoo, August 8, 2011 Supervisor: Instructor: Professor Antti Ylä-Jääski Yrjö Raivio Lic.Sc. (Tech.)

2 Aalto University School of Science Degree Programme of Computer Science and Engineering Author: Rushil Dave Title: Mobile Virtual Network Operator Systems on Cloud: An Architectural and Cost-benefit Study ABSTRACT OF MASTER S THESIS Date: August 8, 2011 Pages: Professorship: Data Communication Software Code: T-110 Supervisor: Instructor: Professor Antti Ylä-Jääski Yrjö Raivio Lic.Sc. (Tech.) Cloud computing technology is growing rapidly in the market providing elasticity, virtualization and most importantly cost savings to the computing industry. Today, telecom operators especially MVNOs face challenges such as reduction of ARPU, need of differentiations and competition from all fronts of software industry. Cloud provides major opportunities to telecom operators to reduce their operational costs, drive new differentiations and be active in cloud ecosystem. Telecom operators can take advantages of cloud by selling the cloud offerings to their customers by using already established infrastructure as well as by using cloud to deploy their own software systems to reduce operational costs. In this research, the techno-economic analysis has been carried out to analyze implementation of telecom systems on cloud in Business Support Systems domain. The research focuses on application mapping strategy required and financial costbenefits gained for MVNOs if their systems are implemented on cloud. The thesis research involves Delphi method based study in which expert interviews are conducted in two rounds to get expert views on the subject. The responses and related analyses are drawn while introducing a proof-of-concept hybrid cloud architecture to implement MVNO systems. An innovative solution of billing-asa-service on cloud is discussed in the thesis as well. The implications and future prospects are presented evaluating the thesis results. In the end, conclusion is derived to summarize the thesis research. In summary, most of the MVNO systems are viable candidates for cloud implementation and significant benefits can be achieved. Cloud will help MVNOs to make transition from CAPEX to OPEX based model while reducing OPEX and gaining other advantages like economy of scale, SaaS based solutions, lower timeto-market, enhanced performance etc. There are certain implications related to data security, availability and government regulations which can impose difficulties on MVNO systems while moving them to the cloud. However, the future of cloud in telecom industry seems bright with emergence of everything-as-a-service model. Keywords: Language: MVNO, BSS, cloud, cost-benefits, hybrid, SaaS, SLA, OPEX English ii

3 Acknowledgements This work was done as a part of the Cloud Software Program of Tivit (Strategic Centre for Science, Technology and Innovation in the Field of ICT, I wish to express my gratitude to the people that have supported me during this thesis research. Firstly, I would like to thank Professor Antti Ylä-Jääski, who acted as a supervisor for the thesis and helped me to initiate the thesis research. Secondly, I would like to extend my sincere gratitude to Mr. Yrjö Raivio, who was the instructor during thesis research. His guidance, support and comments helped me a lot throughout the research process to carry out the thesis research. I also thank all the experts and researchers for their anonymous participation in the interview process providing expert knowledge and comments. I would also like to thank Amit Soni and Koushik Annapureddy, who helped me to setup the CRM proof-of-concept on hybrid cloud and review the thesis. Last but not the least, I thank my family and friends for their support. Espoo, August 8, 2011 Rushil Dave iii

4 Abbreviations & Acronyms 4G APAC API AR ARPU B2B B2C BSS CAPEX CDR CPU CRM CSP CSR DDoS ERP EU HLR HTTP IaaS IMSI I/O IPDR IP IT KPI LTE Mbps MNO 4th Generation (Communication Systems) Asia Pacific Application Programming Interface Account Recievable Average Revenue Per User Business to Business Business to Customer Business Support Systems Capital Expenditure Call Detail Record or Charging Data Record Centralized Processing Unit Customer Relationship Management Communication Services Provider Customer Service Representative Distributed Denial of Service Enterprise Resource Planning European Union Home Location Register Hyper Text Transfer Protocol Infrastructure-as-a-Service International Mobile Subscriber Identity Input/Output Internet Protocol Data Record Internet Protocol Information Technology Key Performance Indicator Long Term Evaluation Mega bit per Second Mobile Network Operator iv

5 MSISDN MSS MVNE MVNO NAS NIST OPEX OSS PaaS PHP RAM ROI SaaS SIM SLA SMS SP STOF TCO VAT VLAN VOIP xdr Mobile Station Integrated Services Digital Network (Number) Mobile Switching System (Server) Mobile Virtual Network Enabler Mobile Virtual Network Operator Network Attached Storage National Institute of Standards and Technology Operational Expenditure Operation Support Systems Platform-as-a-Service Personal Home Page (Hypertext Preprocessor) Random Access Memory Return On Investment Software-as-a-Service Subscriber Identity Module Service Level Agreement Short Messaging Service Service Provider Service Technology Operation Finance Total Cost of Ownership Value Added Tax Virtual Local Area Network Voice over Internet Protocol x (Call or IP) Data Record v

6 Contents Abstract Acknowledgements Abbreviations & Acronyms List of Tables List of Figures ii iii iv viii ix 1 Introduction Background of Research Research Questions Research Objectives Research Methodology Scope of Research Structure of Thesis Report Overview MVNO Architecture and Systems Business Support Systems Cloud Environment and Architecture Existing Scenario with Telecom Systems on Cloud Application Mapping and Finance Application Mapping Finance Action Research Action Research Methods Action Research Setup Qualitative Data Analysis vi

7 3.1.3 Interviews Delphi Method Expert Interviews Setup Interview Responses MVNO Systems MVNO on Cloud Cost-benefits Implications and Future Prospects Round 2 Results Techno-economic Analysis Mapping MVNO Systems to Cloud Interview Analysis Application Mapping Strategy Hybrid Cloud Setup Experiment Analysis of Round Cost-Benefits Cost Calculations Opportunity Gains Parameters Evaluation Importance in MVNO Context Influence of Cloud in MVNO Discussion Billing as a Service Business Model Analysis Implications Future Prospects Conclusion 86 Bibliography 87 A Appendix 95 A.1 Questionnaire for Interview Round # vii

8 List of Tables 3.1 MVNO in Finland, adapted from [30] Results for mapping MVNO systems on cloud Results for parameter analysis Results for interview round Analysis for mapping MVNO systems attributes on cloud scenarios Cost Calculations for MVNO Cost Calculations for SugarCRM Implementation Cost Comparison for SugarCRM Implementation A.1 Mapping of MVNO systems on cloud A.2 Parameters affected while moving MVNO systems to cloud.. 97 A.3 Resource needs of MVNO systems viii

9 List of Figures 1.1 Thesis Research Methods Structure of Thesis Report MVNO Positioning MVNO Types Telecom Operator Systems MVNO Business Support System Processes Cloud Computing Structure Advantages of Cloud Computing Services Cloud Implementation of Telco Systems by Carrier Grade Requirements, adapted from [45] Telecom Cloud Offerings Possible MVNO Applications Mapping on Cloud Cost Analysis Parameters for MVNO Cloud Delphi Method in Research Environment Expert Interview Setup Scenario Layer wise cloud deployment possibilites in Telco Snapshot - MVNO systems in brief MVNO systems on cloud analysis MVNO systems mapping according positive response Snapshots - MVNO on cloud advantages Hybrid cloud setup for Telco Hybrid cloud setup experiment architecture Analysis of interview round 2 responses Snapshots - MVNO Cost analysis Analysis of important parameters in MVNO context Parameter analysis for MVNO on cloud Billing-as-a-Service conceptual architecture Major implications while implementing MVNO systems on cloud. 81 ix

10 Chapter 1 Introduction 1.1 Background of Research Telecom operators are moving towards the flat network architectures and sharing of network resources is now possible in this domain by introduction of Long Term Evolution (LTE) and 4G standards [46]. The flat network architecture is lowering the barrier to network sharing initiatives also enabling the sharing possibilities of Telecom IT systems. The network sharing was started taking place in the past when MVNOs [30] were introduced. MVNOs share network resources with MNOs and they implement their own Customer care, inventory management and billing systems as part of their IT systems. Most of the MVNOs are aggressive on the pricing of telecom products and services offered and price differentiation is vital in MVNO business operations. MVNOs pay large amount of their spending on buying the network capacity from MNOs as they introduce products and services while competing against the MNO offerings. So it s important for MVNOs to lower the operational expenditures by lowering the cost of running their IT systems in place to stay in the highly competitive market. Now the cloud computing technology [6] has given possibility to host systems which require high processing power and large data storage capacity in an efficient manner. In addition to that, cloud computing environments provide possibility of hosting Infrastructure, Platform and Software as service by dynamically setting up the use of different types of cloud. Private cloud gives possibility to share in-house IT resources efficiently while sharing with the processes, batch jobs and services in a highly secured and reliable fashion. Public cloud gives possibility to use public computing resources dynamically and on pay-as-you-go basis which gives very cost-beneficial setup for processing the complex data. Hybrid cloud combines private and public 1

11 CHAPTER 1. INTRODUCTION 2 cloud computing space for managing sensitive data storage and processing in-house and consuming the public computing resources whenever there is a need [64]. In highly competitive market of telecom offerings, every operator is trying to reduce the operational expenditure in one or the other way and cloud environment gives such possibility to minimize the expenditure and maximize the revenues. Telecom networks have various functions and network elements that might be implemented in clouds, called a Telecom Cloud. Operators can utilize all kinds of cloud computing services, including Infrastructure (IaaS), Platform (PaaS) and Software as a Service (SaaS). On IaaS layer communication, computation and storage services can be provided by the clouds. PaaS layer has close links to Business and Operations Support Systems (BSS/OSS) [40]. Finally, SaaS matches the service delivery platforms. The Telecom Cloud can be supported with private, public and hybrid clouds located outside of the operator domain, and separated by open APIs [13]. In cloud environment, however, the mapping of application is also important as to meet with critical SLA and throughput requirements [45] in telecom sector. Also nature of applications in Telecom IT systems vary significantly and mapping of applications allows choosing cloud deployable applications according to their attributes. Mission critical telecom systems may have impact of the complex telecom operations and using cloud for such systems may not be a good choice for telecom operators. Cloud provides cost-benefits while sharing the ideal IT resources with other in-house or public applications, security and availability is a concern for telecom operators as some of the telecom operators think cloud is not ready for some of the telecom systems. It s also important for telecom operators to know how and what cost-benefits can be driven by implementing their telecom systems on cloud as there factors involved such as application migration, network usage, integration and enhancement possibilities which may impact the operational expenditure for telecom operators. So the architectural changes and costbenefits are very important factors here to consider while moving telecom systems to the cloud. 1.2 Research Questions In the highly competitive telecom services market, every operator seeks possibilities to reduce the costs and to maximize the revenues [58]. The cloud technologies provide several ways like IaaS, PaaS and SaaS to improve CAPEX and OPEX values by migrating or implementing telecom systems on cloud. Because MVNOs share various network resources with MNOs, MVNOs can

12 CHAPTER 1. INTRODUCTION 3 become natural appliers of clouds. However, the mapping of MVNO architecture to the cloud has to be carefully planned because of the business sensitivity of MVNO systems. The research questions for this thesis are derived in the direction of MVNO applications mapping possibilities and related cost-benefits on cloud computing architecture. The main research question is followed by the sub-questions which are narrowed-down to illustrate important areas of the thesis research. Main Question: How and which Business Support Systems (BSS) can be deployed for MVNO on Cloud computing environment as to offer high performance, crosslocation architecture and cost-effective system to share resources among other operators? Sub Questions: 1. Which BSS can be deployed on cloud? (BSS Application Mapping on Cloud) 2. How will the current architecture be affected in this case? 3. If high-performance will be gained with cloud implementation? How? (SLA, Throughput in focus) 4. How much cost-benefits can be driven? How much cloud resources should MVNO buy? 5. What are the implications of BSS cloud deployment? (Like security, government laws etc.) 6. How much carbon footprints can be saved by using Cloud? 7. How big is the market? What changes will business models have in this case? 1.3 Research Objectives The objective of the research defines the criteria and framework for answering the research questions. It also defines the evaluation criteria for research and a structure for research while deriving step by step procedure to answer the research question. The main objective of the thesis research is to design the mapping of BSS applications on Cloud for MVNOs and do financial analysis to find out the cost-benefits related to the implementation. The following objectives

13 CHAPTER 1. INTRODUCTION 4 establish the research direction for the thesis while answering the research questions stated in section 1.2: 1. Define criteria and methodology for the thesis research to map MVNO systems to the cloud and finding related cost-benefits. 2. Gather qualitative data from industrial and research partners related to the thesis area of research and analyze it further to derive the results. 3. Conduct architectural and design changes study for MVNO system and map MVNO systems to the cloud taking qualitative data into consideration. 4. Calculate cost-benefits while finding impact on MVNO capital and operational expenditures when moving MVNO systems to the cloud. 5. Evaluate parameters like performance, revenue, market, carbon footprints, cloud resources and business model changes for the MVNO systems on cloud implementation. 6. Discuss the solution for providing Billing as a Service for MVNOs using cloud computing environment using the analysis conducted during the thesis research. 7. Describe the technical and other implications for the MVNO system implementation on cloud. Also discuss the future prospects for the thesis research based upon the input gathered during qualitative data analysis. 1.4 Research Methodology Action research will employed as the main research method involving researchers and practitioners together. Expert interviews will be conducted based upon their area of expertise with pre-formatted and validated questionnaire. The Delphi method [49] will be exercised for the interview formations. The business critical information and knowledge imparted from interviews will remain confidential and anonymous in the thesis report and research publications. Following methods shall be employed during the thesis research for which the a brief agenda is illustrated in Fig. 1.1: Literature Review

14 CHAPTER 1. INTRODUCTION 5 Figure 1.1: Thesis Research Methods Expert Interviews Design/Architectural Study Statistical/Financial Analysis Business Model Analysis 1.5 Scope of Research Scope of the research is limited to the MVNO systems and especially the business support systems in place for the MVNOs. This is due to the fact

15 CHAPTER 1. INTRODUCTION 6 that most of the MNOs have implemented complex in-house telecom IT systems which hold large amount of customer sensitive data. Telecom operators believe that the cloud is not yet ready to hold such complex, mission critical and data sensitive systems [38]. MVNOs, on other hand, have systems which are light weight in nature and hold small amount data and configurations. Some of the MVNOs have also outsourced their IT systems to the Business process outsourcing companies. So it s easy for the MVNO systems to move to the cloud compared to the IT systems of large MNOs. Also the Operation Support Systems include network elements and switches which are required to fulfill carrier grade SLA and in these cases, telecom operators believe that cloud is not yet ready to hold such systems. So to make the viable case of telecom systems implementation on cloud, MVNOs and their Business Support Systems have been considered for this thesis research. MVNO in this thesis research includes MVNE, Service Providers (SP), and resellers in telecom value chain. 1.6 Structure of Thesis Report The structure of the report will provide information on how the report will proceed and what types of different research methods are used to support the objectives of the thesis. Fig. 1.2 depicts the structure and blocks of thesis report which are explained as following. The first part of report starts with Introduction to the report. Introduction also includes research problem, research question and sub-questions, research objectives, research methods and also the research framework or design. It also comprises of background and scope of the research being conducted as part of the report. The second part mentions some theoretical aspects needed to build the background of the report. This part consists of several topics supported by literature reviews and expert interviews. First topic on MVNO systems explains the MVNO positioning in telecom operator environment and different MVNO types along with MVNO operation and business in brief. Second topic focuses on the business support system along with its positioning in telecom IT systems environment and processes involved in MVNO context. Third topic describes the cloud computing architecture and related benefits of cloud implementation. Fourth topic discusses the existing scenario of cloud in telecom system environments. Fifth topic illustrates the theoretical part for the application and finance related to the MVNO systems implementation on the cloud. The third part of the report carries out qualitative data analysis in which

16 CHAPTER 1. INTRODUCTION 7 Figure 1.2: Structure of Thesis Report action research methods and the results are described in detail. First subsection mentions different action research methods used in the thesis in detail. Second sub-section describes the expert interview setup and the Delphi process followed while conducting interviews. Third sub-section demonstrates the results gathered for the semi-structured interviews conducted as part of the thesis research. Fourth part analyzes the gathered results with techno-economic methods in a structured fashion. First topic maps the MVNO systems on cloud taking views from the action research conducted. Second topic calculates related cost-benefits taking the cost-structure and pricing information into consideration. Third topic evaluates different parameters mentioned in the

17 CHAPTER 1. INTRODUCTION 8 research questions. Fifth part discusses different aspects derived from the thesis action research which are related to the telecom systems implementation on cloud. First section discusses and analyzes an innovative solution of Billing-as-aservice for telecom operators using cloud architecture. Second section analyzes market and business model changes for telecom system on cloud. Third topic demonstrates technical and other implications while moving telecom system on cloud. Fourth section discusses future prospects in the direction of thesis research. Sixth part concludes the thesis research while briefly reviewing all parts of the thesis report.

18 Chapter 2 Overview 2.1 MVNO Architecture and Systems Mobile Virtual Network Operator i.e. MVNO [30] is a telecom services provider that does not own licenses for radio frequency spectrum. MVNO buys communication bandwidth or radio frequency spectrum from Mobile Network Operators (MNO) which allow physical channel usage for MVNO. MVNO does not require having all infrastructures needed for telecommunication but it shares such infrastructure with MNOs paying rent for the leased spectrum and/or systems. MVNOs usually compete with the price differentiation rather than service differentiation [56] as to offer the lowest possible prices to their customers for the service offerings. They provide telecommunication services in form of voice and data services along with several value added services in general. Several MVNOs also have a long term exit strategy in place. MVNOs can also work across multiple geographical locations and thus having geographical differentiation. In this way, MVNO s versatile operations background can be divided into categories like: Fixed network operations Network operations in different geographical market Operations with non-telecom business (must have strong brand) Mobile network operators have classifications based upon their area of functioning across the telecom services systems and processes. MNO has ability to control the whole value chain as it owns all or most of the systems and processes across the mobile telecom service provider value chain. MNO can rent their systems, network and services to other participants in the value 9

19 CHAPTER 2. OVERVIEW 10 Figure 2.1: MVNO Positioning chain based upon the contracts or agreements [8]. MVNO and MVNE buy network capacity from MNO while paying the network usage cost on payas-you-go manner. MVNO further provides services to the end-users owning billing and marketing systems. MVNE sells network capacity and services [48] to service providers and in some cases to MVNOs. Service provider sells services to the end-users and in some cases it focuses solely on marketing, branding and reselling the services i.e. Brand Operator. Fig. 2.1 shows the classification and positioning of network operator types in mobile network service providers value chain. MVNO generally owns services and content delivery, billing, customer management and marketing systems. In some cases, MVNO also implements switching and networking elements on its own to have more service fulfillment possibilities [9]. MVNO has full control in different ways over their inventory, resource management, SIM card delivery, marketing and branding systems. Depending on the market share and financial situations, MVNO buy or implement telecom software elements for itself which differentiates it from other MVNOs. Below are the types of MVNO [30] based upon the systems it implements or owns also presented in Fig. 2.2: 1. True MVNO implements HLR, Switching and Intelligent Network platform on their own in addition to Services, Billing and Marketing. Such MVNO has control over service and tariff design, service implementation and differentiation and service marketing as well as branding.

20 CHAPTER 2. OVERVIEW 11 Figure 2.2: MVNO Types 2. Weak MVNO implements Billing, Customer care and Marketing while sharing HLR, Switching and Services with MNO. Such MVNO has control over service and tariff design and service marketing as well as branding. 3. Reseller sales network services by implementing Marketing and Branding. It only sales pre-packaged services while buying it from other operators. Usually, resellers own just marketing, branding and in some cases, customer management integrated with other operators. On an additional note, MNO shares network capacity or radio spectrum with MVNOs and MVNO runs the similar business while selling telecom products and services to the subscriber base. This scenario generally creates the competitions among MNOs and MVNOs depending on the service offerings and subscriber group in focus. MVNOs have to pay high cost to buy the network capacity from incumbent MNOs [17] and MVNOs spend the large part of their expenditure for buying the network capacity. In some cases, MVNOs pay the cost for getting the network capacity on no of existing subscribers (churn) basis and in this case, such network expenditure can be taken OPEX [57] for MVNOs. 2.2 Business Support Systems Fig. 2.3 shows the traditional architecture of telecom operator system [40] which consists of three layers: Business Support System (BSS) Layer Operation Support System (OSS) Layer

21 CHAPTER 2. OVERVIEW 12 Figure 2.3: Telecom Operator Systems Network Layer Along with the system layers, operator systems also include integration enablers to provide the interconnection between layers [21] which provides application connectivity and solution flexibility. Each of three layers has specific functions for the operator systems which are explained below: 1. BSS layer: BSS layer focuses towards the customer and financial transactions segments of telecom operator systems. It also manages partner and marketing functions of operator systems. The front-end operations for self-service portal for the end-users as well as for customer service representatives (CSR) are included as part of BSS. BSS

22 CHAPTER 2. OVERVIEW 13 Figure 2.4: MVNO Business Support System Processes has integrations with OSS which can be configurable. 2. OSS layer: OSS layer has systems for managing network functions of telecom operator systems. The layer is built around the products, services and resources inventory. OSS also includes several service management systems and provisioning. OSS layer has complex integrations with network layer. 3. Network layer: Network layer has systems managing network infrastructure for telecom operator systems. Network layer can manage multiple networks together with one system in place. As shown in Fig. 2.4, MVNO business support systems mainly possess three processes [14] involving various BSS components or systems [29] [27] in place mainly in case of post-paid subscriptions scenario: 1. Taking subscription orders: When subscriber (end-user) wants to buy subscription from MVNO shop or web-shop; the self-service portal

23 CHAPTER 2. OVERVIEW 14 or CRM comes into the picture. Subscriber herself or Customer Service Representative (CSR) enters subscriber details along with the price plan, offers and discount plan are added to the system via CRM. Order management system then processes the order made in CRM or portal getting offer related information from product catalog. Order management system then gets information of resources such as MSISDN, SIM, IMSI, Data number etc from resource management system or resource inventory. Customer management system then enters customer-specific details like one time and recurring charges of the offers to the billing system database. After successful order completion BSS informs OSS and network systems to activate the subscriber s SIM and MSISDN. 2. Processing bills: MVNO gets the Call Details Records (CDR) from the network operators from whom MVNO has bought the network capacity or radio spectrum. Call detail records hold the information of the calls (voice and data) being made including the destination, call start and end time, duration, call type etc. Mediation system gets the CDRs as an input from different network operator systems, analyses the data and prepares data in a generalized format for the usage rating purpose. Rating system rates the calls based upon the prices fetched from product catalog. Billing system calculates individual charges both one time and recurring for the subscribers and enter the detail into the database. Bill formatter gets the data from all BSS systems to prepare the printable bills and pass it to the distribution channel further. 3. Bill payments: Subscriber pays the bill via MVNO shop or web-shop or via online payment gateway. BSS has integration with the payment gateways to receive payments from the subscribers. Account receivable system takes care of integration with CRM as well as payment gateways and makes database entry for the payments received from subscribers. Collection system collects the data from Account receivable and bars subscriber services if payment hasn t been made until the payment due date. Collection also informs OSS and network systems to block the network services for subscriber. After payment received for subscriber, collection unbars subscriber services again. 2.3 Cloud Environment and Architecture According to US National Institute of Standards and Technology (NIST) [6], Cloud computing is a model for enabling convenient, on-demand

24 CHAPTER 2. OVERVIEW 15 network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction. Cloud computing [5] is a utility service for computing resources just like water or electricity where users utilize services sharing with others and paying the cost on pay-as-you-go or subscription basis. Cloud is a mixture of datacenter hardware and software. Cloud provides benefits to use several server instances simultaneously for complex processing tasks. For example, large batch-processing task can be executed using 1000 cloud instances in one hour which is equivalent one server for 1000 hours. Cloud computing provides three aspects in form of hardware virtualization point of view: 1. Illusion of infinite processing power for cloud consumers. 2. Elimination of up-front investment in buying server capacity. 3. Ability to utilize computing resources on pay-per-use model just like the utility services. As defined by US National Institute of Standards and Technology (NIST) [6], there are four different cloud computing deployment models (See Fig.2.5) giving possibilities to use cloud deployment according to the application or system infrastructure needs: Private cloud: The cloud infrastructure is operated solely for an organization. It may be managed by the organization or a third party and may exist on premise or off premise. Community cloud: The cloud infrastructure is shared by several organizations and supports a specific community that has shared concerns (e.g., mission, security requirements, policy, and compliance considerations). It may be managed by the organizations or a third party and may exist on premise or off premise. Public cloud: The cloud infrastructure is made available to the general public or a large industry group and is owned by an organization selling cloud services. Hybrid cloud: The cloud infrastructure is a composition of two or more clouds (private, community, or public) that remain unique entities but are bound together by standardized or proprietary technology that enables data and application portability (e.g., cloud bursting for load-balancing between clouds).

25 CHAPTER 2. OVERVIEW 16 Figure 2.5: Cloud Computing Structure US National Institute of Standards and Technology (NIST) [6] has defined three main types of cloud services models which can be used to build cloud based services or application deployments on cloud: Infrastructure as a Service (IaaS): The capability provided to the consumer is to provision processing, storage, networks, and other fundamental computing resources where the consumer is able to deploy and run arbitrary software, which can include operating systems and applications. The consumer does not manage or control the underlying cloud infrastructure but has control over operating systems, storage, deployed applications, and possibly limited control of select networking component (e.g., host firewalls). Platform as a Service (PaaS): The capability provided to the consumer is to deploy onto the cloud infrastructure consumer-created or -acquired applications created using programming languages and tools supported by the provider. The consumer does not manage or control the underlying cloud infrastructure including network, servers, operating systems, or storage, but has control over the deployed applications and possibly application hosting

26 CHAPTER 2. OVERVIEW 17 Figure 2.6: Advantages of Cloud Computing Services environment configurations. Software as a Service (SaaS): The capability provided to the consumer is to use the provider s applications running on a cloud infrastructure. The applications are accessible from various client devices through a thin client interface such as a Web browser (e.g., Web-based ). The consumer does not manage or control the underlying cloud infrastructure including network, servers, operating systems, storage, or even individual application capabilities, with the possible exception of limited user specific application configuration settings. There are certain attributes for the cloud [14] which define the architecture and related services on the cloud. These attrbitues are categorized as following while explaining how they provide various functionalities and benefits to the IT industry in general: Cloud Infrastructure provides virtualization of hardware resources. Cloud infrastructure is simply the virtual servers in cloud. It s beneficial for large-processing tasks where virtualization is used to reduce time and

27 CHAPTER 2. OVERVIEW 18 cost significantly. With ability of cloud to provide server instances almost infinitely, it eliminates need to buy server resources and provide economy of scale by sharing cloud resources. Cloud Storage is an effective and efficient medium of storing enormous amount of data with pay-you-you-go service model. In this case, cloud also provides services like data synchronization, Network Attached Storage (NAS), database-like functionality and also unstructured data services. Data access to large amount of data is possible anytime anywhere by using cloud storage infrastructure and services. There are certain limitations due to issues with availability, transaction support and data transfer bottlenecks in cloud. Cloud Platform is used to build, test, deploy, and manage applications on cloud with storage and processing power of cloud itself. Cloud platforms are low-cost, reliable, accessible anywhere anytime and highly scalable with provision of web-based services environment. Portability is an issue because as soon as applications or services start running on one cloud platform. It becomes complicated task to move systems deployed on one cloud platform to another cloud platform or back to the original platform. Cloud Applications provide Software-as-a-service model which further eliminates the need to install & configure applications on cloud. Along with this, it also provides cloud benefits related to virtualization & storage. Another model is S + S (Software + Service) on cloud in which cloud hosts use rich client applications interface into an extremely hosted environment with ability to work in offline mode and synchronize data when online. Cloud Core Services provide customer services such as service-to-service integration, payment, billing services, identity management, search, business process management services etc which can be consumed individually or on system to system integration basis. Cloud computing provides several technological and business related advantages as presented in Fig.2.6. Cloud can provide different deployment services models as described earlier. So in a way; cloud can provide anything as a service including infrastructure, platform, software etc. New models like Software + Services provide use rich client application hosted on cloud and an interface to work with such application. Cloud provides different architectures as well as deployment service models and by using them it s possible to drive resource cost disruption and delivery innovation.

28 CHAPTER 2. OVERVIEW 19 Cloud provides several standard services [4] which are also known as core cloud services mentioned in one of the cloud attributes earlier. These services enhance the functionalities at customer end and provide tools to monitor cloud usage, activities, performance, transaction etc. Different cloud services and deployment models also provide differentiations as per customer needs and they help in changing end customer behavior patterns. It s important for any platform to generate complementary products and services to achieve network externality and positive feedback [33] in the market. Cloud has ability to be flexible because of the virtualization and the storage platform it provides. Along with different service delivery models, it s possible to innovate different services and products [18] by using cloud platform. Also the economy of scale is easily achievable due to the fact that cloud provides an illusion of infinite hardware resources for processing complex tasks and storing large amount of data. New business models like flat rate pricing, pay-per-use can be established successfully using cloud architecture. Also it s possible to cut the CAPEX completely or partly for any company by using cloud services cleverly and along with it, cloud drives reduction in the OPEX sharing computing resources with others [63]. This way cloud helps future business architectures in transition. 2.4 Existing Scenario with Telecom Systems on Cloud Cloud in Telco is believed to be a new consumption and delivery model [11]. Cloud implementation in Telco provides benefits like; Economy of scale: Cloud provides very flexible architecture of using computing and storage resources on utility basis only when required. Cloud is an illusion of infinite for hardware resources available on demand for complex processing tasks and large data storage. This was it s possible to achieve economy of scale for telecom systems whenever needed. In telecom systems, many systems have peak load of user traffic at particular hours in a day and cloud gives flexibility to utilize IT resources catering to any amount of peak load when necessary. Resource sharing and centralization: Cloud eliminates the need of individual IT hardware and software resources where it provides possibility to run the systems at one centralized location and users can share software and services by web-based clients. The SaaS and S +

29 CHAPTER 2. OVERVIEW 20 S models mentioned in section 2.3 can be utilized here for sharing resources. Cloud also provides sharing possibilities which is useful to consume ideal resources from other system for processing tasks or let other systems use ideal resources. This is possible in case of telecom IT systems including self-service portals, CRM, billing systems and other individual IT resources. Cost reduction: Cloud has business model of pay-per-use payments which gives possibility to let machines go when they are out of requirement. Cloud also gives option to start with small amount of resources and increasing resource utilization further when there is a need. This elastic attributes make cloud a strong candidate to reduce telecom CAPEX and OPEX. Cloud services to enterprises and consumers: Cloud is relatively new business phenomena in the market which gives telecom operators a possibility to innovate and introduce new cloud based services to the consumer and enterprise market. Also telecom operators can using the network, branding image and marketing channels to sale cloud based offerings to the consumer market. In the current scenario, Major Telcos are more focused on the providing cloud computing services rather than implementing their systems on cloud computing platforms [10]. The main reason behind this is the critical SLA requirements defined for telecom systems and services especially in OSS area. Service Level Agreement or SLA is an important requirement as well as parameter for telecom systems delivering various telecom carrier-grade services. SLA is a document that specifies the rules of legal contract between subscribers and service providers also stating technical performance details. In telecom industry, SLAs are critical and often regulated by government. Telecom vendors and operators often claim that clouds cannot yet meet the telecom Service Level Agreement (SLA) requirements [45] [26]. For that reason a cautious approach is recommended. According to that a three step roadmap depending on the carrier grade requirements is proposed as shown in Fig Firstly, operators can utilize clouds in their support systems, then step into tactical systems and finally to strategic systems [66]. Telecom systems have functions and services that are being implemented on cloud by several operators, service providers and software vendors. The possible scenario of cloud implementation of telecom software and services [45] is depicted in Fig Cloud implementation for telecom systems vary as per the application features and attributes. There are different patterns [35] to deploy telecom

30 CHAPTER 2. OVERVIEW 21 Figure 2.7: Cloud Implementation of Telco Systems by Carrier Grade Requirements, adapted from [45] systems on cloud using utility based services model. Cloud implementation for telecom software and services [22] can be divided into three categories mentioned below, considering the model as one of the possiblities to deploy telecom systems on cloud: 1. Infrastructure-as-a-service (IaaS): Telco operators store large amount of customer data ranging from network usage, billing data, marketing data and customer specific details. Cloud provides efficient medium to store data which can be utilized further for the processing on cloud computing environment. Processing of xdrs (CDR and IPDR), billing system and business intelligence platforms require large amount of processing and cloud infrastructure provides cost beneficial platform for this. Networking especially I/O operations among IT systems on cloud provides performance optimizations for these system operations. 2. Platform-as-a-service (PaaS): Cloud provides a platform to deploy BSS/OSS or part of these support systems on cloud to drive costbenefits and better performance. Along with this economy of scale is important for these systems as to possess ability to tackle situations with support system operations on special events for e.g. New Year s Eve generate large amount of SMS traffic and a significant delay has been seen in such cases. Cloud provides a platform to process extra amount of data without buying permanent resources.

31 CHAPTER 2. OVERVIEW 22 Figure 2.8: Telecom Cloud Offerings 3. Software-as-a-service (SaaS): Cloud is used to deploy service delivery platforms and enterprise applications thus providing software-asa-service with cost-benefits and economy of scale. A good example is salesforce.com which provides online CRM service on cloud for enterprises. Public and private both cloud architectures could be used along with the mixture of both of them i.e. hybrid cloud. Telco and several other generic APIs are used as connectors between cloud and Telco domain. 2.5 Application Mapping and Finance Application Mapping Application mapping [14] is important as not all application can be hosted on cloud or developed on cloud architecture or migrated to the cloud. It will be important to answer questions before implementing or migrating applications on cloud:

32 CHAPTER 2. OVERVIEW 23 Will the application run successfully on cloud? Will it be possible to migrate existing application to cloud successfully without any impact? Could new functions or applications be developed on cloud without adding complexity to the integration? Will migration on cloud architecture be cost-beneficial? Answers to the above mentioned questions may not be the same for all application as the answers depends on several attributes of application which will be mapped to the cloud. Each application solves a purpose and depending on the purpose application can be mapped to different attribute, for example, Billing and Order Management system have attributes such as transaction, locking and integration with other external systems. Two approaches shall be taken into consideration to decide whether to move application on cloud or not: 1. Identify the application attributes and key factors important for application to work seamlessly on cloud. Map these attributes to the cloud service attributes to validate if cloud implementation for that application will be feasible or not. 2. Evaluate cloud services providers to see if application or system attributes are matched can be hosted feasibly along with cost-benefits gained from the implementation. Based upon the common theories; several MVNO systems can be put into the cloud computing environment such that the service delivery, customer management and telecom carrier grade requirements are least affected. As presented in Fig. 2.9, resource inventory, Services & content delivery, Billing & customer care systems [18] [15] are the viable candidates to move MVNO Telco systems to Cloud. MVNOs can share such systems on cloud with each other which ultimately leads to higher cost-benefits for the MVNOs. However, the analysis and evaluation shall be done for these systems or applications to find out if they are actually the viable candidates for the cloud implementation. The thesis analysis for application is done in section 4.1 taking results of action research into consideration. A Common Cloud Business Management platform [51] can be built for MVNOs which can provide: Cloud based Platform as a Service (PaaS) for MVNO systems

33 CHAPTER 2. OVERVIEW 24 Figure 2.9: Possible MVNO Applications Mapping on Cloud On-demand platform to deliver services as well as related content On-demand run for the billing system Hosting resource inventory and large customer database Finance Network operators focus on maximizing their profits from the subscriber base and relative ARPU (Average Revenue per User) [50]. The basic calculation for network operator profit can be presented with the below equation [30] : Where; P rofit = ARP U Subscribers OP EX CAP EX (2.1) ARPU = Average Revenue per User includes roaming and termination apart from the revenue billed from subscribers. To maximize profits, network operators try to increase the usage of the services and offerings by providing more and better products. Subscribers = Number of subscribers including existing subscriber base and target subscriber base for the period of profit calculation. To maximize profits, network operators try to maintain existing subscriber base (churn) and acquire new subscribers by service or price differentiations.

34 CHAPTER 2. OVERVIEW 25 Figure 2.10: Cost Analysis Parameters for MVNO Cloud OPEX = Operational Expenditure which includes administrative cost, marketing and branding expenses as well as expenditure on human resources. CAPEX = Capital Expenditure which includes network setup, equipment, licenses expenditures. In case of MVNO, fees to the MNOs for network usage can be taken as CAPEX. Network operators generally split up the CAPEX to be covered in the course of 2-5 years of their operations. While implementing MVNO systems on the cloud, CAPEX and OPEX are the most affected factors in MVNO profit calculations. It s obvious from the profit calculation equation that as we decrease CAPEX and OPEX for MVNO, the profit increases. So while analyzing the cost for MVNO systems migration to the cloud, CAPEX and OPEX are very important parameters to be considered [11]. Along with CAPEX and OPEX, several additional Non-OPEX parameters as well as opportunity gains should be taken into consideration as well. Fig presents cost analysis parameters and related components while implementing MVNO systems on the cloud.

35 CHAPTER 2. OVERVIEW CAPEX: CAPEX is a capital expenditure required by telecom operators to spend while building the new systems or infrastructure. Developing or migrating existing applications to the cloud requires spending expenses for enhancements in applications. Cloud deployment and integration requires expenses for setting hybrid or private cloud infrastructure and integration among systems. 2. OPEX: When hybrid or public cloud comes into the picture, the expenditures shall be counted as operational expenditures. Cloud related OPEX includes per unit charge for processing, per GB charge for storage and high bandwidth network charges. 3. Non-OPEX: Carbon taxes, VAT and other surcharges shall be taken into account as non-opex charges and shall be counted in the cloud cost calculations. 4. Opportunity Gain: By using cloud, there are benefits gained apart from cost reduction as well. Shorter time-to-market [39] and optimum use of hardware resource driven by cloud elasticity shall be taken as opportunity gained via cloud.

36 Chapter 3 Action Research 3.1 Action Research Methods Action research [42] is done for real situations and real organizations suggesting improvements at the end as a result. Action research is an important method as it consists of actual practices, data and results. In action research researchers and practitioners come together. Problem finding, action analysis and result reflections are important in action research. For information systems, action research serves as an important process where current situation analysis will find problems. Action intervention will prepare the solution while designing, developing and implementing it along with reflective learning which analyzes the collected data and discuss lessons learned from the analysis. Researchers take tasks such as analysis, interviews, team support, observations, findings and result publishing. One another important aspect regarding industry or area specific action research is that research helps industry and institutions to understand the problem situation while tackling down the resolution for the problem. The role of action researcher is very important for practicality of the research. Researcher should be neutral to the situation while collecting as well as analyzing details and data related to the situation. Researcher should take a look at both positive and negative aspects of the data or evidence for the situation. Researcher should set himself free of any perception or biased opinions he has regarding the situation. Also sensitivity is another aspect to be taken care of by the researchers to respond to delicate distinctions of data. 27

37 CHAPTER 3. ACTION RESEARCH Action Research Setup To setup the action research project, there are certain steps need to followed in order to get correct results. These steps are defined as following: Problem Diagnosis: Find a practically relevant problem which also has research potential. Obtain a general and comprehensive understanding of the topic. Action Intervention: Develop and define action research methods and the research setup. Conduct the research and analyze the results. Reflective Learning: Derive final results while gathering them from all sources of research evidences. Build the report and documents representing the research objectives Qualitative Data Analysis Qualitative data analysis [42] focuses on relatively small samples selected purposefully. Logic and power of purposeful selection derives from the emphasis on in-depth understanding of the research topic. Sample size depends on what you want to know, what will be useful, what will have credibility, and what can be done with available time and resources. It s also important to know if the sampling strategy supports study purpose. The validity, meaningfulness and insight gained through qualitative data analysis have more to do with the information richness of the cases selected and observational/analytical characteristics of the researcher than the sample size. Three principles are defined for qualitative data collection: [62] Use multiple sources of evidence Triangulation of data sources (data triangulation) Triangulation among investigators (investigator triangulation) Triangulation of perspectives to the same data set (theory triangulation) Triangulation of methods (methodological triangulation) Create a cases study database Case study notes, documentation Maintain a chain of evidence

38 CHAPTER 3. ACTION RESEARCH 29 The principle is to allow an external observer (reader) to follow the derivation of any evidence, ranging from initial research question to ultimate case study conclusions. Six sources of evidence are supported for the qualitative data analysis: [62] 1. Documentation 2. Archival records 3. Interviews 4. Direct observation 5. Participant observation 6. Physical artifacts Three kinds of qualitative data can be taken into consideration derived by following action research methodologies: [42] 1. Interviews 2. Observations 3. Documentations/Literature Reviews The main method of research in this thesis is supported by Delphi process which involves all of the above mentioned methods. The expert interviews are the most important method which is involved in the thesis action research and therefore this method is described below in detail Interviews Interviews [62] are considered as one of the very effective method of qualitative data research where expert opinions and practical knowledge of the interviewees help forming the qualitative results. The basic strategy for the interview is to gather multiple sources of evidences, create case study like database and maintain chain of evidences. During the qualitative data analysis involving interview as primitive method of analysis, there are certain points to be considered. Planning for the interviews is the first step in which the data collection techniques should be linked to research questions. Goals for the interview analysis should be defined afterwards keeping interviews within the scope of the topic and not forgetting the sensitivity. Formulating

39 CHAPTER 3. ACTION RESEARCH 30 interview questions is an important part to have neutrality and address right topics throughout the process. Validation by testing / piloting the questions for interview is necessary to make sure the quality of action research. Techniques such as audio-visual recording and note taking can be employed to collect the interview responses. Identifying interviewees is also important where interviewees can be an individual or part of research / focus group. Format of questions decides the structure of the interview and responses. Questionnaire can be survey based, structured, Semi-structured, thematic or open depending on the research requirements. Order of questions is essential to derive and formulate the results. Response types can be selection from predefined choices, quantity, and frequency. Open questionnaires often have responses in interviewees own words including their opinions, explanations etc. Interview can be in format of an open discussion among interviewees in focus groups and interviewer herself. It s sometimes meaningful to also note the noticing pause, hesitation, laughter, defensive excuse from interviewees Delphi Method Delphi method [49] is an iterative process to collect and filer out the anonymous opinions from the group of experts or customers or researchers using the data collection tools and techniques interwoven with the feedbacks and intermediate result analysis. The goal of Delphi research is to improve understanding of the problems, processes, future prospects, opportunities, solutions, ideas or to develop forecasts. Classic Delphi method varies by the group size, question formats, data collections processes as well as tools and techniques involved in the research [47]. Some of the important aspects of Delphi method are described as below: Anonymity of interviewees or participants Iteration and feedback mechanism Result aggregation of the responses received The basic structure of classic Delphi method is described in Fig. 3.1: The classic Delphi method involves steps [49] described below in brief: 1. Develop the Research Question 2. Design the Research

40 CHAPTER 3. ACTION RESEARCH 31 Figure 3.1: Delphi Method in Research Environment 3. Research Sample 4. Develop Delphi Round One Questionnaire 5. Release and Analyze Round One Questionnaire 6. Develop Round N Questionnaire 7. Release and Analyze Round N Questionnaire 8. Verify, Generalize and Document Research Results Based upon the above described method the expert interview setup method for the action research in this thesis has been derived. In the exit interview setup for this research, two rounds have been considered following the steps described in this section. The exit interview setup and also the steps for the Delphi method involved in the setup are described in detail in next section. 3.2 Expert Interviews Setup The expert interview setup is based on the Delphi method described in the last section. This setup includes two interview rounds of interview where first

41 CHAPTER 3. ACTION RESEARCH 32 round is done with the broader questions and scenarios while in the second round questions are narrowed down with research specific data gathering scenarios only. Fig. 3.2 describes the process flow of the expert interview setup derived from the Delphi method. 1. Develop the Research Question: The research question was derived in this research with help of the instructor and supervisor. Instructor s and researcher s own industry experience helped with research problem formation and inputs were also taken from the research program in which thesis acts as part of the study. The literature reviews and pilot studies done as part of the research program helped to formulate the research background. Research questions were then derived from main research problem and narrowed-down further to attain the research targets. Research objectives were defined which denotes what research goals will be achieved as part of the thesis research. 2. Design the Research: Research design is defined to plan the research on micro level while reviewing different research methods taking their pros and cons into consideration. The qualitative data analysis was selected as a method of research with the expert interviews as a primary technique of analysis for the thesis research. Research proposal was then developed to formalize the research process and propose the idea to the potential experts participating in the interview. 3. Research Sample: Selecting the participants for the Delphi process is important as Delphi method considers the opinions of interviewees as the expert opinions. Experts for the thesis research were selected with focus on both technical and financial side of the telecom software industry. The experts were from various telecom operator companies, telecom software vendors, companies dealing with MVNO business process outsourcing and researchers from universities dealing in the MVNO and telecom software domain. The research proposal was sent to the experts for the interview considerations. Total 9 experts from 6 different companies and institutions considered the request and took part in the research. 4. Develop and Conduct Delphi Round One: Delphi round one is developed while doing literature review [66] [55] [29] with the broad questions explaining the background and introduction of the research. Round one questionnaire in the thesis research was semi-structured which included open questions for discussions and structured questions which include multiple-choice answers taking the reasons for the choice

42 CHAPTER 3. ACTION RESEARCH 33 Figure 3.2: Expert Interview Setup Scenario into consideration. Questions were validated by the instructor and questionnaire is modified taking the instructor s feedback into concern. Round one was organized as face-to-face interviews so that discussions are possible with the experts. Interview responses were recorded and notes are taken down to analyze the responses further. 5. Release and Analyze Round One: Intermediate responses were collected from the Delphi round one results and analyzed to get the common answers to the questions. Results were formatted for both open and structured question-answers. 6. Develop and Conduct Round Two: Questionnaire for Delphi round two was structured questionnaire narrowed-down for the thesis specific analysis of application mapping and finance related to MVNO systems. Feedback was added from the round one so that experts get the common opinion and responses considered by the other experts. 7. Release and Analyze Round Two: Round two responses were collected from the responses got for the structured questionnaire and analyzed to modify the round one response where it was necessary.

43 CHAPTER 3. ACTION RESEARCH Verify, Generalize and Document Results: The results were verified further with all the responses received from the experts in both rounds of Delphi process. Results were then generalized where common results were taken together and differences were marked and documented as well. Further analysis was done and documented in following section based upon the interview results. 3.3 Interview Responses MVNO Systems Question: How does MVNO system work? (The main focus is on Business Support Systems). What are the integral parts of the system? Please explain the architecture in brief. Also explain MVNO business and operations in brief. Response: When setting up the MVNO, the first question need to be answered at initial stage is why to setup MVNO? It generally takes million euros to setup a small to medium size MVNO. MVNO start-up decisions are made based on the calculations of ARPU it will receive and no of subscribers in nearly 2 years (called break-even point). Most MVNOs target to capture the market as fast as possible and then make an exit (to be sold out). MVNOs mainly work on service and price differentiation where time to market is important due to fierce competition in the market. MVNOs should define at initial stage whether they are a Telco, Media company or Media partner. Some MVNOs also work as mobile advertisements aggregators. Fundamentally MVNOs operate exactly the same as MNOs. Most operators have split their internal structure in three parts: 1. Customer relations and services, branding, marketing 2. Service layer includes product management, pricing, service management 3. Network, infra management, radio, network management MNOs possess BSS systems and also network related systems i.e. OSS and they have their own pricing structures for the products and services they offer. In traditional MNO, IT systems are very complicated called legacy jungle but MVNO do not have such complex systems and also integration burden to replace the systems. MVNOs want to have bare minimum interface. They buy network (the lower layer) from MNO or MVNE and implement

44 CHAPTER 3. ACTION RESEARCH 35 or outsource service and customer layer in from of managed services. Fig. 3.3 shows the layer wise telecom systems classification especially for MVNO environment settings. In MVNO case, MVNOs can possess BSS and sometimes OSS systems too. MVNO do not have much OSS but mostly they have CRM and selfservice and in some case the whole BSS. Billing and rating systems are lighter in MVNO case than traditional systems. MVNOs have small and limited in house CRM system. Ordering has to be integrated with MNO provisioning system as well as debt collection systems. MVNO may use their own billing systems where they get CDRs from other operators or they can use network operator owned MNO owned billing systems. They can also outsource the billing or managed services as a whole. MVNO might even consider taking all systems from other providers and in this case, MVNO not only rent network but also outsource billing and CRM systems. However, MVNOs would like to retain branding, campaign management, resell marketing systems and operations to themselves. It has been seen in some cases of MVNOs across Europe that when MVNO are small they want to outsource or rent everything but when they get bigger they start investing and implementing some systems. MVNO doesn t really own radio network but they might own some network elements. MVNOs might have switching and other network systems along with billing systems. In case of prepaid, MVNOs use MNO network but own CRM system. They might have some elements under CRM dealing with real time charging and network systems. Branding building, distribution and cost factors are very important for MVNOs. In case of MVNO, communication services can never be as better as MNO. MNO provide raw material and MVNOs rebrand and distribute it to potential customers. Some MVNOs sell mobile and customer related marketing data to generate revenue while providing discounts to the endusers. MVNO can be run by 5-10 people working in area of sales, branding, marketing, product management, distribution, partner management. For example, an MVNO Tele Finland started with only 5 persons organizing it several years ago. The managing director, marketing director, business controller and two other consultants managed the MVNO. They used only outsourced resource not TeliaSonera IT processes. The idea was to build operator independent environment to offer other services as well. They wanted to service for other parties as well than TeliaSonera. They outsourced billing systems to star cell now Qvantel. Tele Finland didn t have any systems managed by them but all systems were outsourced. Partner management is essential managing partnership with BSS vendor,

45 CHAPTER 3. ACTION RESEARCH 36 Figure 3.3: Layer wise cloud deployment possibilites in Telco MNO and other partners. MVNO collaborate among partners to whom certain tasks have been outsourced. Service integration is also very important for MVNO especially integration with MNOs and other partners in business. MVNO need to choose the focus group or target customers while moving towards smaller segments of the market. They need to be much more focused but the question is whether to focus on retail or enterprise sales. Differentiation strategy creates base for MVNO strategy. Demographic, service, product, pricing differentiations can be adopted by MVNO. For example, an MVNO can target Russian speaking callers in Finland by providing inexpensive calls to Russia. Some MVNOs also target niche markets of telecom services. For example, TeliaSonera targeted corporate customers during initial stage with high quality of services by charging premium prices to customers. MVNOs focus mainly on post-paid residential market, so subscriber hierarchy is simple. They need to focus on only one market at a time or at a place. MVNOs can provide bundle solutions along with voice and data services. In case of bundle solutions partner management is also important for MVNO. Price differentiation is easy for MVNO but service differentiation is limited due to dependency of OSS and network system on MNO. Most of the MVNOs are price sensitive and keep ARPU at low level as to do effective price differentiation. They have low cost and agile operations in place to

46 CHAPTER 3. ACTION RESEARCH 37 reduce OPEX. MVNOs work on price differentiation and tend to have happy customers along with higher KPI. They have their own pricing structures for the products. Subscribers win due to lower prcing mechanism but telecom industry suffers because of high system administration cost. Telco industry is a challenging business to be in due to fierce competition and so MVNOs always look for additional revenue streams. In recent years, it has been observed that MVNOs outsource as much as possible because their operations are not about system but they are all about the business. MVNOs don t care about system architecture and its implementation. They just care about quality, branding, cost-benefits, SLA agreements and customer satisfaction as well as retention. MVNOs use Business process outsourcing. Business process outsourcing in telecom domain provides BSS as a service but it s not Software-as-a-Service as there are customizations done for every telecom operator systems according to customer needs. MVNOs need lean business operations, business process outsourcing and very effective as well as efficient systems and operations. MVNOs follow rapid service delivery, development and marketing and so they need very agile framework to support it. For MVNO to work there is no need to have own processes, large organization and just by outsourcing it is possible to run MVNO. Outsourcing is possible even outside the country but data security and legal issues are critical. MVNO do not invest on network so capital spending is low and they rent network on pay-per-use or fixed monthly fees. CAPEX is low for MVNO. They invest to get customer base and volume in the market and define threshold to acquire customer base. MVNOs want to have good discount as to get volumes. They are getting the network capacity from already existing players so it s regulated and competition is fierce for MVNO. MVNO pay some fixed fees and also fees per subscriber. Subscriber churn is high in European market around 20% and that makes churn very expensive for operators. For MVNO, more you are dependent on MNO more challenges you have on differentiation side. Since MVNOs introduce competition in market, MNOs don t want to give network capacity to MVNOs very easily. Telecom network infra providers (MNO) rent the radio spectrum to other MVNOs with high rates as they will face competition from those MVNOs in future. Telecom network infra providers have lower rates for their own operators, service providers. Table 3.1 presents a situation in past with finnish telecom operator industry. There are several MVNO examples given below which were discussed during the interviews:

47 CHAPTER 3. ACTION RESEARCH 38 MNO MSO or True MVNO Weak MVNO Sonera Networks TeliaSonera Globetel Finnetcom NetFonet Tele Finland CDF Mobile Elisa Elisa Cubio Kolumbus TDC Song Finnet Verkot DNA Finland Fujitsu Services GoMobile Wireless Maingate Table 3.1: MVNO in Finland, adapted from [30] Saunalahti: Grew from reseller to service provider to MVNO. Elisa functions as an organization can be taken as MVNO in a view of organizational structure. Light Square: Planning to have all IP coverage all over US. They are whole sellers to MVNO. They will never grow on service provider side. Bharti Airtel: It has IBM to operate IT systems. Operationally they are structured as MVNO. Mobistar: It is an MVNE and a light weight organization. MVNOs can buy infra from Mobistar and concentrate on branding and marketing. Outsourcing is the trend in MVNO if they are starting up. Blyk: Blyk in UK were giving voice and SMS free and selling marketing data to other companies. You become Blyk member and tell us what you are interested in and we give you free SMS or free calls. Selling marketing information, mobile ads etc. The business model is the subscriber becomes a partner and let MVNO sell their preferences to marketing companies and subscribers get free calls/sms. Question: How are high performance, carrier-grade SLA, cross-location architecture (if applicable) and cost-benefits important in current MVNO operation context? Response:

48 CHAPTER 3. ACTION RESEARCH 39 As stated earlier, for MVNO it s important to drive customer satisfaction and price differentiation with lean and agile business processes. MVNO may hire consulting firms to drive agreements with other companies to handle parameters such as SLA, performance of the systems etc. MVNOs want efficient and quality systems with cheap prices. Cost and customer satisfaction are directly important for MVNO and other factors are indirectly important. However, to map MVNO systems to the cloud it was important for us to know point of views about these parameters and common points from the interviews are described for main four parameters below: Performance: One point of view was that performance and carrier-grade SLAs are not that important for MVNOs as they do not possess network related systems and provisioning. The MVNO system point of view can differ as system performance does matter in some cases. High performance is important regarding rating system. If MVNO use prepaid then they have to have high performance rating and AR systems due to real time charging. In prepaid case, high-performance is very important as per regulation aspects while making calls and sending messages as there is regulation to complete the call loop in 150 milliseconds. Also important in post paid context due to the issue of customer satisfaction. The performance of the systems depends on how good the billing system is and how much money is spent on it. Network level performance requirements are the same for MNO and MVNO as you cannot differentiate quality of the network and on the network level it s impossible to have different performance requirements. Latency factor makes a difference in MVNO as to transfer CDRs between the systems operators systems and their own or outsourced systems. Also activations to provisioning from self service or CRM systems may delay because of the latency. One point of view differed as the interviewee mentioned that latency hasn t been an issue. CDR transfer doesn t require real time transfer. Latency is not an issue while transferring CDRs. MVNO has enough capacity to provide communication. Carrier-grade SLA: Carrier grade SLA depends on position of MVNO. Replicated systems can have SLA of 99.0% and cluster can have SLA of 99.9%. However, Carrier grade SLA has nothing or very little to do with BSS systems. Billing system SLA can be much lower. Back office systems and billing services have SLA of around 85% while online systems such as Ordering, CRM and Self-service portal have higher SLA of 98%. MVNO just buys SLA in case of OSS as well as BSS (if BSS has been outsourced). They don t care about hardware or systems in place. SLA is

49 CHAPTER 3. ACTION RESEARCH 40 indirectly important as MVNOs are responsible for customer service delivery. SLA could be problem for customer-facing self-service portals but Telcos are not very famous for customer services. SLA agreement is also done between MNO and MVNO which is of carrier-grade level as it involves network elements. Also if MVNO implement HLR then carrier-grade SLA comes into the picture. SLA requirements are one of the reasons why MVNO have to pay high fees or rent for network infra. SLA is important because most of the telecom systems are affected with the down-time. The after-effect can be huge in telecom sector even with the BSS system downtime involving CRM and customer facing systems. However, this SLA can be managed at least on BSS side with cloud. Amazon EC2 provide good SLA agreements and managing processes with public providers may improve the situation. BSS is not a problem but OSS could have problems with SLA and performance. B2B corporate customers are critical part and if these corporate customers are from big companies then they may ask SLA and similar things. Cross-location architecture: Cross-location architecture is important and beneficial for MVNO systems and lot of MVNOs in Europe has this kind of implementation in place. Cross-location architecture is more feasible in MVNO context as most of the MVNOs use web-based systems and may run certain services in headquarters only. Also to achieve economy on scale rapidly cross-location architecture helps. Cross-location architecture is necessary if MVNOs operate in multiple countries. This fact can also be applied in MNO context. Traditional Telco IT used to be built with web based systems and hardware is not utilized as per their full capacity. However, cross-location architecture helps improving hardware capacity utilization and operational perspective of the systems as a whole. One point of view during the interviews was that no government laws stop transferring CDRs within EU and if customers give you consent then it s possible to send to Asia-Pacific or other regions too. You need to give customers details regarding location of server instances, data backup mechanisms and security formation details. Qvantel has dedicated servers creating private cloud and virtualization sharing cloud resources among MVNOs. Qvantel supports cross-location architecture of Yoigo. Another point of view during the interview was regarding data regulation as a challenge in cross-location architecture. Also it s important for telecom operators to report to the authorities whenever needed as operators have to track requests from regulation authorities. Such situations may arise but it s possible to have cross-location architecture with high network bandwidth,

50 CHAPTER 3. ACTION RESEARCH 41 strong data encryption and consent from the operator. B2B customers do not generally allow their customer information outside the country. MVNOs in most of the cases have B2B private customers. Cross-location architecture has to be in EU depending on the country regulations. Some MVNO may not allow data going outside of country. Languages could be an issue, Bills and online system in different languages Cost-benefits: Cost-benefits are heart of any business. Cost benefits the most important thing or Cost factors are much more important for MVNO than other factors. Telecom business is a volume based business where price competitions are fierce and low prices decide the volume. More cheaply you produce more freedom you have upon pricing strategies. Outsourcing the systems is the best option for MVNOs which are starting up their operations. SLA monitoring and ARPU calculations are also important besides the core business. 80% of MVNO cost incur to buy network capacity while marketing, admin and resellers cost varies as per the subscriber base and MVNO strategy. Qvantel BSS costs just 1% of MVNO spending. They provide BSS services on pay-as-you-grow basis just like utility computing. The business model is based on the size of MVNO subscriber base. If MVNOs have fewer subscribers then they pay less and when MVNOs grow with more number of subscribers then they pay more. So outsourced BSS cost for MVNO is a variable cost element and Qvantel share MVNO success as well as risks with them. Qvantel asks a small percentage of ARPU for handling BSS operations at initial stage and gets larger amount if customer base gets larger. Along with these parameters, following parameters are important as well for MVNOs. Regulation aspects Customer experience Service type MVNO on Cloud Attractive sides of cloud are cost-benefits and economy of scale. BSS is easy way to build, add functionalities in the system as BSS is easily configurable. In-premises applications may need dedicated systems but outsourced systems can use cloud easily. Several responses suggested that MVNO should put all the systems that can be implemented on cloud. MVNO should be a light weight organization and cloud can help a lot along with providing costbenefits and lean business operations. Apart from BSS, Revenue assurance

51 CHAPTER 3. ACTION RESEARCH 42 within OSS and BSS makes an important system to be considered while moving Telco system to the cloud. For example, Qvantel managed 50% costcost in IT Infra services. One dedicated Qvantel team manages around 10 customers together. Today we have examples of CRM on cloud - salesforce and Business Process Outsourcing or managed services on cloud - Qvantel. Large CSPs prefer to be provider of SaaS or provider of cloud for SaaS. They would also like to provide third party services and applications to users as CSPs have channels and infrastructure to support them. In case of independent MVNOs, there are more cases of using SaaS solutions for their processes or internal work since cost-efficient services are important to them. Large CSPs prefer OPEX to CAPEX strategy as they tend to have lower OPEX and invest in CAPEX. They want to have capital spending on infrastructure because profitability is important. On the other side, small CSPs prefer CAPEX to OPEX transition as they have to mitigate risks of market uncertainty. Therefore, MVNO should make decision to move to the cloud depending on its size. Question: How does the cloud make an important factor to be considered in Telco and especially MVNO systems? Which part of the MVNO system can be deployed to the cloud? How the present architecture is affected in this case? (Please refer to table on page no 2 of the questionnaire in Appendix for MVNO systems application mapping on cloud) Response: MVNO Systems Self-service (end-user facing web-portal) MVNO Operation Taking Orders Comments from Interviewees Self-service portal is a light-weight system and based on SaaS architecture. It doesn t require carrier-grade SLA and some outage is considerable. Self-service makes a good candidate for costbeneficial cloud implementation of BSS. However, integration and data access issues can be encountered.

52 CHAPTER 3. ACTION RESEARCH 43 Integration CRM (Customer Relationship Manager) OMS (Order Management System) Billing & CRM Integrator (Engine or JMS implementation) CRM implementation on cloud is also feasible and viable option. The successful example of salesforce.com shall be taken into consideration. Assuming telecom operators have service points close to users it s easy to deliver CRM solution to different location using cloud just like SaaS. However, there are restrictions related to tele-identity info which must be logged into system and shall be available all the time. Customer data security integration is a must. Fraud management system implementation will get difficulties. Data replication policy should be employed while mapping application to the cloud especially public or hybrid cloud and so before moving data to public or hybrid cloud, it must be replicated or backup must have been taken already. Ordering is a lightweight system for MVNOs so there is no harm in putting it on the cloud. It will be easier to provide multiple instances of order management system at multiple locations (like SaaS) if it s implemented on cloud. However, network connections need to be secure. There are integration issues as well with provisioning system. Customization process gets difficult in case ordering is implemented on the cloud as this system carries most of the integration points. If other parts of BSS are implemented on the cloud then integrator should be implemented on cloud. However, there may be performance bottlenecks due to the transactions coming every hour in real time which makes integrator not optimal for cloud. The advantage of moving this system on cloud may not be that huge because number of instances is small in case of MVNO and may not generate enough benefits.

53 CHAPTER 3. ACTION RESEARCH 44 Processing Bills Product Catalog (Repository of products) Mediation (processing call records) MVNOs have fewer products and so light-weight Product Catalog. It should be deployed on the cloud. Cloud also makes multi tenant implementation possible. However, there are issues like regulatory limits, customization-configuration issues and also if MVNO is large then the cloud implementation gets difficult. B2C products are easy to implement on cloud but B2B products are problematic. Big corporate companies have access to self-service ordering portal where they can define or change the subscription details in bunch. For example, companies like Nokia have web-portals to place orders. These companies change subscription details all the time and may want to have reporting. Mediation should generally be on network side or as an integrator between OSS and BSS. It s possible to deploy mediation on cloud but the deployment is risky and it needs proper integration with MVNO. There are performance and legal issues involved in cloud implementation on mediation. MVNOs get millions of CDRs after some mediation from MNO every hour every day. So network bandwidth is one of factors deciding the performance as we have to transfer CDRs to Cloud. CDRs and call details are very sensitive information and data security is a very important concern here as there is regulatory restrictions related customer data security. There were cases where privacy breached via call details records. A good data encryption policy is required. The data transfer to the cloud will be very heavy which may increase the cost of cloud implementation significantly. Comptel is providing mediation solution within one country on cloud. Load balancing is important in case mediation on cloud.

54 CHAPTER 3. ACTION RESEARCH 45 Collecting Payments Rating & Invoicing (rating calls and preparing bills) Bill Formatter (Formatting and printing bills) Account Receivable (receiving payments) Collection (due payments, barring, processing payments) Rating has also problems similar to Mediation. Invoicing can be deployed on cloud easily. Qvantel is already doing it. Small operators tend to use it. Network bandwidth should be large and hypervisors should be fast. There are latency driven issues as well as dependencies on IO and hypervisors. There already some cloud implementations of bill formatter in place and some companies are already providing it. For example, StreamServe provides bill formatting and printing as a service. There can be problems as bill formatter involves physical systems such as print devices and proper networking is needed in such cases. There is not a major problem to implement account receivable on cloud however there are concerns regarding credit card information security. Data access and security, especially for financial data, must be of high level for this system. Number of processes are less so account receivable may not have significant advantage if they are implemented on the cloud independently. There is not a major problem to implement collection on cloud however data security and data access could be an issue and cloud implementation of collection system depends on the service layer implementation. Collection has high amount of processes which gives possibility to implement this system on cloud if other parts of BSS are implemented on the cloud. TeliaSonera has it on cloud. TeliaSonera has outsourced it to collection agencies and they are running the system on cloud. Internal collection processes, network barring and debt collection agency processes may get affected and need attention.

55 CHAPTER 3. ACTION RESEARCH 46 Inventory Resource Management (managing SIM, MSISDN, Data number resources) Prepaid Operation Prepaid Card System (real time charging) In many cases, MVNO rents inventory management system from MNO. If a service layer is in the cloud then it s easy to deploy it on cloud as ERP / CRM will already be on cloud making inventory a viable candidate for cloud. It would follow same SLA as in case of self-service. However, the counter arguments suggested that the inventory system is close to network elements such as provisioning and others which make it difficult to deploy on cloud due to regulatory issues. For MVNO, it might be difficult to implement all systems as cloud may act as generic interface for different elements. There is only advantage of cost sharing but it might be the strong reason to proceed with implementation. The common consent from interviewees was that prepaid system is challenging and not feasible from technology point of view to implement on cloud. The reasons are described as following. Cloud implementation of prepaid systems is difficult as it s a real time charging system and there high availability requirements for such systems. SLAs are critically high and no delays should be there. Intelligent network systems are very close to prepaid systems and high level integration is needed which is critical. It will be easier with flat IP architecture in future but right now implementation is way too risky. However, there were some positive responses for cloud implementation of prepaid system which mentioned that online top-ups can be easier with cloud implementation however real time charging setup can be challenging. There are real time charging systems from TeliaSonera for pre and post paid which can be deployed on cloud easily. Country specific clouds are good options to implement prepaid like systems. Table 3.2: Results for mapping MVNO systems on cloud

56 CHAPTER 3. ACTION RESEARCH 47 Question: If following parameters are affected while migrating some part or the whole of the MVNO system to the cloud? How? Response: Parameter Performance (Throughput, Latency) Service Level Agreement (SLA) Service Delivery Ser- Customer vices Security (N/w and Data Security) How is it affected? Performance is important and MVNO would like have the same performance level whether or not the systems are implemented on cloud. Throughput and latency are affected on cloud but network bandwidth upgrade could save the situation. Tight data center SLA could improve the performance. On BSS side, SLA requirements are not critical especially for retail or residential customers. SLA may not have critical impact on Billing and CRM systems but the monitoring is needed. For corporate customers, billing SLAs are important and may get affected. Also, internal SLAs between MNO and MVNO may have issues. Cloud service provider should take care of SLA and availability factors. Some responses mentioned that SLA depends on implementation and architecture of IT systems. Service delivery is not affected much and it may not be visible to customers that the system is implemented on the cloud. In case of self-service portal migration to cloud there is a possibility that service delivery may get affected. However, most of the interviewees agreed that sufficient self-service can be organized with the cloud. Customer service is important and critical for MVNOs. It gets affected if system implementation on cloud is not proper and this may ruin MVNO business. Costumer services are mostly implemented as self-service portals (or CRM) and it highly depends on technology used to build the system. However, some interviewees agreed that customer services won t be affected much. At present many small companies are using CRM on cloud solutions and they are getting good benefits without significant problems. Security of Call data records and customer sensitive data is critical and the most important factor to consider while moving MVNO systems to the cloud. Data security and availability are highly affected. Recent issue with Sony Play Station cloud is one of the examples. Security is easy to implement if systems are in-house but cloud implementation has several challenges.

57 CHAPTER 3. ACTION RESEARCH 48 Foot- Carbon prints Business Model changes Cross-location Architecture Cloud is more efficient and environment friendly than in-house systems. Carbon footprints are important and they can be reduced by using cloud. There are concepts of green data centers and green MVNOs coming into existence. Carbon footprint savings also add up to MVNO profits as an opportunity gain. In Netherlands, an MVNO markets their products by saying we donate saved costs to NGOs. MVNO can use it as marketing factor however doesn t make much difference in some markets and age group. Business model changes are important since cost-benefits gained using cloud implementation allow MVNOs to drive differentiations. Also, MVNOs can concentrate on the core business of selling services and products to the end-users rather than administration of IT systems. For example, MVNOs can reduce MNP period from 5 days to 3 days getting long term benefits of customer satisfaction. It s possible for MVNO to build a partnership model and provide carrier-grade services to smaller operators. MVNO can drive price differentiations and achieve agility and cutting-edge in the industry while lowering time to market. MVNO can try to operate or differ based on price as OPEX is reduced. Cross-location architecture gets affected by centralization using the cloud. It can also be done without cloud. It could be affected but the thing is international MVNOs are not much in operation so it s a question of importance. Table 3.3: Results for parameter analysis Cost-benefits Question: Which cost factors are involved in telecom systems especially for MVNOs? How do you calculate pricing for telecom cloud? How do you get Return on Investment (ROI) while implementing MVNO systems on the cloud? Response: MVNO prices are very much competition driven and not cost calculation driven however cost-benefits can be driven by moving implementing MVNO systems on cloud which makes MVNO further lower the prices. Cloud brings advantages for MVNOs to cut system administration costs while moving from

58 CHAPTER 3. ACTION RESEARCH 49 CAPEX to OPEX. MVNO assets can then be taken as an expense or OPEX. CAPEX to OPEX transition makes a difference as investment is smaller. It is interesting to note that the profit margin is also small if systems are not owned however cloud makes a case where profits can be improved. Cloud makes fixed cost as low as possible and variable cost as high as possible. MVNO pricing is mostly based on ARPU while studying quarterly income. MVNO profits are not always calculated per subscriber costs and ARPU as the calculation involves other factors too such opportunity gains etc. There is no CAPEX involved in MVNO calculations as such for cloud and OPEX is the only thing which needs to be taken care of. There is no need to invest for MVNOs as it s possible to go for utility based cost calculations. However, if CAPEX is needed then such onetime charges or expenditures can be divided for 3-5 years and considered as OPEX only. Another point of view is that ARPU may not be that important in MVNO cost calculations but such calculations are more concentrated on customer base or customer churn. MVNOs drive the business based on price and service package differentiation. So in this case to calculate cost-factor always one should go for ROI calculation which is valid for any project in this industry. Cost and ROI will be final deciding factor and for MVNO, it s important to prove that cloud is cheaper and ROI will be higher. Cloud can improve ROI. By default ROI will be very high for MVNO because of low CAPEX and high profits as ROI is generally calculated on CAPEX or fixed costs. However, it s difficult to say whether it will affect ROI more than any other means of outsourcing as it depends on pricing. As mentioned earlier that for MVNO investment is smaller and so ROI is higher which leads to lower profitability. So there is a question of balancing the ROI. Question: How do you improve the cost-benefits for MVNO system? How are the high-level calculations made to derive cost-benefits? Cloud may drive the cost-benefits in MVNO context. Are you willing to accept cloud only on the basis of cost-benefits? Response: If MVNO systems are moved to the cloud then cost of cloud usage in terms of processing and memory consumption must be considered in calculations. Geo-graphical location of cloud makes difference along with the idea of centralization. Cloud cost can be calculated based on some cents per user or CDR or mixture of both. In billing and CRM systems, estimated number of customers or activities decides the price but price does not fluctuate much. Along with it, factors such as network bandwidth and data transfer cost shall be taken care of. Cost factors:

59 CHAPTER 3. ACTION RESEARCH 50 Cover minimum cost of BSS BSS license as a fixed cost Variable costs Elements in cost calculation: BSS license - Fixed Network Bandwidth Hardware Hosting 24*7*365 monitoring Third-party software (like db license) Profit-margin Support and end-user guidance Another cost factor involved in MVNO calculation is rent of network elements and radio spectrum MVNO pays to MNO based on agreed network pricing structure. MVNO pay different prices to MNOs for network bandwidth sharing and it s generally pay-per-use basis. MVNOs usually calculate the TCO in the systems in their own hands and then they have to look towards price they are paying for the cloud services along with bandwidth costs. MVNOs use low cost and light weight processes and cloud provides significant benefits to lower MVNO operational costs. MVNO could choose cloud on the basis of cost-benefits if security issues are taken care of because the competition is harsh and every operator is looking for low-costs and pricing games Case Qvantel: No ROI calculation is done in Qvantel as the model is mainly pay as you go. So, for example, MVNO pay 0.7% of ARPU or cost to Qvantel to manage their BSS. BSS hardware is in the software vendor package. Network bandwidth prices are also based on pay as you go mechanism. Other managed services can be outsourced as part of Business Process Outsourcing. The common consent during the interview sessions was that MVNO should move their systems, and in simple cases whole managed services, to cloud since cloud does provide cost-benefits to MVNO operations. Capability of cloud to keep MVNO operation compact i.e. agility and have minimum risk on investment is an important point to consider. Cost-benefits improvement can be done by making business processes smoother and agile and cloud

60 CHAPTER 3. ACTION RESEARCH 51 can help. Correlation for price competition among operators. Oligopoly settings among operators. Along with cost-benefits; assurance, legal aspects and flexibility factors are also important for MVNOs as to adjust themselves with the competition as fast as possible Implications and Future Prospects Question: What are the implications of cloud deployment of MVNO systems? How government laws can affect the deployment? What are the financial implications? Response: Regulatory restrictions from government related to the customer data security and transferring data outside the country are the most discussed implications in the interview sessions. Data security and data access of customer sensitive data are the biggest challenges. In some countries, there is a law that authorities can listen to the communication lines. Moving data outside of country may not be possible as per some customer agreements. For example, police and fire-brigade numbers cannot be taken outside the country. If such important data need to be put in cloud then highest level of security and availability should be in place. However, bilateral contracts done between or among countries may help lowering the effect of such implications. One point of view related to these implications was regarding customer data that it s possible to move CDRs among EU states with consent from the customers. It s interesting to note that there were no major implications faced by Qvantel while moving MVNO/MNO BSS systems to the cloud. There is also a challenge that the customer data should be retained in BSS systems for specified time frame and it should also be possible to remove data which can be problematic with the cloud implementation. It s very dangerous for operators if customer data is stolen or lost. For example, Sony PlayStation PS3 customer credit card data were stolen. Such situations may put operators in difficult position and operators could lose the significant customer base and business. Operators must have access to customer data all the time. Union or government regulations are general implications. Security, privacy and network could be technical implications. Security while sharing processing and storage spaces with other companies is a big concern. There are problems with ability to do customization, systems integration and configuration challenges. MVNOs may want to change BSS functions at times and cloud makes it difficult. Time to respond to new legislation changes could have significant delays. There are also regulations from tele-

61 CHAPTER 3. ACTION RESEARCH 52 com authority related to data, SLAs and customer services which should be taken care of while moving MVNO systems to the cloud. On the operational perspective, the issue is to maintain critical tickets in the region as to solve customer issues within the region which may be difficult if data is not available with operators all the time. Interaction transaction logging is also a challenge especially in case of B2B customers if systems are on cloud. Latency and throughput problems may arise if services are migrated or outsourced to other country. Country specific requirements or factors such as call loop timings, data protection regulations, network latency etc may create implications. Labor laws are also of concern as operators may reduce the workforce from IT admin department to gain cost-benefits from cloud implementation. Generally human resources reside in IT admin departments in medium scale MVNOs and implementation of cloud gives possibility to reduce IT admin resources significantly. No financial implications as such. Question: What do you think of the future of MVNO and Telecom Software industry also considering importance of cloud? What vision do you look for? Response: Cloud in Telco IT systems is already taking place. However, Telco clouds with high availability and closing the gaps of carrier-grade SLAs are not yet available. OSS on cloud is not feasible as of now due to high OSS SLAs, network bandwidth problems, and cloud issues of availability and SLA situations. However, Comptel is planning implementation of several components of OSS on the cloud. So it s clear that for Telco, there is still long way to go to deal with cloud fully. There are inherent problems in network architecture and so MSS and HLR on cloud are not feasible. Moving existing systems to the cloud is more difficult than starting the operations from scratch on cloud. Cloud is important where capacity in network or processing might not be enough. Operators ted to get market share and cloud will help with its economy of scale attributes. There will be future for the cloud when it s technically feasible, economically cost-beneficial. However, cloud is fragile as lot of network related and trust issues to have data outside company or country or region. Future will be more like utility based telecom traffic and implementation of flat rate business models. Flat rate data plans are already in place and getting popular. There will be no need of complex billing systems for flat rate pricings and such scenario will work in favor of cloud implementation of telecom systems. Clouds will be very important in the future as they are also based on utility computing architecture. Also Cloud will be a natural choice for MVNO in fierce competition of price and service differentiation. If integration and data security is proper then Telco will tend to use cloud

62 CHAPTER 3. ACTION RESEARCH 53 services and gain benefits of cloud making cloud - a good, smart and reasonable hype. BSS and CRM will be easy to deploy on cloud however OSS and Prepaid won t be easy to move to the cloud. In case of MNOs, lot of MNOs have old in-house legacy IT systems and it s difficult and expensive to move or migrate those systems to the cloud. TeliaSonera is using salesforce in Denmark and Norway and they are also evaluating possibility to expand it more. However, TeliaSonera is not aggressive on cloud front Round 2 Results Round 2 of the interview conducted to support the Delphi methodology by narrowing down the questions and widening up the choices. The questionnaire was made of total 10 statements derived from the round 1 analysis of the interview. While sending the questionnaire for round 2 the brief results of the interview round 1 were also sent to the experts so that they get idea of overall responses of interviews from round 1 and decide their choices for round 2 questions. The round 2 interview was offline in which a survey link sent to the experts to select single choice for each statement. The results are presented in Table 3.4 with percentage responses obtained for each statement. Sr No Statements MVNOs implement or outsource BSS and customer care systems. They rent the radio capacity and OSS from network operators. Cost-benefit is the most important aspect of their business for MVNO. MVNOs do price differentiation and compete on the basis of lowering prices. Centralized systems are important for cross-located MVNOs to have agility in their processes Percentage Response (single choice) Not Totally Agr- Dis- Sure or Agreeagree Depend Totally Disagree

63 CHAPTER 3. ACTION RESEARCH Carrier-grade SLA (99.999%) does not matter for MVNOs as they manage BSS and not the network/oss Data security is the biggest concern while moving MVNO systems to cloud There are regulatory implications to move customer sensitive data outside the country or region. Integration and functionality changes will get more difficult if MVNO systems are moved to the cloud. Performance will be enhanced and economy of scale can be achieved if MVNO systems are implemented on the cloud. There will not be any significant business model changes for MVNO if they implement their IT systems on cloud. Table 3.4: Results for interview round 2 The results are analyzed further in section 4.1 in which the graph is presented with the response analysis of each statement and its importance in context of MVNO systems implementation on cloud.

64 Chapter 4 Techno-economic Analysis 4.1 Mapping MVNO Systems to Cloud Interview Analysis The first round of interview had first two questions related to MVNO systems without introducing cloud to get idea how experts think MVNO systems work. The responses obtained were ranging from the technical and operational to business perspectives. The main points from all the responses combined are given in Fig The responses presented in Fig.4.2 are collected during the first round of interviews in which the structured question-answers were asked to the interviewees for mapping the MVNO systems on cloud. There were three options for interviewees to choose from and those were 1. Agree, 2. Not sure or depends and 3. Disagree. The graph below describes the responses in an analytical manner in which the MVNO systems are mentioned on x- axis while y-axis refers to the percentage response obtained in reply to the question whether system should deployed on cloud? By looking at the graph in Fig.4.2, we can say that the experts were quite insistent to put self-service, CRM and bill formatter systems on cloud as to provide SaaS like environment for such applications. For Order management, Billing & CRM integrator and account receivable systems the responses had some doubts and so small portion of responses were not sure to deploy such systems on cloud. The experts thought of integration problems with other systems be the main issue in these cases. Rating and invoicing had similar responses in which close to half of them were not sure to move these systems to cloud. The interviewees mentioned data transfer as well as latency driven issues with cloud I/O and hypervisor [25] be the key concern in these cases. It s interesting to note that all of the above mentioned systems had positive 55

65 CHAPTER 4. TECHNO-ECONOMIC ANALYSIS 56 Figure 4.1: Snapshot - MVNO systems in brief or neutral answers which make them viable candidates for cloud after solving key issues associated with them. Product catalog, collection and resource management had overall positive responses however there were some neutral and negative reactions at the same time. Integration with external systems as well as proximity to the network elements drove such responses for these systems. Mediation remained a doubtful system for the possible cloud implementation as it got same number of positive and negative answers along with half of the responses as neutral or uncertain. This was because of the CDR security and transfer problems in the cloud environments. Prepaid as well as network systems got more than half of negative responses and so they remain impractical to implement on cloud as of now. This is due to a well-known fact that cloud is not ready for telecom systems to provide carrier-grade services [38]. Fig. 4.3 illustrates the same interview responses in a different manner in which it categorizes each MVNO system according to the percentage of positive ( Agree ) response acquired in reply to the question whether system should deployed on cloud? This figure depicts almost the same picture as mentioned in analytical description of the graph. Systems with green should be moved to the cloud while systems in blue can be moved to the cloud after resolving related issues with cloud or the systems themselves. Mediation is the only system in violet and it remains suspicious for cloud implementation while prepaid, OSS and other network systems remain repulsive to move to the cloud. MVNO systems drive several advantages which were discussed during the interview sessions with experts. The focus remained on the system performance and cost-benefits driven by implementation of MVNO systems on cloud. Fig. 4.4 illustrates these advantages in brief.

66 CHAPTER 4. TECHNO-ECONOMIC ANALYSIS 57 Figure 4.2: MVNO systems on cloud analysis Application Mapping Self-service, CRM, Order Management, Account Receivable and Resource Management can be deployed as SaaS on cloud. All these applications need a user interface for the customer service representatives and SaaS makes the deployment easy for these applications. Self-service portal is end-user facing application and it is connected to CRM, order management, account receivable and resource management via self-service APIs. SaaS on cloud provides possibilities to scale up and scale down the load quickly as per user sessions and so to drive cost-benefits in managing theses applications. Billing-CRM integrator, Product catalog, Rater, Invoicing and Bill formatter shall be implemented using PaaS on cloud as these applications are not user-facing applications and most of these applications possess asynchronous background processing capabilities. In such cases, PaaS provides a platform to share resources among several MVNOs and in this way to drive cost-benefits. Also economy of scale and elasticity attributes of cloud help to scale the applications to carry fluctuating load easily. Batch jobs processing, Mediation, Business intelligence systems can be deployed IaaS on cloud since these applications need high computing as well as storage capabilities and IaaS on cloud provide such potential.

67 CHAPTER 4. TECHNO-ECONOMIC ANALYSIS 58 Figure 4.3: MVNO systems mapping according positive response As described in section the application mapping for MVNO business support systems [34] can be done by mapping application attributes to various cloud scenarios. Table 4.1 maps two to three main attributes to the possible cloud scenario for each application [28] and then decides whether the application should be deployed on cloud or not. MVNO Operation Taking Orders MVNO Systems Self-service Portal Key Attributes Cloud Scenario Deployable? User experience SaaS Scalability Economy of scale Yes Availability 99% availability

68 CHAPTER 4. TECHNO-ECONOMIC ANALYSIS 59 Integration CRM Order Management Billing & CRM Integrator Product Catalog Data security & access Security issues (hybrid cloud helps) Online data SaaS Yes Affordability Administration costcut Transaction/data Data lock-in problems locking Complex integration Critical Integration Depends & customiza- obstacles tion Load balancing Hybrid cloud Transaction management Unpredictable perfortency & persismance Scalability Elasticity on cloud Depends Configuration management Configuration issues on cloud Online data SaaS Depends Processing Bills Mediation Rating Invoicing Bill Formatter Data transfer Data transfer bottlenecks Batch processing Efficient batchprocessing Data security Security breaches on cloud Configuration management Configuration issues on cloud Batch processing Efficient batchprocessing Offline data Hybrid cloud Scalability Elasticity of cloud Batch processing Efficient batchintensivetation (computeprocessing & compu- Monitoring & af- Administration cost- fordability Physical device data transfer cut Data transfer bottlenecks No Depends Yes

69 CHAPTER 4. TECHNO-ECONOMIC ANALYSIS 60 Batch processing Efficient batchprocessing Yes Collecting Payments Inventory Prepaid Operation Account Receivable Collection Resource Management Real-time Charging Online data SaaS Data security Data security issues Yes on cloud Availability 99% availability Data locking & securitrity Data lock-in and secu- problems on cloud Integration Integration obstacles Depends Batch processing Efficient batchprocessing Online data SaaS Integration / configuratioration Integration & configu- Yes issues on cloud Cost-sharing Cost-beneficial implementation on cloud High availability 99% availability - not (carrier-grade) feasible High performance Performance unpredictability No Integration Integration challenges Table 4.1: Analysis for mapping MVNO systems attributes on cloud scenarios Strategy The strategy to move applications to the cloud shall be prepared carefully considering all the relevant aspects of technology as well as business domain [60]. A brief technical and business strategy analyses are presented below while gathering points from the interview results: Technical: Analyze contemporary and existing process in the system along with their tailoring needs, configurations and integrations with external systems. For the systems having fluctuating load, cloud implementation is beneficial. Non mission critical systems can be moved to the cloud as operator may not want to be the first one to move to the cloud. Systems should be loosely coupled and highly configurable to move to the cloud. Hybrid cloud with

70 CHAPTER 4. TECHNO-ECONOMIC ANALYSIS 61 Figure 4.4: Snapshots - MVNO on cloud advantages good data encryption policies is a good option especially for the MVNO systems. Applications with parallel batch processing, analytics or business intelligence gathering and computation-intensive tasks should be moved to the cloud. The customer-facing systems such as self-service portals and CRM should be deployed on the cloud while providing SaaS to end-users. Business: Need to check regulatory requirements from authorities. Data availability and retention plans as per regulations should be in place for customer sensitive data. Cost should be calculated for moving the systems to cloud. This includes cost for application migration, customization and integration changes as well as monthly cost for processing, memory and network bandwidth usage cost for cloud. It s good to have in-country or in-region cloud instances in case of public or hybrid cloud deployments. It s important to find as well as mitigate impacts on SLA and customer services while deploying customer facing systems on cloud. There is an option of business process outsourcing or manages service outsourcing to the vendors providing such services for more cost-beneficial approach Hybrid Cloud Setup Experiment Proof of concept: The public cloud involves the data and application access via public internet channels and so many critical services and sensitive data might be exposed to the security threats on the public networks. The private cloud is more restricted environment which resides internally or nearby company premises constituting safer environment for enterprise applications and re-

71 CHAPTER 4. TECHNO-ECONOMIC ANALYSIS 62 Figure 4.5: Hybrid cloud setup for Telco lated data. However, private cloud may not significantly represent the benefits of using cloud such as elasticity, economy of scale, cost factors, green computing etc. Hybrid cloud is the model which will prevail [22] in such cases where it s possible to install database only in private cloud and application images residing in both private and public cloud will access it through highly secure data channels. This way an enterprise can make efficient use of internal IT resources [24] and they can switch dynamically to the public resources whenever there is a need. Following are the steps derived to implement enterprise applications on hybrid cloud environment (See Fig. 4.5) while balancing the load among private and public cloud instances: 1. Setup a private cloud and create private cloud instances. The private cloud instances are the chunks of the whole private cloud resources combined and it should be designed in such a way so that optimum memory and processing power are allocated to each chunk or instance. 2. Install application database (or databases) and build an application image for different applications on private cloud. Ensure that all the application images of different applications have necessary configurations and database access on private cloud. Application images are virtual and ready-to-use installation of applications.

72 CHAPTER 4. TECHNO-ECONOMIC ANALYSIS Modify load balancing script on underlying server in use so that application can start using cloud instances to balance the incoming load. 4. Setup the public cloud instances and get elastic IPs of those instances. It should be noted that the use of public cloud instances from multiple vendors ensures high availability as in case of down-time of cloud instances; system can start using cloud instances from other public cloud vendors. 5. Add public cloud instances (IPs) to load balancing script. Along with this, also add the logic to switch from private to public cloud instances whenever the private cloud instances reach at their maximum usage in terms of memory or processing or other attributes depending on the application purpose. There are different technologies and tools [52] available which can help creating such environment where both private and public computing resources can be used efficiently by defining underlying requirements. 6. Allow application and database to have external access with encrypted channels. The channel encryption shall be supported by highly efficient network security algorithms in place. Virtual private network and high bandwidth data pipe can be established in such cases. 7. Prepare auto-spawning script for public cloud instances so that when system switches the processing from private to public cloud, the public cloud instances will be started automatically. Similarly, add logic to turn off public cloud instance where the processing need is ended on that instance. This functionality is needed for the reason that public cloud usage is charged on pay-per-use basis and auto-spawning reduces the cost and adds to the dynamic elasticity of the system resources. 8. Add monitoring and logging scripts to track the system usage and operations. It should be noted that web-based system can be accessed by single IP of a load balancer. Experiment: In the experiment (See Fig. 4.6) followed from the proof of concept presented above, a private cloud was setup on virtualization platoform and private cloud instances were created. After that, the installation of sugarcrm mysql database was carried out and application image for sugarcrm was compiled. Already built sugarcrm images were then deployed on different private cloud instances ensuring that all the application images of sugarcrm had necessary configurations and database access on private cloud. An http

73 CHAPTER 4. TECHNO-ECONOMIC ANALYSIS 64 Figure 4.6: Hybrid cloud setup experiment architecture load balancer on top of all sugarcrm images (php+apache) was developed to balance all the requests and responses coming from both private and public cloud instances. Public cloud instances were created while getting elastic IPs of those instances. Already built sugarcrm images were deployed on public cloud instances as well. Public cloud instances (IPs) were added to http load balancer as to distribute the load. Along with this, the logic was developed to switch from private to public cloud instances whenever the private cloud instances reach at their maximum usage in terms of memory or processing or other attributes depending on the application purpose. The sugarcrm images on private and public cloud instances communicate with http load balancer configured on a standalone Apache server via http requests and responses. Application and database were allowed to have external access with encrypted channels so that the sugarcrm instances can interact with mysql database via mysql port. It should be noted that It was possible to deploy mysql load balancer on the underlying sugarcrm database as to balance the load from application images as well as from external applications and batch

74 CHAPTER 4. TECHNO-ECONOMIC ANALYSIS 65 Figure 4.7: Analysis of interview round 2 responses jobs. Also, auto-spawning script for public cloud instances could be prepared so that when system switches the processing from private to public cloud, the public cloud instances will be started or turned off automatically. The web-based sugarcrm was accessible by single IP of an http load balancer Analysis of Round 2 As stated in the round 2 results in section 3.3.5, round 2 was developed while narrowing down the questions or scenario while addressing the important statements created after analyzing the responses from round 1. The graph in Fig. 4.7 illustrates the statement wise single choice responses acquired from interviewees while statement wise brief analysis in done as following. 1. MVNOs implement or outsource BSS and customer care systems. They rent the radio capacity from network operators and use their OSS. Analysis: This statement got all the responses in total agreement and so we can say that while analyzing MVNO systems the OSS and network systems doest come into the picture directly. Therefore, MVNO systems generally do not possess carrier-grade SLA and their implementation on cloud is possible without Telco carrier-grade services.

75 CHAPTER 4. TECHNO-ECONOMIC ANALYSIS Cost-benefit is the most important aspect of their business for MVNO. Analysis: This statement got all agree responses suggesting that costbenefits are very important for MVNO however, there are other functions or issues important as well along with cost-benefits. 3. MVNOs do price differentiation and compete on the basis of lower prices. Analysis: The response obtained for this statement was mixed in which some experts agreed while others were not sure. So we can say that MVNOs do price differentiation but along with price, they also differentiate their products based on other factors, for example, geography, service, demography etc. 4. Centralized systems are important for cross-located MVNOs to have agility in their processes. Analysis: Again the mixed responses obtained for this statement in which 20% totally agreed, 60% agreed and rest 20% disagreed for the scenario. So we can say that centralized systems may not be necessary but important in MVNO context to drive agility and so cloud may help to have agile operations for MVNO. 5. Data security is the biggest concern while moving MVNO systems to cloud. Analysis: This statement got the similar mixed response as statement 3 and so we can say that data security is an important issue to be taken care of but it may not the biggest concern as there are other issues involved as well while moving MVNO systems to the cloud. 6. There are regulatory implications to move customer sensitive data outside the country or region. Analysis: The same mixed response has been found for this statement as well and therefore it suggests that there are regulatory restrictions but exceptions can be made with customer consent and Qvantel example has already been discussed in the results section. 7. There will not be any significant business model changes for MVNO if they implement their IT systems on cloud. Analysis: 80% of the responses are in agreement here and soothe responses support the statement that cloud will not be able to drive significant business model changes in case of MVNOs.

76 CHAPTER 4. TECHNO-ECONOMIC ANALYSIS Integration and functionality changes will get more difficult if MVNO systems are moved to the cloud. Analysis: Major part of the responses disagreed to this statement and so we can say that cloud may not add significantly to the implications of integration and customization in MVNO systems. 9. Performance will be enhanced and economy of scale can be achieved if MVNO systems are implemented on the cloud. Analysis: This statement obtained mixed response as well in which major chunk agreed while others were not sure due to the latency and throughput issues in cloud. 10. Carrier-grade SLA (99.999%) does not matter in MVNO context as they manage BSS and not the network/oss. Analysis: The mixed response got for this statement partly supports the idea mentioned statement analysis that MVNO systems implementation on general cloud is possible. 4.2 Cost-Benefits Cloud may not look that attractive while comparing the server utilization, memory requirements and data transfer of small or medium sized in-house IT systems with cloud side by side. However, several additional cost savings such as power, cooling cost, physical plant space, IT administration cost, insurance etc [5] makes the cloud more interesting in case of cost-benefits scenario. The main idea of moving from CAPEX to OPEX while further reducing OPEX may not save a lot of money for the company but it s definitely an attractive option for companies starting up their operations. This transition minimizes the risk on investment for a new entrant. Another aspect is to reduce huge operational and administrative cost of the company by using cloud. One statistics says that often companies spend 8$ for administration of hardware cost of every 1$ [59]. By using cloud, this huge gap between hardware cost and its administration cost can be eradicated considerably. Cloud provides on-demand utility based computing in which due to low capital expenditure the total cost of owner ship (TCO) and lower profitability over the period. On ARPU, however, cloud has positive impact and cloud can drive increment in ARPU and reduction in subscriber churn. Equation 2.1 shows that as CAPEX and OPEX decreases the profits increases.

77 CHAPTER 4. TECHNO-ECONOMIC ANALYSIS 68 Figure 4.8: Snapshots - MVNO Cost analysis MVNOs are the early adopters of SaaS based solutions and it s the same in case OSS/BSS too. MVNOs always look for rapid deployment of the system as to have faster time to market. There is also a risk involved in MVNO operations of overestimating investments cost and underestimating demands which may create bad reputation for the MVNO. Cloud helps significantly while almost eliminating such risks [65]. It lowers the initial investment while reducing barrier to the new entrants in market and so MVNOs will get high revenues if successful and low revenue losses of not successful. The Fig. 4.8 presents the main points discussed during the expert interview sessions in the area of cost-benefits while moving MVNO systems to the cloud Cost Calculations Table 4.2 presents an example cost calculation for CDR processing on mediation platform by taking following parameters and their nearly practical values received from interview responses or literature reviews: No of Subscribers: to for typical MVNOs ARPU: 20 Euro (in Europe and Americas) while 5 Euro (in APAC) CDRs: 200 CDRs/subscriber/month 7 CDRs/subscriber/day Processing speed: 2000 CDRs/sec Memory: 1 KB/CDR Network transfer speed: 20 Mbps

78 CHAPTER 4. TECHNO-ECONOMIC ANALYSIS 69 No of subscribers No of CDRs / day Memory (in GB) / day Processing (in hours) / day Network transfer time (in sec) Cost ,07 0, ,5 Amazon small package 250 $ / month ,35 0, ,5 Amazon medium package 450 $ / month ,7 0, Amazon medium package 450 $ / month ,5 0, Amazon std large package 600 $ / month , Amazon xtra large package 750 $ / month , Private Cloud + Amazon xtra large package Table 4.2: Cost Calculations for MVNO By looking at the data presented in Table 4.2, it shall be noted that till subscribers it s feasible to use the public cloud packages. However, after subscrbiers. it gets difficult to use only the public as the data transfer costs increase heavily and in this case hybrid cloud is a good option to implement the CDR processing platform. Another example of cost calculation [31] can be given for the SugarCRM implementation on hybrid cloud setup presented in section Server or instance configuration: Private cloud server: Intel e5640 or i5 dual core or equivalent, 2.6 GHz, 4 GB RAM, 8-12 MB Cache Public cloud instance: 2.6 GHz, 4 GB RAM How to calculate private cloud cost [23] for 1 server over 3 years: (1 server * 1500 $/server) + (3 * 8 * 1500 $) admin cost/server + (3 * 800 $) electricity cost/server = $ Note:Admin cost is taken into calculation with the fact that companies spend 8 $ of administration cost for each 1 $ spent when buying the server.

79 CHAPTER 4. TECHNO-ECONOMIC ANALYSIS 70 How to calculate private cloud cost [23] for 1 instance over 3 years: ((1 instance * 0.50 $/hour) * (3 * 365 * 24) hours) $/year network cost = $ Note: 0.5 $/instance can be broken up into 0.2$/hour computation cost $/GB data transfer cost $/GB data storage cost (total storage cost divided) Cost calculations for SugarCRM [54] on hybrid cloud over 3 years are presented in Table 4.3. Users Max Server CPU Server Cloud Usage Records RAM 1 to 5 1,000,000 1x i5 core or equivalenstance 4 GB 1 private in- 5 to 50 2,000,000 2x i5 core or equivalenstances 4 GB 2 private in- 50 to 4,000,000 4x i5 core or equivalent 8-16 GB 2 private & public in- stances Table 4.3: Cost Calculations for SugarCRM Implementation Cost $ $ $ $ = $ Table 4.4 shows cost comparisons for SugarCRM on private, public and hybrid cloud over 3 years. Users Max Cost for private Cost for pub- Cost for hy- Records only lic only brid 1 to 5 1,000, $ $ $ 5 to 50 2,000, $ $ $ 50 to 4,000, $ $ $ 100 Table 4.4: Cost Comparison for SugarCRM Implementation Opportunity Gains MVNOs can also gain siginificant advantages by using cloud apart from costbenefits and such advantages shall be taken into consideration as opportunity

80 CHAPTER 4. TECHNO-ECONOMIC ANALYSIS 71 gains. One of the important gains is the faster delivery of customer services while reducing the time-to-market [39] parameter. Cloud supports the webbased services very efficiently and companies can provide the applications and services on SaaS based cloud solutions quite effectively after making business decisions. Another aspect is the green IT and evironment friendly computing. Cloud saves the power consumption and enxpenditure on hardware resources along with reducing hardware cooling needs significantly. There are several MVNOs already marketing their products with green initiatives. For example, an MVNO Ecofoon in Netherlands. Cloud will help adding another aspect to the green initiative by acting as an environment-friendly hosting platform. There are also ideas of green cloud [3] coming into the picture to enhance the efficiency of telecom operators. Along with above impacts, large MVNOs can expand their service offerings to the end users as well by introducing cloud services. Such cloud offerings can gain huge benefits to the operators without adding too much costs to setup and market them. 4.3 Parameters Evaluation Importance in MVNO Context It s important to see that in MVNO if scenarios such as performance, carriergrade SLA, cost-benefits and cross-location architecture are important. To map MVNO systems on the cloud it s vital to know that how these parameters behave in MVNO context. Fig. 4.9 shows the graphical analysis of the structured interview responses for the paramaters importance in MVNO context. Performance [41] and carrier-grade SLA [45] are affected in case of MVNO implementation on cloud and may not retain the same level as in case of normal implementation without cloud. Cost-benefits are affected in a positive manner while using the cloud and cost-benefits can alone drive the possibility and decision to implement MVNO systems on cloud [55]. Cross-location architecture is important as cloud provides distributed and centralized operations and therefore MVNOs operating across the countries have significant impact on their operations. As we can see in performance case, more than 40% responses agree that performance could be an important scenario in MVNO context. As we see in results, performance seems to be important in cases of network systems, CDR transfer and prepaid operations (real time charging). Some responses mentioned that the performance really depends on the MVNO systems, their size as well as implementation. Small and medium MVNO systems do not

81 CHAPTER 4. TECHNO-ECONOMIC ANALYSIS 72 Figure 4.9: Analysis of important parameters in MVNO context need high performing systems as such due to small amount of data traffic in and out of the systems. However, large in-house systems do need high performance standards as to handle the system load efficiently and drive customer satisfaction to the highest level. Two of the responses mentioned that MVNOs now tend to outsource or rent BSS. In such cases, MVNO do not care about performance of the system but they care only about the SLAs agreed among MVNO and other parties to which system operations are outsourced. The problem with the cloud not becoming Telco cloud which can offer wholesome implementation of Telco software is the carrier-grade SLA requirement often defined by government. However, by looking at the responses we can say that at least on the BSS side or for the MVNOs it doesn t matter much. Carrier-grade SLA is often defined for OSS and network level systems having SLA in degree of % or more. As mentioned in results, billing and the front-end systems in BSS have SLAs at around 85% and 98% respectively. Also, public cloud provides SLA and availability close to 99% [53]. So we can say that carrier-grade SLA may not have much to do with MVNO BSS. Nevertheless, if prepaid systems are involved in the MVNO operations or MVNO possess HLR and other switching elements then carrier-grade SLA matters significantly. From the results shown in the graph, cross location architecture is important in MVNO context as there was not a disagreement for the scenario. More

82 CHAPTER 4. TECHNO-ECONOMIC ANALYSIS 73 than half of the responses recommended that cross-located or distributed architecture is important while other responses suggested that it really depends on the MVNO operations, business model and the market they are operating in. Lot of MVNOs operate across the countries or continents in some cases [12] and building cross-location distributed architecture brings benefits at system as well as financial levels. Even for MVNOs which are operating in one country only, web-based distributed CRM and order management systems are in place and cross-location distributed architecture helps to achieve economy of scale as well as centralized cost-beneficial operations while utilizing hardware resources at its full capacity. There are problems in MVNO cases operating in different countries or geographic locations where the government regulations restrict the transfer of customer sensitive data outside the country or region [61]. Also systems like fraud management needs data to be available all the time to track the requests from authorities. However, with customer consent and proper data encryption and access policies it could be possible to transfer CDRs and other system data across the region which helps in building cross-location architecture. By looking at the responses for cost-benefits scenario, it s clear that the most important thing for MVNO is the cost-benefits across different areas of operation. More than 85% of responses suggested that cost-benefits have the significant importance in MVNO operations forming the core of MVNO business. There are already sections in the thesis which mentioned about the cost-benefits and its importance for MVNO. MVNOs compete on the basis of price differentiation in most of the cases and cost-benefits driven from MVNO operations can be utilized to drive the price competition further achieving the edge in the market Influence of Cloud in MVNO If MVNO systems are moved to the cloud then parameters which are important in MVNO systems context may get affected. These parameters can impose positive or negative effects on MVNO systems and business [16]. Fig presents analysis of certain important mvno paramters in cloud settings and their influence to the MVNO systems implementation on cloud. As stated earlier in this section, performance is an important criterion in MVNO systems context. 8 out of 9 responses believed that in one or the other way performance will be affected in case if MVNO system is implemented on cloud. This should be taken as an important point as in high-tech telecom systems, performance along with throughput and latency matters significantly and cloud might not be ready for it yet. SLA has mixed responses where around 55% responses mentioned that SLA gets affected but not crit-

83 CHAPTER 4. TECHNO-ECONOMIC ANALYSIS 74 Figure 4.10: Parameter analysis for MVNO on cloud ically in case of MVNO cloud implementation. Public cloud architecture doesn t provide 100% availability promise. Also, public cloud service doesn t agree to the formal SLA agreements [20] for maintaining availability at certain level of expectations. So again, cloud has certain difficulties in coping with SLA factors in Telco. Service delivery doesn t seem to be affected much as more than half of the interviewees agreed that service delivery should be affected much in case if MVNO systems are moved to the cloud. Proper integrations with external systems and SaaS platform could deliver efficient service delivery. Customer services and customer satisfaction are at heart of MVNO business. For customer services, the overall responses was mixed where 5 out of 9 responses believed that customer services will get affected if MVNO systems are implemented on cloud while other 4 responses suggested the opposite. Customer services are highly dependent on the technology being used and business level agreements with partners. So in cloud context, technology and business level agreements make significant impact on customer services and ultimately the MVNO business. Data security got highest responses in agreement amongst all the parameters where 8 out of 9 responses were in agreement and 1 response was neutral. So we can say that data security in the most important parameter to be taken care of while moving MVNO systems to the cloud. There were cases in the past where customer sensitive data was stolen from cloud [61]. In Telco, customer sensitive data security is very important as there are government regulations related to customer data security as well

84 CHAPTER 4. TECHNO-ECONOMIC ANALYSIS 75 as the reputation of Telco depends on that. The parameters discussed above create negative impact on MVNO cloud implementation while next three parameters generally create or bring positive impact on MVNO business. Carbon footprints is important in context of the world today where lot of green IT projects are being driven by the companies, organizations and also different government agencies across the world. Cloud reduces the server hardware resources while sharing it with other applications, organizations or companies. Along with this, it reduces the power consumption and cooling requirements of data centers [5]. There are surveys [2] already done by several companies regarding possible reduction in carbon footprints using cloud computing infrastructure. More than 50% responses agreed that carbon footprints will be affected in a positive way by using cloud while others mentioned that it won t be necessarily important in MVNO operations context. For business model changes, there were mixed responses as some interviews agreed that there will be changes in price differentiation and business model itself for MVNOs if significant cost-benefits were gained by using cloud. Some responses suggested that cloud won t make much difference to the MVNO business models and MVNOs will stick to their current widely used price differentiation based models. More than half of the interviewees i.e. 67% agreed that cross-location architecture will be affected by cloud implementation and in a positive way. MVNOs having operations across different countries can centralize their systems using cloud gaining cost-benefits along with better operation management.

85 Chapter 5 Discussion 5.1 Billing as a Service Billing-as-a-service is to be setup on the hybrid cloud in form of platformas-a-service using the proof of concept presented in section 4.1. In this architecture, database remains in the private cloud due to data security and access reasons. The real time and batch job processing is to be done on both private and public cloud instances. To handle fluctuating load, hybrid cloud provides possibility to setup private cloud utilization for average processing needs. For the load going beyond the capacity of private cloud, public cloud instances are to be spawned when needed. This way it will be cost-beneficial to maintain the system and provide multi-tenant platform to different companies together. The public cloud instances will have access to the database on the private cloud with highly encrypted network and cloud data security. Load balancing and auto spawning of public cloud instances will ease the administration of the system. Data security, access, transaction locking and API integration are the areas to be taken care of. Fig. 5.1 shows the proposed architecture at high level for billing-as-aservice implementation. Network usage data comes from MNO to the system in form of CDR and IPDR via highly secure data transfer channel. Robust mediation system converts the usage data from different format to a common standard and places the data into the database. Rater provides interface to rate the calls and data traffic for subscribers. It takes input related to the products rates and offer changes from reference database. It also gets input related to call durations, geographical destination of calls made, roaming, time and origin of the call related to each call made by subscriber. It converts the call record data to financial data and forwards it to the invoicing system further. Here in this case, hybrid cloud makes a good case since mediation 76

86 CHAPTER 5. DISCUSSION 77 and rater load fluctuates as per the input coming from external systems. It s possible to use necessary public cloud instances only for processing xdrs and not storing the customer sensitive database. Invoicing and billing system then analyzes and calculates one time and recurring charges to the subscriber call usage according to the price plans and offers selected by subscribers. It also calculates the discounts and taxes for the subscribers as per the current government regulations and ongoing marketing campaigns. After all calculations it computes the final bill amount for the subscribers and prepares necessary data for the bills. Bill formatter system gets all the data needed from billing system to print and format it so that it can be printed or sent to the customers by services. Bill distribution prints and sends bills to customers or post agencies. It connects to external system or self-service portal to put electronic bills to subscribers if needed. Payment gateways like PayPal etc are connected to the billing-as-a-service platform so that customers can pay bills via their credit cards or online bank transfer. Such gateways can be integrated with self-service or CRM platform. Account receivable connects to self-service or CRM and payment gateway to collect the payments and dues from customers. It stores the data of payments received along with reference no and other payment related information. Collection collects subscriber s payment information and sends barring or unbarring instructions for the subscription to the network as per the rules defined in the system. Collection may also have integration with debt collecting agencies to push due payment collection. Product catalog, CRM and self-service portal acts as external systems to the billing-as-a-service platform and they are connected with APIs to the billing service platform. Product catalog provide offers and services related data to the system. CRM enters customer data like name, address, price plan, offers, campaigns etc to the billing system and it gets billing data from billing platform to display it to the customers or customer service representatives. Self-service portal gets bill data or even electronic bills to present it to the customers on the web service portal. In future, billing systems may have flat architecture in place and it may be possible to provide billing services without much customization and configuration changes [32] [19]. Prepaid and flat-rate billing-schemes are already getting popular and for them complex billing systems are not needed as such. Billing-as-a-service will be a feasible idea at least for small and medium scale MVNOs to drive cost-benefits further down. The service should be multitenant where a single instance of the software runs on a server, serving multiple clients. The service can be designed on cloud to virtually partition its data and configuration, and each client organization works with a customized

87 CHAPTER 5. DISCUSSION 78 Figure 5.1: Billing-as-a-Service conceptual architecture virtual application instance. Traditional operators (MNO) have possibility to offer billing as a service to other small or medium size operators because they already have necessary knowledge as well as the system in place and running. Billing-as-a-service will reduce time to market and improve costbenefits. It will be good to deploy billing service as whole to the cloud and not the individual BSS components or applications as to have minimum integration points in the system. Billing service will not be available to control issues like integration, customization and monitoring however billing-as-aservice can be a feasible and viable idea if the service is highly configurable and dynamic. For CRM, salesforce.com has already CRM as a service on cloud. Integration with such CRM service is a good idea. Difficulties related to the customizations may arise if billing service is provided as a generic SaaS. Also customers have rights to know the billing item at any time and billing as a service may make it difficult to get such data or integrate with customer facing systems. Legal and technical implications shall not be overlooked in this case. Security and system integration issues [36] will be there to solve for this service on cloud. Large volume of data transfer and integration issues are problems to deal with and connectivity issues do matter for cloud environment. Data should be secured and no

88 CHAPTER 5. DISCUSSION 79 illegal access shall be possible to the data. Country specific data should remain inside the country most of the time. Data security must be of high level in any case along with which the security data backup and replications must be planned. 5.2 Business Model Analysis Even though business models are evolving, we may not see any radical changes in MVNO business models due to cloud implementation of their systems. There may be incremental changes which are competition driven or driven by the cost-benefits obtained by cloud deployment [16]. Telecom software vendors and managed service providers will try to expand their role by becoming true partner to have longer and stronger relationships with CSP rather than just selling services. In this way, CSPs can focus on their core business of selling communication services to the end-users and move responsibilities of their software systems to managed services partners. Cloud can help to drive cost-benefits in this case since managed services providers can support multiple CSPs simultaneously to allow efficient resource sharing among partner CSPs easily. For example, before going to the cloud, Qvantel was traditional software and a platform company. Now Qvantel is Business Process Outsourcing partner or a managed services company for telecom service providers operating several MVNO platforms at the same time. They take care of billing and collection runs, performance and optimization of system etc by their own platform. One of the main obstacles for MVNO to enter CSP market is the entrant cost. MNOs see MVNO as potential threat to their business and increase in incumbency factor [17]. So MNOs are always reluctant of sharing network with virtual operators but because of the government regulation they must have policy in place of sharing their network capacity among virtual operators. This drives very high network sharing cost for virtual operators as MNOs try to maximize their profits by getting higher prices for the network sharing. MVNOs may spend 70-80% of their revenue for buying the network capacity from network operators. Cloud computing provides significant benefits for MVNOs where it reduces the fixed cost and operating costs as well while implementing the business support systems and other integrated systems. It reduces the cost to enter the market for MVNOs and thus driving business creation along with higher competition in the market. Cloud provides very flexible processing and storage architecture due to which it s possible to achieve economy of scale [5] for network operators. Low operational expenditure can be driven with cloud implementation and

89 CHAPTER 5. DISCUSSION 80 thus operators have possibilities to implement flexible pricing structure for the services they provide to the end users while driving price differentiations further. Economy of scale and price differentiation can allow operators to establish business model to gain large customer base. Below points are important to create cloud based business model changes or present the idea to the customers while presenting idea to move Telco systems to the cloud: Legacy system migration transformation to cloud Whole Telco system architecture along with integrations to external systems Efficiency and performance of the system Revenue, Cost-benefits and ROI Managed services outsourcing Cloud hype, a new way of doing things Pricing models for service provisions 5.3 Implications As mentioned in the interview results, there are still major implications [37] involved with the cloud implementation especially of the enterprise systems. Fig. 5.2 presents the snapshot of the implication findings obtained during the expert interviews. The analysis of these implications is done as following: Availability of service: Cloud has availability close to 99.9% which might not be enough to support telecom operator business and due to availability issues; operators may lose business as a result of down time of the systems on cloud. Telecom software implementations, especially on real-time charging, fault tolerance and network switching side should have availability close to % of the time and recovery time of around 5 minutes which is times higher than normal public cloud availability [38]. There were outages reported due to programming or software errors at cloud provider companies like Amazon, Google, Microsoft etc and those outages were of durations ranging from 2-8 hours [5]. Such availability issues show that cloud is not ready to host carrier-grade telecom services as telecom operators are very sensitivity about the business continuity. The effect of availability issues can be reduced by the use of multiple cloud provider services however creating

90 CHAPTER 5. DISCUSSION 81 Figure 5.2: Major implications while implementing MVNO systems on cloud and maintaining multiple application stacks in different clouds will be cumbersome. Distributed Denial of Services (DDoS) attacks can also add up to the availability of services problem where the bot attacks can be established on Cloud based SaaS implementations. Utility computing can absorb such attacks and may also have core competency to protect systems for DDoS. Data security and access: Most of the components of BSS can be deployed on cloud but data security and data access are the key concerns [61]. Public clouds are offered on public networks and so they are subject to the attacks similar to any system on public network. The issue of auditability [37] remains as well where necessary data access and regulations may impose difficulties [44] while moving customer sensitive data to the cloud. As mentioned in thesis results, there was a recent case of Sony PlayStation where customer sensitive data were stolen from the cloud. In such cases, operators may lose their reputation and business. However, there are technologies like virtual local area network (VLAN), encrypted storage and network middleboxes which can be used to protect data in public cloud as well as at the time of data transfers to the public cloud [5]. In some cases, data encryption before placing it on cloud may be even safer than the unencrypted data residing in an in-house data center. Hybrid cloud is also one way to ensure the data remains in private cloud close to the other customer facing systems and public cloud can be used only to process data with highly encrypted data channels. Such architecture ensures data access and security very close to the same of in-house local data storage. Data transfer issues: Telecom applications, especially on BSS side, are very data-sensitive and the data transfer rate as well as mechanism matters a lot while integrating applications with other parts of the telecom systems. Cloud providers charge 100$ to 150$ per terabyte of data transferred to and from cloud. Also, there could be a possibility where large amount of data transfer may take days if the network bandwidth is not high enough. For example, to transfer 10 terabyte of data to the public cloud situated at

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