Networking Business Models: Post Humpty Dumpty

Summary

  • Network virtualization, as historically targeted, breaks what already works
  • There is a necessary maturation process to get all the new pieces working together again
  • After that comes new value propositions and outcome innovation
  • That could have been done upfront, as it often is when new entrants/ businesses lead the charge, but the lack of this, necessarily lead to a focus on cost reduction
  • The most powerful transformations drive new value propositions, new outcomes, and expand the pie for the entire ecosystem
  • Network buyers and suppliers should focus on new value propositions

Humpty Dumpty

The Humpty Dumpty idea is: take a monolithic thing, smash it into many pieces, and then put it back together again. This dynamic was a problem in the early days of NFV, from both a technical and a pricing model perspective. Buyers wanted something new, more complicated, and incomplete, for a lower price. New paradigms/solutions take time to evolve and mature. After this maturation, the focus of the industry will shit to new value propositions that expand the pie for everyone.

The problem with NFV

When I hear people talk about automation and workflows (which is a good thing), I tend to think infrastructure / framework; that the networking industry is still working on putting Humpty Dumpty back together again. Even if there is some new services / new service capabilities at the margin. This investment may be a necessary phase of automation and NFV maturation, but if the focus remains here, it is also symptomatic of a problem.

The problem being that NFV was born without clear purpose – without the promise of a new, compelling value proposition. It could be argued this is OK. Take the promise of a technology, throw it out there, experiment with it, and something good will happen. However, if virtualization is just a new way of getting to the same outcomes, then who really benefits from the investment, especially if the transformation will take years or decades? This is a status quo transformation mindset from a customer value generating perspective, especially if either a) velocity and agility/flexibility improvements are marginal from the service customer’s perspective or b) service customers only have marginal need for those improvements.

The best transformations

Notwithstanding the interest in NFV for EPC, v/uCPE, and SD-WAN…The best transformations, the best business model changes, expand the pie for everyone; they drive new value propositions and new outcomes. Short of these emerging, cost will of course be the driving motivation, right up until the point that suppliers decide this is not an opportunity that they want to invest in heavily, and their investors may decide that for them first – investors don’t care much about “fair”, they care about performance (often some dimension of growth).

A better, more compelling, inspiring vision, would be one that benefits suppliers and buyers. Not suggesting there has been no effort, and I have been in some interesting conversations with buyers where that has been discussed. I am simply saying that everyone in the industry put the cart before the horse, the technology before the value proposition.

How does the industry get there?

The shift in mindset from automation to autonomy has the potential to be one catalyst along the path to going beyond putting Humpty Dumpty back together again. There likely needs to be others, significant service catalysts as well, where SD-WAN may play a role, and perhaps these catalysts would ultimately be entangled.

Conclusion

There is no doubting that industry structures DO change over time. The shifting sands of buyer and suppler purchasing/selling power, backward integration, forward integration, disruptive technologies, new entrants, games, etc. These are real, and they happen. Those changes may drive one part of the ecosystem to focus on flexing growing power. This is natural.

However, the most powerful changes are pie expanding changes, not pie shrinking changes. In the post Humpty Dumpty world, the networking industry, suppliers and buyers, will work on how to increase the size of the pie. The shift from “NFV” to “Cloud Native” maybe an important technology pivot, but regardless of the technology, great business models start with value proposition clarity. Network buyers and suppliers have to do less thinking about how to transform existing networks and more thinking about how to build new businesses / value streams. Business propositions and purpose organizes activities around value propositions and drives how technology is used and implemented. Not the other way around.

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