Build or Buy: 3 Things to Consider in Deploying IoT Application Platform

The IoT market will create the same sort of market disruption that preceded it with the World Wide Web. Almost every industry will be transformed by IoT in both developed and emerging markets. The impact of IoT will not be confined to individual market segments. It will reshape entire industries in the eco-system. Accenture has forecasted that the global market potential for IoT will reach $14.2 Trillion by 2030. The exact size of the market potential 15 years from today is difficult to predict but directionally it has merit.

The development of the IoT market will rely on technology advances in the semiconductor component industry and the software industry. McKinsey estimates that 30 Billion devices will be connected by 2020. Microelectro-mechanical-systems (MEMS) technology will play a significant role in enabling Internet of Things application. MEMS helps to overcome the challenges of integration, power, and cost.

The economic value of connecting sensors and devices brings tremendous value because data can now be processed in real time. Information can now be disseminated across a much wider industry eco-system to manage product life cycles, perform scheduled maintenance, and manage the supply chain. Other obvious benefits include applying predictive analysis to allow managers to make much more timely informed business decisions.

Most of the value derived from IoT systems will come from the IoT Application Platform. The IoT Application Platform will enable developers, business partners, and customers to build, deploy, and share information across the expanded industry eco-system (see my previous blog “IoT Service Enablement Platform Role in 2020).

The commercial software market is fragmented with software suppliers providing strong support in some areas of the IoT application platform and lacking functionality in other areas. The IoT Application Platform is responsible for managing connected devices, providing API gateways to existing systems for legacy data exchange, data analytics and secure data storage.

The three most important considerations in building or buying an IoT Application Platform is to make sure it supports:
1) Open standards
2) Hybrid Cloud
3) Security

Many industry standards are emerging in the IoT space. This includes everything from network communication protocols to data models. oneM2M just issued its Release 1 global standards Feb 4 2015. The IEEE and ETSI are both active in developing low throughput network protocols and interfaces. Some of the open source groups include Open Interconnect Consortium, AllSeen Alliance, and Industrial Internet Consortium. The objectives are intended to define a common communications framework based on industry standard technologies.

Developers and software suppliers of IoT Application Platforms should promote support of heterogeneous IoT devices to communicate and leverage common software applications and embrace standards as the market matures. The dynamics of competing interest and lack of standards will be a long term process over the next decade, especially with competing consortiums.

A hybrid cloud environment enables industries to scale up rapidly to support billions of connected devices. It also facilitates agile development with fast deployment timeframes. The hybrid cloud will become more mainstream with business critical applications as the infrastructure becomes more hardened to security vulnerabilities. I use the term hybrid cloud because I expect that Enterprise customers will bridge their private clouds with public clouds which may be provided by partners, CSPs, government agencies and other companies in the ecosystem depending on the IoT applications.

The cloud provides the necessary scaling to support the requirements of Fortune 500 industries such as shipping and manufacturing which rely on a global communication infrastructure. Because no CSP can claim to operate a global network, the business models will require partnerships that are able to support the connected platform subsystem.

The IoT Application Platform could be installed on premise or hosted as a Software as a Service (SaaS). The advantage to a SaaS model is that companies looking to stand up an IoT business can deploy services quickly without expensive upfront capital cost and long integration cycles. Most commercial IoT platforms provide the management tools, APIs, and an integration framework to rapidly build new applications and integrate into existing software systems.

Security is paramount for both industrial and consumer industry verticals. As part of an overall secure IoT application platform all access to the system must be centrally controlled and provide password encryption and authentication. The system must also protect against malicious control of the devices and network infrastructure. Finally access to the data must be secured and controls must be applied to the level of access granted to users based on their role. This is important for a diverse system of suppliers, partners, and end user customers.

The security provided must consider legacy based systems such as Industrial Control Systems (ICS). Before IoT there was ICS. Critical infrastructures, such as electricity generation plants, transportation systems, oil refineries, chemical factories and manufacturing facilities have deployed sensors and management systems since the era of the mainframe. ICS are command and control networks and systems designed to support industrial processes. The largest subgroup of ICS is SCADA (Supervisory Control and Data Acquisition) systems. These systems were not designed for the security threats posed by today’s hackers and internet DDOS and viruses. The evolution of these systems is important to better understand the vulnerability to computer network-based attacks. The reliable function of SCADA systems in our modern infrastructure is critical to public health and safety. As such, attacks on these systems may directly or indirectly threaten public health and safety.

In an attempt to isolate the three areas that will act as the biggest challenges to IoT adoption, I neglected to point out other capabilities of the IoT Application Platform that are important considerations. Certainly data streaming and the use of real time analytics is an important component to make informed business decisions. Development tools that support device gateway support are useful for extending management and control. Many commercial solutions also support a non-programmatic graphical tools to configure scripts, alarms, business logic, and custom rules for the devices and sensors deployed or about to be put into service. I will be profiling IoT Application Platform commercial solutions in future research reports.

IoT Service Enablement Platform Role in 2020

The Internet of Things (IoT) is creating entirely new businesses and disrupting old business models. It’s fascinating to watch entire new business models emerge and track the companies that will shape the next wave of IT technology – connected products.

The impact of IoT is not confined to individual market segments. It will reshape entire industries in the eco-system. Professor Michael Porter from Harvard University has published articles on the technology waves of IT-driven transformation. The first wave of IT innovation occurred in the 1970’s and drove changes in the order processing, computer aided design, and ERP. The first wave was driven by data processing for activities and the standardization of processes across companies. The second wave occurred in late 1980’s with the rise of the internet and ubiquitous connectivity. It allowed global integration across the supply chain.

We are now entering the third wave of IT transformation. IT is becoming part of the product. This is a result of low cost sensors being deployed in cars, shipping containers, medical devices, utility meters, and other products across a diverse set of industries. Combining embedded sensor technology with cloud computing platforms expands the market opportunity for value creation for companies in the IoT ecosystem. It opens up new markets because the supply value chain is expanded to systems and not simply discrete products or services. Today we are in the era of connected devices. Figure 1 provides a simple diagram on the evolution of the connected automobile. The future IoT market expansion system will grow well beyond the existing market today which is essentially focused on the individual automobile manufacturer. Future markets will expand to include transportation optimized services.

Figure 1

IoT Service Enablement Platforms are an integral part of optimizing and expanding the market opportunity and transforming businesses. The IoT Service Enablement Platforms must provide management of the connectivity, device management, and sensor management. This includes activating, on-boarding the device, and performance monitoring of the M2M devices. Sensor data provide advanced analytics for control decision and usage analysis.

The evolution of the IoT market and the expansion opportunities will bring new competitors into the market. Technology companies will disrupt the supplier market in each vertical industry. Google is exerting its position as an OS supplier. In the automobile industry GM, Honda, Audi, and Hyundai have joined the Open Automotive Alliance to utilize the Android operating system. AT&T is opening up its network to provide a platform of APIs to allow developers to create new cloud-based solutions on top of connectivity. It includes vehicle remote controls, child safety innovations, theft control and e-commerce from the vehicle.

Look for future blogs and in-depth research in IoT Service Enablement Platforms in the coming months.

Customer Experience Analytics Must Blend Real Time Network Usage Data with Customer Profiles

Voice of the customer is a repeated process used by companies that want to understand customer’s preferences for engagement and levels of satisfaction with services delivered. To successfully execute a VOC activity, analytics will be applied in each phase of the customer journey. Customer experience management and analytics go hand in hand.

The telecommunication industry has put a priority on improving the customer experience. This is a top down driven initiative driven largely by increased competition from OTT players, revenue declines in core business segments, and an obsession to reduce subscriber churn. But a gap exist in truly understanding the customer experience often measured using NPS scoring and customer satisfaction surveys with the data reported in internal systems.

Customer Experience Analytics (CEA) closes the gap and helps take real time customer behavioral data and push this information into the hands of managers tasked with improving customer retention and satisfaction thru all stages of the customer lifecycle.

CEA is a strategic business imperative and it impacts marketing, customer care, network planning, and operations. The software systems if implemented properly bring together different data sets from different organizational groups to solve specific business problems. Most CSPs want to be more customer centric. Changes towards customer centricity is reflected in the fact that some CSPs have designed compensation models tied directly to NPS scores. When more employees have skin in the game, the culture of the organization begins to change. This focus on customer centricity is a result of competitive changes in the marketplace and a desire to generate more revenue from the same set of customers.

The CSP thinking a decade ago focused on the network. KPI’s measured network uptime, order to fulfillment timeframes, and mean time to resolve a problem. These metrics remain relevant but network faults increasingly are being correlated to customer impact. Metrics such as revenue per cell site drive new RAN deployments. The notion of improving the customer experience will vary depending on who you speak with inside a CSP and their ability to enact change in the organization. This includes both developed and developing countries.

The figure below provides some sample use cases by departmental group where CSPs can expect to achieve improvements in the business outcome by applying CEA techniques.

NetScout Seeks To Become The Leading Service Assurance Supplier In 2015

Every month, I will profile a supplier which is either outperforming peers in a respective market segment, or carving out a niche in a new high growth market.

NetScout Systems, Inc. (NASDAQ:NTCT) is a supplier of passive network probe technology to CSPs and enterprise companies. NetScout has been growing much faster than its peers and posted double-digit growth this past year. In 2014, CSPs accounted for 45% of its sales in the first six months. Revenue for the first six months was $211.5 Million. My estimate for growth in the overall passive network probe market was 7% in 2014. Netscout's ability to outgrow its peers is a result of strong demand from communication service providers (CSPs) for its nGenius products to support mobile broadband technology.

I have been following NetScout for 15 years and have seen a dramatic transformation of the company that supplied DS3 and ATM OC3 probes to mostly Fortune 500 companies at the start of 2000. Since then, NetScout has acquired small technology focused suppliers such as Psytechnics and Accanto, and larger well established firms, most notably, Network General.

The pending acquisition of the Danaher assets which includes Tektronix Communications, Fluke Networks, and Arbor Networks changes the supplier landscape and will vault Netscout into the leading service assurance supplier globally. Assuming the deal is completed in mid 2015, it raises questions on how the company will be structured and which products will be supported in the future.

The size and scale of the Danaher businesses will require a lot of time and attention from the NetScout senior leadership team to assess the target company’s management team and understand the capabilities of the diverse portfolio. A key outstanding question for me is; “Will the Danaher companies operate independently or will they eventually be incorporated into NetScout?”  All other NetScout acquisitions to date have been integrated into the company. If NetScout plans to eventually integrate the Danaher companies, it will take at least two years to complete the restructuring effort. In the first year, I would expect each operating entity to maintain autonomy until a plan has been established. During the second year, a restructuring of the new company will be necessary to align Netscout to focus on high growth segments.  At this point, NetScout will need to shed non-core assets and boost investments in higher growth areas of the business.

Arbor Networks brings a strong domain expertise in the security threat detection market and proven Distributed Denial of Security products deployed at tier 1 CSPs including AT&T, Verizon, DT, and NTT. The Arbor solutions expand the NetScout product arsenal.  NetScout also gains entry into the threat detection market which will remain strong for the foreseeable future.

Fluke Networks is mostly a handheld business, which one could argue, is non-core to Netscout -why would Netscout want to compete in a lower margin business where Fluke is not in a leading position?

Tektronix Communications strengthens NetScout’s reach into the top tier CSP market and provides excellent cross selling operations across IT and operation groups inside existing CSP accounts. Most of Netscouts growth has come from CSPs in the mobile segment of the market which deployed nGenius in the data center. Tektronix Communication has a larger business in the CSP segment and a large part of the revenue mix is comprised in the core network. Tektronix Geoprobe is widely deployed in the signaling network at many large Tier 1 CSPs, both mobile and fixed. Tektronix Communications portfolio certainly needs to be pruned - and it’s long overdue. Of all three assets under the Danaher umbrella, the Tektronix pairing will solidify Netscout’s dominance in the passive probe market. The next closest competitor JDSU is a distant second.

The ability of NetScout to remain focused on its IP probe business; support the demands of Tektronix Communications large existing install base; and transition the company to future markets in the NFV, 5G, VoLTE, and video based services; will require the NetScout leadership team to shuttle some assets quickly and prioritize R&D investments. I would argue that Fluke Networks is not essential to NetScout’s vision and should therefore be sold off, pending close of the deal. The entire portfolio of products needs to be evaluated. Some of the products that have been sustained have not achieved success in the market. The most lackluster products within the Tektronix portfolio that have underperformed include Iris and touchpoint. The risk for NetScout is not moving quickly enough to rationalized the portfolio and restructure the company. The interim period will create doubt in the customer base and open up opportunities for NetScout competitors.

For more insight contact me at Patrick.kelly@appledorerg.com

Suppliers of NFV solutions should prioritize their investments to help carriers deploy and manage virtualized infrastructures

For NFV and SDN to succeed management of the virtualized infrastructure must be implemented Day 1

Every five years a technology trigger comes along that generates hype, confusion, and inflated expectations that fade as the realities of commercial success and operationalizing the new technology settle in. This was the case with IMS 5 years ago. Today NFV is cresting the wave of inflated expectations. Our industry is ripe with innovation but when it comes to deploying it with carrier grade scale and five nines of reliability, the reality is that the implementers need time to prove it out.

I often hear comparisons to OTT and internet companies and how Telcos need to become more like these companies. This sounds good on the surface but CSPs businesses are not the same businesses as OTT, social media, or internet companies. The networks are more complex, the regulatory rules more onerous, and some of the legacy services remain cash cows despite the cries that voice is free. Managing voice services brings with it a complex web of home grown tools, islands of databases, customized COTS solutions, and inter-connection systems. CSPs will not move at the speed of OTT and social media companies because of the legacy services anchored in their traditional business, the mandates enforced by regulators, and the culture instilled in companies over the past century.

Instead what I expect to see is a gradual shift in business models as technology enablers like NFV and the move towards cloud based services permeate in the CSP business. To succeed in this journey CSPs need to revise their thinking on the deployment of new technologies such as NFV and SDN. For virtualization and control plane separation to move from PoC to commercial deployment, management of the technology must be implemented day 1. This is a departure from the thinking of the past where new technology infrastructure deployments led management systems by six months or even a year in some cases.

A significant barrier to more wide scale deployment of NFV and SDN is rooted in managing the virtualized infrastructure. At the center of the debate is the work that has originated out of the ETSI NFV MANO working group which acknowledges the OSS and BSS components but documents them as place holders in the overall blueprint.

A key challenge still under development is how the NFV orchestration process will bind with the assurance processes – also known as “management” under the ETSI nomenclature. The ETSI MANO document provides a useful blueprint only. The work to date is concentrated on the orchestration layer which takes an order, de-composes the service components, and coordinates the activation process across both the virtual and physical components. Service chaining is an important process in this orchestration activity.  A chasm still exist in linking together the orchestration process with the network delivery and end to end service assurance processes. This chasm can be bridged in the service management process which comprises elements of infrastructure performance, component failure, and other functions which assure end to end availability and service impact.

More work is necessary in defining how the legacy OSS and BSS systems will interface with the NFV orchestration layer. The TMF has embarked on bringing clarity to this area with ZOOM. TM Forum’s Zero-time Orchestration, Operations and Management project defines an architecture that that is based on the seamless interaction between physical and virtual components. ZOOM provides a framework to help service providers manage the entire lifecycle of both virtual networks and services. I will be looking beyond the catalyst demos to identify where CSPs are gaining real business benefits in the NFV orchestration and management domain over the next year.

Carrier Network Virtualization Palo Alto Conference Summary

Informa hosted the Carrier Network Virtualization conference in Palo Alto December 11 – 13 2014. Approximately 300 CSPs, vendors, and investors attended the high quality event focusing on lab and early PoC deployments for NFV and SDN. A small area was set-up for exhibits. The bulk of the presentations from operators provided a glimpse on practical NFV/SDN deployments that attempted to tackle some key business problems. Brian Field from Comcast presented an interesting SDN business use case that blended both open source with commercial source code. Comcast is experimenting with the notion that one platform can be created that runs both its supplier commercial code and Comcast defined open source code. Comcast calls this “hybrid open”architecture (“HOpen”).

A strong underlying theme was present at the conference on facilitating an open collaborative community among both IT developers within CSPs and the vendors that have joined OpenDaylight and OpenNFV. Neela Jacques from OpenDaylight Project and Marc Cohn from OPNFV presented on the progress of both groups in the past year.

Presentations focused on recent NFV and SDN sandbox activity from carriers across the globe. A solid representation of leading CSPs included AT&T, Verizon, DT, SK Telecom, Orange, Comcast, PCCW, China Mobile, BT, Cox, and Telus. The maturity of NFV can best be classified as early proof of concept with most activity occurring in the labs within CSPs.

I would expect to see increased POC activity in 2015 moving from lab trials to limited deployments on a small scale. Despite leading CSPs driving standards and crystallizing their blueprints for how NFV and SDN can best be applied in their future network build-outs, the market place is still fluid and suppliers will most likely conform to their own idea of the standards in an effort to differentiate their solutions from competitors. As long as CSPs band together and participate in driving the standards, the adoption curve of NFV/SDN will accelerate bringing faster innovation in the market and significant reductions in the integration tax.

All of the major suppliers were represented including Intel, Oracle, Cisco, Amdocs, Huawei, HP, Alcatel Lucent, Netcracker, and Ciena. Smaller ISVs in the software space included Nakina, Ixia, QosMos, anuta networks, and tail-f now part of Cisco. This is a worthwhile event for vendors that want a big bang for their marketing dollar. The event was designed to expedite network opportunities and educate the audience on current CSP initiatives.