Telcos' profitability problems - and how they might tackle them

Telecoms firms should work together on a common technology stack, says a cloud native panel

Telecoms companies find themselves in a tight spot. Simple connectivity offers diminishing returns, yet they are ill-prepared to offer the sorts of digital services demanded by customers. That's according to a panel of telecoms companies and suppliers who were speaking at the Cloud Native Computing Foundation's KubeCon & CloudNativeCon Europe 2022 yesterday.

The reasons for this situation are many, but most are rooted in a necessarily conservative business model (dropped emergency calls can see huge fines levied by regulators) and legacy technology which makes modern application development practices like DevOps and GitOps a challenge.

Shaun O'Meara, field CTO at open source cloud services firm Mirantis, said that historically telcos have lifted and shifted the pure-telecoms stack to VMs, "going from expensive metal from Ericsson or Nokia to expensive tin from HP or Lenovo," as he put it. This situation suits the big integrators who tend to understand and can support all layers of the stack, but it does not make for the flexibility and rapid release cycles demanded by developers, nor does it offer freedom of choice for the telecoms firms when it comes to suppliers.

This point was also made by Darragh Grealish, site reliability engineer and co-founder of cloud consultancy 56k.cloud. "The big integrators have a lot of competency running five-nines networks, but if you ask them to do cloud native with open source like containers and Kubernetes, potentially the telco could do it themselves. There's too much value shared. If they can push legacy tech that still has a value to the telcos they get to keep more of the share."

But telecoms companies face competition from more than just other telcos. First, the cloud hyperscalers are rushing to provide the sort of value-added services built on top of communications infrastructure that telcos would love to make their own. Second, companies that own fibre networks, such as Equinix, are bypassing telecoms firms altogether and connecting businesses straight to the cloud. Third, tech firms are muscling in on the rapidly growing areas of IoT and edge computing.

Because of this increased competition from multiple sources, telecoms companies need to work together on common infrastructure. This is starting to happen said Philippe Ensarguet, CTO of Orange Business Services, the B2B arm of the French telecoms giant, who explained that his company has been talking with Deutsche Telecom, T-Mobile and others with the aim of building a cloud-native, open source telecoms code stack: "We have exactly the same challenges with transformation and acceleration and quite honestly there's no real reason to have a different flavour of what is common".

There are also plenty of groups working under the umbrella of CNCF and parent the Linux Foundation focussed on making telecoms firms more agile, said Kirsten Newcomer director cloud and DevSecOps strategy at Red Hat, with developments in SR-IOV, service mesh, VLAN and SASE specifically focused on the sector, which has very specific needs.

But rolling out new tech is not enough. CNCF members are primarily developers, Grealish pointed out, whereas most techies working in telecoms are sysadmins and network engineers. There's a significant cultural divide between the two.

Orange Business Services has been working though a transformation to digital over the past five years, training 4,000 engineers in the ways of GitOps and cloud native with a strong focus on developer experience. But it has not been an easy journey.

"If it was just about tech it would be simple", said Ensarguet. "But it's about culture, it's about mindset, it's about skillset."

Today 45 per cent of the company's services come from digital services, and these should account for the majority of earnings in the next three years, he said.

O'Meara mentioned India firm Reliance Jio as one telco that is doing well with cloud native, although it has the advantage of being a greenfield venture not burdened with the baggage of the past. AT&T and Inmarsat are also making progress, he said.

Acknowledging that transformation in a regulated industry is not easy, he advised telecoms firms to hire and train people around the concepts of DevOps and cloud native, not just the engineers and admins but also the decision makers and managers. He also urged those working at software's cutting edge to focus on the proven rather than the new, so that organisations that cannot afford glitches feel confident in adopting it.

"There's the academic idea of cloud native that everything is ephemeral, but in the real world shit breaks. People are not going to make everything ephemeral, so you have to find the right balance. Practicality will win every time."