Selling something you don’t own

Creativity’s about ownership.”
John Maeda
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The biggest profit you can make is from repeatedly selling something that you don’t own. Some versions of this model will send you to jail. Other versions can make you rich.

John Reilly has proposed the value fabric concept, where third-party organisations become interwoven into the supply chain. In the case of telco operators, this comes in many forms, including the use of third-parties to provide services on behalf of the operator. This can be a brilliant model for all involved, particularly the operator in situations where it derives a revenue from subscribers without having to significantly invest in infrastructure to support the service.

The next evolution of networking is likely to be a virtualised one, which is likely to deliver a heavy investment load on carriers to upgrade their equipment. Does this come from debt? Or do they have the option of “clipping the ticket” on infrastructure and services provided by organisations that are capable of providing carrier-grade networks on a massive scale?

When reading this article about InterCloud in Cisco’s newsroom, it made me wonder whether this is one of the reasons John Chambers is so confident that virtualised networking might disrupt Cisco’s current business model but won’t disrupt the Cisco business.

There aren’t too many organisations in the networking world that are able to build next-generation networks of a scale that Deutsche Telekom, BT and others require and then run them on behalf of the telcos as managed services. The InterCloud model takes the risk and the spend off the shoulders of debt-laden carriers, so it’s obviously an attractive offering from Cisco.

This guarantees a revenue from which Cisco can develop products (or buy in from third-parties themselves) and deliver services. The curious piece of the puzzle that will make the model successful will become whether Cisco and/or the carriers can build the OSS that allows their customers to self-serve services over this infrastructure. The InterCloud will need to deliver OSS tools to support self-serve XaaS and have the back-end OSS tools to keep the infrastructure humming.

But is the competition for this model coming from other telcos or is it coming from the likes of Amazon and Microsoft, which are further down the track of delivering self-serve XaaS tools?

Either way, both of these solutions have a big advantage over the telcos. They don’t have to integrate with the same number of legacy networks and systems.

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