The $1 ARPU economyThe first likely truth is the emergence of the $1 ARPU (average revenue per user) economy. The shift from mobile telephony to mobile compute has irreversibly shifted our attentions and our wallets away from undifferentiated voice, text and data services to the billions of individual apps encompassing all user needs.
This “few” to “many” application economy drives pricing pressure, resulting in a $1-ARPU-per-service revenue foundation. That service unit could take the form of a Nike wellness application or it could be a production-line sensor connected to a General Electric industrial control system. Whether serving human or machine, the value of a service is being driving down to a dollar.
These forces are not binary. We are still stuck between the old and new realities. The telecom landscape has become a tug-of-war. On one end of the rope is increasing capital investment driven by growing data demand. On the other end is increasing price competition, causing diminishing margins. Profitable growth will require rethinking the network end to end.
Telecom data centerLet’s start with compute. The prevailing telecom services consist of voice and messaging. These applications are typically part of mobile data service subscription bundles. Data center equipment is designed to fit those few applications. Network sub-systems come with significant software built in. The resulting bespoke systems require significant operating expenses. The business model here is to minimize upfront costs and pay maintenance to maintain that hardware and software. The distribution model is limited to the telecom provider and a specific mobile client.
There is a Henry Ford “any color you like as long as it’s black” philosophy to telecom architecture. It is imminently suitable for to high-ARPU services like mobile telephony, but it’s simply not flexible or cost efficient to give choice to the mobile compute consumer. To compete at cost, the data center must be more efficient.
The key metric here is number of servers operated by a single system administrator. Today that ratio is around 40:1, this involves individual servers with unique installs, low levels of automation, compliance requirements and time-intensive support requests. To reduce the marginal cost of adding an application, carriers would need to migrate to cloud architectures. Cloud systems offer a unified platform for applications and allow for high levels of automation with server to system administrator ratios greater than 5000:1. The higher the ratio, the more the system administrator’s role becomes that of a high-level software developers – instead of hitting a reset switch they’re finding find bugs with the help of custom firmware. The consequence is a massive competency shift in the operations team.
By Vish Nandlall
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