Telcos play a large part in how new technologies play out, which makes their
conspicuous absence from the ranks of cloud success stories all the more puzzling.
“How did we let a bookseller corner the market?” asks Sunny Tan, Assistant Vice
President of Enterprise Business Group – Solutions, StarHub (Singapore’s secondlargest info-communications operator) and the head of its business solutions.
Better late than never
Nobody who reads this magazine needs to be reminded of the promise of cloud
computing, and yet, the key names in cloud computing presently are either Internet or IT
firms, not telcos. Amazon Web Services hosts some of the world’s most prominent sites,
such as Netflix, Farmville, and Foursquare, and its cloud service revenue is poised to top
USD1 billion in 2012, according to IDC.
So how did telcos miss the boat? Tan attributes this to cultural barriers and a lack of
profit pressure during the key window of opportunity ten years ago. “Telcos used to have
a quite handsome profit margin in the traditional businesses. Added to that is the cultural
difference (telcos are slower to act than Internet companies) in a highly regulated market.
So, the majority of telcos didn’t really think innovatively enough to enter this market,” he
says. As an IT veteran, he has discovered that the skill sets in the IT and telco worlds
are different. “It’s almost like talking a different language.”
However, despite this, he is very upbeat about the competitive advantage that the telco
industry enjoys. “Our network touches everything. We telcos are in the center of the
connectivity space, without which a lot of the cloud services wouldn’t exist today. SLA is
our DNA. For wide adoption of cloud, whether by consumers or enterprises, you really
need to have carrier-grade reliability. Besides, we have multiple customer service and
support touchpoints. Finally, we have the billing relationships and aggregator abilities…
for ISVs (Independent Software Vendors), this is one clear advantage when working with
a telco. A lot of ISVs cannot simply scale if they do not partner with someone like a telco
and enter into a billing relationship with the customers.”
Opportunity arises
StarHub is a quadruple-play carrier that operates solely in Singapore, where two-thirds
of its business is in the consumer space. Compared with the incumbent, the operator
previously had limited fixed access to commercial buildings, greatly hindering its
enterprise business. But then, in 2010, an opportunity arose in the form of Singapore’s
Next-Generation Nationwide Broadband Network (NGNBN), which has the laudable goal
of wiring the city-state with ultra high-speed broadband access of up to 1Gbps. Fiber
rollout is scheduled to reach 95% coverage by mid-2012 (Source: IDA). For businesses,
this means choice, reduced costs, and increased redundancy. For StarHub, it “levels the
playing field for us. We can have complete coverage and access a bigger pool of
customers, particularly business customers.” With this impressive leap in bandwidth,
StarHub started to provide more data-heavy services, such as telepresence and cloud
computing. “We actually timed the launch of our cloud computing initiatives until the
NGNBN was in the midst of rollout because you simply cannot run a lot of cloud services
on ADSL.”
For StarHub, the decision to enter the cloud was more evolution than revolution. “It was
a natural extension of our data center business. We already had the space, the facility;
we knew how to build data centers and redundancy. We saw a lot of telco-IT
convergence; in terms of customer purchase behavior – they wanted to buy solutions
from us instead of hardware and connectivity separately. StarHub is a local trusted
brand in Singapore. Especially in the SMB space, familiarity with the brand is very
important. We have found that many customers are actually coming to us, asking for
SaaS applications as well as infrastructure as a service (IaaS).” One ingredient in
StarHub’s recipe for consumer success is what the operator calls “hubbing” (service
combination). “By bundling connectivity, IT services, and SaaS, we are adding a
differentiator via cloud hubbing.”
Getting started
StarHub took its first steps into the cloud in 2010 through the offering of SaaS solutions,
including accounting, HRM, and sales systems delivered though a utility model to small
businesses (SBs) and small-to-medium businesses (SMBs). “Our success was OK, not
fantastic. We knew here was still room for improvement, for example, an
email/collaboration suite which would be the central identity of the user.” StarHub beefed
up its portfolio later with the necessary security elements, so that its customers could
sleep easier. Education was also necessary to win over the uninitiated. “We went
through a lot of troubles explaining to SBs and SMBs, especially those that were not
very familiar with IT, what cloud computing was, and how they could benefit.”
StarHub reached a milestone in 2011 when it entered into a syndication partnership with
Microsoft that allows the operator to bundle Office 365 with its enterprise broadband
services, Microsoft’s second such partnership in Asia. “This is a key step for us, because
it allowed us to provide a very important piece called Office 365. In a lot of cloud service
brokerage models, one of the critical pieces is the email collaboration portion. This is
clearly the first piece any small business or even a mid-market business will ask for
when they go into a cloud.”
The market takeup for this caught Tan and his team by surprise. “Even though we
targeted the product at SMBs initially, a fair number of customers are in the larger midmarkets. For example, a well-known hospitality and resort chain headquartered in
Singapore, with operations all over the world. They actually deployed Office 365
throughout the Asia-Pacific, covering multiple resorts and hotels.” Tan is more excited
about the new business opportunities this application signifies. “When the hotel HQ’s
purchasing decision is done in Singapore, we are in a good position to provide services
to the entire footprint that they have. Only cloud enables us to do this… without cloud,
we will not be able to sell software, for example, to overseas markets. So this is also
changing how we address our market.”
The public cloud is advancing
StarHub’s pursuit in the cloud space has not stopped at SaaS. In February 2012,
StarHub, in collaboration with Huawei, made a big step into the public cloud space by
launching their public IaaS cloud, branded as Argonar. When asked about this name,
Tan explained that the element Argon glows green when ignited, rather like the StarHub
theme color. Argonar offers on-demand scalability in computing and storage with carriergrade connectivity. “Thanks to the collaboration with Huawei, we now have a highlyscalable public IaaS cloud suitable for all sorts of cloud computing purposes. Combined
with telco’s reliable network connectivity and security, a lot of customers will find it very
advantageous to host mission critical services with Argonar,” Tan adds confidently.
The service is primarily targeted at the SBs and SMBs, allowing them to manage their
computer resources with ease without the hefty costs of infrastructure. While this may
sound familiar to anyone who has been exposed to the hype of cloud computing,
StarHub has added a telco flavor to the service through innovative billing. “One way to
sell cloud services is that you go on a pure utility model in which customers bill for every
resource they use.”
Through experience and extensive interaction with some of the customers and potential
customers, StarHub found that customers were not quite sure how much they would
consume. In fact, they were quite worried that the cloud would end up costing more than
traditional leasing or acquisition of hardware.
“So we decided that, while retaining some flexibility in utility model, we would use tiered
plans similar to mobile phone plans… for example, we have plans such as ‘744
computing units per month’, which roughly translates to a certain number of services
running continuously for 24/7. IT managers would roughly know their normal
consumption, and pick the suitable tier. In case of a surge in demand, they can
subscribe to a turbo plan and pay more for the excessive usage (similar to what a mobile
phone user would do).” This billing model has proven very popular with customers. “It’s
quite unique in the Singapore market. For now, at least,” Tan adds with a smile.
Looking back at the public cloud journey, Tan feels very fortunate to have had Huawei
as a partner. As StarHub is relatively new to the cloud, it was beneficial to have
Huawei’s support throughout the more than one-year journey from preliminary business
case validation to implementation to post-launch marketing consultation. “Huawei
worked with us closely to develop the cloud infrastructure as well as our go-to-market
strategy. As every operator is different, so is every market and segment. We wanted to
have a system that is not too simple so that we can respond to certain demands; we also
didn’t want a system that is overly complex that would drive up the costs. We eventually
ended up with a system that was just right… one thing that we were particularly happy
about is that Huawei was accommodating to changes. As we learned more about the
market, we decided to make certain tweaks to our business model, which actually
required Huawei to change a fair bit, in terms of implementation of the cloud. We are
quite happy that this was done very quickly and nicely. As a result, we were able to
launch a product which met all our requirements.”
More to come
So what’s next for StarHub? “Huawei has a very advanced roadmap in enhancing
(public cloud) services. We will be working with Huawei on the enhancements,
particularly on storage as a service, through the second half of the year… our customers
can also expect more exciting software-as-a-service (SaaS) solutions targeted at
verticals in both SMBs and enterprise base.”
Looking at the big picture, Singapore has proven very receptive to cloud computing. The
government has been advocating cloud computing’s expected boost to productivity, and
formulated a strategy as part of a wider effort under Singapore's new e-Government
masterplan (eGov2015). “We were recently selected to be one of the public service
providers for the Singapore government. That actually requires us, together with Huawei,
to go beyond the quality requirements and respond to clarification requirements of the
Singapore government.”
Tan concludes with lessons learned that he would like to share with fellow telcos. “Know
your customers and routes to market. We focused on particular segments and sizes of
customers. So when we built our cloud services, they were really for particular use.
There is really no “one size fits all.” We didn’t want to launch a cloud with enterprise VMbased kinds of offerings. We wanted something that is open, scalable, and ISV-friendly.
Also worthy to note is that cloud offers the telcos long-tail profit. In a cloud brokerage
model, you can have one app in your platform as SaaS and it’s still profitable for you as
a telco. Don’t miss the long-tail opportunities.” One final note he adds, “Although it is not
the early days, it is not yet too late.”