Between cloud computing, storage issues and finding the right systems for the right business, the telecommunications industry is changing quickly. Recently, telecommunications executives representing companies throughout the industry met at the Las Vegas office of Holland & Hart to discuss their growing pains and meeting the needs of increasingly technologically advanced consumers.
Connie Brennan, publisher of Nevada Business Magazine, served as moderator for the event. These monthly meetings are designed to bring leaders together to discuss issues relevant to their industries. Following is a condensed version of the roundtable discussion.
What challenges does the telecommunications industry face?
Mike Ballard: The greatest challenge is, right now, there’s a lot of opportunity and the market is ripe for telecom. Dealing with that is a challenge.
Mark Haley: The needs of our convention customers across the country are expanding constantly, just keeping up with upgrades and bandwidth requirements is a challenge. Also, trying to forecast what they’re going to need each year is a challenge. The most visible part of our business is the wireless networks. People feel they should walk into a convention center and it should all be free. It cascades down so we’re trying to deal with that.
Jeff Grace: Our biggest challenge has been the economic climate. As of the middle of this year, I’m happy to say much less so than in previous years.
Cheri Hickman: The biggest challenge is keeping up with technology and keeping the technicians up with the new solutions that are out there. The other one is, with small businesses, [there’s] the mindset of letting them know that the infrastructure is in place for your host in your voiceover IP so they understand it’s safe to look at those solutions.
Duffy Leone: The biggest challenge for us is that the large, established businesses continue to grow in this business climate. You’ve got the economic conditions, the regulatory conditions, [and] you have got labor issues. All of those things that are coming our way in addition to the real changing tastes of consumers. They’re expanding in their own world and we’re trying to chase down where we think they’re going.
John DeMarco: Our biggest challenge has been, over the past several years, rebuilding after the telecom boom of the 2000’s and really define what our core business is. We’ve done that over the past 12 to 24 months and we’re starting to get some traction now in the United States.
Chris Donnelly: Our challenge is how do we, as an organization, partner with our carriers to scale the support to where we think the technology consumption, meta-data consumption, is going? It’s a strange conversation when someone asks for a hundred gigs at a dollar a megabyte. We have to figure out a way to stabilize pricing so that our carrier partners can afford to monetize 40- and hundred-gig nodes in every city in America.
How are you keeping up with demand?
Leone: There’s an article in the Wall Street Journal talking about the Justice Department looking at usage and how cable companies limit usage. One of the stats in there is the number of hours of video usage over the internet which has grown 47 percent in the last year. That’s the kind of pace of change that we’ve been seeing. We spent a billion dollars here in Las Vegas over the course of the last eight years to try to build the network up so we had the capacity to continue to spend tens of millions of dollars a year. It’s not a game for the faint of heart. You have to keep dumping capital into the network in order to keep up with that kind of growth.
Haley: We’ve gone from commitments on circuits from around nine gigs to over 27 gigs in about three years with less facilities. It’s a tsunami of data requirements for that.
Donnelly: The question then becomes, how do carriers continue to support the beginning of the explosion? We have one customer that has over a hundred petabytes of storage in one building. The amount of infrastructure required to support that continued growth and sustaining that type of storage cloud is unbelievable. To give you some perspective of how much data [a petabyte] is, if you started at the beginning of time, every piece of written media, every language on every newspaper, magazine and book that’s ever been printed, and bundled it up until the end of 2010, that would be about 50 petabytes. We have one customer who’s recently installed almost a hundred petabytes.
Ballard: The big question is, as demands are getting bigger and bigger and customers are demanding a lower price, how do we make that make sense in the business?
Grace: That’s the real issue.
Urquhart: Unfortunately, the customer looks at it as a commodity, not a technology. That’s where we have evolved. The end user is so keyed to their business, both their telephone and their data, yet they’re price shopping all the time.
Grace: I think the answer really is education, to let folks know the difference between home grade and business grade. I had this conversation with a client yesterday. We can solve the problem with $500 or we can solve the problem with $5,000, and many points in between. It’s educating the client, the end user, of what the difference is.
Is cloud computing still the newest trend?
Grace: Cloud computing is definitely a huge new trend. We launched our cloud platform hybrid a year and a half ago and we sell it to small and medium-sized businesses. What we’re seeing in the IP industry is, it’s not taking as rapid a foothold as folks expected. We’re seeing instead a hybrid model where businesses put some pieces and parts there and keep others on premise. It’s a pretty intelligent approach. That speaks to end users, businesses being much more sophisticated and discriminating than they were. It’s a huge, new, important trend.
Ballard: One of the recent statistics I heard is about 40 percent of companies have gone to the cloud, but they’ve only incorporated ten to 20 percent of their business of what they think will end up in the cloud. There’s still a lot of room to go for cloud computing.
Urquhart: They’re all testing it right now. There’s an insecurity factor in the cloud, in terms of a security breach. We have a major medical practice in Phoenix that we provide a ten-gig ring to connect all of their facilities. Will they store their data off-site? No, they’re not. They’re not going to do anything in the cloud. There’s a insecurity.
DeMarco: It’s funny because for people’s personal life, we rely on the cloud each and every day. Whether its counting on your Hotmail, Gmail or Yahoo account or when you shoot your Instagram photographs, when you upload them to the iPod. From the individual level, we all rely on it. Yet, when it comes to our business data, we’re a little more reluctant. It’s just a matter of time before we embrace it in the business world, just like we embrace it each and every day in our personal life.
Donnelly: If someone said, what is the biggest inhibitor of cloud today? My opinion is that it’s all of us not wanting to be wrong. The key challenge is how to create an environment that takes the risk and fear away but gives and provides empirical data so we can all figure out the right solution, not based on speculation or inappropriate financial investment. Based on real live, empirical data that we can say, “Here’s what we did. Here’s how we duplicate it. Here’s why I’m comfortable.” Let’s make an investment in that.
Lance Earl: You talk about the educational process. For law firms, we store many of our hard-copy documents off-site. At some point, we became comfortable with documents you store off-site and can retrieve upon request. It’s not much different than educating people or introducing people to the cloud the same way. You can essentially store your information off-site and access it in the same way you do your hard-copy, it just doesn’t take as much time.
Does the average business person understand what the cloud is and what it does?
Donnelly: It’s a funny question because what we’re seeing (and we have a wonderful perspective at Switch because we’re meeting so many different size companies) is that there’s not a CIO on earth that doesn’t want to understand what cloud means to their corporation. The interesting thing is that, the more sophisticated of a technologist you are, the more frustrated you are with the word “cloud,” because it means so many different things to so many different people. On the one end of the spectrum you have a company like Zynga that runs a game. If the game goes down, it goes down. On the other end, you might have a Wells Fargo. They can never go down, not for one second. Then there’s everything in between. What we see happening is that people are trying to figure out how to migrate applications into the cloud. That’s the challenge.
Grace: It’s a learning curve for the end user in the organization. It’s a learning curve for the service providers as well. When we started ours a year and a half ago, we very much wanted to be early in that game. We’ve learned a tremendous amount over a year and a half. We’ve been able to reduce price points, understand the customers’ needs much better, and change the way that we approach the back-end technology. It’s a huge learning curve for everyone.
Do you see business telecom expenses going up or down as a result of the changes we’re seeing in the industry?
Hickman: As far as the small business owner goes, we have been able to go in and change out their security services and provide them with a new solution for less money than they’re spending on their traditional carrier services using a set platform and voiceover technology.
DeMarco: It’s just a displacement of expense. Instead of spending it for pieces, parts, gears and cables, it’s now for services. It’s for the cloud, based on service.
Grace: It depends on what the consumer wants, if they want a $500 solution or a $5,000 solution. If it’s a cheap solution, let’s all be aware that if there are other issues, you’ve got to understand that you bought the cheaper solution.
Ballard: Nationally, you’re seeing telecom spending last year rise by nine percent in general. Businesses are spending more on telecom, but we’re seeing the average unit price go down 12 to 15 percent. You’re buying more, but you’re getting so much more.
Leone: The price of vending continues to decline but the net spending will still be more because of the use. Their internal labor cost is being reduced and the effectiveness of the organization is improved in terms of the sources.
