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SDN Journal: Article

Monetizing Complex Services of the Future

There will always be a need for some kind of communications fabric to deliver information from one physical location to another

In my last blog, I speculated about some of the opportunities that could arise from the implementation and subsequent evolution of SDN and NFV across virtual carrier networks. With companies like Google well-advanced in the implementation of an SDN control plane to manage its flow of bits around the world, service providers are quickly realizing they need to move.

There will always be a need for some kind of communications fabric to deliver information (today, in the form of strings of bits) from one physical location to another. NFV and SDN provide a roadmap for building ubiquitous networks of massive scale more economically and with fewer constraints caused by legacy technology choices. Management and service creation will be (to the user) much simpler: it's just programming. As a result, we can imagine a future in which carriers, and probably third parties, too, will create more elaborate mashups of network functionality, application features and content. Those mashups bring with them more complicated chains of commercial relationships. We can conceive multiple parties carrying the bits, different companies providing software features, content and (possibly) other organizations pulling all these components together and calling it a service.

We are used to talking about a value chain and allowing for multi-party settlement along that path. What we see already and will see more as programmable networks proliferate, will be complex value meshworks, which may be created, rearranged and taken down when they've done their jobs.

We see SDN and NFV - or more likely their intellectual descendants - as providing a framework for bringing the network to this party. We already have a Web services approach to application interworking, and the network will look to the world just like another application interface. We're well on the way to making this happen.

One challenge: who charges the customer and how does that money ripple back to all the players? In the past, we tended to meet complexity and scale with simple solutions, such as bulk tariffs, peering relationships, subscription services without actual subscriptions, all-you-can-eat pricing and so on. Actually, all of these approaches can be useful. The problem is that service providers have often chosen a pricing scheme not because it was the most appropriate for the service and its target customers, but because it was the only way their billing system could handle the case.

Now we can see an impending explosion in the complexity of services that could be offered, and taking an expedient short-cut might not be the best way to tackle this. With scale and variety, there will be an increasing need for granularity rather than broad-brush approaches to pricing. Also, there will be a need for pricing to respond to customer behavior in real-time, not after months of deliberation by the product management and IT teams. And when a new service has been conceived and is ready for launch, the ability to monetize it needs to be there already; no one will want to tolerate delaying a product launch for a few weeks while the billing team works out how to bill for it.

And by the way, this will not be just a challenge for network carriers, but for every business that delivers complex services, and every enterprise that uses those services as part of delivering services to others.

Service providers could discover to their dismay that the process of charging for the next generation of services in the most effective way for the market could be more complicated and expensive than the process of actually building and delivering the services. The fall-back situation, common today, is to avoid granularity, and go for a simplistic solution. But will that work in the new world? A simplistic approach is to go for all-you-can-eat pricing, but will you have time to adjust if your volume assumptions are wrong or change rapidly? You can settle with service partners using peering or broad-brush volume pricing. But peering becomes problematic when the relationship is asymmetric. Broad-brushes are ok unless the brush was too broad, or maybe not broad enough.

My point here is that service providers, of all types and sizes, should be able to price products and services in exactly the way that works best in the market, without constraints. Mostly, today's billing systems don't let them do that.

And in the future, with an immense scaling up of service types and complexity, we see the need for service providers to negotiate deals with customers and partners that are more granular, not less, down to the point where almost every billable event might be a micropayment.

At MetraTech, we thought about this some years ago. As a result, we are happy to make the claim that if any billing company is able to handle this complexity, MetraTech can. In building our billing platform from the ground up, we recognized the need to be able to handle any billing event that can be captured, without exception. No matter how innovative these as-yet-unimagined new services are, we can bill for these. We can handle any number of layers of organization hierarchy, so business relationships within companies and between partner companies can be modeled in the system. We recognized the need to build compensation functionality into the system, so that the cost of all mashup components can be individually tracked and consolidated into the end-user billing stream. There's more, but I hope you get the picture.

We're looking forward to this further revolution in communications. Not all billing companies are so enthusiastic.

More Stories By Esmeralda Swartz

Esmeralda Swartz is VP, Marketing Enterprise and Cloud, BUSS. She has spent 15 years as a marketing, product management, and business development technology executive bringing disruptive technologies and companies to market. Esmeralda was CMO of MetraTech, now part of Ericsson. At MetraTech, Esmeralda was responsible for go-to-market strategy and execution for enterprise and SaaS products, product management, business development and partner programs. Prior to MetraTech, Esmeralda was co-founder, Vice President of Marketing and Business Development at Lightwolf Technologies, a big data management startup. She was previously co-founder and Senior Vice President of Marketing and Business Development of Soapstone Networks, a developer of resource and service control software, now part of Extreme Networks.

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