Telecom companies have a fight on their hands with OTTs, the more agile born in the cloud companies are able to signficantly cut into the profit margins of the legacy system burdened telco giants.
Gillai, said: "They’ve been successful because their networks are stable and they work but they’re not very agile. One problem they face is that the traditional services which they monetise are getting compressed."
For its part, HP is assisting with Network Functions Virtualisation technology to help move legacy technology into software which is running on standard hardware and then "cloudifying" it to help them compete.
Gillai, said: "Cloudifying it doesn’t mean it has to run on public cloud but in a cloud paradigm, so they can gain better control of their CAPEX but also gain agility by moving to a cloud model. Then eventually move to a DevOps model so they can compete and provide services against the competition, people like Skype and Netflix."
HP and Gillai feel that they are in a good position to help in this area as most of it is ‘green field’ for the company. So although the market is going to get compressed by companies trying to reduce costs, this is unlikely to negatively affect HP as it is new business.
To address this the company launched its Open NFV program and NFV organisation which includes technology architecture from HP and its partners.
Part of what is driving the telco industry to modernise is the demand for more bandwidth and the competition from OTTs and start-ups which are particularly dangerous for established companies in Europe.
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"In Europe it’s open season, it’s brutal."
The diversity of providers in Europe makes it a very different landscape to operate in compared to the U.S. where Gillai says: "The big guys are concerned about their cost structure, they aren’t really concerned about an upstart, they just want to find a way to make more profit."
Comparatively, in Europe larger companies have to constantly find ways to implement what a start-up is doing but in a cost effective manner.
"The pressure is much higher in Europe, the competitive pressure is much more intense and that’s driving people to take much bigger risks on the technology perspective to try new things faster. They are under pressure from competitors who are trying all kinds of things."
This may be beneficial for consumers who should find that their services improve while being delivered at a cheaper price but it is not necessarily beneficial to the companies.
"At the moment people are not making money, they are making bets, so at some point you will see people say they’ve got to make money."
With the bar being set higher for where these companies can make any profit, this is where NFV can be of benefit."A lot of the costs are operational, so what occurs is a move to new technologies which remove a lot of these."
While the path should eventually lead to a more cloud oriented business, he expects this to be a long road taken in four phases.
"The first phase is you separate, you decouple the hardware from the software, then you virtualise so you can decouple but you can run off the software, then you cloudify which gives you automation and finally de-compose, which means you re-write the apps to make them more cloud oriented."
This is a lot of work, with Gillai believing that the majority are now in the virtualised phase and while re-writing applications will take a lot of work, he expects that the culture in these companies will be the biggest problem.
"They structured themselves in a certain way, with certain silos that worked really well for them. Now they have to change and implement a different play and change how they work."
