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Why Don’t Enterprises Believe Telcos on Optical Networking?

In my prior article, I mentioned that only a third of enterprises I’d talked with believed telcos would be able to exploit optical routing to manage network costs. That raises an interesting question: Why is that number so small? Surely the skepticism could impact enterprises’ future service planning, and if telcos can’t hold the line on VPN and business access costs, trying to get off those services via something like SD-WAN could be the smart move. Three-quarters of enterprises tell me that they’re already facing some price increases, but that doesn’t answer the question of why enterprises don’t believe that operators will push for optical routing to reverse that trend.

The biggest reason, cited by 74% of enterprises who don’t believe in telco optical routing progress, is that enterprises say telcos aren’t trying to control costs with optical routing or anything else. This view seems to stem from a general cynicism enterprises express toward their suppliers. In fact, more enterprises (79%) say that their equipment vendors (network and IT) aren’t trying to control costs than say that about telcos.

Enterprises, particularly CIOs, feel they’ve been fighting a budget battle for literally decades. When you ask them the last time they believed they weren’t under cost pressure in their own budget, you get answers like “Decades!” and “Longer than I’ve been in my job.” If you dig through the often-bitter replies, you find that the problem is that the projects that can fund real advances in the way a company uses its networks have gotten scarce. With no new benefits, there’s no appetite for taking on new costs, and CIOs focus instead on wringing every dime out of sustaining what they already have. No wonder they feel like nobody is helping them out!

Almost half of this group cites the difference in price trends for consumer broadband and small-site VPN connectivity. They point to consumer broadband and the Internet, which is delivering more capacity at a much lower cost, and say that telcos are just gouging the business service buyer. This group says that if telcos reduced costs at the optical level, the telcos would probably add them back in the form of charging more for VPNs or adding other features. While consumer broadband costs have plummeted in the last twenty years, telco service costs for smaller sites have risen, if only slightly. Enterprises believe it would be easy for telcos to offer MPLS VPNs over consumer broadband, and they see the lack of progress here as an indication that telcos don’t care about controlling prices.

But are business customers part of this problem? Almost three-quarters of businesses say that consumer broadband isn’t suitable for business connectivity because of reliability, QoS, security problems, or a combination of the three. Is that fair, given how much traffic into enterprise applications originates on the Internet? If the Internet is good enough to connect prospects and customers, and if more and more enterprises are using the Internet and the cloud to connect workers, how is it not good enough to connect small offices?

The second-most-cited reason, mentioned by 44% of enterprises, is that telcos take forever to make any fundamental technology changes, and when they finally launch a trial, it never goes anywhere. At one point in my surveys, telcos said that 85% of the trials they ran never resulted in anything getting deployed.

Enterprises say that telcos simply don’t like to make changes. They also say telco planning makes glaciers look like meteors. Then there’s the fact that telcos rely on standards, and the processes to standardize technology protocols are even slower than telco planning. There’s a lot of truth to this one, particularly the part about projects going nowhere. To paraphrase an old story I read, a telco project is like studying where your lap goes when you stand up.

Enterprises believe that telcos are stuck in supply-side thinking, that they can build something and everyone will adopt it. Responding to something like buyers’ need to see prices decline so that they can justify more connectivity just isn’t in telco DNA.

Reason number three, which 39% of enterprise respondents mention, is that telco equipment vendors are reluctant to introduce technology changes that might impact their sales. Telco X wants another giant router. Vendor A says, “Why not consider optical interfaces on this?” and Telco X launches one of those marathon planning reviews…at best. At worst, they say, “Maybe we should do a whole optical core” and thus buys products from Vendor B. Enterprises see it this way because it’s how their own network vendors (often the same vendors) behave.

“Market leaders hate revolutions,” one enterprise network ops professional told me. He claims, and enterprises often agree, that vendors will use new technologies to get a meeting, and then won’t press even consideration of the new technology because it would slow the sales cycle. Enterprises believe this same behavior will interfere with optical networking transformation.

You might be asking, at this point, why we (or operators) care about enterprise professionals' skepticism. The answer is simple. Enterprises are finding it harder and harder to make a business case for network projects, because the “best” low-apple projects are now complete. High service costs discourage network expansion, which leaves the enterprise at risk for network stagnation. If enterprises believe that their network costs are only going to rise over time, then they’ll not only seek new technology options like SD-WAN, they’ll look for competitors to their traditional business service providers, and they’ll stop believing that the network can empower their workers further. That would be very bad for telcos, for enterprises, and for us all.