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Thursday, December 12, 2002

Stupid Networks & Smart Business

Meeting and seeing David Isenberg presentation at Supernova gave me a different level of respect for his views.  I subscribe to his newsletter and have been a believer in Stupid Networks.  The difference is seeing how over time businesses are adopting his simple and elegant vision.

However, the problem I have always had with the Stupid Network paper and resulting world view is how it fails to define a role for network operators.  The strongest arguement for Stupid Networks is that you can't centrally scale service and services (this is why SG&A is the highest of any industry, at 25% of sales), and if you push service and services to the edge of the network you have greater scale as well as innovation.  The role left for network operators is to operate a dumb network.  The problem is:

  1. As Adina pointed out, centralized forces (network operators) seek to retain power,
  2. There are many network equipment and software vendors seeking to enable network-based value-added services,
  3. Without any alternative profitable business model, telecom will go with what it knows, the old way of doing business

This is not to say that David is wrong, its just that there is a hole in his arguement and he needs to plug it.  Unless he can define a business model for existing players, the theory isnt pragmatic.

So here's my suggestion.  Network operators are utilities.  Adopt a utility business model that focuses on lean operations, efficient infrastructure, consolidated billing and commodity management. 

Take advantage of the existing asset redistribution period, liquidate any network element that cannot be managed through SMTP.  Throw away as much legacy OSS as you can.  Develop self-service customer interfaces that are integrated with flow-through provisioning systems.  Innovate in billing to provide it as a service both to your customers and trading partners.  This is different from aggregating partner services, its suppporting their billing through an efficient web service.  Price volatility for commodity bandwidth will increase over time.  Manage that risk for your customers and they will pay you for it.

Being a Network Utility Operator would be a great business.  The first to truely embrace this model will not only be more competitive, but supported by the innovations at the edge.

4:40:52 PM    comment []

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