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The Cloud Is Calling

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Tien TzuoBy Tien Tzuo

Editor’s Note: For more premium content from Zuora, visit the The Next Generation Communications Service Provider Billing Solution Center.

If you could witness behind-the-door discussions among senior execs at the world’s biggest carriers, what fear would you hear most often expressed? Would it be the competitive threat presented by other large carriers? Maybe, but I’d be willing to bet there’s another form of competition that they find equally daunting, one that’s certainly become a huge focal point of these talks in the past few years.

I’m referring to the relatively recent explosion of cloud services, such as Google, Netflix, Apple and even Zynga. These are the companies that consumers are now turning to for compelling new content and services while the big carriers are increasingly becoming mere commodity brokers. For example, while Google isn’t a carrier, its innovative Google Voice service has been met with huge success. One can argue that even Microsoft is now a competitor to the traditional carriers via its acquisition of Skype.

Then, there’s the example of Netflix. With the exploding popularity of its video streaming service, it seems only a matter of time before the company competes head to head against both cable companies and carriers for the right to bring content into our homes.

Moreover, the tremendous success of consumer electronic devices such as the iPad – and the services that run on them such as music, video and gaming – has forced carriers to re-evaluate how they offer data services, from tiered pricing to “all you can eat" packages just scratching the surface. With new tablets, smartphones and other data-intensive devices introduced to the market on a weekly basis, carriers are struggling to offer optimal pricing that meets the constantly changing needs of customers.

Frankly, it’s become a heck of a lot tougher to be a carrier today.

That said, what do carriers need to do to ensure that they’re still relevant in another ten years … or perceived as a relic of the 20th century?

Carriers need to take a page from the playbook of the tech companies that they’re now competing with and do two things. First, get to market with services significantly faster than they have. And, secondly, once they get these services to market, have greater flexibility in terms of how they offer them.

So, what is preventing some of the world’s biggest carriers from doing so? The biggest impediment to change is purely a technical one.

Carriers have long relied on antiquated back-end billing systems that often require years of development and testing before they can bring a new service to market. Moreover, once they do introduce a new service, these systems typically have lacked the flexibility to alter how they package it. Until recently, the infrastructure didn’t exist to move “fast and flexibly."

However, a number of innovative service providers have begun turning to the cloud as a solution. These companies are using cloud-based services to launch new products and services rapidly, have the flexibility to change pricing, packaging and promotions in real-time, and connect with customers across the Web, over the phone, and on mobile devices. Open Range provides an interesting example of the “power of the cloud" as it relates to customer billing.

Open Range is a new telco that leveraged cloud-based technologies to begin offering service within 100 days vs. the two-year window that is typical of new billing deployments. However, the company also utilized another interesting benefit afforded by the cloud. Beyond simply getting to market quickly, cloud services have allowed Open Range to test the viability of different marketing and promotional initiatives of new services such as 4G broadband and digital voice. Moreover, Open Range is able to change course extremely quickly when it becomes apparent that a particular promotion isn’t working. Bottom line: The cloud allows carriers to test and tweak service offerings in ways that would have been inconceivable just a few years ago.

Tata Communications – the $2.4B telecommunications arm of the $67.4B Tata Group – provides an equally compelling example of a carrier that has benefited enormously by using cloud billing. And, given its size, Tata Communications might serve as a model for large carriers that want to leverage the cloud both to get to market quickly and offer services in a flexible manner.

Last October, Tata introduced its InstaCompute service, a fully automated, self-provisioned pay-per-use, enterprise-scale cloud computing and storage solution for businesses. Tata Communications competes with Amazon and other tech-savvy companies in this exploding market for cloud computing, on-demand services. Given the extremely competitive state of the market, Tata Communications knew it was critical to get to market quickly. By leveraging sophisticated cloud billing technologies, Tata completed the billing component in 60 days and brought InstaCompute to market in a year – half the time that it would have taken to do so with a traditional billing system.

Tata Communications is now rolling out InstaCompute to the U.S. market and throughout parts of Europe. And, the company has noted that cloud billing also allows it to easily scale InstaCompute over time to a variety of other global markets, without additional development.

Certainly, Open Range and Tata Communications are very different companies: Open Range is a small U.S.-based telco that caters to consumers. Conversely, Tata Communications is a multibillion-dollar, global organization that serves businesses throughout the world. However, they have at least one thing in common. Each company recognized that to compete today in this extremely fast-paced competitive landscape – against a variety of new types of competitors that seem to pop up on an almost monthly basis – the “old way" of rolling out and packaging services is simply no longer an option. In short, the time for cloud billing is here.

Tien Tzuo is CEO of Zuora, a subscription-billing company based in Silicon Valley. Previously, he was the chief strategy officer and chief marketing officer at Salesforce.com.

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