At the recent COMPTEL Spring conference in Dallas, a well attended session I organized explored “the Ethernet phenomenon”, an area experiencing tremendous growth despite the downturn economy. Companies represented on the panel had serious success stories to tell: RCN Metro just turned in its best quarter in five years, Optimum Lightpath saw 19% year-over-year growth in their most recent quarterly earnings, and the rapidly growing Zayo Bandwidth just raised $130M to fuel their network expansion plans. What do they have in common?
Despite having widely different infrastructures, geographical coverage and operational practices, all had figured out the formula for rapid revenue and margin growth in Carrier Ethernet: (1) Move from best-effort to premium, SLA-grade services to introduce 25-65% higher pricing, (2) offer hosted and managed services – such as VoIP, stateful firewalls, storage extension and even hosted-router services for financial trading – to reduce churn and further drive growth, and (3) use demarcation units to monitor their critical services and expand to off-net locations – providing unrivalled QoS and best-in-class performance on a national or even global scale.
The monitoring aspect is a key component of offering SLA-backed services, as one audience member asked during the question period, “How many of you are assuring your SLAs with real performance data – shouldn’t an SLA be more than just a piece of paper?”
Aqeel Asim, Director, Data Engineering & Operations, RCN Metro answered that there is strong demand from their customers for network performance visibility, and that they are working with their equipment and back-office vendors to make near real-time SLA reporting directly to customers, collected both from service endpoints demarcation units as well as the network elements they use for Carrier Ethernet service delivery. He cautioned that providing raw data directly to the customer doesn’t fit the bill – the data needs to be in a format customers can understand. Time-averaged and 5-15 minute reporting periods work well from an operations perspective while meeting customer reporting expectations.
David Strauss, Vice President of Marketing for Optimum Lightpath agreed, “customers aren’t always in a position to look and understand all that data, especially in a time when resources are constrained”. Even if they aren’t ready to digest this data, “an SLA should be far more than a handshake. If there is an agreement that these are the terms, then there should also be transparency. If there’s a risk of an outage that the provider is aware of, they should be open about it and dealt with immediately. If a customer wants reporting, then that should be provided.”
John Scarano, President and COO of Zayo Bandwidth learned from frequent acquisition due diligence sessions that service providers fall into one of “two schools of thought – one is the sincere intent to provide high quality service,” backed by solid engineering and assurance, “and there’s a fairly large number of the opposite school of thought that suggest that SLAs are tools to win business but there is really not an engineering commitment that underpins what is put on paper, and so people cross their fingers and hope for the best. In other words, commit to an SLA that requires high performance service credits, or penalties, but without development efforts that over time can meet the thresholds they’ve committed to. Customers clearly don’t want just this idle promise, but a real commitment”.
Tim McElligott, Editor-in-Chief of B/OSS magazine underlined that if a provider does have monitoring SLA-monitoring data and shares it with their customers, they’ll build a stronger relationship and differentiate their offerings over operators who can’t show their performance.
So providing proven performance to meet customer expectations is not just a trend, it appears to be a winning formula for Ethernet services growth – an approach that appears to overcomes the current economy and captures long-term market share secured by bundling hosted and managed services.
You can watch a video replay of the panel at www.Accedian.com/comptel if you’d like to hear it direct from the experts.
Scott Sumner, VP Marketing, Accedian Networks
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