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What is the difference between a CLEC/ICP and a cloud services provider?

A few months ago, I spoke at a technology conference about the future of cloud computing and cloud-based virtual desktop infrastructure (VDI) solutions. While there, I dropped in on one of the keynote sessions, which included a lineup of executives from some of the larger services providers in the industry. I had my own session that day, so I wasn’t nearly as engaged as I normally would be, but then a question came from the audience that piqued my interest:

Do you believe that CLECs (competitive local exchange carriers) or ICPs (integrated communications providers) are in a position to disrupt CSPs (cloud services providers) with their portfolios of cloud computing offerings?

The well-rehearsed answer (from a CLEC) was that CLECs and ICPs are in a good position to do so. The speaker supported this opinion with well-crafted, creative reasons that on the surface sounded very convincing.

The CLEC and ICP cheerleaders present a good story. They say they’re a threat because they have a track record of delivering reliable voice and data services, established business and operations support systems (B/OSS), superior customer support and responsiveness, experience to scale products, and great services bundles. In some cases, their financial strength anchors the logic.

Sounds like a good argument, right?

After 16+ years of talking to customers about their experiences, my personal take is that the majority of CLECs have little-to-no chance of disrupting CSPs. The forecast is cloudy at best!

While CLECs and ICPs have strengths on paper, there are challenges for these business models to adapt. Without change, it will be difficult to disrupt pure cloud services providers. Successfully delivering production and enterprise applications — whether web scale, infrastructure, or cloud VDI — requires innovation, business agility, technical voodoo, competencies that go deeper than running a network, and a collaborative culture. Doesn’t sound like many CLECs I know!

I have broken down the challenges and differences between the two models to demonstrate why CLECs and ICPs will fail where CSPs flourish.

Business agility. The cloud services market continues to change and define itself. Success in bringing disruptive services to the market requires an ability to react quickly and a willingness to embrace change. CLECs, by their very nature, struggle with quick movements in the market and with technology. They are slow and steady. In this case, their size is a weakness, not a strength.

Probably the most relevant impediment for the carrier, regardless of what it calls itself, is that it is dragging a huge ball and chain behind them. This ball and chain is called legacy network infrastructure. The burden of maintaining a network with increasing costs and declining revenues precludes them from making a real commitment to the cloud.

Cloud services providers, on the other hand, are generally more agile, innovative, and extremely motivated. CSPs bring very specific domains of knowledge — for example, in computing or IP contact center — which is distinctly different than delivering a pipe of bandwidth. CSPs are committed. They are also network agnostic and can deliver the best of multiple carrier offerings to create a more stable access option for moving your services to the cloud.

Innovation. To start, I recognize that an innovative CLEC is usually an oxymoron. However, this is a key distinction between success and failure in cloud services.

CSPs are innovative and forward-thinking. They are engineers that learned how to sell and market their wares, rather than salesmen that view engineering as an afterthought or a necessary evil. To be successful in cloud computing, your engineering kung fu must be deep and it must be strong! There are no shortcuts.

There is a quantifiable financial argument for cloud computing. But in the end, IT managers will not move production applications to the cloud unless they are confident that the cloud is stable, secure, and controlled and that the service provider has the engineering and development competence to deliver enhancements and new solutions on a regular basis. It needs to be faster and cheaper than what they could do on their own. CSPs flourish in this environment; CLECs, not so much.

Culture. This could be the most limiting factor for CLECs and ICPs. After all, a company’s culture either fosters or suppresses innovation. Some quick comparisons between CLECs and CSPs:

  • Transactional vs. consultative
  • Cookie cutter vs. purpose-built
  • One-size-fits-all vs. focused offerings
  • Silos of functional areas (sales, marketing, operations, etc.) vs. domains of discipline (computing, VoIP, call center, etc.)

For example, it’s challenging for cloud computing or IP contact center disciplines to prosper in CLEC or ICP environments because of the deep-rooted cultural barriers.

ICPs will tell you that since they provide the network, they should provide the applications that ride it. Yes, there is an intersection of connectivity and applications in the cloud, and we need the network provider to deliver a good grade of service (i.e., low latency, minimal packet loss, predictable deviation between packets, and up time), but hosting applications is different than maintaining the highway.

Visibility is important, too. But how many CLECs and ICPs really have end-to-end visibility? I’ll let you decide.

Service and support. This all starts with expectations. When they think of the cloud, many end users incorrectly start with the expectation that IT professionals are being replaced with a mouse click. The cloud doesn’t replace IT, it optimizes IT. It makes IT faster, more agile, and more strategic. IT is a critical part of any cloud strategy and is an absolute necessity. Please do not believe anyone that tells you that the cloud replaces IT.

Why is this important? Because CLECs and CSPs cannot replace your on-staff IT professionals, but we do need to support them.

CLECs take the traditional approach to support, which ends at the demarc, and they manage it with an iron fist. If your CLEC or ICP provides exceptional support on its core services, then this might not be an issue. If not, then proceed with caution.

CSPs, on the other hand, have engineering resources on staff that have the ability to go deeper if, and when, needed. They understand that your experience in the cloud will come from many different interactions and that confidence in your people and support staff is crucial if you are going to stay in the cloud long term.

Brand. Customer perception around a certain brand or logo is paramount for any service provider to be successful. If there is a stigma in the marketplace regarding a brand’s service availability or quality, it will be very difficult to get any traction in cloud computing. The company needs to have a reputation for quality and innovation to have staying power in this segment.

CLECs often struggle in this area. Yes, they have customer relationships, but many are cautious to put more eggs in that fragile basket. CSPs, on the other hand, have built their business and brand in the world of high availability and stringent service level agreements (SLAs).

Distractions. CLECs and ICPs have legacy businesses that require attention. They have to manage aging networks, declining revenues, competitive pressures from cable companies, shrinking margins, and more. They have resources, but how many are focused on delivering cloud services? The answer would surprise you.

Alternatively, CSPs are smaller companies but dedicate 100 percent of their resources on delivering cloud services. In this case, it’s an easy argument that the smaller guy is more committed and managing fewer distractions than a CLEC. The result? A smaller size, but a proportionately larger share of resources focused on your core application.

I don’t think it can be argued that there is a game-changing opportunity in front of us. But for many CLECs and ICPs, the bridge between who they are and who they want to be might be too much to overcome. Some will acquire and some will build, but the key to success lies firmly in their ability to embrace a longer transformation of their business model to support these new opportunities. Until then, this is a space that the CSPs will continue to dominate and, as you can probably tell, I do not anticipate any disruptions!

Let the ICPs and CLECs provide the pipe that delivers network services and applications. It’s what they’re good at, it’s what they know, and it’s what 99 percent of their resources are focused on. We’ll take care of the rest. It’s a win-win!

The post What is the difference between a CLEC/ICP and a cloud services provider? appeared first on Evolve IP.

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Scott Kinka is Chief Technology Officer for Evolve IP. He has spent almost his entire career devising new and simpler ways for companies to acquire and integrate technology. While all of the tech talk these days is about the cloud, he was doing this when it was called ASP (application service provider) or on-demand. Before Scott joined Evolve IP as Chief Technology Officer, he served as Vice President of Network Services for Broadview Networks and ATX Communications. He has been involved in application development, hosting, messaging, networking, unified communications, contact centers, and security. His mission (and specialty) is acting as a translator between technology and business needs.