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Why SOA implementation is necessary for Traditional Telco Service Companies?

After lecturing on SOA concepts, Architecture and Technology, I present Case Studies. While presenting Case Studies, I ask my students: "Why many Case Studies and Success Stories are from the Telco industry?" Usually they do not provide a good answer to the good question.

It is a good question because the answer is based upon Business dimension, Technology dimension and the relationship between the two dimensions. 

Why SOA implementation is necessary for Traditional Telco Service Companies?
For many years, Traditional Telco companies revenues were based upon telephone calls billing.
In USA Bell Labs was split to Baby Bells. In other countries these companies were Monopolies or Duopolies.  
Due to lack of competition, their revenues were high.

When Voice over IP matured they found a lot cheaper competition such as Skype

When someone traveled to other countries, he called his family in his home country. The Telco service providers earned money.

However, when I paid a visit to Bhutan two years ago, I could find free Internet services in almost every hotel or guest house. I used Skype. I could talk to my friends and relatives as much as I liked to. I paid nothing to a Telco Service provider
The Computer Camera enables another type of data classical phone calls were not able to provide: I could see my friends and relatives during our phone calls. 

Bhutan is just an example of Developing Country. You may be sure that me and anybody else could use free Skype calls from Developed Countries.

The traditional Telco Companies had to reinvent themselves or perish. 
They developed new Business Model based on new services e.g. Content Services, Internet Infrastructure Services etc. 

As Far as Information Technology is concerned, frequent and major changes were required in order to support the new Business model and the New Business Services. 

Agility or ease of Change is SOA's major Value Proposition. The Traditional Telco Services providers transformed their IT systems to Service Oriented Architecture based systems in order to support the IT Systems changes.  

SOA and Cellular Phone Service Companies
The emergence of Cellular Phones is another threat to the Traditional Telco model, which was not mentioned in the previous paragraph.

I would like to describe the beginning of my SOA lectures, prior to discussing why there are many successful Cellular Phone companies SOA Initiatives.  

I start my lecture by describing two new banks. I describe a very simple Business Plan and the Information technology effort supporting it.

The first imaginary bank, named T-Bank (T stands for Traditional) built Legacy Silo based systems. The students easily find and understand the disadvantages of that approach.

S-Bank(S stands for Service Oriented Architecture), imaginary bank as well,  built a pure Service Oriented Architecture and the systems building blocks are Services. The students easily find and understand the advantages of this approach. It is  relatively simple and easy to  build S-bank systems


The third imaginary bank is R-Bank (R stands for Real). It is a "T-Bank" which was merged with another "T-Bank".
Moving from large Silo systems architecture to SOA based Architecture is a long, complicated and expensive journey. 

Let us go back to the Cellular services companies. 
Which type of bank resembling them? These companies are new companies, therefore most of their systems are modern. They have only few Legacy Silo Systems. They resemble S-Bank.

Most of the Traditional Telco Companies as well as most Banks, Insurance Companies, Governmental Agencies and Utilities companies resemble R-Bank.

It is easier for Cellular Services Companies to transform their architecture to SOA, therefore SOA Initiative's success stories of companies of this vertical are common. 

New Challanges to Cellular Services Companies
Similar to the need of Trditional Telco Companies to reinvent themselves a decade ago, Cellular Services Companies need to change their Business model.  
Revenues from Cellular Phone calls and SMS messages are lower than few years ago.

Services like downloading a Ringtone you paid for are obsolete in Smartphones.

Regulations and Competition are factors lowering income from Phone Calls and other services.

Mobile Apps make some paid services unnecessary. 
WhatsApp is an example of an aplication replacing SMS, without any revenews to the Mobile Services provider.
Infrastucture costs are high. 

The Mobile Services Companies are looking for new revenews sources e.g. Financial services, Content Services and even Cloud Computing Services.

The lucky providers have solid SOA and BPM implementations, which facilitate the major IT systems changes supporting the assimilation of new Business Lines. 

Final Notes
SOA provides the basis for Business Agility. Business and IT Agility is a must for Traditional Telco companies, as well as new Telco companies, which have no choice but to reinvent themselves. 

I read about financial difficulties of Post companies.
Increased usage of e-mail, SMS as well as other technologies, reduce the number of letters and reduce the revenews. Soon they will have to reinvent themselves like the Traditional Telco services providers and the Mobile services providers.

Read the original blog entry...

More Stories By Avi Rosenthal

Ari has over 30 years of experience in IT across a wide variety of technology platforms, including application development, technology selection, application and infrastructure strategies, system design, middleware and transaction management technologies and security.

Positions held include CTO for one of the largest software houses in Israel as well as the CTO position for one of the largest ministries of the Israeli government.

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