The New Web 2.0

Transcript

Introduction

Peter Shaplen: Welcome to this Podcast Series and ongoing conversation about Trends, Technology, and Business. For Cisco, I'm Peter Shaplen. Jeff Spagnola is Vice President of Cisco's Worldwide Service Provider Marketing organization. Good to see you.

Interview

Jeff Spagnola: It's a pleasure to be here.

Peter Shaplen: Let's begin with the top line. What factors are buffeting the service provider's business right now?

Jeff Spagnola: SPs are being asked to deliver more and more value to the consumer or to the business enterprise. Now, you've got to think about how you are going to actually deliver value to a consumer who is used to this Internet world, where everything is free.

When I think of my teenagers, they are online. That's a way of life for them, right? Technology is like air. They just expect it. So I think that demand on the household to keep a good broadband connection is really important. It's integrated into their schoolwork. It's integrated into their work life, right, if they've got summer jobs or what have you, like my kids. And it's integrated into their entertainment.

Peter Shaplen: I drove over here this afternoon. Gas in Northern California is $4.69 a gallon. Anyone who's gone to the market is paying $6 plus for milk. Looking six months ahead, looking 12 months ahead, could rising fuel prices create an upsurge in consumer demand for network connectivity, telecommunicating, VOIP, entertainment VOD?

Jeff Spagnola: So far, the trend is panning out that with less discretionary income out there in the marketplace, there are areas to cut back spending for the consumer, but if you are, say, a parent of millennials with a lot of interest in the Internet, that's not an area that we're cutting back. I think right now the sense is the service provider views this as a market to capitalize on versus a market to be afraid of and to kind of hunker down.

Peter Shaplen: There have been several stories in the press, business press, even the pop press, about whether or not the Internet, the network can sustain this kind of traffic. The clichéd headline is, "Is the Internet doomed?" Listening to you, I sort of have the feeling that you have a different view.

Jeff Spagnola: Well, yes, technology innovation is not the problem. At Nexcom, we'll be demonstrating a technology innovation we call IP over DWDM, Dense Wave Division Multiplexing, which is basically taking IP network traffic and sticking it right into wavelengths, right into fiber optics. Very innovative approach. Takes cost out of the actual model itself but gives you a lot more bandwidth. We're doing 40-Gig today, going to 100-Gig interfaces, etcetera.

So is the Internet doomed? Absolutely not. Vendors like Cisco are out innovating rapidly to make sure that all this traffic can be managed and cost-effectively delivered.

Peter Shaplen: The thought that comes to mind, of course, is that everyone sees those rates for bandwidth as something good. Question in my mind is how do folks -- how do project managers -- how do people make money?

Jeff Spagnola: What I think the opportunity is, and what the challenge is for the service provider is, again, how do you deal with all this traffic in a way that allows you to capture the relationship with the consumer or the business person, deliver richer experiences, and then get paid for that experience in a fair and equitable way.

And I think if there's one thing that keeps the service provider up at night is staying ahead of the innovation curve that they need to keep new applications always in front of the consumer.

We have a lot of different ideas about how to do this.

Number one is it really requires the service provider to think differently about service innovation. The days of building up a frame relay network and spending 18 months to do it and testing it all out and then rolling out your first customer, those days are behind us. Most service providers now have this IP platform, this infrastructure that gives them a large horizontal architecture from which they can play with, right?

So what has to happen next then is once you have this horizontal platform, you have to have product management teams that understand how to extract the value out of that platform. So they have to work with the IT, kind of the data center sides of the house that understand how to build software-based applications. The future of the service providers is heavily dependent on software models versus hardware models or network-centric models.

I was with a customer this morning, actually, at our briefing center here in San Jose, and they just went through an organizational change where the CIO has now taken over responsibility for more of the value-added services side of the business than just supporting the enterprise, if you will, infrastructure sides of the service provider business. And this is a trend that we're seeing, the importance of software, the importance of new service delivery models in the context of the SP environment.

Peter Shaplen: But you're speaking about something even more than that. You're talking about companies actually going to the process of restructuring who does what and who's responsible for what?

Jeff Spagnola: Absolutely, absolutely.

Peter Shaplen: Essential? Can't be done any other way?

Jeff Spagnola: Can't be done without really doing an internal transformation at the same time you're doing a network transformation. Both of them are hard. The network transformation's been going on now for half a dozen years, kind of thing.

Peter Shaplen: Yes, that's just something you buy.

Jeff Spagnola: That's something you buy, and there's a lot of challenges in doing that, getting to think differently about how to build a network. That's taken a lot of work. But a lot of them, they get that part, right? And there are lighthouses out there, from an SP perspective, around the world that are really aggressively going after these transformational opportunities internally, organizationally.

We're actually seeing the CIO play even a more relevant position than the CTO, in some cases, which is where typically the network-based engineering teams have been sitting because there's this realization that, wow, we're in a software business now. In the software business, you're typically looking more towards that CIO background than that CTO background.

The ones that really get it have figured out a way to blend those two together organizationally and redefine the metrics that manage their organizations.

You also have service providers, say, in the mobile space. The mobile industry has been more adept at applications-oriented offers. They've had this thing called the handset, and a lot of the handset applications were vertically integrated in with the network, and they used that handset as a platform, right, to layer on new applications. So the mobile guys actually get this transformation pretty well. It is absolutely an industry transformation, and it doesn't stop at the customer.

The same flip side could be said for the cable industry, with CableLabs, all right, and what they're doing to deal with this.

The home is still an environment where there's a lot of opportunity to improve on the usability, the manageability, the seamlessness of the experience inside the home. Today, they've created this horizontal platform called their Next Generation Network, or IP NGN, platform, and now they need to reshuffle, reorganize, reorient themselves to how to extract value out of that IP NGN network.

There's presence information, right? [Peter] -- is Peter present in an instant messaging kind of way? There's location. Where is Peter? What's his GPS telling me? There's the ways to do identity management, etcetera. That's -- those are all attributes inside of the IP platform that can be extracted and new services can be created and then monetized by the service provider. Great opportunity for the service provider. Comes with different challenges but great opportunity for the service provider.

So it's a completely different way of thinking about service development and service delivery than it was in the past. How do I keep giving them an experience whether they're at home, at work, or on the move, right? So what does that mean for my network? What does that mean for my business models? And so we're working with all of them in terms of navigating through this transformation, and it's going to be fun.

Peter Shaplen: Jeff Spagnola is Vice President of Cisco's Worldwide Service Provider Marketing organization. Thank you for speaking with us.

Jeff Spagnola: You betcha. Thanks, Peter.

Peter Shaplen: And thank you for listening. An archive of this and other podcasts, both audio and video, can be found online at newsroom.cisco.com. For Cisco, I'm Peter Shaplen.