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Billions of dollars have been invested in the last few years to build a powerful and omnipresent network infrastructure capable of transforming the way businesses work.
The bandwidth is ready. What's needed next, according to four experts on Internet infrastructure who spoke at the HBS Entrepreneurship Conference, is a sustainable business model that can take advantage of it.
"People have invested a great deal of money" in the infrastructure, said Malik Khan (HBS MBA '82), founder and CEO of Sitara Networks. "But 'Build it and they shall come' does not work in this industry."
The challenge, said Khan—and the opportunity for entrepreneurs—is to develop services that boost the demand for bandwidth and devise ways to provision and charge for those services.
"Unless that demand side gets taken care of," he said, "growth in supply will get interrupted in the short term. I think the next 12-18 months will be a little challenging as the carriers absorb all that infrastructure.
"Having said that, I think there are many different companies and many different technologies that are being employed to create that demand, so I think, long term, the demand for network growth is very, very bright."
Value-added services, not pure bandwidth
Alnoor Shivji, founder and CEO of Cyras Systems, agreed on the need and opportunity to provide new services. "The traditional carriers, and also the new carriers, are focused on selling pure bandwidth services. They don't know how to market value-added services. Until they understand how to market those, it becomes very hard for consumers, as well as businesses, to understand what they are getting.
"The carriers just say, 'Here's the bandwidth, you pay me for this much bandwidth.' Their focus is to drive down the cost per mile and per bit. They really are not focused on enhanced services.
"As a businessman, I would be willing to pay for something that is useful to me as a business. I have critical data I have to drive between my offices. I'm willing to pay whatever it takes for that, but the carriers are not ready."
There's a great opportunity, said Shivji, for entrepreneurs who can start carriers "that are focused on services, on marketing based on value rather than just raw bandwidth."
The panel's moderator, Rakinder Grover of Walden International Investment Group, said intermediaries are needed who understand the customer's business processes and what networks can provide, and who can bridge the gap between them with effectively marketed solutions. "The carrier, traditionally, has not been very good at it, and neither are the new carriers," he said.
Intelligence at the edge
A key to providing that kind of service, said Khan, is what he called "intelligence at the edge of the network."
"In an effort to go faster, the network has become dumber," he said. "People like us, over the last 15 years, have taken a perfectly smart network and dumbed it down. First we dumbed it down because we created an IP infrastructure. Then we dumbed it down because we're creating an optical infrastructure on top of that.
"That intelligence needs to be replaced. At every edge of the network we have to create and overlay intelligence that can take a look at the pipe, take a look at the packets flowing through the pipe, and be able to do things with that content and that information."
A network provider may offer a network built to deliver services, said Faraj Aalaei, founder and CEO of Centillium Communications. "But if I'm a network operator, what I really want to do is deliver you the bundle of services, a one-stop shop. Which means I've got to handle your voice, I've got to handle your data, I've got to handle everything you've got.
"How do you build one box that takes all of this stuff in, treats them as though they were special, gives them tender, loving care, packages them in one pipe, and sends them to you?
"That's what intelligence at the edge of the network can do. It's handling every service as transparently to the user as possible. If you do that with more than one service, it's got to be intelligent."
Trends and opportunities
So where should entrepreneurs focus as they look at the infrastructure space?
"In every technology—we've seen this in dot-coms, we're seeing it in optics—you get this huge initial stage of euphoria: best thing since sliced bread, everybody's going to get it, and all the world's problems are going to be solved," said Aalaei.
"Then, sometime later, there's this realization, as we're finding in the optical arena, that just putting fiber optics there is not enough. You need to be able to manage it, you need to be able to add whole new services."
After that realization, he added, there is painful disappointment as stocks drop and venture capitalists cut their funding. "But it's also a learning time for the next wave of improvements, the next wave of promising technologies and companies.
"That's where big companies are made, finding the trends, exploiting them, and then fixing the next problem as you go on."
The key is fixing the bottlenecks that emerge as the networks evolve, said Grover. "That's clearly a theme in the general infrastructure side. That's the first thing to recognize. There will always be bottlenecks as the network evolves.
"Focus on the bottleneck—not the bottleneck that's there today, but the ones that will be there a couple of years down the road. There's the opportunity."
The opportunity for MBAs in the telecommunications business is tremendous right now, concluded Khan.
"The reason is it's all about the business," he said. "The technology part we have solved. It's all about how do you create revenue streams, how do you create value-added services. The training you have is going to come in really handy.
"Networking is it. There is no market comparable to the network market. Over the next 10 years, I believe, this is going to be the hottest market in the whole high tech industry."
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