One of the most dynamic segments in the market today is that of interconnection and cloud connectivity. Automation is key, and the shift from a telco mindset to a DevOps approach is something we are hearing about on many fronts. One company that has been shifting its model in this way is Epsilon Communications, which has been in the interconnection business for many years. With us today to talk about the company’s approach and plans for the future is Jerzy Szlosarek, who just took the CEO chair in November 2015 after serving as CTO and COO for more than a decade.
TR: How did Epsilon get started, and where is the company at today?
JS: We started out building an inventory of connectivity solutions for the traditional voice and data markets. We then saw an opportunity to simplify the way carriers connect. In a world where wholesale minutes and IP transit dominated, our customers were asking us to look at establishing connections more easily with more flexible contract terms, providing interconnection. Today ironically, you have interconnection platforms which some of our competitors are doing, but Epsilon was and has been an interconnection company all this while. We grew to a large base of global carriers, Tier 1 and Tier 2 operators, fixed and mobile, which culminated in the building of a global presence with European, Middle East, APAC, and North American operations where our clients could interconnect easily. For the last few years we have been reshaping our network and taking the company digital. Today it's all about cloud-centric Networking.
TR: How is that transformation unfolding for Epsilon?
JS: We are today becoming a cloud-centric network. Keeping cloud context in mind, we are doing a number of things: providing automated connectivity services for our customers to have secure access into the cloud, encompassing SD-WAN services, putting intelligence into the last mile, and orchestrating that back to cloud services. We are also addressing real-time communication services. We have investments and years of competence in providing SS7/C7 signaling services, and we've been an early adopter of SIP in private networks for many years. We are building a virtualized real time communication engine inside our network to allow our customers virtual access to build a telco cloud or operating telco cloud-building services virtually. That's where we are now. It’s quite an exciting time with what's happening in the market with many new models, disruptors, and OTTs coming into the mainstream. Traditional legacy models are under pressure like never before, and we are using this opportunity to really push more innovation and service portfolio into the market. Before if you built a static network, you put it in and you don't really worry about it until the capacity runs out. Now, your customers are really driving the innovation. Things move a lot quicker.
TR: What internal transformations have you had to make to make this shift? Has it been more about infrastructure or about people?
JS: That takes organizational DNA. One thing that dawned on us very early was that this was not just a technical project where we were putting more advanced capabilities in the network. We really had to retool our organization. We came from a legacy model where we were using off-the-shelf vendor products whether it was private lines or Ethernet or IP services. What we had to instill was a culture of DevOps, developing platform capabilities from within. We had to customize a lot of internal processes and develop a whole ethos around DevOps. We wanted open networks API to be the core of all that, so we started investing in our internal systems of our networks themselves via API. In the network layers, we had to change our model from the network or point-to-point or traditional model and start integrating our network with the cloud service operators. So we established direct connections with public cloud operators like AWS, Azure, Google Cloud, and so on. The journey really started with our partners, because the APIs allowed us to interoperate network and virtual machine right away.
TR: How have those new relationships affect Epsilon’s development?
JS: We were very clear that we didn't want to be a cloud, in the same way that we previously said we didn’t want to be a voice provider globally. But we did want to provide connectivity services for those end-user applications, realizing our value in the chain in terms of secure connectivity with high availability and SLA and TOS. We spoke to many customers and partners who would tell us their fear of moving to the cloud as kind of a fear of the unknown, so to speak. The questions ‘how do I protect my data?’, ‘How do I manage to have one system and network?’ are where legacy networks are today. What it meant for us was understanding that it as a collaborative partner ecosystem that we're working with. We were lucky enough early on to share our partnership for how we see telco cloud services and connectivity for the cloud model. And we were working with a number of application providers who are software-only, embedded with public cloud pure offering rich services and so had a demand for secure connections. We talked to them, and they're saying look we are an application provider, and we want to invest in developing enterprise and retail applications but we need a different way of building network and connectivity services. So for us it was a number of things, organizational transformation with all the complexities that came with that, working with the broader ecosystem, and working with customers to realize the value. The whole value chain is shifting and who is who is different, and how services are conceived and where they are relevant is also different. It takes a lot of time to get that figured out. We went to market the end of last year and this year, gaining steady traction in the adoption on our CloudLX portal. We are seeing interesting cases with every customer that we connect, we are realizing new possibilities.
TR: Are you planning to take on the enterprise segment directly? How do you view your potential markets going forward?
JS: We've enjoyed the wholesale market. One of the things about being an alternative player but still having global aspirations is that the channel is key. We provided our network services to the carriers who in some cases would package Epsilon as part of their connectivity solution. We now ask: What does the new wholesale look like? For Epsilon, we want to grow with our customers, and we don't want to compete with our partners. So we don't address the enterprise market directly. We are working with a number of different groups. We are working with carriers of course, positioning platform service and innovation for the carrier landscape. We are working with the data center companies, who are themselves becoming a marketplace whereas in the past they have focused on racks and power. If we look at big companies that are in the space like Equinix and Digital Realty, connectivity is as much a part of their system now as the co-location ever was. We are working with the managed service providers, who have focused for many years purely on IT, applications, hosting, and the SMB. They want different types of network solutions now. For numerous years they have been going to the telcos and buying big MPLS and on-premises services. Today they want access to a new kind of connectivity solutions. And we are working with the SaaS community itself, application providers who are resident in a cloud, public or private, investing in software for all kinds of things. They need secure networks and guaranteed latency performance, and they need to be able to scale up and spin up fast.
TR: Where do you see the need for additional expansion?
JS: We are not in Latin America today, although we do reach it via our PoPs in Dallas and Miami. But LatAm would be a market that could be a new one for us. In all the other markets where we are, we are continuously expanding coverage - North America, Europe, the Middle East, and Asia-Pacific. But it's pretty dynamic in all regions at the moment, and we see a big appetite.
TR: We’ve seen a series of new cables come online over the last year, and more are on the way. How does the newly available submarine capacity affect your business?
JS: The addition of any new cable really supports our business. For every cable pricing changes, and when pricing changes it's easier to satisfy demand, and cloud equals demand. We see public cloud growing exponentially, it's quite staggering. There's literally a race on to have enough resources to meet demand. It's pretty much total warfare out there from the frontrunners and we see it in the headlines all the time. And you have to connect to the cloud, and what's happening in terms of the size of the infrastructure required is explosive. We do work with many new cable projects, we most recently have been working with EBG and SEA-ME-WE5, and Aqua Comms in the North Atlantic. New cables create more opportunity for us, more resilience, a more competitive environment, and satisfy a growing need.
TR: Epsilon has followed a path of organic growth for the most part, but is M&A something you see as a possibility going forward?
JS: Yes, we have grown organically, but we do look all the time. We've looked at a number of targets over the last few years. But it's important to understand what our value is and consider what is the right kind of company for us to get involved with. We would want those that help us get into new geographies or that provide us with a strategic asset that would add value to our effort -- whether fiber or colocation or a software platform. We do have a number of potential targets under consideration, and are working with a number of parties. But nothing has turned out just yet.
TR: What’s the biggest challenge you see ahead of you?
JS: We are changing our model, and that has impacts across the board. To get the people with the right skill sets in and have them really understand the value of the networks and how we present them through APIs and portals, that is the big challenge. There's a lot of pressure all around from engineering roadmaps, product, pricing, pre-sales, getting solutions all put together, and upgrading our backend to manage transactional volumes of cloud services as well as managing a legacy business. It's testing our teams. But they're committed, and it's fair to say we're here 24 hours at Epsilon keeping on top of it. In a software world, you are innovating a lot more quickly, committing updates to your platform on a daily basis. We didn't have that type of change control in traditional networks. Getting our minds to be a part of that journey is by far our greatest challenge.
TR: How much has your employee base shifted toward software?
JS: Before, the network was at the core of our business, but tomorrow it will be the platform software services. We recognize that and we are addressing that shift with our staff. If two years ago 100% of our resources were telco people, next year some 15-20% of our resources will be software people. That's the DevOps culture, and DevOps becomes a community. We are in the infancy of this industry, and getting the right skill sets in is a big focus for us. We are building our roadmaps all around becoming a platform for that.
TR: Thank you for talking with Telecom Ramblings!Industry Spotlight · Interconnection