Action In The Cloud
The market for cloud computing infrastructure and services is growing rapidly and a wide variety of players—some old, some new—are rushing in to grab a share of the opportunity.
To thrive in the cloud market, they must establish and solidify their positions as value-adding players. Otherwise, they risk being pushed aside by both traditional players and entirely new entrants to the market.
To win in the cloud marketplace, telecom operators must determine where in this new ecosystem they can play most successfully. Finally, they need to determine which other players they can partner with most effectively in order to build the best cloud offerings possible.
The New Cloud Ecosystem
With the advent of the cloud, however, the need to operate in the physical world is being replaced by the delivery of software over the Internet. This shift is rapidly creating a new and very different ecosystem, one driven by a new set of players that provide essential cloud offerings.
Three kinds of services are currently available in this new ecosystem: software-as-a-service (SaaS), platform-as- a-service (PaaS), and infrastructure-as- a-service (IaaS). Telecom companies have only begun moving into the cloud space in the past couple of years, primarily offering IaaS in the form of networking and hosting services.
Some telecom operators, however, have been moving into more value added services, including basic SaaS offerings and early efforts at PaaS, for both consumers and small and medium-sized businesses (SMBs).
Strength in Assets
Telecom operators have long been in the business of offering highly reliable network connectivity to their commercial and retail customers, as well as accompanying security and billing services. Telecom operators must extend their strengths to new areas while making use of the powerful assets and control points they already have. Those assets are concentrated in five key areas:
- Quality of service: Telecom operators have the ability to fully control quality of service at every point in their networks, which allows them to augment cloud offerings with wide-area network optimization and variable, tailored quality of service.
- Connectivity: They have a unique selling proposition at the connectivity layer. They can use that connectivity to refine and enhance a variety of cloud offerings.
- Aggregation: Telecom companies are uniquely positioned to group and structure a wide variety of trusted and tested cloud services for all their customers, and to provide flexible combinations of private- and public-cloud elements, depending on customers’ needs.
- Delivery: Their strengths in the connectivity layer allow them to offer a wide range of cloud based services.
- Sales channels: Their existing sales channels, including telesales and portals, give telecom operators built-in direct access to large numbers of consumer, SM SMB, and enterprise customers.
Ways to Play
Trying to compete with large ISPs as pure operators and retailers of standard cloud connectivity services will not be a winning strategy in the new cloud ecosystem.
There are six strategic plays that will enable telecom companies to position themselves effectively against traditional cloud players.
- Network Infrastructure Play
This strategy, which focuses on connectivity, the first step in the cloud computing value chain, involves offering networking and value-added services for virtual private clouds. It leverages core telecom assets such as managed connections, end-to-end quality of service, and managed security.
- Commodity Private-Cloud Play
This strategy involves delivering complete private-cloud infrastructure and software platforms primarily to large enterprises. This asset-heavy play focuses on operating customers’ existing infrastructure for key enterprise apps like Oracle/Sun and SAP/TSystems, and potentially also for e-mail and collaboration services.
- Secure Private-Cloud Play
Potentially more attractive than the play above, given telecom operators’ reputation for strong data privacy and network security, is their real opportunity to offer complete cloud services to individual enterprises in highly security- and privacy conscious industries. This is an asset-heavy play that entails managing customers’ existing infrastructure in a private cloud.
- SMB Public-Cloud Play
The assets that enable the secure private-cloud play—unified communication, storage, and seamless NaaS-enabled services—could also allow telecom operators to offer public cloud services accessible over the Internet to small and medium sized businesses. Telecom companies could gain a significant share of this market by leveraging their substantial SMB customer base and gaining scale.
- App Aggregator Play
This play focuses on aggregating SaaS applications and offering them both to enterprises and to SMBs and consumers
- M2M Hybrid-Cloud Play
Telecom operators have a real opportunity to offer services to companies looking to transparently integrate services around machine-to-machine (M2M) communications. By operating such services in the cloud, telecom companies can provide enterprise customers with considerable flexibility in running their M2M communication networks.
No matter which path telecom operators choose, their opportunities will also depend on the range of services they offer, the nature of the specific market or markets they operate in, and the kinds of customers they serve.
In mature markets, they will likely focus on more sophisticated plays that can differentiate them from the other players in the market, and increase the pressure on companies offering commodity services. The M2M hybrid-cloud play also offers a good opportunity during the next few years for telecom operators with ISP arms.
In emerging markets, telecom players should focus on helping their customers generate new capabilities while offering strong support for customers new to these technologies.
Few telecom companies will have the full range of capabilities needed to create complete cloud offerings. Therefore, many of them will need to partner with other players in the cloud ecosystem.
Adding an aggregator service to make the play more comprehensive for specific industry and consumer segments can improve margins further, though the payback will take longer and generating scale will be more critical. More problematic is the small-scale niche play catering to specific verticals, due to up-front costs and the inevitable low volume. The private cloud offering, meanwhile, is likely to provide a stable revenue contribution, thanks to the implementation and consulting services required to set up such clouds.
This article is an excerpt from “Sunshine Behind the Cloud” by Booz & Company. Booz & Company is a leading global management consulting firm, helping the world’s top businesses, governments, and organizations. Visit booz.com to learn more about Booz & Company.
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