Looks Who’s in the Cloud  – Telcos are on the Rise

It makes total sense for communications service providers that deliver voice, video or data services to add cloud services to their mix. But according to Talkin’ Cloud’s recent compilation of the top 100 cloud service providers, aggregators and brokers, none of the top telcos made the list. However, we predict that this may change by the time next year’s top 100 list comes out.

Although the majority of telcos have been slow to introduce cloud services as part of their service offerings, some big name providers such as AT&T, Verizon, Orange Business Services and XO Communications have started to push their weight into the cloud services market. According to a recent Heavy Reading Service Provider IT Insider survey, a number of communications service providers are tracking Infrastructure-as-a-Service (IaaS), Platform-as-a-Services (PaaS) and Software-as-a-Service (SaaS) as part of their telcom service revenue.

The diagram below shows that the majority of telcos surveyed realized less than 10% cloud services revenue as part of their total 2014 telecom revenue mix. The leading cloud service in that category was SaaS, with PaaS and IaaS coming in second and third, respectively. However, the combined percentages of those telcos show that they are collectively seeing between 25% and 50%+ revenue from cloud services with higher end IaaS solutions making up the majority of cloud revenue.  This development is not insignificant.

telcosontherise Source: Heavy Reading Service Provider IT Insider

The Cloud Journey  

According to a recent report by Accenture, “A new era for communications service providers,” cloud computing totally changes the game for telcos. They will need to “drive down costs, increase competitiveness and boost agility and scalability” to make a dent in the enterprise cloud IT market.

Accenture sees three phases in a telco’s journey to becoming a cloud service provider:

Phase 1: Harvesting the low-hanging fruit

Telcos should focus on offering services that are already in demand from enterprise customers,
including hosting on demand, SaaS enablement for widely-used office applications and storage on
demand

Phase 2: Expand cloud services portfolio

Telcos can grow their cloud customer base and revenues without making major changes to their
current  operating  model by offering the following types of cloud services:

̶         Cloud security services, through existing markets in managed security services
̶         Unified communication-as-a-Service, which strengthens telco market presence across messaging, voice over Internet protocol (VoIP) and PBX
̶         Wholesale capacity, which leverages a telco’s global IP backbone and private multiprotocol label  switching (MPLS) networks to offer processing capacity-as-a-service to both cloud service vendors and enterprises

Phase 3: Adjust the business model

Phase 3 services require communications service providers to gain significant experience in cloud
service provisioning, but promise significant rewards:

̶         Billing-as-a-Service (BaaS)  ̶  Telcos can leverage their experience in offering billing solutions and, potentially, go to market in collaborative partnerships with specialized billing providers
̶         Platform-as-a-Service (PaaS) – Telcos can offer platforms that help customers build applications that improve their productivity and reduce costs
̶         Cloud Services Broker – Telcos can leverage their experience in delivering multiple services and enable end users to switch between cloud vendors without worrying about the operational aspects

One part of the journey that Accenture did not mention, but will give telcos looking to make this shift a significant leg up, is the opportunity to join an already established cloud ecosystem within a multitenant data center. This gives a telco instant access to a variety of cloud service providers that they can partner with to expand their cloud services portfolio. This is exactly what we see happening today within our worldwide Equinix International Business Exchange™ (IBX®) data centers.  Communications service providers like AT&T, Orange Business Services,  XO Communications , National Voice Data and many more are forging cloud service partnerships that are catapulting them into the global cloud services market.

The right cloud DNA

It’s way too early to rule telcos out of the cloud market. In our experience with the number of the industry leading telcos joining our cloud ecosystem of more than 450 cloud service providers, many of them Equinix Cloud Exchange partners, telcos have the right cloud DNA to make significant contributions to this market. In fact, they’re already making.

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