Telcos and Cloud Computing


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Cloud Computing is new Greenfield for IT related activities. Telcos are believed to be natural choice having readily available infrastructure and experience in managing massive data base. Nadeem Syed looks at this avenue from market segmentation and broad band perspective.

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Telcos and Cloud Computing

  1. 1. Evaluating The Impact of Cloud Computing In The Telecommunications World Mobile Cloud Computing Asia Singapore July 14 – 15, 2010 1 Ahmad Nadeem Syed
  2. 2. The Discussion Points 2 A Brief overview of Cloud Computing The Broadband Divide Are the Telcos Natural Choice for Cloud Computing? Conclusion
  3. 3. Cloud Computing – A Confusion or Reality? 3 There are diversified opinions about definition of cloud computing: • Larry Ellision, Oracle’s CEO does’t understand “what we would do differently in the light of Cloud Computing other than change the wordings of some of our ads” • Richard Stallman, of Free Software Foundation founder thinks “It’s a stupidity it’s a marketing hype campaign.” • Andy Isherwood, HP’s Vice President of European Software says “ Two people say the same thing about it [cloud]. There are multiple definitions out there of “the cloud”
  4. 4. A Broad Definition 4 Cloud computing is a way of computing, via the Internet, that broadly shares computer resources instead of using software or storage on a local PC
  5. 5. Main Categories of Cloud Computing 5 Infrastructure as a Service PaaS Platform as a ServiceSoftware as a Service
  6. 6. SaaS "Software as a Service (SaaS)" deliver software as service over the Internet, eliminating the need to install and run the application on the customer's own computers and simplifying maintenance and support. 6 Google e-mail service calendar, document editor Spreadsheet Etc. CRM software on-demand Sales cloud: containing accounts, contacts, leads, quotes, etc Service cloud. contains a customer portal, knowledge base, analytics, etc. Zoho e-mail service, document editor, spreadsheet presentation tool Invoicing reporting, applicant tracking.
  7. 7. PaaS "Platform as a Service (PaaS)" deliver a computing platform and/or solution stack as a service, often consuming cloud infrastructure and sustaining cloud applications. It facilitates deployment of applications without the cost and complexity of buying and managing the underlying hardware and software layers 7 Google a framework to allow building software in Python or Java that is automatically distributed and scaled as necessary on the cloud. Microsoft Azure platform, provides Visual Studio programmers the ability to build software for the cloud - the operating system as an online service - SQL Azure, a fully relational cloud database solution. is a development platform that allows users to build business applications in the cloud.
  8. 8. IaaS Infrastructure :Cloud infrastructure services or "Infrastructure as a Service (IaaS)" delivers computer infrastructure, typically a platform virtualization environment, as a service. Rather than purchasing servers, software, data center space or network equipment, clients instead buy those resources as a fully outsourced service. 8 Amazon with its Elastic Compute Cloud (EC2). Renting this capacity to others through the internet Rackspace renting out space in their racks , providing managed hosting and dedicated servers through Inernet GoGrid virtual machines to be rented by the hour, but they also offer dedicated servers for specific tasks that tend to be slow on virtual machines, such as databases.
  9. 9. Cloud Computing – Drivers and Enabling Factors Customer needs ● Capex savings - SMEs being the main target market ● Any where any time - Individual’s requirement Prerequisites ● Readiness for use of IT applications ● Availability of high speed Internet ● Affordability from Individual’s perspective ● Education Role of Telcos ● Service provider ● Access provider 9
  10. 10. From Digital Divide to Broadband Divide Cloud computing penetration is dependent upon level of Broadband penetration in a given market Market Segmentation ● Developed markets ● Developing (Emerging) markets ● Under developed markets Current Market Status ● Use of Internet based services is growing in developed markets at high rate ● There is very limited market for such services in developing /underdeveloped economies 10
  11. 11. From Digital Divide to Broadband Divide Excerpts from UNCTAD Report ● The digital divide between developed and developing economies is wide and growing in terms of Internet broadband access ● There is a huge gap in terms of broadband speed within the two Developed and Underdeveloped market segments ● A person in developed country is on average at least 200 times more likely to enjoy high-speed access to the internet than someone in a least developed country ● Broadband Price Divide: The cost of using fixed broadband is highest in low income countries. Average fixed broadband price at purchasing power parity in 2008 was: - Developed countries $ 28 - Developing countries $ 289 11Source: UNCTAD Information Economy Report 2009
  12. 12. Underdeveloped Countries are Bandwidth Starved – UNCTAD Report Excerpts ● Despite positive Internet developments in many countries, its use is progressing slowly in certain regions. ● The developing countries are facing insufficient demand due to - high prices - inadequate infrastructure ● The lack of demand contributes to - low levels of investment and - high prices due to high cost of international connectivity ● Another barrier to greater Internet take-up is - low levels of education - Limited supply of web content in local languages 12Source: UNCTAD Information Economy Report 2009
  13. 13. There is Direct co-relationship Between Level of Purchasing Power, Education and Internet Usage Purchasing Power Internet Usage Education 13
  14. 14. Purchasing Power & Education Main Drivers of Internet Usage 14 - 20 40 60 80 100 93 99 99 99 99 71 61 50 48 36 29 % Literacy - 10.0 20.0 30.0 40.0 50.0 60.0 50.3 46.4 38.8 35.234.1 6.0 3.1 2.6 1.6 0.9 0.7 US$(000)/Capita(PPP) GDP/Capita (PPP) - 50,000 100,000 150,000 200,000 250,000 300,000 217,355 234,621 243,898 282,145 274,724 9,4424,469 950 312 5 42 No.ofSubs(000) Broadband Subs / 1 Billion Population Countries with Higher Purchasing Power and Higher literacy have higher Internet usage Source: ITU ICT Indicators and CIA fact sheet
  15. 15. Market Share of Economies 15 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% 100.00% >25000 10001 - 25000 5001 - 10000 1001 - 5000 <1000 NA 96.42% 2.56% 0.28% 0.75% 0.00% 0.00% %DSLsubs GDP $ Per Capita (PPP) GDP $ per Capita/DSL Subs 26% 41% 4% .10%14%14% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% >25000 10001 - 25000 5001 - 10000 1001 - 5000 <1000 NA 24.78% 22.94% 24.18% 27.21% 0.86% 0.03% %MobileSubs GDP Per Capita (PPP) Sources: CIA Fact sheet & ITU CIT indicators GDP per Capita /Mobile Phone Subs Mobile Penetration 56% 14% 20%40% ● Countries Having GDP/Capita over $ 25 K have 25% of mobile Subs ●mobile phone market there is saturated ●Countries having GDP/Capita $ 5 – 10 K have 51% of mobile Subs ●The mobile phone penetration there is around 50% there ● Countries Having GDP/Capita over $ 25 K have 96% of DSL subs ●Such countries have only 14% of the world population ●Countries having GDP/Capita less than $25 K have only 4% of the DSL Subs ● Such countries constitute about 86% of the world population
  16. 16. Telcos and Cloud Computing 16
  17. 17. Telco’s – Apparently Natural Choice? ● Infrastructure available for SMEs (e.g. they are experienced in managing massive amounts of data having own data centers) ● Own subscriber base ● Opportunity for additional revenue stream by - Charging end users for a given level of service quality - Charging cloud-based providers 17
  18. 18. Telco’s – Apparently Natural Choice? ● The Telco’s success in cloud computing as competitor to IT Service providers depends upon - Right market conditions - SME’s preparedness ● The pre-requisites for success of mobile cloud computing are - High speed internet (3G) availability - Affordability - Time to cost relationship 18
  19. 19. Possible Suite of IT Services by Telcos 19 0% 20% 40% 60% 80% 100% Cloud Services IaaS , SaaS Deploying and managing enterprise… IT infrastructure solutions , virtulization Client and desktop management support Hosting, web, infrastructure and colobration… Design, management and maintain… Network and point security Network services, consulting and integration Connectivity (voice and data needs) Telco’s Trump card Traditional weakness in IT Key datacenter battleground Traditional strengths Core Business Source: IDC Telecom Perception Survey April 2010
  20. 20. Telco’s Preparedness - Varying Opinions ● Leading global and regional telcos have developed and launched their own cloud computing services, including infrastructure-as-a-service (IaaS) - (Ovum) ● Telco’s visibility in the market is very low . Only a very small number of telcos have so far shown commitment in this market according to some analysts. ● Sales uptake for IaaS is likely to be slow for at least the next two or three years – (Ovum) ● It may take two or three years for telcos to establish credibility in this market, so early market entry will have its benefits in the longer term 20
  21. 21. Some Forecasts about Mobile Cloud Computing ● ABI Research forecasts that mobile cloud computing subscribers be over 998 million in 2014 ● Mark Beccue says : “By 2014, mobile cloud computing will become the leading mobile application development and deployment strategy, displacing today’s native and downloadable mobile applications ● Mobile phones will overtake PCs as the most common Web access device worldwide by 2013 ● Ovum research indicates that cloud computing is currently low on the agenda of most CIOs/IT managers, This means that sales uptake for IaaS is likely to be slow for at least the next two or three years” 21
  22. 22. Issues for Telcos as Cloud Computing Service Provider ● Telcos will face all the following issues which other cloud computing service providers could be facing: - Security standards - Reliability - Outage & Performance standards - Portability In Addition ● Competition both from Mobile operators and cloud computing service providers ● The cost for telcos to jump into cloud computing could be significant as they need to upgrade their operational networks and data centres ● Telecom equipment is currently connectivity oriented and vendors are lagging behind in the race to drive cloud-enabling technology for telcos ● High cost of bandwidth - Presumable cost savings may be off-set by high cost of bandwidth 22
  23. 23. Issues for Mobile Cloud Computing ● Outage - 3G coverage is non-existent and spotty even in most developed markets ● The networks are generally loaded ● The bandwidth access could be insufficient ● Loss of control – (Multiple points of failures) ● Competition from peer telcos and IT service providers (Such as email which remains the largest application) 23
  24. 24. Issues for Mobile Cloud Computing ● Issues in developing/underdeveloped economies - Lack of speedy mobile Internet access - Affordability – Access + Cost of smart phone - Availability of cheap alternates ● Handset Impediments - Smart phone high cost - Battery life - Keyboard limitation - Small screen vs large screen 24
  25. 25. Some Facts About Two Markets 25 Description Developed Economies Developing/ Underdevelop ed economies Voice Market Saturated Lot to cover Overall ARPU $ 40 - $ 50 As low as $ 2.5 Data ARPU $ 15 in US Negligible Data Share 10% – 20% Less than 1% Internet & Internet based Application Usage High Low Major objective New Avenues Struggle for survival Time lag for data services (say for 3G) Since early 2000 8 – 10 years behind (India, for example has only recently auctioned 3G licenses, Pakistan is yet to follow) Source: Number from Cheetan Sharma Consulting
  26. 26. Conclusion ● Cloud computing by itself is in infancy stage ● Sustainability of success of Cloud Computing is yet to be proven even in developed economies ● Voice is and will remain the prime service both for developed and developing /underdeveloped markets for quite some time ● Developing /underdeveloped markets are not ready yet ● In terms of time for developing/underdeveloped economies - Digital divide has taken about 10-15 years to narrow - The broad band divide is already 8-10 years wide ● Level of Broadband penetration will determine fate of Cloud Computing in a given market 26
  27. 27. Ahmad Nadeem Syed Research Analyst & Regulatory Economist 27