Navigating the Telecom Cloud: Growth Perspectives


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This white paper, produced in April 2012, is derived from the Informa Telecom Cloud Monitor, an analytical tool tracking the cloud-related activities of more than 130 operators worldwide.

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Navigating the Telecom Cloud: Growth Perspectives

  1. 1. Navigating The Telecom CloudGrowth Perspectives
  2. 2. Fig. 1 – CSPs selling cloud services multiplyIntroduction 160 140Communication service providers should remember that 120 CSPs selling cloud servicescloud computing can – and must – defend the core. The core is 100broadband, whatever their aspirations to become digital mediaoutlets or ICT service providers. 80Using cloud services, CSPs have a multi-billion dollar opportunity to 60change the dynamics of ICT wallet share. Nevertheless, CSPs’ cloudservices must fulfil a primary function of securing revenues on the 40network assets that make CSPs positively different from pure-play cloud 20service providers. 0Informa has examined the cloud strategy of more than 130 CSPs across 2006 2007 2008 2009 2010 2011 1Q12the world (see fig. 1). This underscores that CSP cloud activities and  Eastern Europe & CISinvestments are accelerating (see fig. 2).  Western Europe  Asia PacificCSPs – particularly those in North America and Asia - spent almost  North America  Middle East & Africa$14 billion on cloud pursuits in 2011 (see fig. 3), according to Informa’s  Latin AmericaTelecom Cloud Monitor. Revenue growth rates comfortably exceeding100% per annum are common. However, only a handful of CSPs currentlygenerates more than 5% of overall revenues from cloud services. SOURCE: Informa Telecoms & MediaCSPs must act now to secure long-term profits from cloud services.As demand for cloud services shifts to emerging markets and acrosscustomer segments, CSPs’ cost bases are under increasing pressure – and Fig. 2 – CSP cloud activity acceleratestheir competitors are increasingly diverse and sophisticated.We hope that the following perspectives provide guidance, and we lookforward to working with you on your cloud journey. 66 1Q12 Camille Mendler 39 Principal Analyst – Informa Telecoms & Media @cmendler 27 1Q11 22 4 1Q10 4  Services launched  CSPs active in quarter SOURCE: Informa Telecoms & Media© 2012 INFORMA UK LTD. ALL RIGHTS RESERVED. WWW.INFORMATANDM.COM
  3. 3. Fig. 3 – CSP spent $13.5 billion on cloud in 2011The status quo Investment by region Top telecom cloud investorsCSPs are muscling into the global cloud market with bulk – big-name acquisitions and big-ticket investment programs. In 2011alone, CSPs spent $13.5 billion on cloud-related pursuits.So far, CSPs in developed markets have called the shots. Notably, ATT,NTT and Verizon are executing well-established plans to sell cloudservices – and they have the appetite to invest globally. North Americanand Asian CSPs accounted for 90% of telecom cloud investments in 2011.European operators accounted for only 7%. CSPs in other regions madeup the remainder (see fig. 3).  Russia and CIS (2.7%)  Centurylink (18.7%)  Europe (7.1%)  Windstream (18.6%)Europe’s economic weakness and uncertainties about security and  Latin America (0.8%)  NTT (16.1%)privacy laws have meant more muted investment activity. Yet European  Asia Pacific (30.8%)  Verizon (10.4%)  Middle East and Africa (0.4%)  ATT (7.4%)CSPs continue to launch the largest number of new cloud services – and  North America (58.2%)  Telstra (6.3%)half of their cloud enablement partners are European firms. Prominent  China Unicorn (4.7%)  Others (17.8%)European CSPs include Deutsche Telekom, Orange, Portugal Telecomand Telefonica. NOTE: Totals may not add up to 100% due to rounding. Totals include estimated value of acquisitions and investment plans announced in 2011.From 2012 onward, Informa believes that CSPs in other regions willbecome prominent in cloud services, particularly in emerging markets SOURCE: Informa Telecoms Media(see fig. 4). In Africa for example, lack of legacy ICT infrastructure mayprove a positive advantage for cloud service takeup. Besides data centerinvestments, African CSPs including MTN, Safaricom and Vodacom arenow linking cloud services to m-commerce payment models, cleverly Fig. 4 – Cloud activity shifts to emerging marketsadapting to the limitations of Africa’s formal banking infrastructure. Number of CSP cloud service launches by country typeIn the Middle East, CSPs are ramping up activity and bolstering cloud 1Q11 1Q12skills through ICT partnerships. STC works through its ICT subsidiaryAwal and with India’s Sify. Etisalat works with HCL Technologies. Mobily High income Eg: Germany, Japan,and Qtel work with regional ICT integrators, Smartworld and iHorizons, countries UAE, United States 77% 59%respectively. du is targeting SMEs through a government-supportedcloud initiative in partnership with Microsoft. Upper-middle income Eg: Brazil, China, Russia, countries Turkey 9% 33%In Latin America and the Caribbean, data center construction is wellunderway, involving CSPs such as Digicel, Entel, Telconet and Telmex. Lower-middle income Eg: Egypt, India Ikraine,Service launches are accelerating: America Movil and Lime are rolling countries Vietnam 9% 8%out cloud services across their subsidiaries. SMEs are a principalcustomer target for CSPs like Telefonica. But equally, CSPs like Alestra, Low income Eg: Kenya, Pakistan,Oi and Telmex are also targeting public sector organizations in general countries Tanzania, Ugandaadministration, health and education. 5%In each region of the world, there is much to play for, and rising pressureon CSPs to make a return on their considerable cloud investments. SOURCE: Informa Telecoms Media© 2012 INFORMA UK LTD. ALL RIGHTS RESERVED. WWW.INFORMATANDM.COM
  4. 4. Fig. 5 – Cloud services benefit everyone, and everythingSecure the core Customers People Objects SegmentsCSPs’ cloud services are not interchangeable with those of Horizontal Verticalother cloud service providers. The services may bear the same Consumers SoHos SMEs Enterprises Government Health Finance Energy etc…name and functionality – IaaS, PaaS and SaaS – but they have aspecific duty to perform. Services UCaaS IaaS PaaS SaaS Carrier Ethernet DSL WiFi M2M 2G/3G/4G IP VPNBroadband, and increasingly mobile broadband, is the anchorservice that CSPs must support and integrate into their cloud service Assetspropositions. CSPs must not seek to simply copy pure-play cloud service Spectrum Fiber Datacenters OSS / BSS Stores Channels Security Certified Skillsproviders; they must emphasize how they positively differ.CSPs must also suppress the urge to silo cloud services into the SOURCE: Informa Telecoms Media‘ownership’ of a particular division: Cloud is a consumption model fordigital goods which touches all customer segments – as well as CSPs’internal processes (see fig. 5). Fig. 6 – CSPs prioritize IaaSCSPs can act as a distribution channel for third-party cloud services. But acentral role in the cloud value chain – and a bigger share of the revenue World: CSP cloud services launched by type, 2011pie – is sought. Reflecting this desire is the growing focus on IaaS (seefig. 6) and data center assets. In 2011, eight out of 10 CSPs’ cloud-relatedinvestments and acquisitions involved data centers to establish positionsin IaaS. CSPs are now constructing a quarter of a million square meters ofdata center space.But making a land grab for physical assets in order to sell virtual goodscarries risks. Once the cloud’s digital assets are fungible – standardizedand completely interchangeable, irrespective of vendor – the only realdifferentiator becomes price.CSPs must not re-architect the boom and bust cycle of the Enron Era. Twoduties are clear: To assert service differentiation and to lower costs. In apost-PC world, CSPs must remember that their ability to secure, mobilize  IaaS (18%)and democratize access to cloud services is increasingly valuable.  Storage, back up and restore (16%)  nified communications and collaboration (15%) URecommendations  Business apps suite (14%)  Security (9%) • ecure core income: Cloud services must drive usage of CSPs’ S  Other (28%) broadband networks and secure customer loyalty. • ifferentiate, don’t copy: CSPs must emphasize their multi-device D NOTE: n=170 new services launched in 2011 and multi-platform cloud service delivery and support capabilities. • emove silos: CSPs must develop a holistic cloud strategy that R SOURCE: Informa Telecoms Media delivers both go-to-market and operational benefits across their customer bases and business processes.© 2012 INFORMA UK LTD. ALL RIGHTS RESERVED. WWW.INFORMATANDM.COM
  5. 5. Fig. 7 – Triaging services to secure differentiationPromote differentiators Cloud Service What do they promote in the Telecom Cloud? Quality Ubiquity Security Interstitial Collaboration consumptionMany CSPs want to establish a high-volume hypermarket for Multimedia contentcloud services. But CSP success is highly dependent on whether management     their service delivery and management costs are pared down Console-qualityand their competition is weak. gaming    Open-source cloud stacks promise more competitive cloud economics for Medical imaging   CSPs moving into commodity, public cloud services. But to play for keeps, Cross-platformCSPs must also prioritize differentiating services that underscore the video conferencing     importance of broadband and alter patterns of user behavior in leisure orwork contexts. Differentiating services (see fig. 7) are those which: Cloud telephony    • epend on quality of interaction: Services which rely on high- D speed connectivity, where latency impairs the quality of user Virtual desktop    experience and application functionality. • llow ubiquity of interaction: Services which are accessible and A SOURCE: Informa Telecoms Media easily switchable between connected devices without impairment of experience, irrespective of location. • ecure digital interaction: Services which safeguard content, S the physical housing and transmission of content according to Fig. 8 – Linkages between consumer and enterprise cloud services individual, corporate and governmental requirements. • timulate “interstitial” consumption: Services which enable digital S interaction during downtimes, typically when an individual is moving from one task or location to another. Examples may include CONSUMER CLOUD ENTERPRISE CLOUD queuing, taking a taxi or being on hold. Multimedia content Storage-as-a-service • romote collaboration: Services which support multi-user P management Backup disaster recovery interaction, content sharing and problem solving across diverse Gaming Collaboration, enterprise video connected devices and physical locations. Cloud telephony second-line Dual-persona / managed BYOD Unified communications Device securityIn particular, CSPs need to mirror consumer and enterprise cloud services Managed security device managementin order to create operational and behavioral synergies (see fig. 8). Only5% of CSPs’ new cloud services targeted consumers in 2011. Consumercloud services may not be highly profitable in their own right, but theycan help build cloud experience and grassroots demand. The consumer SOURCE: Informa Telecoms Mediacloud is a Trojan horse into the enterprise.Recommendations • pply the power of consumerization: Consumerization of the A enterprise is a weapon to use proactively to drive cloud service demand. • eware cloud hypermarkets: Brokering apps, storage and compute B services mustn’t downgrade a CSP’s differentiators in the cloud ecosystem. • ursue open source: Open source cloud stacks are still maturing, P but could improve CSP costs and competitiveness.© 2012 INFORMA UK LTD. ALL RIGHTS RESERVED. WWW.INFORMATANDM.COM
  6. 6. Fig. 9 – CSPs focus on SMEsSell trust to SMEs World: Segments targeted in CSP services, 2011Small and medium-sized enterprises are the number-onetarget for CSPs’ cloud services (see fig. 9). But SMEs are nota single ‘mass’ market. CSPs must execute a two-prongedstrategy: They must support both general and selectedindustry-specific business processes.Generic functions addressing nearly all SMEs include unifiedcommunications and collaboration, security, data storage and backup,point of sale, invoicing and billing, sales force automation, inventorymanagement, customer care, and marketing. Addressing industry-specific processes is also relevant where demographics are favourable  SMEs (44%)(see fig. 10).  Enterprises (41%)  Vertical industries (10%)Many CSPs believe that price is the only issue that really matters to SMEs.  Consumers (5%)This is only partly true. An effective SME portfolio should demonstrate a NOTE: n=170 new services launched in 2011balance of capabilities: • ocalization: Serve local conditions and business processes. For L example, Koç.net is partnering with SaaS vendor Surado Solutions SOURCE: Informa Telecoms Media to sell a Turkish-language version of its CRM package to Turkish- speaking SMEs in Turkey and beyond. • emocratization: Extend enterprise-class capabilities cheaply into D SMEs. For example, Telecom Italia’s Fast-Start per SAP Business All- Fig. 10 – SME verticals are worth targeting in-One service includes an online configurator where SMEs select and pay only for required processes. 1000+ • pecialization: Target sizeable SME sub-segments. For example, S NTT Data’s Recec service for the Japan Dental Association is a SaaS service for dentists which manages their medical insurance reimbursement claims, bundled with a secure VPN connection. • Mobilization: Deliver mobility that positively boosts an SME’s 500 business efficiency. For example, Vodafone Germany’s Vodafone Locate service helps SMEs working in logistics to track their drivers without the need to invest in specialist hardware or software. • rust: Stress competence to reduce business risk and boost T profitability on a strategic and operational level. For example, Employees per Company Orange’s Le Cloud Pro is a dedicated small business portal which 100 sells cloud services, but also integrates curated business strategy and trading advice.Recommendations • romote trust over cost: CSPs must find new ways to help SMEs P 20 to do business using the cloud, not just cheaper ways. Trust is a SME VERTICALS differentiator. Shop owners • erticalize the SME universe: CSPs should market to large sub- V Hotel / restaurant / bar owners 5 segments within their SME universe. Sizeable groups exist where Accountants discrete targeting is justified. Doctors, dentists • on’t downplay broadband: CSPs should promote services that D Small manufacturers offer fundamentally new ways for SMEs to do business using assets that CSPs control. 1 Lawyers Plumbers / electricians 0 SOURCE: Informa Telecoms Media© 2012 INFORMA UK LTD. ALL RIGHTS RESERVED. WWW.INFORMATANDM.COM
  7. 7. Fig. 11 – Money flows are complexTriage cloud enablers SaaS vendorThe average CSP works with 16 cloud enablement partners,according to Informa’s Telecom Cloud Monitor. Manyrelationships simply involve SaaS resale (see fig. 11), but morecomplex relationships are also common.Informa defines cloud enablement as a sub-set of telecom managed andprofessional services, divided into two inter-related types. Go-to-market Cloud Indirect CSP aggregator channelservices involve helping CSPs to sell cloud services to end customers.Operational services, meanwhile, may include the construction andoperation of cloud service infrastructure, but also the migration of CSPs’existing processes to the cloud’s operational model, such as provisioning,billing and service orchestration.CSPs’s leading partners in 2011 illustrate the diverse, multi-faceted nature Indirect Indirectof cloud enablement. They included: CSP channel channel • icrosoft: Twenty eight CSPs developed and launched services M (largely Office365) with Microsoft in 2011. • isco Systems: A leading unified communications and C collaboration (UCC) provider, Cisco was also a global IaaS enabler with EMC and VMWare. • E On-Demand: The Hungarian Office365 syndication partner C helped CSPs in Austria, Bulgaria, Hungary, Poland and Slovenia. • oogle: GoogleApps won support as far afield as the Maldives with G SME / Enterprise Dhiraagu, but also major CSPs like Vodafone Germany. • imension Data: The NTT Group subsidiary provided its onecloud D Payment types may include: IaaS platform to CSPs including BSNL, Hutchison Global, Indosat and PLDT. Retail payment Referral commission, Pass-through • arallels: The vendor’s cloud-service automation tools helped P revenue-share payment payment Charter Communications, KDDI and KT in 2011. • EC: Most prominent in Telefonica Espana, NEC’s SaaS enablement N services extended to Latin America, and CSPs like MTS Belarus. SOURCE: Informa Telecoms MediaHistorically, go-to-market partnerships dominated enablement activity,but needs are evolving. Fig. 12 – Cloud enablement is multi-sidedToday, the transition to cloud-based operations ranks among CSPs’ topthree operational investments for 2012, according to a recent Informasurvey. Ultimately, telecom cloud market dynamics (see fig. 12) will favor PROPOSITION ENGAGEMENT COMPENSATIONenablers that can provide a lifecycle of services – and shared reward.Recommendations One-off • emand gain sharing: Favor partners willing to share risk and D CLOUD ENABLER Sell to Consult, design, plan, build, deploy, integrate, migrate reward. Go-to-market services • valuate wider partnership benefits: If a partner’s proposed E Help sell the cloud financial terms are unfavorable, consider if the cloud service can CSP Annuity act as a loss leader to secure broadband subscriptions before Manage, operate, Sell with optimize, licence, white walking away. label • treamline partnerships: Look to lifecycle partners that can S FIXED PRICE simplify partner onboarding and management burden. Units, over term, license Operational services fee Help deploy the cloud VARIABLE Sell Performance, deferred through CAPEX, pay-as-you-grow, shared risk/reward SOURCE: Informa Telecoms Media© 2012 INFORMA UK LTD. ALL RIGHTS RESERVED. WWW.INFORMATANDM.COM
  8. 8. The Informa Telecom CloudMonitorThis analysis is derived from the Informa Telecom CloudMonitor, an analytical tool tracking the cloud-related activitiesof more than 130 operators worldwide. Content sourcesinclude Informa operator, vendor and enterprise interviews,company financial statements, press releases and otherpublicly-available data. Activities tracked include acquisitions,investments, customer wins, service launches, trials andpartnerships with more than 250 cloud-related equipment,software and services vendors, with a historical archivebeginning in 2005.Related researchSell the cloud to protect the core: Action plan for 2012Cloud TV: A future necessity for operatorsThe SME cloud opportunity: A market overviewIs SaaS a loss leader in the telecom cloud?Working with InformaInforma Telecoms Media’s strategic insights, key market dataand forecasts have led the market for more than 25 years. Wehave 65 analysts in nine research offices offering pragmatic andactionable advice to the leading global players in the telecomsand media sector.Our clients represent all parts of the value chain, from telecom CSPs topay-TV providers, from content providers to device manufacturers. Oursyndicated research and comprehensive databases provide vital dataand analysis focusing on the global telecoms and media markets, and arewidely used and valued by industry professionals and thought leaders.We also provide a range of consultancy and bespoke researchFor more details on Informa Telecoms Media and how we can helpyour company identify future trends and opportunities, please contact:Dominic Offord+44 (0)20 3377© 2012 INFORMA UK LTD. ALL RIGHTS RESERVED. WWW.INFORMATANDM.COM