The future of edge computing: three scenarios for how the opportunity could play out

What is the future of edge computing?

With a shifting ecosystem and new developments daily, it is not clear how the edge computing opportunity will play out. There is significant hype within the telecoms space that it could be a much needed new form of revenue, i.e. through enabling new enterprise services. But there are other players interested in tapping into the edge computing potential – and there are no guarantees that telcos will be the one that play the largest role. In fact, at STL Partners, we believe there are at least three potential scenarios for how the edge computing opportunity could play out.

Edge computing scenario 1: Hyperscalers dominate the opportunity

We already know the likes of Microsoft, Amazon and Google are making major plays into edge computing thanks to their announcements both of new products and new partnerships. For them, they will likely be viewing edge computing as a key opportunity for two key reasons:

1. Providing cloud services at the edge may enable pull through revenues for their core business since edge computing is likely to enable cloudification of solutions that previously have only existed on traditional on-premise servers.
2. Enables closer partnerships with telcos with the aim to providing public cloud infrastructure on which telcos will run their network functions. Microsoft’s recent acquisitions makes clear their seriousness at moving into this domain.

In a scenario where the hyperscalers end up providing the majority of edge IaaS and PaaS, the telco role would primarily be to provide the facilities within their network to house edge computing infrastructure, including physical space, power and cooling. In playing a smaller role, the likely revenues from providing facilities only is only likely to be relatively low per site. The benefit is that telcos would not need to outlay capex investment in edge infrastructure or service innovation costs in developing a platform-as-a-service offering. For some telcos, such as Telecom Italia, the hyperscaler, in this case Google Cloud, footing the majority of the up-front cost and risk, was a major driving force in their partnership.

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Edge computing scenario 2: Telcos dominate the opportunity

Here telcos would play a significantly larger role including providing facilities, IaaS and even some platform capabilities. Here operators are likely to restrict the amount of third party infrastructure they have within their edge sites, opting to provide the majority of edge servers themselves. Operators are likely to build some of their own PaaS capabilities or to work with edge PaaS specialists such as MobiledgeX to provide the orchestration necessary to manage workloads across multiple different edges, likely provided by multiple different operators.

For this scenario, telcos will need to collaborate with each other more closely than has been usual, which comes with its own set of challenges. Telcos will also need to work more closely with new customers they don’t have a history of engaging with, such as application developers considering moving some of their application workloads to the edge. However, if they are successful in doing this, operators stand to move higher up the value chain, and through partnerships, may even be able to offer some end-to-end edge-enabled solutions to their customers.

Edge computing scenario 3: Neutral parties dominate the opportunity

For the majority of edge use cases being discussed today, the network performance (e.g. the latency and jitter it can deliver) will be adequate at relatively centralised regional datacentres. While there are benefits to edge sites being located within an operator’s network, this is not the only way that edge will manifest itself, as neutral third parties like tower companies and regional datacentres may also establish their own edge sites. In this scenario, edge computing could be delivered by a series of partners excluding telecoms operators entirely. Companies like Equinix, who acquired start-up Packet earlier this year, will open up their sites to third parties, including the hyperscalers, but also others interested in moving their infrastructure closer to their end-users, such as CDN companies. This would create more open, neutral datacentres, though these are likely to be less distributed than what operators could achieve if they looked to use technical spaces beyond their central offices, reaching out to base stations and beyond.

Shaping the future of edge computing: Ambition and investment will the required for telcos to do more

Despite being much discussed as one of the most promising opportunities for telcos over the next 5 years, there are no guarantees that operators will remain in the driving seat with edge computing. Without significant ambition and investment, operators will continue to play their role as “the pipe” and perhaps also in this case “the facilities provider”, without doing much more. The message from the hyperscalers and other parties is that they have the appetite to do more, and to a large extent it will be up to the telcos to decide whether they will let this happen, or not.

Author

Tilly Gilbert

Principal Consultant & Edge Practice Lead

Tilly is a Principal Consultant at STL Partners and has led consulting projects with both operators and technology companies across a number of domains including network automation, edge computing and 5G B2B strategies. She has authored research reports including “Building telco edge infrastructure: MEC, Private networks & vRAN” and “Recovering from COVID: 5G to stimulate growth and drive productivity”. Tilly holds a BA from University of Oxford and an MA from University of Pennsylvania.