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Both telcos and hyperscalers want to capture the value at the edge, but they need to work together to deliver of edge computing solutions and generate demand among customers. How can operators collaborate with hyperscalers while strengthening their role beyond connectivity?
Edge computing is getting real
Hyperscalers such as Amazon, Microsoft and Google are rapidly increasing their presence in the edge computing market by launching dedicated products, establishing partnerships with telcos on 5G edge infrastructure and embedding their platforms into operators’ infrastructure.
Many telecoms operators, who need cloud infrastructure and platform support to run their edge services, have welcomed the partnership opportunity. However, they are yet to develop clear strategies on how to use these partnerships to establish a stronger proposition in the edge market, move up the value chain and play a role beyond hosting infrastructure and delivering connectivity. Operators that miss out on the partnership opportunity or fail to fully utilise it to develop and differentiate their capabilities and resources could risk either being reduced to connectivity providers with a limited role in the edge market and/or being late to the game.
Edge computing or multi-access edge computing (MEC) enables processing data closer to the end user or device (i.e. the source of data), on physical compute infrastructure that is positioned on the spectrum between the device and the internet or hyperscale cloud.
Telco edge computing is mainly defined as a distributed compute managed by a telco operator. This includes running workloads on customer premises as well as locations within the operator network. One of the reasons for caching and processing data closer to the customer data centres is that it allows both the operators and their customers to enjoy the benefit of reduced backhaul traffic and costs. Depending on where the computing resources reside, edge computing can be broadly divided into:
- Network edge which includes sites or points of presence (PoPs) owned by a telecoms operator such as base stations, central offices and other aggregation points on the access and/or core network.
- On-premise edge where the computing resources reside at the customer side, e.g. in a gateway on-site, an on-premises data centre, etc. As a result, customers retain their sensitive data on-premise and enjoy other flexibility and elasticity benefits brought by edge computing.
Our overview on edge computing definitions, network structure, market opportunities and business models can be found in our previous report Telco Edge Computing: What’s the operator strategy?
The edge computing opportunity for operators and hyperscalers
Many operators are looking at edge computing as a good opportunity to leverage their existing assets and resources to innovate and move up the value chain. They aim to expand their services and revenue beyond connectivity and enter the platform and application space. By deploying computing resources at the network edge, operators can offer infrastructure-as-a-service and alternative application and solutions for enterprises. Also, edge computing as a distributed compute structure and an extension of the cloud supports the operators’ own journey into virtualising the network and running internal operations more efficiently.
Cloud hyperscalers, especially the biggest three – Amazon Web Services (AWS), Microsoft Azure and Google – are at the forefront of the edge computing market. In the recent few years, they have made efforts to spread their influence outside of their public clouds and have moved the data acquisition point closer to physical devices. These include efforts in integrating their stack into IoT devices and network gateways as well as supporting private and hybrid cloud deployments. Recently, hyperscalers took another step to get closer to customers at the edge by launching platforms dedicated to telecom networks and enabling integration with 5G networks. The latest of these products include Wavelength from AWS, Azure Edge Zones from Microsoft and Anthos for Telecom from Google Cloud. Details on these products are available in section.
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From competition to coopetition
Both hyperscalers and telcos are among the top contenders to lead the edge market. However, each stakeholder lacks a significant piece of the stack which the other has. This is the cloud platform for operators and the physical locations for hyperscalers. Initially, operators and hyperscalers were seen as competitors racing to enter the market through different approaches. This has resulted in the emergence of new types of stakeholders including independent mini data centre providers such as Vapor IO and EdgeConnex, and platform start-ups such as MobiledgeX and Ori Industries.
However, operators acknowledge that even if they do own the edge clouds, these still need to be supported by hyperscaler clouds to create a distributed cloud. To fuel the edge market and build its momentum, operators will, in the most part, work with the cloud providers. Partnerships between operators and hyperscalers are starting to take place and shape the market, impacting edge computing short- and long-term strategies for operators as well as hyperscalers and other players in the market.
Figure 1: Major telco-hyperscalers edge partnerships
Source: STL Partners analysis
What does it mean for telcos?
Going to market alone is not an attractive option for either operators or hyperscalers at the moment, given the high investment requirement without a guaranteed return. The partnerships between two of the biggest forces in the market will provide the necessary push for the use cases to be developed and enterprise adoption to be accelerated. However, as markets grow and change, so do the stakeholders’ strategies and relationships between them.
Since the emergence of cloud computing and the development of the digital technologies market, operators have been faced with tough competition from the internet players, including hyperscalers who have managed to remain agile while building a sustained appetite for innovation and market disruption. Edge computing is not an exception and they are moving rapidly to define and own the biggest share of the edge market.
Telcos that fail to develop a strategic approach to the edge could risk losing their share of the growing market as non-telco first movers continue to develop the technology and dictate the market dynamics. This report looks into what telcos should consider regarding their edge strategies and what roles they can play in the market while partnering with hyperscalers in edge computing.
Table of contents
- Executive Summary
- Operators’ roles along the edge computing value chain
- Building a bigger ecosystem and pushing market adoption
- How partnerships can shape the market
- What next?
- The edge computing opportunity for operators and hyperscalers
- From competition to coopetition
- What does it mean for telcos?
- Overview of the telco-hyperscalers partnerships
- Explaining the major roles required to enable edge services
- The hyperscaler-telco edge commercial model
- Hyperscalers’ edge strategies
- Overview of hyperscalers’ solutions and activities at the edge
- Hyperscalers approach to edge sites and infrastructure acquisition
- Operators’ edge strategies and their roles in the partnerships
- Examples of operators’ edge computing activities
- Telcos’ approach to integrating edge platforms
- Infrastructure strategy
- Platform strategy
- Verticals and ecosystem building strategy