Cloud 2.0: the fight for the next wave of customers

Summary: The fight for the Cloud Services market is about to move into new segments and territories. In the build up to the launch of our new strategy report, ‘Telco strategies in the Cloud’, we review perspectives on this shared at the 2012 EMEA and Silicon Valley Executive Brainstorms by strategists from major telcos and tech players, including: Orange, Telefonica, Verizon, Vodafone, Amazon, Bain, Cisco, and Ericsson (September 2012, , Executive Briefing Service, Cloud & Enterprise ICT Stream).

Below is an extract from this 33 page Telco 2.0 Briefing Report that can be downloaded in full in PDF format by members of the Telco 2.0 Executive Briefing service and the Cloud and Enterprise ICT Stream here. Non-members can subscribe here and for this and other enquiries, please email contact@telco2.net / call +44 (0) 207 247 5003.

Introduction

As part of the New Digital Economics Executive Brainstorm series, future strategies in Cloud Services were explored at the New Digital Economics Silicon Valley event at the Marriott Hotel, San Francisco, on the 27th March, 2012, and the second EMEA Cloud 2.0 event at the Grange St. Pauls Hotel on the 13th June 2012.

At the events, over 200 specially-invited senior executives from across the communications, media, retail, finance and technology sectors looked at how to make money from cloud services and the role and strategies of telcos in this industry, using a widely acclaimed interactive format called ‘Mindshare’.

This briefing summarises key points, participant votes, and our high-level take-outs from across the events, and focuses on the common theme that the cloud market is evolving to address new customers, and the consequence of this change on strategy and implementation. We are also publishing a comprehensive report on Cloud 2.0: Telco Strategies in the Cloud.

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Executive Summary

The end of the beginning

The first phase of enterprise cloud services has been dominated by the ‘big tech’ and web players like Amazon, Google, and Microsoft, who have developed highly sophisticated cloud operations at enormous scale. The customers in this first round are the classic ‘early adopters’ of enterprise ICT – players with a high proportion of IT genes in their corporate DNA such as Netflix, NASA, Silicon Valley start ups, some of the world’s largest industrial and marketing companies, and the IT industry itself. There is little doubt that these leading customers and major suppliers will retain their leading edge status in the market.

The next phase of cloud market development is the move into new segments in the broader market. Participants at the EMEA brainstorm thought that a combination of new customers and new propositions would drive the most growth in the next 3 years.

These new segments comprise both industries and companies outside the early adopters in developed markets, and companies in new territories in emerging and developing markets. These customers are typically less technology oriented, more focused on business requirements, and need a combination of de-mystification of cloud and support to develop and run such systems.

Closer to the customer

There are opportunities for telcos in this evolving landscape. While the major players’ scale will be hard to beat, there are opportunities in the new segments in being ‘closer to the customer’. This involves telcos leveraging potential advantages of:

existing customer relationships, existing enterprise IT assets, and channels to markets (where they exist);
geographical proximity, where telcos can build, locate and connect more directly to overcome data sovereignty and latency issues.

Offering unique, differentiated services

Telcos should also be able to leverage existing assets and capabilities through APIs in the cloud to create distinctive offerings to enterprise and SME customers:

Network assets will enable better management of cloud services by allowing greater control of the network components;
Data assets will enable a wider range of potential applications for cloud services that use telco data (such as identification services);
And communications assets (such as APIs to voice and messaging) will allow communications services to be built in to cloud applications.

Next steps for telcos

Telcos need to move fast to leverage their existing relationships with customers both large and small and optimise their cloud offerings in line with new trends in the enterprise ICT market, such as bring-your-own-device (BYOD).
Customers are increasingly looking to outsource business processes to cut costs, and telcos are well-placed to take advantage of this opportunity.
Telcos need to continue to partner with independent software vendors, in order to build new products and services. Telcos should also focus on tight integration between their core services and cloud services or cloud service providers (either delivered by themselves or by third parties.) During the events, we saw examples from Vodafone, Verizon and Orange amongst others.
Telcos should also look at the opportunity to act as cloud service brokers. For example, delivering a mash up of Google Apps, Workday and other services that are tightly integrated with telco products, such as billing, support, voice and data services. The telco could ensure that the applications work well together and deliver a fully supported, managed and billed suite of products.
Identity management and security also came through as strong themes and there is a natural role for telcos to play here. Telcos already have a trusted billing relationship and hold personal customer information. Extending this capability to offer pre-population of forms, acting as an authentication broker on behalf of other services and integrating information about location and context through APIs would represent additional business and revenue generating opportunities.
Most telcos are already exploring opportunities to exploit APIs, which will enable them to start offering network-as-a-service, voice-as-a-service, device management, billing integration and other services. Depending on platform and network capability, there are literally hundreds of APIs that telcos could offer to external developers. These APIs could be used to develop applications that are integrated with telcos’ network product or service, which in turn makes the telco more relevant to their customers.

We will be exploring these strategies in depth in Cloud 2.0: Telco Strategies in the Cloud and at the invitation only New Digital Economics Executive Brainstorms in Digital Arabia in Dubai, 6-7 November, and Digital Asia in Singapore, 3-5 December, 2012.

Key questions explored at the brainstorms and in this briefing:

How will the Cloud Services market evolve?

Which customer and service segments are growing fastest (Iaas, PaaS, SaaS)?

What are the critical success factors to market adoption?

Who will be the leading players, and how will it impact different sectors?

What are the telcos’ strengths and who are the most advanced telcos today?

Which aspects of the cloud services market should they pursue first?

Where should telcos compete with IT companies and where should they cooperate?

What must telcos do to secure their share of the cloud and how much time do they have?

Stimulus Speakers/Panelists

Telcos

Peter Martin, Head of Strategy, Cloud Computing, Orange Group
Moisés Navarro Marín, Director, Strategy Global Cloud Services, Telefonica Digital
Alex Jinivizian, Head of Enterprise Strategy, Verizon Enterprise Solutions
Robert Brace, Head of Cloud Services, Vodafone Group

Technology Companies

Mohan Sadashiva, VP & GM, Cloud Services, Aepona
Gustavo Reyna, Solutions Marketing Manager, Aepona
Iain Gavin, Head of EMEA Web Services, Amazon
Pat Adamiak, Senior Director, Cloud Solutions, Cisco
Charles J. Meyers, President, Equinix Americas
Arun Bhikshesvaran, CMO, Ericsson
John Zanni, VP of Service Provider Marketing & Alliances, Parallels

Consulting & Industry Analysis

Chris Brahm, Partner, Head of Americas Technology Practices, Bain
Andrew Collinson, Research Director, STL Partners

With thanks to our Silicon Valley 2012 event sponsors and partners:

And our EMEA 2012 event sponsors:

To read the note in full, including the following sections detailing support for the analysis…

Round 2 of the Cloud Fight
Selling to new customers
What channels are needed?
How will telcos perform in cloud?
With which services will telcos succeed?
How can telcos differentiate?
Comments on telcos’ role, objectives and opportunities
Four telcos’ perspectives
Telefonica Digital – focusing on business requirements
Verizon – Cloud as a key Platform
Orange Business Services – communications related cloud
Vodafone – future cloud vision
Techco’s Perspectives
Amazon – A history of Amazon Web Services (AWS)
Cisco – a world of many clouds
Ericsson – the networked society and telco cloud
Aepona – Cloud Brokerage & ‘Network as a Service’ (NaaS)
The Telco 2.0™ Initiative

…and the following figures…

Figure 1 – Bain forecasts for business cloud market size
Figure 2 – Key barriers to cloud adoption
Figure 3 – Identifying the cloud growth markets
Figure 4 – Requirements for success
Figure 5 – New customers to drive cloud growth
Figure 6 – How to increase revenues from cloud services
Figure 7 – How to move cloud services forward
Figure 8 – Enterprise cloud channels
Figure 9 – Small businesses cloud channels
Figure 10 – Vote on Telco Cloud Market Share
Figure 11 – Telcos’ top differentiators in the cloud
Figure 12 – The global reach of Orange Business
Figure 13 – The telco as an intermediary
Figure 14 – Vodafone’s vision of the cloud
Figure 15 – Amazon Web Services’ cloud infrastructure
Figure 16 – Cisco’s world of many clouds
Figure 17 – Cloud traffic in the data centre
Figure 18 – Ericsson’s vision for telco cloud
Figure 19 – Summary of Ericsson cloud functions
Figure 20 – Aepona Cloud Services Broker
Figure 21 – How to deliver network-enhanced cloud services

…Members of the Telco 2.0 Executive Briefing Subscription Service and the Cloud and Enterprise ICT Stream can download the full 33 page report in PDF format here. Non-Members, please subscribe here. For this or other enquiries, please email contact@telco2.net / call +44 (0) 207 247 5003.

Companies and technologies covered: Telefonica, Vodafone, Verizon, Orange, Cloud, Amazon, Google, Ericsson, Cisco, Aepona, Equinix, Parallels, Bain, Telco 2.0, IaaS, PaaS, SaaS, private cloud, public cloud, telecom, strategy, innovation, ICT, enterprise.

Mobile TV: going ‘Round The Side’ of telco networks?

Summary: Dyle TV, a new mobile TV broadcast network (supported by Fox), was presented at the Silicon Valley Brainstorm against the backdrop of Cisco’s VNI (Visual Networking Index) research on forecast growth in mobile video traffic. It was argued that Dyle’s model can both take the pressure off mobile operator data capacity by taking video traffic ‘round the side’ and make good use of TV Broadcasters’ spectrum. Could this model work, not only in the US but elsewhere around the world? (May 2012, Executive Briefing Service)

Dyle Mobile TV Image Telco 2.0

Below is an extract from this 19 page Telco 2.0 Report that can be downloaded in full in PDF format by members of the Telco 2.0 Executive Briefing service here. Non-members can subscribe here, buy a Single User license for this report online here for £595 (+VAT for UK buyers), or for multi-user licenses or other enquiries, please email contact@telco2.net / call +44 (0) 207 247 5003. We’ll also be discussing our findings at the London (12-13 June) New Digital Economics Brainstorm.

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Background

This is an extract of the analysis of a session at the Digital Entertainment 2.0 stream of the Silicon Valley New Digital Economics Executive Brainstorm, that took place on the 28th March, 2012. Using a widely acclaimed interactive format called ‘Mindshare’, the Digital Entertainment 2.0 stream enabled specially-invited senior executives from across the communications, entertainment and technology sectors to discuss and explore key strategic issues on the theme of ‘New Business Models in a multi-screen, 3D/HD, mobile world’. Presentations from the event can be found here and further STL Partners research on entertainment and content can be found here.

Mobile Video: How to Reduce Complexity

The hypothesis explored at this session (one of three) was that content owners and carriers want to deliver live video content to their customers but face significant barriers: hundreds of device types, various network conditions, bandwidth congestion, hundreds of simultaneous sessions, and a painful workflow.

Key questions:

How are new devices, formats and enabling technologies improving the situation?
What use cases are most compelling – for different markets, in different geographies?
What are the viable cost models?

Presenters and Panellists:

Chris Osika, Senior Director IBSG, Cisco Systems presented an overview of Cisco’s VNI study of the future impact of video on communications networks;
Erik Moreno, SVP, Corporate Development, Fox Networks Group, presented on Dyle TV, a new innovation in Mobile TV in the US market;
Andre James, Partner, Media Practice, Bain, also joined the panel.

The session was hosted and moderated by Andrew Collinson, Research Director, STL Partners. This Briefing summarises some of the high-level findings and includes the verbatim output of the brainstorm.

Stimulus presentations

Cisco’s VNI Study

Opening the session, Chris Osika, Senior Director IBSG, Cisco Systems, gave some background to mobile broadband data growth and especially video traffic, citing Cisco’s own VNI (Visual Networking Index) forecasts. As well as a summary of top-level findings below, here is a video of his presentation in full.

He covered changing end-user behaviours and business models in the TV and video sectors, citing tablets, multi-tasking and “TV Everywhere” services as catalysts of change, and you can see a video of this presentation below.

Figure 1 – Cisco VNI forecast growth of mobile data traffic

Mobile TV 'Round the Side' Telco 2.0 image

Source: Cisco

[Note: STL Partners will shortly be issuing its own analysis of the new Cisco VNI mobile data forecasts]

Counter-intuitively, he disagreed with part of the central notion of “Social TV”, stating that while consumers might use two devices simultaneously, it will likely be for two different experiences, not a single converged one. He also touched on the risks of video “breaking the network”, and subtly introduced the idea of using WiFi for offload, suggesting that this might be part of a service provider’s arsenal (rather than driven by the user, as is currently typical).

Figure 2 – Adoption of tablets & other examples of new consumer behaviour

Mobile TV 'Round the Side' Telco 2.0 image Fig 2

Source: Cisco

Dyle TV

Next, Erik Moreno, SVP Corporate Development, Fox Networks Group, introduced Dyle, a new partnership for mobile TV which Fox is working on with partners such as Comcast/xfinity. (Currently, five out of the top 7 US broadcast networks are participating – excluding ABC and CBS at present). It intends to use existing broadcasting technology to provide live TV onto mobile devices (including tablets & automotive screens). In essence, this is another attempt to create a mobilised version of broadcast (this technology is called ATSC-MH), complete with new chipsets to be included into handsets, and apps to decrypt and play back content.

Figure 3 – An introduction to the Dyle mobile TV business model & technology

Mobile TV 'Round the Side' Telco 2.0 image Fig 3

Source: Fox Networks

However, unlike previous misadventures in mobile TV (think DVB-H in Europe, and Qualcomm’s MediaFlo network in the US), this time Dyle might be able to exploit a changing consumer behaviour mindset about on-the-go content (e.g. on tablets), coupled with different economics to 3G/4G usage – i.e. no data caps – as well as smarter and more user-friendly devices. Also, initially Dyle will be free-to-air, rather than demanding upfront monthly subscriptions, which has proven a major obstacle for occasional users.

He discussed the complexities of getting the service to market, juggling 11 different partnerships, cutting deals with content publishers, obtaining the first ATSC-MH integrated handset (from Samsung), starting build-out in 32 initial markets, gaining a distribution deal with MetroPCS and outlining its future roadmap such as an iPad antenna accessory from Belkin.

Figure 4 – Dyle mobile TV form-factors

Mobile TV 'Round the Side' Telco 2.0 image Fig 4

Source: Dyle

He sees four potential future revenue streams

Direct to consumer, which he thinks is “hard”
Wrapped up into MVPD services from cable companies wanting to offer TV Everywhere propositions
Targeted advertising – potentially location-based as well as individualised.
Distributed as an add-on to telcos’ voice and data plans

Figure 5 – Dyle has multiple business & distribution models

Mobile TV 'Round the Side' Telco 2.0 image Fig 5

Source: Fox Networks

Mr Moreno said that for mobile, “IP networks don’t scale” – especially for multiple viewers of live TV in the same location.

As part of the business rationale for Dyle, STL Partners thinks that it could help the TV industry justify continued ownership of spectrum in the face of a concerted effort by the telecoms industry to push regulators to repurpose it for mobile broadband.

To read this report in full, including…

Background
Mobile Video: How to Reduce Complexity
Stimulus presentations
Cisco’s VNI Study
Dyle TV
Panel Discussion & Delegate Input
Audience Q&As on presentations
Panel Discussion
Will Dyle work in the US and elsewhere? (Votes by region)
Verbatim delegate questions
What are the compelling mobile device video use cases?
Conclusions and next steps
Key takeaways
Next steps

… and the following figures….

Figure 1 – Cisco VNI forecast growth of mobile data traffic
Figure 2 – Adoption of tablets & other examples of new consumer behaviour
Figure 3 – An introduction to the Dyle mobile TV business model & technology
Figure 4 – Dyle mobile TV form-factors
Figure 5 – Dyle has multiple business & distribution models
Figure 6 – Vote on Dyle model in the US
Figure 7 – Vote on Dyle model in Europe
Figure 8 – Vote on Dyle model in Asia

…Members of the Telco 2.0 Executive Briefing Subscription Service can download the full 24 page report in PDF format here. Non-Members, please subscribe here, buy a Single User license for this report online here for £595 (+VAT for UK buyers), or for multi-user licenses or other enquiries, please email contact@telco2.net / call +44 (0) 207 247 5003.

Key terms referenced: Cisco, Dyle. Mobile TV, mobile operators, telcos, US, Europe, Asia, MediaFlo, VNI.

Cloud 2.0: don’t blow it, telcos

Summary: enterprise cloud computing services need great connectivity to work, but there are opportunities for telcos to participate beyond the connectivity. What are the opportunities, how are telcos approaching them, and what are the key strategies? Includes forecasts for telcos’ shares of VPC, IaaS, PaaS and SaaS. (September 2011, Executive Briefing Service, Cloud & Enterprise ICT Stream)

Apps & Telco APIs Figure 1 Drivers of the App Market Telco 2.0 Sept 2011

Below is an extract from this 28 page Telco 2.0 Report that can be downloaded in full in PDF format by members of the Telco 2.0 Executive Briefing service and the Cloud and Enterprise ICT Stream here. Non-members can subscribe here, buy a Single User license for this report online here for £795 (+VAT), or for multi-user licenses or other enquiries, please email contact@telco2.net / call +44 (0) 207 247 5003.

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Introduction

In our previous analyses Cloud 2.0: What are the Telco Opportunities? and Cloud 2.0: Telcos to grow Revenues 900% by 2014 we’ve looked broadly at the growing cloud market opportunity for telcos. This new report takes this analysis forward, looking in detail at the service definitions, market forecasts and the industry’s confidence in them, and actual and potential strategies for telcos.

We’ll also be looking in depth at the opportunities in cloud services in the Cloud 2.0: Transforming technology, media and telecoms at the EMEA Executive Brainstorm in London on Thursday 10th November 2011.

The Cloud Market

Cloud computing represents the next wave of IT. Almost all organisations are saying that they will adopt cloud computing to a greater or lesser extent, across all segments and sizes. Consequently, we believe that there exists a large opportunity for telcos if they move quickly enough to take advantage of it.

Total market cloud forecasts – variation and uncertainty

In order to understand where the best opportunities are and how telcos can best take use their particular strengths to advantage of them, we need to examine the size of that opportunity and to understand which areas of cloud computing are most likely to offer the best returns.

Predictions for the size and growth of the cloud computing market are very diverse:

Merrill Lynch has previously offered the most optimistic estimate: $160 billion by the end of 2011 (The Cloud Wars: $100+ billion at stake, May 2008)
Gartner predicted expenditure of $150.1 billion by 2013 (Gartner forecast, March 2009)
IDC predicts annual cloud services revenues of $55.5 billion in by 2014 (IDC report, June 2010)
Cisco has estimated the cloud market at $43 billion by 2013 (STL Partners video, October 2010)
Bain expects spending to grow �?vefold from $30 billion in 2011 to $150 billion by 2020 (The Five Faces of the Cloud, 2011)
IBM’s Market Insights Cloud Phase 2 assessment of September 2011 sizes the cloud market at $88.5bn by 2015
Of that total, research by AMI Partners suggests that SMBs’ share of that spend will approach $100 billion by 2014 – over 60 % of the total (World Wide Cloud Services Study, December 2010)

Figure 1 – Cloud services market forecast comparisons

Source: Bain, Cap Gemini, Cisco, Gartner, IBM, IDC, Merrill Lynch

Whichever way you look at it, the volume of spending on cloud computing is high and growing. But why are there such large variations in the estimates of that growth?

There is a clear correlation between the report dates and the market forecast sizes. Two of the forecasts – from Merrill Lynch and Gartner – are well over two years old, and are likely to have drawn conclusions from data gathered before the 2008 recession started to bite. Both are almost certainly over-optimistic as a result, and are included as an indication of the historic uncertainty in Cloud forecasts rather than criticism of the forecasters.

More generally, while each forecaster will be using different assumptions and extrapolation techniques, the variation is also likely to reflect a lack of maturity of the cloud services market: there exists little historical data from which to extrapolate the future, and little experience of what kinds of growth rates the market will experience. For example, well-known inhibitors to the adoption of cloud, such security and control, have yet to be resolved by cloud service providers to the point where enterprise customers are willing to commit a substantial volume of their IT spending.

Additionally, the larger the organisation, the slower the adoption of cloud computing is likely to be; it takes a long time for large enterprises to move to a new computing model that involves changing fundamental IT architectures and will be a process undertaken over time. It is hard to be precise about the degree to which they will inhibit the growth of cloud acceptance.

As a result, in a world where economic uncertainty seems unlikely to disappear in the short to medium term, it would be unwise to assume a high level of accuracy for market sizing predictions, although the general upward trend is very clear.

Cloud service types

Cloud computing services fall into three broad categories: infrastructure as a service (IaaS), platform as a service (PaaS) and software as a service (SaaS).

Figure 2 – Cloud service layer definitions

Source: STL Partners/Telco 2.0

Of the forecasts available, we prefer Bain’s near term forecast because: 1) it is based on their independent Cloud ‘Center of Excellence’ work; 2) it is relatively recent, and 3) it has clear and meaningful categories and definitions.
The following figure summarises Bain’s current market forecast, split by cloud service type.

Figure 3 – Cloud services: market forecast and current players

Currently, telcos have around a 5% share of the c.$20 billion annual cloud services revenue, with 25 % CAGR forecast to 2013.

At the May 2011 EMEA Telco 2.0 Executive Brainstorm, we used these forecasts as a base to explore market views on the various cloud markets. There were c.200 senior executives at the brainstorm from industries across Telecoms, Media and Technology (TMT) and, following detailed presentations on Cloud Services, they were asked highly structured questions to ascertain their views on the likelihood of telco success in addressing each service.

Infrastructure as a Service (IaaS)

IaaS consists of cloud-based, usually virtualised servers, networking, and storage, which the customer is free to manage as they need. Billing is typically on a utility computing model: the more of each that you use, the more you pay. The largest of the three main segments, Bain forecasts IaaS to be worth around $3.5 billion in 2011, with 45 % CAGR forecast. The market leader is Amazon with about 18 % share. Other players include IBM and Rackspace. Telcos currently have about 20 % of this market – Qwest/Savvis/Equinix, and Verizon/Terremark.

Respondents at the EMEA Telco 2.0 Brainstorm estimated that telcos could take an average share of 25% of this market. The distribution was reasonably broad, with the vast majority in the 11-40% range.

Figure 4 – IaaS – Telco market share forecasts

Source: EMEA Telco 2.0 Executive Brainstorm delegate vote, May 2011

To read the note in full, including the following additional analysis…

Virtual Private Cloud (VPC)
Software as a Service (SaaS)
Platform as a Service (PaaS)
Hybrid Cloud
Cloud Service Brokerage
Overall telco cloud market projections by type, including forecast uncertainties
Challenges for telcos
Which areas should telcos target?
Telcos’ advantages
IaaS, PaaS, or SaaS?
Developing other segments
What needs to change?
How can telcos deliver?
Telcos’ key strengths
Key strategy variables
Next Steps

…and the following charts…

Figure 1 – Cloud services market forecast comparisons
Figure 2 – Cloud service layer definitions
Figure 3 – Cloud services: market forecast and current players
Figure 4 – IaaS – Telco market share forecasts
Figure 5 – VPC – Telco market share forecasts
Figure 6 – SaaS – Telco market share forecasts
Figure 7 – PaaS – Telco market share forecasts
Figure 8 – Total telco cloud market size and share estimates – 2014
Figure 9 – Uncertainty in forecast by service
Figure 10 – Telco cloud strengths
Figure 11 – Cloud services timeline vs. profitability schematic
Figure 12 – Telcos’ financial stability

…Members of the Telco 2.0 Executive Briefing Subscription Service and the Cloud and Enterprice ICT Stream can download the full 28 page report in PDF format here. Non-Members, please subscribe here, buy a Single User license for this report online here for £795 (+VAT), or for multi-user licenses or other enquiries, please email contact@telco2.net / call +44 (0) 207 247 5003.

Organisations, people and products referenced: Aepona, Amazon, AMI Partners, Bain, BT, CenturyLink, CENX, Cisco, CloudStack, Deutsche Telekom, EC2, Elastic Compute Cloud (EC2), EMC, Equinix, Flexible 4 Business, Force.com, Forrester, France Telecom, Gartner, Google App Engine, Google Docs, IBM, IDC, Intuit, Java, Merrill Lynch, Microsoft, Microsoft Office 365, MySQL, Neustar, NTT, OneVoice, OpenStack, Oracle, Orange, Peartree, Qwest, Rackspace, Red Hat, Renub Research, Sage, Salesforce.com, Savvis, Telstra, Terremark, T-Systems, Verizon, VMware, Vodafone, Webex.

Technologies and industry terms referenced: Azure, Carrier Ethernet, Cloud computing, cloud service providers, Cloud Services, Communications as a Service, compliance, Connectivity, control, forecast, Global reach, Hybrid Cloud, Infrastructure as a Service (IaaS), IT, Mobile Cloud, network, online, Platform as a Service (PaaS), Reliability, resellers, security, SMB, Software as a Service (SaaS), storage, telcos, telecoms, strategy, innovation, transformation, unified communications, video, virtualisation, Virtual Private Cloud (VPC), VPN.

Cloud 2.0: Telcos to grow Revenues 900% by 2014

Summary: Telcos should grow Cloud Services revenues nine-fold and triple their overall market share in the next three years according to delegates at the May 2011 EMEA Executive Brainstorm. But which are the best opportunities and strategies? (June 2011, Executive Briefing Service, Cloud & Enterprise ICT Stream)

NB Members can download a PDF of this Analyst Note in full here. Cloud Services will also feature at the Best Practice Live! Free global virtual event on 28-29 June 2011.

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Introduction

STL Partners’ New Digital Economics Executive Brainstorm & Developer Forum EMEA took place from 11-13 May in London. The event brought together 250 execs from across the telecoms, media and technology sectors to take part in 6 co-located interactive events: the Telco 2.0, Digital Entertainment 2.0, Mobile Apps 2.0, M2M 2.0 and Personal Data 2.0 Executive Brainstorms, and an evening AppCircus developer forum.

Building on output from the last Telco 2.0 events and new analysis from the Telco 2.0 Initiative – including the new strategy report ‘The Roadmap to New Telco 2.0 Business Models’ – the Telco 2.0 Executive Brainstorm explored latest thinking and practice in growing the value of telecoms in the evolving digital economy.

This document gives an overview of the output from the Cloud session of the Telco 2.0 stream.

Companies referenced: Aepona, Amazon Web Services, Apple, AT&T, Bain, BT, Centurylink, Cisco, Dropbox, Embarq, Equinix, Flexible 4 Business, Force.com, Google Apps, HP, IBM, Intuit, Microsoft, Neustar, Orange, Qwest, Salesforce.com, SAP, Savvis, Swisscom, Terremark, T-Systems, Verizon, Webex, WMWare.

Business Models and Technologies covered: cloud services, Enterprise Private Cloud (EPC), Virtual Private Cloud (VPC), Infrastucture as a service (IaaS), Platform as a Service (PaaS), Software as a Service (SaaS).

Cloud Market Overview: 25% CAGR to 2013

Today, Telcos have around a 5% share of nearly $20Bn p.a. cloud services revenue, with 25% compound annual growth rate (CAGR) forecast to 2013. Most market forecasts are that the total cloud services market will reach c.$45-50Bn revenue by 2013 / 2014, including the Bain forecast previewed at the Americas Telco 2.0 Brainstorm in April 2011.

At the EMEA brainstorm, delegates were presented with an overview of the component cloud markets and examples of different cloud services approaches, and were then asked for their views on what share telcos could take of cloud revenues in each. In total, delegates’ views amounted to telcos taking in the region of 18% by revenue of cloud services at the end of the next three years.

Applying these views to an extrapolated ‘mid-point’ forecast view of the Cloud Market in 2014, implies that Telcos will take just under $9Bn revenue from Cloud by 2014, thus increasing today’s c$1Bn share nine-fold. [NB More detailed methodology and sources are in the full paper available to members here.]

Figure 1 – Cloud Services Market Forecast & Players

Source: Telco 2.0 Presentation

Although already a multi-$Bn market already, there is still a reasonable degree of uncertainty and variance in Cloud forecasts as might be expected in a still maturing market, so this market could be a lot higher – or perhaps lower, especially if the consequences of the recent Amazon AWS breakdown significantly reduce CIO’s appetites for Cloud.

The potential for c.30% IT cost savings and speed to market benefits that can be achieved by telcos implementing Cloud internally previously shown by Cisco’s case study were highlighted but not explored in depth at this session.

Which cloud markets should telcos target?

Figure 2 – Cloud Services – Telco Positioning

Source: Cisco/Orange Presentation, 13th Telco 2.0 Executive Brainstorm, London, May 2011

An interesting feature of the debate was which areas telcos would be most successful in, and the timing of market entry strategies. Orange and Cisco argued that the area of ‘Virtual Private Cloud’, although neither the largest nor predicted to be the fastest growing area, should be the first market for some telcos to address, appealing to some telcos strong ‘trust’ credentials with CIOs and building on ‘managed services’ enterprise IT sales and delivery capabilities.

Orange described its value proposition ‘Flexible 4 Business’ in partnership with Cisco, VMWare virtualisation, and EMC2 storage, and although could not at this early stage give any performance metrics described strong demand and claimed satisfaction with progress to date.

Aepona described a Platform-as-a-Service (PaaS) concept that they are launching shortly with Neustar that aggregates telco APIs to enable the rapid creation and marketing of new enterprise services.

Figure 3 – Aepona / Neustar ‘Intelligent Cloud’ PaaS Concept

In this instance, the cloud component makes the service more flexible, cheaper and easier to deliver than a traditional IT structure. This type of concept is sometimes described as a ‘mobile cloud’ because many of the interesting uses relate to mobile applications, and are not reliant on continuous high-grade mobile connectivity required for e.g. IaaS: rather they can make use of bursts of connectivity to validate identities etc. via APIs ‘in the cloud’.

To read the rest of this Analyst Note, containing…

Forecasts of telco share of cloud by VPC, IaaS, PaaS and SaaS
Telco 2.0 take-outs and next steps
And detailed Brainstorm delegate feedback

…Members of the Telco 2.0^TM Executive Briefing Subscription Service and the Cloud and Enterprise ICT Stream can access and download a PDF of the full report here. Non-Members, please see here for how to subscribe. Alternatively, please email contact@telco2.net or call +44 (0) 207 247 5003 for further details.

Tag: Bain

Mobile TV: going ‘Round The Side’ of telco networks?

Background

Mobile Video: How to Reduce Complexity

Stimulus presentations

Cisco’s VNI Study

Dyle TV

Sample Reports