Driving the agility flywheel: the stepwise journey to agile

Agility is front of mind, now more than ever

Telecoms operators today face an increasingly challenging market, with pressure coming from new non-telco competitors, the demands of unfamiliar B2B2X business models that emerge from new enterprise opportunities across industries and the need to make significant investments in 5G. As the telecoms industry undergoes these changes, operators are considering how best to realise commercial opportunities, particularly in enterprise markets, through new types of value-added services and capabilities that 5G can bring.

However, operators need to be able to react to not just near-term known opportunities as they arise but ready themselves for opportunities that are still being imagined. With such uncertainty, agility, with the quick responsiveness and unified focus it implies, is integral to an operator’s continued success and its ability to capitalise on these opportunities.

Traditional linear supply models are now being complemented by more interconnected ecosystems of customers and partners. Innovation of products and services is a primary function of these decentralised supply models. Ecosystems allow the disparate needs of participants to be met through highly configurable assets rather than waiting for a centralised player to understand the complete picture. This emphasises the importance of programmability in maximising the value returned on your assets, both in end-to-end solutions you deliver, and in those where you are providing a component of another party’s system. The need for agility has never been stronger, and this has accelerated transformation initiatives within operators in recent years.

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Concepts of agility have crystallised in meaning

In 2015, STL Partners published a report on ‘The Agile Operator: 5 key ways to meet the agility challenge’, exploring the concept and characteristics of operator agility, including what it means to operators, key areas of agility and the challenges in the agile transformation. Today, the definition of agility remains as broad as in 2015 but many concepts of agility have crystallised through wider acceptance of the importance of the construct across different parts of the organisation.

Agility today is a pervasive philosophy of incremental innovation learned from software development that emphasises both speed of innovation at scale and carrier-grade resilience. This is achieved through cloud native modular architectures and practices such as sprints, DevOps and continuous integration and continuous delivery (CI/CD) – occurring in virtuous cycle we call the agility flywheel.

The Agility Flywheel

agility-flywheel

Source: STL Partners

Six years ago, operators were largely looking to borrow only certain elements of cloud native for adoption in specific pockets within the organisation, such as IT. Now, the cloud model is more widely embraced across the business and telcos profess ambitions to become software-centric companies.

Same problem, different constraints

Cloud native is the most fundamental version of the componentised cloud software vision and progress towards this ideal of agility has been heavily constrained by operators’ underlying capabilities. In 2015, operators were just starting to embark on their network virtualisation journeys with barriers such as siloed legacy IT stacks, inelastic infrastructures and software lifecycles that were architecture constrained. Though these barriers continue to be a challenge for many, the operators at the forefront – now unhindered by these basic constraints – have been driving a resurgence and general acceleration towards agility organisation-wide, facing new challenges around the unknowns underpinning the requirements of future capabilities.

With 5G, the network itself is designed as cloud native from the ground up, as are the leading edge of enterprise applications recently deployed by operators, alleviating by design some of the constraints on operators’ ability to become more agile. Uncertainty around what future opportunities will look like and how to support them requires agility to run deep into all of an operators’ processes and capabilities. Though there is a vast raft of other opportunities that do not need cloud native, ultimately the market is evolving in this direction and operators should benchmark ambitions on the leading edge, with a plan to get there incrementally. This report looks to address the following key question:

Given the flexibility and driving force that 5G provides, how can operators take advantage of recent enablers to drive greater agility and thrive in the current pace of change?

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Table of Contents

  • Executive Summary
  • Agility is front of mind, now more than ever
    • Concepts of agility have crystallised in meaning
    • Same problem, different constraints
  • Ambitions to be a software-centric business
    • Cloudification is supporting the need for agility
    • A balance between seemingly opposing concepts
  • You are only as agile as your slowest limb
    • Agility is achieved stepwise across three fronts
    • Agile IT and networks in the decoupled model
    • Renewed need for orchestration that is dynamic
    • Enabling and monetising telco capabilities
    • Creating momentum for the agility flywheel
  • Recommendations and conclusions

Telco 2030: New purpose, strategy and business models for the Coordination Age

New age, new needs, new approaches

As the calendar turns to the second decade of the 21st century we outline a new purpose, strategy and business models for the telecoms industry. We first described The Coordination Age’, our vision of the market context, in our report The Coordination Age: A third age of telecoms in 2018.

The Coordination Age arises from the convergence of:

  • Global and near universal demands from businesses, governments and consumers for greater resource efficiency, availability and conservation, and
  • Technological advances that will allow near their real-time management.

Figure 1: Needs for efficient use of resources are driving economic and digital transformation

Resource availability, Resource efficiency, Resource conservation: Issues for governments, enterprises and consumers. Solutions must come from all constituents.

Source: STL Partners

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A new purpose for a new age

This new report outlines how telcos can succeed in the Coordination Age, including what their new purpose should be, the strategies, business models and investment approaches needed to deliver it.

It argues that faster networks which can connect tens of billions of sensors coupled with advances in analytics and process digitisation and automation means that there are opportunities for telecoms players to offer more than connectivity.

It also shows how a successful telecoms operator in the Coordination Age will profitably contribute to improving society by enabling governments, enterprises and consumers to collaborate in such a way that precious resources – labour, knowledge, energy, power, products, housing, and so forth – are managed and allocated more efficiently and effectively than ever before. This should have major positive economic and social benefits.

Moreover, we believe that the new purpose and strategies will help all stakeholders, including investors and employees, realign to deliver a motivating and rewarding new model. This is a critical role – and challenge – for all leaders in telecoms, on which the CEO and C-suite must align.

To do this, telecoms operators will need to move beyond providing core communications services. If they don’t choose this path, they are likely to be left fighting for a share of a shrinking ‘telecoms pie’.

A little history 2.0

Back in 2006, STL Partners came up with a first bold new vision for the telecoms industry to use its communications, connectivity, and other capabilities (such as billing, identity, authentication, security, analytics) to build a two-sided platform that enables enterprises to interact with each other and consumers more effectively.

We dubbed this Telco 2.0 and the last version of the Telco 2.0 manifesto we published can be found here – we feel it was prescient and that many of the points we made still resonate today. Indeed, many telecoms operators have embraced the Telco 2.0 two-sided business model over the last ten years.

This latest report builds on much of what we have learned in the previous fourteen years. We hope it will help carry the industry forwards into the next decade with renewed energy and success.

Other recent reports on the Coordination Age:

Table of contents

  • Executive Summary
  • Introduction
  • Industry context: End of the last cycle
    • The telecoms industry is seeking growth
    • Society is facing some major social and economic challenges
    • Addressing society’s (and the telecoms industry’s) challenges
  • The Coordination Age
    • Right here, right now
    • How would the Coordination Age work in healthcare, for example?
  • New opportunities for telcos?
    • The telecoms industry’s new role in the Coordination Age
    • Telcos need an updated purpose
    • This will help to realign stakeholders
    • A new purpose can be the foundation of new strategy too
    • Investment priorities need to reflect the purpose
    • New operational models will also follow
  • Conclusions: What will Telco 2030 look like?

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Edge computing: Five viable telco business models

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This report has been produced independently by STL Partners, in co-operation with Hewlett Packard Enterprise and Intel.

Introduction

The idea behind Multi-Access Edge Computing (MEC) is to make compute and storage capabilities available to customers at the edge of communications networks. This will mean that workloads and applications are closer to customers, potentially enhancing experiences and enabling new services and offers. As we have discussed in our recent report, there is much excitement within telcos around this concept:

  • MEC promises to enable a plethora of vertical and horizontal use cases (e.g. leveraging lowlatency) implying significant commercial opportunities. This is critical as the whole industry is trying to uncover new sources of revenue, ideally where operators may be able to build a sustainable advantage.
  • MEC should also theoretically fit with telcos’ 5G and SDN/NFV deployments, which will run certain virtualised network functions in a distributed way, including at the edge of networks. In turn, MEC potentially benefits from the capabilities of a virtualised network to extract the full potential of distributed computing.

Figure 1: Defining MEC

Source: STL Partners

However, despite the excitement around the potentially transformative impact of MEC on telcos,viable commercial models that leverage MEC are still unclear and undefined. As an added complication, a diverse ecosystem around edge computing is emerging – of which telcos’ MEC is only one part.

From this, the following key questions emerge:

  • Which business models will allow telcos to realise the various potential MEC use cases in a commercially viable way?
  • What are the right MEC business models for which telco?
  • What is needed for success? What are the challenges?

Contents:

  • Preface
  • Introduction
  • The emerging edge computing ecosystem
  • Telcos’ MEC opportunity
  • Hyperscale cloud providers are an added complication for telcos
  • How should telcos position themselves?
  • 5 telco business models for MEC
  • Business model 1: Dedicated edge hosting
  • Business model 2: Edge IaaS/PaaS/NaaS
  • Business model 3: Systems integration
  • Business model 4: B2B2X solutions
  • Business model 5: End-to-end consumer retail applications
  • Mapping use cases to business models
  • Some business models will require a long-term view on the investment
  • Which business models are right for which operator and which operator division?
  • Conclusion

Figures:

  • Figure 1: Defining MEC
  • Figure 2: MEC potential benefits
  • Figure 3: Microsoft’s new mantra – “Intelligent Cloud, Intelligent Edge”
  • Figure 4: STL Partners has identified 5 telco business models for MEC
  • Figure 5: The dedicated edge hosting value
  • Figure 6: Quantified example – Dedicated edge hosting
  • Figure 7: The Edge IaaS/PaaS/NaaS value chain
  • Figure 8: Quantified example – Edge IaaS/PaaS/NaaS
  • Figure 9: The SI value chain
  • Figure 10: Quantified example – Systems integration
  • Figure 11: The B2B2X solutions value chain
  • Figure 12: Quantified example – B2B2x solutions
  • Figure 13: Graphical representation of the end-to-end consumer retail applications business model
  • Figure 14: Quantified example – End-to-end consumer retail applications
  • Figure 15: Mapping MEC business models to possible use cases
  • Figure 16: High IRR correlates with low terminal value
  • Figure 17: Telcos need patience for edge-enabled consumer applications to become profitable (breakeven only in year 5)
  • Figure 18: The characteristics and skills required of the MEC operator depend on the business models

Network slicing: The greatest thing since sliced bread?

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The Network Slicing research project was sponsored by HPE. This report and the analysis it contains were independently produced by STL Partners.

Service providers continue to face a decline in revenue

STL Partners has written for some time about the significant pressure faced by communications service providers (CSPs), both from operator rivals and players in adjacent sectors. Traditional telecoms revenue streams such as voice and messaging are shrinking, and as a result operator growth is slowing. Figure 1 shows that the average year-on-year revenue growth rate for 68 major telecoms groups worldwide has fallen since at least 2010.

Figure 1: 68 major telecoms groups – aggregate telecoms revenue, 2009-16

Source: Company accounts; STL Partners analysis

Much of this decline is fuelled by the impact of new competition: digital players such as Google, Facebook (including Whatsapp), Microsoft (including Skype and Skype-for-business) and Netflix, who are equipped to provide their own digital services, including voice- and messaging-enabled applications, without the headache of maintaining capital-intensive network infrastructure. It is now widely acknowledged that voice minutes and SMS bundles will continue to decline as a revenue stream as other players can offer the same, or better, capabilities ‘over-the-top’ to consumers and organisations for much less or free.

Data is not enough to ensure future growth

Of course, in order to use these new digital services, organisations and consumers do need network connectivity and, as a result, data consumption levels have shot up. Currently, the only players able to offer data connectivity are the communications service providers themselves, and therefore many have pointed to data as the primary source of new revenues which might offset the gap left by the decline in voice and messaging. In developed markets, in particular, some operators hope that it may be possible to ‘premiumise’ data services and drive higher average revenues per user (ARPUs). We do not believe that the evidence supports this and anticipate that plummeting data connectivity rates ($/MB) will neutralise growth in volumes resulting in low or no net growth in revenues.

In many developed markets, intense competition and strict regulation restricts the ability of operators to resist data price decline and squeeze more out of customers. Figure 5, for example, shows that despite mobile data consumption in the United Kingdom growing 243% between 2013 and 2015, ARPUs actually fell 4.5% over the period. More data, it is clear, does not automatically translate into more money.

 Figure 5: UK mobile ARPUs and data volumes, 2013-15

Source: STL Partners, Ofcom

In Figure 6 below, we show our revenue forecast for a telecoms operator offering converged fixed and mobile telecoms services to both enterprise and consumer customers in a developed market. In this conservative estimate, data revenues grow slightly, but not enough to offset voice and messaging revenues falling by half.

Figure 6: Forecast revenues for converged telco in advanced market

Source: STL Partners analysis

It is STL Partners’ belief that the path to sustainable telecoms growth lies not just in better monetising connectivity, but rather in telcos developing new capabilities of their own, continuously innovating and launching new products and services that more readily meet the needs of their customer base. It is only by doing so, and by leveraging new technology and network assets where possible, that telcos will be able to truly compete with digital players. In essence, communications service providers must either evolve to overcome commoditisation or to embrace it. Either way, they cannot continue business as usual.

Virtualisation and slicing: enablers for change?

STL Partners has written previously about Telco Cloud, a concept in which telcos redefine themselves by adopting cloud business platforms and practices (similar to internet and content players), alongside virtualisation of their core assets. This could lead to increased service agility, and the ability to create new, network-integrated services. In turn, this could drive new revenue growth.

Network virtualisation is still at an early stage, but its adoption is increasingly seen as inevitable. Operators worldwide are already deploying NFV/SDN technology, some setting ambitious virtualisation targets over time. The forthcoming 5G standards, as well as IoT technologies, are being developed with virtualisation in mind, and technology vendors are increasingly evolving their software offerings. If managed effectively, virtualisation could be the catalyst for the transformation towards the digital service provider.

One way in which virtualisation might enable this change is through the concept of ‘network slicing’, under which network operators would be able to operate multiple logically separate virtual networks over a single network infrastructure. This paper examines what network slicing might look like in practise, and what that could mean for CSPs.

Slicing: a vision for fundamental transformation

Defining slicing is not about the ‘what’, it’s the ‘how’

Network slicing is a term that has been discussed quietly in the industry for some time, but it has gained prominence more recently in parallel with the industry’s developing new 5G standards. Slicing has recently become the focus of a public disagreement between industry players involved in driving 5G standards. In essence, one group of operators and vendors are keen on accelerating New Radio (NR) standards in 5G, whereas another group see this as potentially undermining future standards in end-to-end slicing. A related debate also exists within operators between the core network and radio access teams, but that is neither new, nor surprising. These debates are not about slicing, since most parties appear to broadly agree on its potential, but more about how 5G will be introduced: as an evolution of 4G or as a completely new network.

A few considerations

In recent years, network slicing has also gained prominence as a way of creating unified 5G networks, which cover multiple very-different use-cases with a single infrastructure. Turning a necessity into a virtue, this technical “fix” is now being seen as a possible basis for extra capabilities and new services. However, many of the benefits could – and should – be achievable before 5G.

While network-slicing can in theory extend all the way through core networks and down to the radio connection, it is still subject to the laws of physics: if there is no coverage, poor RF propagation, or limited overall capacity, there is a hard limit to what performance can be guaranteed. There are also boundaries at the device, 3rd-party server/cloud interface, or where other networks interconnect, which mean that “end-to-end control” doesn’t always mean an entire system.

It’s important not to fall into the trap of thinking that because we have a slicing “hammer” that all problems start to look like “nails”. Telcos have many other approaches to future service creation and revenue expansion, that lie outside the core network. Content partnerships, vertical-industry solutions, in-home automation and new forms of connectivity all offer opportunities. If network-slicing does not reach its aspirations, there are still plenty of other options for the industry to prosper.

Independently of the 5G debate, slicing can be considered part of a wider trend (in both fixed and wireless networks) towards a more software-centric infrastructure leading to more flexible networks. As more network resources become virtual (rather than physical), operators could readily allocate resources to a particular ‘network slice.’ Hence, slicing is arguably really about the orchestration of operator assets and how an operator is able to effectively manage its network.

This vision affirms that the ‘one size fits all’ model will not applicable for the future where a diverse set of requirements will need to addressed with more customised services: from (enhanced) mobile broadband (eMBB), to ultra-low latency types (uRLLC), to low-power machine-type communications for IoT devices (mMTC).

Taking the work done by industry organisations, such as The Next Generation Mobile Networks (NGMN) Alliance , 5G Americas and the Open Networking Foundation (ONF) into consideration, STL Partners has developed the following definition for network slicing as the basis for this paper:

‘Network slicing is a mechanism to create and dynamically manage functionally-discrete virtualised networks over a common infrastructure’

 

  • Executive Summary
  • Introduction
  • Slicing: a vision for fundamental transformation
  • Defining slicing is not about the ‘what’, it’s the ‘how’
  • How slicing could enable growth
  • New services from network slicing
  • Evidence of the demand for slicing
  • Examples of new services
  • The slicing business models
  • So, where is the money?
  • Scenarios for the telco of the future
  • The scenarios imply different business models and ways of making money…
  • How slicing might work in practice
  • Key challenges to achieving slicing
  • Early 5G trials and proofs of concept
  • The evolution to slicing
  • A tricky transition with major obstacles to address
  • Conclusion

 

  • Figure 1: Benefits of network slicing
  • Figure 2: How might (operator) assets translate into demand for slices?
  • Figure 3: ‘External’ slicing business models
  • Figure 4: 68 major telecoms groups – aggregate telecoms revenue, 2009-16
  • Figure 5: UK mobile ARPUs and data volumes, 2013-15
  • Figure 6: Forecast revenues for converged telco in advanced market
  • Figure 7: With slicing, networks can be adapted to customers and applications
  • Figure 8: Diagram of slicing
  • Figure 9: Network slicing compared with existing technologies and services
  • Figure 10: Potential benefits of network slicing for network operators
  • Figure 11: Google Chrome’s release channels – a model for network development?
  • Figure 12: How operating models could change under network slicing
  • Figure 13: How might (operator) assets translate into demand for slices?
  • Figure 14: Example 1 – Emergency Services VMNO
  • Figure 15: Example 2 – Low Power IoT Service
  • Figure 16: Example 3 – Pop-up Network
  • Figure 17: Example 4 – Global Streaming Service
  • Figure 18: Example 5 – Smart Meters
  • Figure 19: Example 6 – Renewable Energy
  • Figure 20: Example 7 – Mining
  • Figure 21: Slicing Business Models
  • Figure 22: Mapping out the scenarios
  • Figure 23: Where will revenues come from?
  • Figure 24: Traditional telco cost structure and operating model is set up to operate networks not innovate in services
  • Figure 25: Under the slicing scenarios, the cost structures shift accordingly
  • Figure 26: Challenges identified from interview programme
  • Figure 27: Phases of network transformation for slicing future

Telco Cloud: Translating New Capabilities into New Revenue

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Preface

The telecoms industry is embracing network virtualisation and software defined networking, which are designed to both cut costs and enable greater agility. Whilst most operators have focused on the operating and capital cost benefits of virtualisation, few have attempted to define the range of potential new services that could be enabled by these new technologies and even fewer have attempted to forecast the associated revenue growth.

This report outlines:

  • Why and how network functions virtualisation (NFV), software defined networking (SDN) and distributed compute capabilities could generate new revenue growth for telcos.
  • The potential new services enabled by these technologies.
  • The revenue growth that a telco might hope to achieve.

This report does not discuss the cost, technical, organisational, market or regulatory challenges operators will need to overcome in making the transition to SDN and NFV. STL Partners (STL) also acknowledges that operators are still a long way from developing and launching some of the new services discussed in this paper, not least because they require capabilities that do not exist today. Nevertheless, by mapping the opportunity landscape for operators, this report should help to pave the way to fully capturing the transformative potential of SDN and NFV.

To sense-check our findings, STL has tested the proposed service concepts with the industry. The new services identified and modelled by STL were shared with approximately 25 telecoms operators. Hewlett Packard Enterprise (HPE) kindly commissioned and supported this research and testing programme.

However, STL wrote this report independently, and the views and conclusions contained herein are those of STL.

Introduction

The end of growth in telecoms…?

Most telecoms operators are facing significant competitive pressure from rival operators and players in adjacent sectors. Increased competition among telcos and Internet players has driven down voice and messaging revenues. Whilst demand for data services is increasing, STL forecasts that revenue growth in this segment will not offset the decline in voice and messaging revenue (see Figure 5).

 Figure 5: Illustrative forecast: revenue decline for converged telco in advanced market

Source: STL Partners analysis

Figure 5 shows STL forecasts for revenues over a six-year horizon for an illustrative converged telco operating in an advanced market. The telco, its market characteristics and the modelling mechanics are described in detail later in this report.

We believe that existing ‘digital’ businesses (representing consumer digital services, such as IPTV and managed services for enterprises) will not grow significantly on an organic basis over the next six years (unless operators are able to radically transform their business). Note, this forecast is for a converged telco (mobile and fixed) addressing both enterprise and consumer segments; we anticipate that revenues could face a steeper decline for non-converged, consumer-only or enterprise-only players.

Given that telcos’ cost structures are quite rigid, with high capex and opex requirements to manage infrastructure, the ongoing decline in core service revenue will continue to put significant pressure on the core business. As revenues decline, margins fall and telcos’ ability to invest in innovation is curbed, making it even harder to find new sources of revenue.

New technologies can be a catalyst for telco transformation

However, STL believes that new technologies have the potential to both streamline the telco cost structure and spur growth. In particular, network functions virtualisation (NFV) and software-defined networking (SDN) offer many potential benefits for telcos.

Virtualisation has the potential to generate significant cost savings for telcos. Whilst the process of managing a transition to NFV and SDN may be fraught with challenges and be costly, it should eventually lead to:

  • A reduction in capex – NFV will lead to the adoption of generic common-off-the-shelf (COTS) hardware. This hardware will be lower cost, able to serve multiple functions and will be more readily re-usable. Furthermore, operators will be less tied to vendors’ proprietary platforms, as functions will be more openly interchangeable. This will increase competition in the hardware and software markets, leading to an overall reduction in capital investment.
  • Reduction of opex through automation. Again, as services will be delivered via software there will be less cost associated with the on-going management and maintenance of the network infrastructure. The network will be more-centrally managed, allowing more efficient sharing of resources, such as space, power and cooling systems.
  • Product lifecycle management improvements through more integrated development and operations (devops)

In addition to cost savings, virtualisation can also allow operators to become more agile. This agility arises from two factors:

  1. The nature of the new infrastructure
  2. The change in cost structure

As the new infrastructure will be software-centric, as opposed to hardware-centric, greater levels of automation will be possible. This new software-defined, programmable infrastructure could also increase flexibility in the creation, management and provisioning of services in a way that is not possible with today’s infrastructure, leading to greater agility.

Virtualisation will also change the telco cost structure, potentially allowing operators to be less risk-averse and thereby become more innovative. Figure 6 below shows how virtualisation can impact the operating model of a telco. Through virtualisation, an infrastructure player becomes more like a platform or product player, with less capital tied-up in infrastructure (and the management of that infrastructure) and more available to spend on marketing and innovation.

Redefining the cost structure could help spur transformation across the business, as processes and culture begin to revolve less around fixed infrastructure investment and more-around software and innovation.

Figure 6: Virtualisation can redefine the cost structure of a telco

Source: STL Partners analysis

This topic is explored in detail in the recent Executive Briefings: Problem: Telecoms technology inhibits operator business model change (Part 1) and Solution: Transforming to the Telco Cloud Service Provider (Part 2).

 

  • Preface
  • Executive Summary
  • Introduction
  • The end of growth in telecoms…?
  • New technologies can be a catalyst for telco transformation
  • Defining ‘Telco Cloud’
  • How Telco Cloud enables revenue-growth opportunities for telcos
  • Connect services
  • Perform services
  • Capture, Analyse & Control services
  • Digital Agility services
  • Telco Cloud Services
  • Service Overview: Revenue vs. Ease of Implementation
  • 15 Service types defined (section on each)
  • The Revenue Opportunity
  • Model overview
  • Sizing the revenue potential from Telco Cloud services
  • Timeline for new service launch
  • Breaking down the revenues
  • Customer experience benefits
  • Conclusions
  • Appendix
  • Modelling Assumptions & Mechanics
  • Service Descriptions: Index of Icons

 

  • Figure 1: Defining Telco Cloud
  • Figure 2: Overview of Telco Cloud categories and services
  • Figure 3: Telco Cloud could boost revenues X% higher than the base case
  • Figure 4: Breakdown of Telco Cloud revenues in 2021
  • Figure 5: Illustrative forecast: revenue decline for converged telco in advanced market
  • Figure 6: Virtualisation can redefine the cost structure of a telco
  • Figure 7: Defining Telco Cloud
  • Figure 8: Telco Cloud Service Categories
  • Figure 9: Telco Cloud will enable immersive live VR experiences
  • Figure 10: Telco Cloud can enable two-way communication in real-time
  • Figure 11: Overview of Telco Cloud categories and services
  • Figure 12: Telco Cloud Services: Revenue versus ease of implementation
  • Figure 13: Telco X – Base case shows declining revenues
  • Figure 14: Telco X – Telco Cloud services increase monthly revenues by X% on the base case by Dec 2021
  • Figure 15: Telco X – Timeline of Telco Cloud service launch dates
  • Figure 16: Telco X (converged) – Net new revenue by service category (Dec 2021)
  • Figure 17: Telco Y (mobile only) – Net new revenue by service category (Dec 2021)
  • Figure 18 Telco Z (fixed only) – Net new revenue by service category (Dec 2021)
  • Figure 19: Modelling Mechanics

Cloud 2.0: Telco Strategies in the Cloud

Will Telcos be left behind?

Introduction

Cloud services are emerging as a key strategic imperative for Telcos as revenues from traditional services such as voice, messaging and data come under attack from Over The Top Players, regulators and other Telcos. A majority of these new products are delivered from the Cloud on a “pay for consumption” basis and many business customers are increasingly looking to migrate from traditional in house IT systems to Cloud-based or virtualized services to reduce costs, increase agility and decrease deployment times. Gartner recently estimated that the Cloud services market would be worth over $200 billion by 2016, roughly double the value of 2012 and with a CAGR of around 17% whereas traditional IT products and services will see just 3% growth.

It is clear that some Telcos have gained a greater understanding of the Cloud market, and are acting on that understanding, offering increasingly rich Cloud-based products and services, paving the way for Cloud 2.0. But for most Telcos, Cloud services remain secondary to their core business of voice and data delivery. Telcos are wrestling with issues of reduced margin on Cloud and how to stay relevant to their business customers.

This report looks at the development of the Cloud market providing clarity around the different types of cloud products and the impact that they have on business users. Cloud value propositions are examined along with criticisms of cloud products and services. We show that the current risks for Cloud customers represent an opportunity for Telcos and Cloud vendors because….

The report also looks at the development of Cloud 2.0 – a second generation or a more ‘intelligent’ evolution of Cloud products and services. Cloud 2.0 offers key additional benefits/capabilities to consumers, vendors, businesses and Telco/Service providers. These can be typified by cost reductions in the delivery and consumption of cloud services through working with scale players to provide basic compute services, ease of acquisition and most importantly the ability to deliver “mash-up” products and services by using API’s to provide integration between cloud services and products and Telco/service provider products such as Bandwidth, Voice, Management, Support and Billing. Cloud 2.0 is gaining rapid momentum and we show how there is still time for Telcos to play a key role in Cloud 2.0.

Who should read this report?

The report is a ‘must-have’ for all strategy decision makers, Cloud specialists and influencers across the TMT (Telecoms, Media and Technology) sector; in particular, CxOs, strategists, technologists, marketers, product managers, and legal and regulatory leaders in telecoms operators, vendors, consultants, and analyst companies. It will also be invaluable to those managing or considering medium to long-term investment specifically in Telco Cloud services, but also more broadly those involved within telecoms and adjacent industries, and to regulators and legislators.

Contents

Executive Summary

Introduction

  • What is Cloud?
  • What is the Cloud Value Proposition?
  • Types of Cloud
  • Key criticisms of the Cloud
  • What is ‘Cloud 2.0’ and why does it matter?
    • Enterprise vs Consumer cloud, Fit with Telco 2.0 strategies

Market Structure & Opportunity

  • What is the shape and size of the market (revenues and profit)?
    • Total size, definitions of SaaS, PaaS, IaaS, VPC + forecasts
    • Advantages and limitations of XaaS definitions
  • What are the key customer segments and their needs?
    • SMBs vs Enterprise
    • Early adopters vs mass adopters
  • What is the opportunity for Telcos (market size and revenues)?
    • Share forecasts / ranges for Telcos
  • What are the most relevant cloud services for Telcos?
  • What are the key barriers?
    • Overall and by segment
  • Future Scenarios
  • What is the competitive landscape and who are the key players in Cloud Services?
    • Detailed competitor analysis, groupings by type and strategy Strategy review: Analysis of 6-10 key players, covering
      • Objectives, strategy, areas addressed, target customers, proposition strategy, routes to market, operational approach, buy / build partner approach
    • Key strategies of other players
    • Role of the network / operators to Vendor/partner strategies

Telco Strategies

  • Which strategies are Telcos adopting and what else could they do
    • Review of Telco attitudes and approaches based on following analysis
    • Grouping of Telcos by approach (if valid)
  • Which are the leading Telcos and what are they doing?
    • Case studies on 6-10 leading Telcos, covering:
      • Objectives, strategy, areas addressed, target customers, proposition strategy, routes to market, operational approach, buy / build partner approach
  • Outlines of 10 additional Telco strategies
  • What relationships should Telcos establish with other ecosystem players?

Conclusions and recommendations