Cloud 2.0 offers telco benefits

The cloud is the future, the future is now, and telcos around the world are making moves to incorporate cloud-based technologies and services into their strategies. But while many telcos may "get" the cloud, they may not be embracing it enough, and still risk being left behind as the IT world goes virtual.
So said a recent research report from Telco 2.0 Research. According to the report, while some telcos have gained a greater understanding of the cloud market, and are offering increasingly rich cloud-based products and services, "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."
Indeed, cloud is not an easy thing for the average telco to get its head around, not least because "cloud" is a term that gets bandied about somewhat carelessly, and it's challenging to suss the realistic capabilities and revenue opportunities of any new technology at the peak of its hype cycle.
And cloud is reaching that peak now, says research firm Gartner. According to its "2012 Hype Cycle for Emerging Technologies" report, released last month, hybrid cloud computing has just entered the "Peak of Inflated Expectations", which private cloud computing has just left, while cloud computing has just entered the "Trough of Disillusionment". Hosted virtual desktops has just exited said trough, and is starting to climb up the "Slope of Enlightenment", and is expected to reach the "Plateau of Productivity" in two to five years.
All of which essentially means that cloud computing is reaching its tipping point, although it may help to remember that Gartner's Hype Cycle tends to look at technology trends in the context of the bigger picture. For example, "big data and global scale computing at small prices" is one group of tipping point technologies that, according to Gartner, presents a scenario in which analytic insight and computing power are nearly infinite and cost-effectively scalable.
The enabling technologies for that scenario include quantum computing, the various forms of cloud computing, big data, complex-event processing, social analytics, in-memory database management systems, in-memory analytics, text analytics and predictive analytics.
That said, Gartner can tell them this much: the cloud services market will be worth over $200 billion (€154 billion) by 2016, roughly double the value of 2012 and with a CAGR of around 17%, compared to just 3% growth in the same time frame for traditional IT products and services.
That said, Gartner can tell them this much: the cloud services market will be worth over $200 billion by 2016, roughly double the value of 2012 and with a CAGR of around 17%, compared to just 3% growth in the same time frame for traditional IT products and services.
Meanwhile, says the Telco 2.0 Research report, telcos do have plenty working in their favor when it comes to the cloud, and particularly what it describes as "Cloud 2.0 - a second generation or a more ‘intelligent' evolution of Cloud products and services."
Cloud 2.0 and the telco role
According to Telco 2.0 Research, Cloud 2.0 offers "key additional benefits/capabilities to consumers, vendors, businesses and telco/service providers", notably "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 APIs to provide integration between cloud services and products and telco/service provider products such as bandwidth, voice, management, support and billing."
Telcos have a serious opportunity to play a key role in Cloud 2.0, and have several advantages they can capitalize on, Telco 2.0 Research says.
For a start, while it's true that telcos have to move fast to be able to compete with the likes of OTT players like Dropbox, Microsoft Office 365 and Google Apps, those same OTT companies are also helping build awareness of cloud services, which in turn creates opportunities for telcos to develop similar apps. Moreover, those services can be customized and secured for enterprise use, "and so be more viable than the basic SaaS model, where a telco resells low-margin third-party software."
Telco 2.0 Research also points out that Microsoft is starting to offer voice capability integrated with Office 365/Lync, either through partners such as Vodafone or JaJah (Telefonica). "Going forward we believe that Microsoft will offer integration between Lync and Skype enabling voice out from the desktop and potential mobile integration through Lync or Skype Mobile clients."
Another advantage telcos have is that enterprises tend to buy cloud services from suppliers they know and trust. A deep understanding of customer needs and processes is a core requirement for enterprises. Telcos that already have relationships with large enterprises are ideally placed to deliver that - provided they have the "appropriate supporting organization and products to convince larger enterprises to adopt them as their cloud provider," the report says, citing Orange Business Services and Vodafone Global Enterprise as examples.
Economy of scale is the other key factor here. Put simply, few enterprises want to trust their data to a small cloud services provider that may not survive in the market because it can't deliver the economies of scale it needs to compete. Larger telcos are in a good position to do that, although Telco 2.0 notes that the market is "likely to see merger and acquisition activity among cloud service providers, which on their own would be unable either to scale or to deliver a compelling service portfolio to increase customer stickiness."
Side bar: How the cloud will empower M2M
For operators keeping an eye on the revenue possibilities of machine-to-machine (M2M) and the Internet of Things, a new report from Maravedis-Rethink claims market is poised for the biggest transformation in its ten-year history - thanks to the cloud serving as the foundation.
Bill Lesieur, cloud analyst and author of the report, says that the M2M market will shift in the next three years from vertically focused and typically incompatible solutions to platforms and standards that can be used across many sectors, which in turn will lay the foundation for the Internet of Things.
"The key catalyst for this change will be the adoption of cloud-based approaches for M2M applications," Lesieur says. "That will help address many of the biggest challenges to mass market M2M adoption."
Specifically, cloud will have a significant impact on the two critical areas of cost to deploy and ability to scale. By unlocking data "trapped" in vertical silos and exposing M2M systems to applications such as Facebook, innovative applications and services will be enabled, Lesieur says.
"The cloud has dramatically reduced the cost and time to get pilot programs up and running in order to establish organizational support and maintain interest in M2M initiatives," he says. "Based on discussions with vendors and end user customers, large enterprise M2M projects historically have taken two to three years to complete and often at least $25 million in IT infrastructure investment. Cloud can slash that to a third or less."
Maravedis-Rethink says M2M is set to be one of the biggest growth drivers for the device supply chain and for service providers in the second half of this decade.