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Today each and every company is toying with the idea of cloud computing-some of them are already there, while others are contemplating with the idea. Nevertheless, a large majority of the enterprises are expected to hit the clouds within the next couple of years. In fact, IDC has predicted that by 2014 sales of cloud computing products or services will generate almost $56 bn in annual revenues. IDC expects “the cloud model to propel IT market growth and expansion for the next 20 years and help the industry to more rapidly develop and distribute a new generation of killer apps, and to more successfully penetrate small and medium-sized businesses”.
The telecom industry is very excited about the prospects of the cloud. In fact, the telecom service providers have a unique advantage as network operators and if they combine it with innovative technologies, they will no doubt play an extremely crucial role in the fast growing world of cloud computing. In addition, the IP infrastructure and componentized nature of the software used by telecom service providers is ideal for cloud computing. Emerging technologies like IP multimedia subsystems (IMS) and next-generation networks (NGN) service architectures will further strengthen their position in the new world of computing.
The telecom companies will definitely gain a lot in the cloud computing arena. A recent report by telecom analysis and consulting firm Ovum pointed out that the Global telecommunications majors like AT&T, BT, Orange Business Services and Verizon Business could take a large share of the cloud computing pie, giving IT companies a run for their money. As per Ovum “the major telcos have a long heritage in providing managed data center services and hosting and have combined this with their networking and security expertise to meet the needs of customers for cloud computing services”. The firm believes that the global and major regional telcos will become strong players across the full spectrum of cloud computing services including Infrastructure-as-a-Service (IaaS) and Software-as-a-Service (SaaS).
Opportunities
The opportunities from the clouds are immense. It has brought up new revenue streams for telecom service providers. Clouds will greatly increase network traffic and utilization and hence transport revenues. In addition, the providers can charge end users for a given level of service quality and also charge the cloud based providers for service quality—which is exactly a win-win situation for the providers.
The falling ARPU levels has been a major challenge for the service providers, and they have been looking at others ways to make money. Cloud computing offers a means of sharing resources like hardware, software, and data on-demand to users. With business offerings like “Infrastructure as a service” or “Pay as you go”, the providers can rake in profits. The providers are also looking at offering cloud based services including security, storage, computing and network managed services for enterprises. Additionally, the providers are also looking inward to optimize their various IT estates, and data centers comprising different stacks to a virtualization model, thus bringing opex reduction too.
Another segment of telecom service which is expected to be highly profitable in the cloud is billing. As per IDC's Worldwide Telecom Cloud Billing 2009-13 report, worldwide telecom cloud billing investments will grow from $15 mn in 2008 to $350 mn in 2013. The report further revealed an interesting finding, “the emerging telecom cloud billing platforms are increasingly smaller and lighter investments, particularly in comparison with legacy telecommunications billing platforms”. This will be sweet music to the new as well the established telecom companies, and will also enable cost effective solutions and services.
Another area of growth will be mobile applications in cloud. Mobile application developers are increasingly turning to cloud computing mainly due to the limited processing power and battery life of mobile devices and the low-bandwidths of mobile networks. In cloud computing, processing happens at the server rather than the handset so mobile applications can offer great performance speeds and fantastic level of sophistication. In addition, as cloud computing helps increase processing power, mobile applications can be used for collaboration, sharing, remote access and more. ABI Research has further fueled up the excitement by predicting that the number of mobile cloud computing subscribers worldwide will grow rapidly from 42.8 mn subscribers in 2008 to about 1 bn in 2014.
Industry experts have pointed out that the mobile networks will play a major role in expanding cloud computing beyond its core enterprise market. In developed as well as developing markets, mobile cloud computing will give telecom service providers and their business partners more options for launching services. The point to be noted and which is extremely important for the industry is that with cloud computing, it is easier and faster to roll out services as new hardware is not required. Many leading telecom providers have already devised growth strategies for mobile cloud computing so as to capitalize on this fast growing sector. By 2014, more than 130 mn enterprise customers is expected to use mobile cloud computing. Juniper Research further added to the excitement by predicting that it will bring in annual revenue of nearly $9.5 bn.
Increasing demand for cloud based services is driving a boom in the wholesale telecoms market, according to Ovum. In a new report 'Wholesale telecoms: Fit for growth?', Ovum claimed that wholesale telecoms providers are set to benefit from growing consumer and business demand for cloud based services, provided by a new breed of enterprise.
Although everything seems to be on a high note, service providers should be aware of the fact that there are many expected and unexpected risks and complications associated with cloud computing.
Watch Out for the Risks
Cloud computing is still at its nascent stage. The complications and issues associated with the cloud have not been fully investigated and discovered. Hence, there might be problems-some minor and some critical. So, it is extremely important for the telecom service providers to proceed carefully and to ensure that they have the right cloud platform and the capacity and security that enterprises will demand from cloud computing services.
Security and data breach are among the biggest concerns of the enterprises already on the cloud or are planning to go to the cloud. Most of the enterprises are still concerned about whether their competitors can hack into their system and steal the business critical data if the same servers are used to store their data. To have the appropriate security solution as well as to create the right mindset for the cloud is a big challenge for majority of the providers. Although the providers are already in a secured environment but whether they will able to provide the same kind of blanket solutions to everybody is also an area of concern for many. Avoiding security and data breaches will be extremely crucial for the success of their cloud computing services. Although security can never be 100%, but with the right kind of security solutions and approach building strong security controls to ward off any kind of breaches and attacks is possible.
Providing the public cloud services seem to be not an extremely big challenge for the providers as they already have an infrastructure ready. But owing to the risks involved, many enterprises are opting for a private cloud. This means their provider gives them their own database with its own levels of security, which is hosted and backed-up in known locations. In fact, IDC has pointed out that 75% of data center managers will spend more on private clouds than public cloud computing until at least 2012. Although private clouds are a safer option for the enterprises, but it can be a major challenge for many of the providers as it would also means major shift from their core business model of providing public services to private.
The enterprises are clamoring to develop an industry-wide action to establish good practices which can act as standards. It would be an important step to assure the IT managers and would also encourage a much faster rate of adoption in the industry. But even this can be a big challenge and risk for the telecom service providers. The telecom industry is already besotted with standards and regulation, adding a new standard would not only mean a lot of investment but would also lead to additional workload.
In the area of mobile cloud computing, connectivity and speed are the primary areas of concern. Despite the industry's excitement and possibilities about this sector, the fear that still looms is whether the cloud computing infrastructures will be able to handle the increased demand. But this should not prove to be a damper for telecom service providers. An exponential increase in mobile cloud computing would mean higher traffic but it would also mean increased revenue for service providers; hence upgrading the mobile networks to meet such demands would not only be a smart move but would ensure an additional flow of revenue. Supporting mobile cloud computing applications can be a big challenge but service providers can offer integrated networking, storage, and infrastructure to ensure seamless connectivity and high bandwidth. By offering self-service solutions to help manage their services and devices the providers can address concerns over security and reliability. In addition, telecom service providers can make mobile cloud computing more affordable and profitable with layered pay-as-you-go models.
Conclusion
Majority of the telecom service provider has a huge computing infrastructure running different and multiple complex applications that manage different aspects of the service. Telecom service providers are increasingly looking towards the cloud as transforming their infrastructure into clouds can reduce internal computing resource needs and release the excess for customers' use. It not only reduces internal costs but also increases revenue; hence it's a profitable and no loss scenario for the telecom service providers.
The new entrants in the arena are even more excited because cloud computing enables them to spend less on infrastructure by making it possible to share the resources and use more efficiently and effectively. Hence, it lowers the telecom service providers' costs and even allows them to offer additional pay-as-you-go computing services to their customers.
As virtualization and data center technologies and characteristics mature, majority of telecom applications will move into the cloud environment while others will likely be delivered as Software as a Service (SaaS). This will not only be a huge and positive step for the telecom service providers, but it will also be beneficial for the vendors offering managed services offerings. In fact, looking at the type of control the providers have over their equipments industry experts have stated that they are well positioned to address many of the concerns that relate to cloud computing, and ensure secure quality-of-service (QoS) connectivity.
The opportunities and benefits are enticing the providers to go to the cloud, but additionally they should also be aware of the risks involved. Issues like security, availability, regulatory and compliance, performance and excess capacity usage might prove to be a damper. To avoid such issues, proper planning and strategies, processes and appropriate policies, and great service management plans are required. It is imperative to have the processes and policies in place before going ahead with cloud implementation as a failure of one component can collapse the whole system.
An important thing for the telecom service providers is to be aware of all the potential revenue generating strategies for their cloud computing business. Another equally important part is to be able to predict IT service performance and determine optimal configurations to assure availability and minimize cost while meeting demand. Hence the providers will reap the benefits by IT optimization (via both resources and capabilities) and also exploit new business opportunities. In addition, there will be a paradigm shift in the revenue model as cloud computing customers prefer pay-as-you-go services to being locked into contracted hosted services, and the providers should be ready it.