Challenges for telcos in cloud computing

CIOL Bureau
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MELBOURNE, AUSTRALIA:Cloud Computing provides a new enterprise service opportunity for telcos who are well positioned to combine cloud computing platforms with secure managed networking to meet enterprise requirements for high performance and secure cloud computing services.   However, telcos will meet challenges in terms of credibility with IT decision-makers as providers of cloud computing.


Over the last two years, cloud computing has grabbed the attention of the IT industry because of its potential to offer a new model for the provision of computing and applications to enterprises. More recently, leading global and regional telcos have developed and launched their own cloud computing services, including infrastructure-as-a-service (IaaS), as they plan to compete head-on with solutions from leading players in the IT industry. For example, over the last year we have seen IaaS service launches from Verizon Business with Computing as a Service and BT with Virtual Data Center.

In spite of the industry buzz around cloud computing, Ovum research indicates that it is not currently high on the CIO/IT manager agenda. “However, we believe that early market entry by leading telcos will give them the opportunity to establish awareness and credibility before the cloud computing market steps up a gear to a higher adoption phase”, said Peter Hall, Principal Analyst based in London.

The cloud computing market is still evolving, and while we have seen wide deployment of some SaaS solutions (e.g. and WebEx), the market is still at an early adopter stage for IaaS services.


Ovum research indicates that cloud computing is currently low on the agenda of most CIOs/IT managers, although many are open-minded about the longer-term potential benefits. “This means that sales uptake for IaaS is likely to be slow for at least the next two or three years”, adds Peter Hall. “At the same time, it may take two or three years for telcos to establish credibility in this market, so early market entry will have its benefits in the longer term”. The cost to a telco of launching IaaS is significant, although it may be possible to offset some of this against internal use of the infrastructure. This will also help to demonstrate to external customers that the business is prepared to commit to its new services for important internal applications.

The credibility issue is not to be underestimated. Figure 1 (attached) illustrates the results of an Ovum Enterprise Architecture survey where CIOs/IT managers were asked about their preferred suppliers of cloud computing. More than half of CIOs/IT managers in this study would not currently consider a major telco for supply of cloud computing services, whereas more than half expressed a preference for a major ISV, and more than a quarter for a major SI.

“The result is not surprising, given that only a very small number of telcos have so far shown commitment in this market so telco visibility in the market is very low”, comments Peter Hall. Telcos will need to show that they are not just competitors in this market but that they have the best solutions, particularly in areas such as security, performance, and SLAs. This includes leveraging their core network assets in providing secure and high-availability access to cloud computing services.

Telcos that are considering entering the market for IaaS will need to assess whether they can develop these services internally or whether a partnership or alliance with an existing player is the preferred option. They will need to gauge local market interest and competition and determine which vendors, including global telco partners, can help them expedite their cloud computing offer.

Competing in the market for SaaS and Caas/UCaaS will be lower-risk than that of IaaS, particularly as these require less infrastructure and some can be offered through a simple resale model with no telco hosting. However, they will also offer lower reward in the long run and, if offered alone, will not begin to demonstrate to customers that the telco is a serious or credible player in the potentially much bigger opportunity of IaaS.