How Telecom Operators Could Capture Business in the Cloud Market

By Yiannis Giokas

In the last decade, we've witnessed a major shift in the way IT departments operate. Today, many organizations are faced with competing choices in speed, availability, stability and cost optimization. As an expert in telecom operations, I believe there should be a balance between all of them.

Cloud computing has very much disrupted the way businesses operate: Consolidating infrastructure in the cloud frees up resources, allowing companies to invest in cloud-based collaboration tools that drive productivity. This was driven by a change in spending behavior and an increased demand for resources, elasticity and accessibility to services from anywhere at anytime.

Now, there's a lucrative, projected $204 billion market that has been growing by the double digits and attracting increasingly more players. Companies that have decided to enter the market are offering a range of services, from IaaS (Amazon), to PaaS (Heroku), to SaaS (e.g. SalesForce). The highly segmented market has started to consolidate via mergers and acquisitions, price wars, and service launches from major players like Google, Amazon, Microsoft and IBM. It has exhausted even key challengers, like Rackspace, forcing it to focus its business model more on professional services and less on cloud offerings, ultimately leading to its acquisition by a private equity firm. Today, these four major players are facing new challenges from the launch of Alibaba's cloud platform, AliYun, which is supported by China's booming information and communications technology market as well as Oracle.

Cloud computing poses a challenge to telecom operators, the owners of the pipes that connect these services with the world and the internet. They have tried to seize opportunities by bundling services, leveraging existing customer relationships and building brand awareness, but the reality is they reacted to this new trend after the big four cloud players had already established. This is leading them to offload lines of services to those major players, like AT&TVerizon, and VMware have done. It has become too late for them to build in such a scale that allows them to compete on price; the cost of such an expedition would completely destroy their balance sheets and introduce other problems.

Telecom operators shouldn't be oblivious to market trends: They should find ways to launch cloud services and disrupt too, or face the commoditization of capacity, and therefore, price erosion. With this notion in mind, they should build complementary services based on the fact that their customers have already picked a cloud service provider. They can offer these services by collaborating with cloud operators and leveraging their network infrastructure by bringing them to their points of presence (PoPs). This scenario would benefit both parties: Telecom operators would have the ability to strengthen their relationship with new and existing customers, while cloud operators would grow their business by enabling customers to bring their network to the cloud. Customers would be provided with a "best-of-breed" approach without restrictions.

I've already seen some established players taking this approach, like IBM, and I think many others will follow. Cloud computing will not only enable cost optimization, flexibility and agility, but it will aid in developing the IoT ecosystem. By partnering with telecom operators, cloud service providers will be able to deliver reliable services backed by a reliable and trusted network.

Yiannis Giokas is a serial entrepreneur with domain expertise in cybersecurity, data analytics and telecoms. Currently, he is the vice president of research and development at PCCW Global.