Cloud Computing: The Telco Opportunity

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<ul><li><p>8/8/2019 Cloud Computing: The Telco Opportunity</p><p> 1/18</p><p>the way we see it</p><p>Cloud Computing</p><p>The Telco Opportunity</p><p>Telecom &amp; Media InsightsIssue 57</p><p>Telecom, Media &amp; Entertainment</p></li><li><p>8/8/2019 Cloud Computing: The Telco Opportunity</p><p> 2/1810</p><p>Contents</p><p>1 Abstract 1</p><p>2 Introduction 2</p><p>3 Market Dynamics 3</p><p>4 Telco Activity in Cloud Computing 5</p><p> Target Segment 5</p><p> Service O erings 6</p><p> Entry Strategy 7</p><p>5 Attractive Opportun ities or Telcos in Cloud Computing 8</p><p> Low Hanging Fruits 9</p><p> Phase 2 10</p><p> The Future 10</p><p>6 Recommendations 12</p><p> Service O erings 12</p><p> Service Delivery 13</p><p> Customer Segment 13</p></li><li><p>8/8/2019 Cloud Computing: The Telco Opportunity</p><p> 3/18</p></li><li><p>8/8/2019 Cloud Computing: The Telco Opportunity</p><p> 4/182</p><p>Cloud computing is the latest technology trend in which IT in rastructure andso tware programs are accessed over the Internet or private networks. Cloudo erings can be largely categorized as So tware as a Service (SaaS), Plat orm as aService (PaaS), and In rastructure as a Service (IaaS) (see Figure 1). These servicesare delivered via three main models: public cloud 7, private cloud 8, and hybridcloud 9.</p><p>Enterprises o all sizes are being increasingly drawn to cloud computing. Bene tssuch as reduced IT costs, pay-per-use, better resource utilization, and elasticscalability are driving its uptake. The percentage o CIOs interested in cloudcomputing has grown rapidly rom 5% in 2009 to 37% in early 2010 10. The risinginterest in these services is driving increased enterprise spending, and as a result,cloud computing presents an attractive revenue potential or technology playersand telcos alike.</p><p> While the bene ts o cloud computing make it attractive or customers, concernssuch as data security, privacy, and compliance have slowed down the pace o adoption. For instance, strict privacy laws that place limits on the movemento in ormation beyond the borders o the European Union, have hindered theevolution o cloud computing in Europe.</p><p> Software applications running on aCloud infrastructure</p><p> Applications are accessible througha thin client interface such as webbrowser </p><p> Delivering storage, computing,monitoring and backup servicesfrom the cloud</p><p> Companies can manage their infrastructure remotely</p><p>SaaS Offerings</p><p>IaaS Offerings</p><p>Applicationruntime</p><p>environmentWeb serversDatabases</p><p>ApplicationsEnd-user applicationsavailable throughInternet</p><p>The Cloud</p><p>Stack of Cloud Services</p><p>Service Catalog,component library</p><p>Monitoring and management of: -- Services &amp; Resources- Virtual servers (Virtualization)- Physical servers</p><p>(Datacenters)</p><p>VirtualInfrastructure</p><p>ApplicationDevelopmentEnvironment</p><p> Applications built using toolssupported by the provider </p><p> Clients have control over theapplication hosting environment</p><p>PaaS Offerings</p><p>Source: Capgemini TME Strategy Lab Analysis</p><p>7 Public cloud services are delivered to multiple customers from third party data centers over the Internet.8 Private cloud is deployed within an enterprise for its internal use.9 In a hybrid cloud model, some resources are provisioned and managed in-house while others are</p><p>delivered from the cloud.10 Harvard Business Review,What Were Watching in Cloud Computing , http://hbr.org/2010/06/what-</p><p>were-watching-in-cloud-computing/ar/1.</p><p>2 Introduction</p><p>Figure 1: Categorization o Cloud Computing O erings</p><p> A ter care ully weighing the bene ts and risks o cloud computing, severaloperators have advanced into this lucrative market. However, the key challengeahead or these operators is to di erentiate themselves in this highly competitivearena. In this paper, we take a close look at the cloud computing space, quali y theopportunity or telcos, and propose some recommendations around how operatorscan maximize the opportunity in this market.</p><p>Given the revenuepotential, telcos should notnot delay their entry in thecloud computing space</p></li><li><p>8/8/2019 Cloud Computing: The Telco Opportunity</p><p> 5/18</p><p> Telecom, Media &amp; Entertainment the way we see it</p><p>3Cloud Computing The Telco Opportunity</p><p> Worldwide IT cloud services revenues are expected to grow rapidly at a CAGR 11 o 26% rom 2009 to 2013 to reach US$44.2 billion. While SaaS will continueto contribute the highest to the overall revenue, its share is expected to decline,largely due to an increased enterprise ocus on IaaS (see Figure 2). The rapidgrowth o IaaS will be uelled by a keen interest rom businesses on curbing thehuge costs associated with IT in rastructure.</p><p>Several companies are competing aggressively to grab the largest share o thelucrative cloud computing market. These players all largely under one o thesethree categories: enablers, vendors, or service providers (see Figure 3). The role o some mature players, however, can also span a number o categories. For instance,both Cisco and IBM are cloud enablers as well as CSVs 12.</p><p>Source: Capgemini TME Strategy Lab Analysis; Forrester Research; Cloud Computing 2010, An IDC Update , September2009</p><p>11 Compound Annual Growth Rate.12 Cloud Service Vendors.</p><p>3 Market Dynamics</p><p>x% CAGR</p><p>69%</p><p>10%</p><p>21%</p><p>58%</p><p>13%</p><p>29%</p><p>21%</p><p>35%</p><p>37%</p><p>$17.4billion</p><p>$44.2billion</p><p>Figure 2: Worldwide IT Cloud Services Revenue (US$Bn) and Growth Rate by</p><p>Service Type</p></li><li><p>8/8/2019 Cloud Computing: The Telco Opportunity</p><p> 6/184</p><p>Leading technology vendors such as Amazon, Sales orce.com, and Microso t haveestablished a rm ooting in this market and o er a range o services spanningSaaS, PaaS, and IaaS (see Figure 4). In terms o revenues, the current CSVlandscape is dominated by players such as Sales orce.com, Amazon, and Oracle.Sales orce.com, the leading provider o SaaS CRM13 solutions, reported revenueso over US$1billion14 in 2009, which is the highest amongst CSVs. The success o these leaders can be attributed to their technical prowess, early mover advantage,and the strong ocus on cloud computing.</p><p>Though large technology players have emerged as leaders in cloud computing,several smaller companies such as Rackspace and Netsuite are trying to carve theirniche. Telcos such as BT and AT&amp;T have also entered this market. In the nextsection, we will evaluate the cloud computing initiatives and strategies o telcos.</p><p>13 Customer Relationship Management.14 Company Websites; Annual Report.</p><p>Source: Capgemini TME Strategy Lab Analysis</p><p>Source: Capgemini TME Strategy Lab Analysis; Company Websites</p><p>Service ProvidersCloud ServiceVendors (CSVs) Cloud Enablers</p><p> Provide cloud focusedbusiness consulting, andtechnology services such assystem integration, cloudmigration, and maintenance</p><p> Provide the actual cloudservices, spanning SaaS,PaaS and IaaS, to customers</p><p> Provide the technology,infrastructure , platforms, andmiddleware to enable theprovision of cloud services</p><p>Examples Software (SaaS)Application</p><p>DevelopmentPlatform (PaaS)</p><p>Servers Storage</p><p>Oracle on Demand Cisco Webex Salesforce CRM IBM Lotus Live Salesforce Force.com Google App Engine Microsoft Azure Amazon Web Services BT Orange Business Services AT&amp;T GoGrid Rackspace</p><p> EMC MozyEnterprise Nirvanix CloudNAS </p><p>Figure 3: Stakeholders in the Cloud Computing Ecosystem</p><p>Figure 4: Enterprise Cloud O erings o Select Vendors</p></li><li><p>8/8/2019 Cloud Computing: The Telco Opportunity</p><p> 7/18</p><p> Telecom, Media &amp; Entertainment the way we see it</p><p>5Cloud Computing The Telco Opportunity</p><p>Compared to market leaders such as Amazon and Sales orce.com, telco entryinto cloud computing has been reasonably late. While Sales orce.com startedo ering services in 1999, BT and T-Systems, one o the earliest telcos to o er cloudsolutions, entered only in the 2003 to 2004 time rame (see Figure 5). Despite thelate start, several telcos such as BT, AT&amp;T, and Verizon are competing aggressivelywith market leaders to establish a strong oothold. The majority o operators havetaken the role o a CSV while a ew such as Verizon also act as service providers.This section presents an overview o key telco strategies in cloud computing.</p><p>Target SegmentThe cloud computing o erings o most telcos are targeted towards the enterprisesegment. Enterprises and governments spend nearly US$2.4 trillion worldwide 15 on IT products and services, many o which can be delivered rom the cloud. Thishigh revenue potential makes the segment attractive or operators. Moreover, theconsumer cloud space is nascent and the revenue opportunities limited.</p><p> Within the enterprise segment telcos are aggressively targeting SMEs due tothe growing interest in this segment or cloud-delivered so tware. SME sharein overall cloud services revenue is expected to increase rom 25% to 40%between 2009 and 2015 16 . To bene t rom this opportunity, several telcos o erservices customized to ul ll SME needs. For instance, IT Plan rom Orange isa packaged SaaS solution o ering a suite o o ce productivity, messaging, andbusiness applications targeted at SMEs.</p><p>15 Forrester Research, The Evolution Of Cloud Computing Markets , July 6, 2010.16 Capgemini TME Strategy Lab Analysis; Analysis Mason,Seize the US$35.6 billion global market for </p><p>enterprise cloud services , June 2010.</p><p>4 Telco Activity in CloudComputing</p><p>Source: Capgemini TME Strategy Lab Analysis; Company WebsitesNote: Deutsche Telekom spun off from Zimory as an independent subsidiary in November 2007</p><p>2003-2004 2007-2008 2009-2010 Planned</p><p>SaaS</p><p>PaaS</p><p>IaaS</p><p>BT OpenOrchard</p><p>T-SystemsDynamicServices</p><p>TelstraT-Suite</p><p>NTT BizSecurity</p><p>TelefnicaAplicateca</p><p>AT&amp;TSynapticHosting</p><p>DeutscheTelekomZimory*</p><p>Orange ITPlan</p><p>OrangeFlexibleComputing</p><p>VerizonComputing as aService</p><p>SK Telecom CloudComputing Platform</p><p>T-Systems (Database andMiddleware Environments)</p><p>BT VirtualData Center </p><p>AT&amp;T SynapticStorage andCompute</p><p>AT&amp;T</p><p>Telstra</p><p>Telecom Italia</p><p>TeliaSonera Business ClassCloud Services</p><p>NTT</p><p>Figure 5: Select Examples o Telco Foray into Cloud Computing</p><p>Several telcos haveentered the cloudcomputing market withIaaS as their agshipo ering and a strong ocuson the enterprise segment</p></li><li><p>8/8/2019 Cloud Computing: The Telco Opportunity</p><p> 8/186</p><p>Service OfferingsTelco o erings in cloud computing are centered around IaaS and SaaS with limited</p><p>ocus on PaaS (see Figure 6). IaaS is the fagship o ering o most operators, andin general SaaS has taken a backseat compared to IaaS primarily because telcocapabilities and experiences are more aligned towards delivering IaaS.</p><p>In 2008, AT&amp;T made its debut in IaaS with its Synaptic Hosting proposition. Sincethen, several leading operators such as BT (Virtual Data Center), Orange (FlexibleComputing), Verizon (Computing as a Service), and Deutsche Telekom (Zimory)have ollowed suit. In act, the current IaaS o erings o most operators are ascompetitive as those rom established players like Amazon and Rackspace. Overthe next ew years, all major telcos plan to ocus most on IaaS in order to addressthe growing enterprise demand or cloud in rastructure services.</p><p> Although IaaS has captured most o the operators attention, SaaS too has garneredsigni cant interest. Many telcos o er a host o SaaS applications, usually inpartnership with ISVs 17, or accomplishing a range o business tasks. For example,BT o ers multiple CRM solutions in partnership with Sales orce.com and Netsuite,NTT has recently launched a cloud-based security solution, and T-System deliversSAP rom the cloud. Communication and collaboration so tware such as hostedPBX18, messaging, email, con erencing, and team collaboration solutions are themainstay o SaaS o erings rom leading operators.</p><p>Telcos have traditionally stayed away rom PaaS, largely due to its unattractivenessboth in terms o revenue and demand, when compared to IaaS and SaaS. Apart</p><p>rom T-Systems, which o ers database and middleware environment to nearly30019 customers, ew operators have shown signi cant interest in this category.</p><p>In addition to SaaS, PaaS, and IaaS some telcos such as Verizon, Orange and BTalso o er pro essional services, helping customers identi y and migrate the rightapplications to the cloud.</p><p>Source: Capgemini TME Strategy Lab Analysis</p><p>Telcos SaaS IaaS PaaS</p><p>BT </p><p>Orange Business Services </p><p>Deutsche Telekom/T-Systems </p><p>TeliaSonera </p><p>Belgacom </p><p>Telefnica </p><p>AT&amp;T (Planned)</p><p>Verizon Business </p><p>Telstra (Planned)</p><p>SK Telecom </p><p>NTT </p><p>Bharti Airtel </p><p>Tata Comm </p><p>Figure 6: Categorization o Cloud O erings rom Telcos</p><p>17 Independent Software Vendor.18 Private Branch Exchange.19 Forrester Research, Market Overview Of Cloud IT Services From Major Telcos , September 2009.</p></li><li><p>8/8/2019 Cloud Computing: The Telco Opportunity</p><p> 9/18</p><p> Telecom, Media &amp; Entertainment the way we see it</p><p>7Cloud Computing The Telco Opportunity</p><p>Entry StrategyPartnership with technology players has been the oremost entry strategy o telcos in cloud computing. Operators have partnered with a range o vendors</p><p>rom hardware providers such as HP and Sun to virtualization specialists such as VMware and Citrix Systems. These partnerships have helped telcos signi cantlyreduce their time-to-market and minimize the risks associated with developingcomplex technical capabilities in-house.</p><p>In addition to partnerships, a ew operators have acquired technology companiesto leverage their expertise to launch cloud services. For instance, AT&amp;T acquiredleading application services provider USInternetworking (USi) in 2006 or US$300million to develop capabilities in delivering on-demand services and managedenterprise so tware solutions. Similarly, telcos such as BT, Verizon and T-Systemsalso acquired companies to develop expertise in launching certain cloud services.</p></li><li><p>8/8/2019 Cloud Computing: The Telco Opportunity</p><p> 10/188</p><p>Cloud computing presents several opportunities or telcos to pursue (seeFigure 7). Analysts estimate that by 2015, telcos will have a 23% 20 share in theoverall cloud services market.</p><p>Operator success in the cloud, however, will depend largely on selecting the rightchoice o services to launch. Telcos should consider a combination o actorssuch as the attractiveness 21 o a service, its complexity, and the expertise requiredto launch be ore determining the services to o er. Most importantly, operatorsshould ocus on those services or which they are well positioned to o er byleveraging their existing capabilities such as data center expertise, managedservice experience, and global ootprint. Based on this rationale, the most relevantcommercial opportunities or telcos can be categorized into three di erent servicebuckets: low hanging ruits, the next phase, and the uture (see Figure 8). In orderto make the most o these opportunities, telcos should launch these o erings in aphased manner, starting with the low hanging ruits rst.</p><p>20 Analysis Mason,Seize the US$35.6 billion global market for enterprise cloud services , June 2010.21 Service attractiveness is a combination of customer demand and revenue potential.</p><p>5 Attractive Opportunities forTelcos in Cloud Computing</p><p>Source: Capgemini TME Strategy Lab Analysis; Forrester, Future View: The New Tech Ecosystems of Cloud, CloudServices, And Cloud Computing , August 2008</p><p>SaaS</p><p>PaaS</p><p>I a a S </p><p> E n a</p><p> b l e m e n</p><p> t a n</p><p> d</p><p> P r o</p><p> f e s s</p><p> i o n a</p><p> l S...</p></li></ul>