As part of their traditional business model, telcos have been utilizing specially built data centers for large enterprise customers with long term contracts for years. However, over the last few years, the public cloud market has grown exponentially, led by giants like Amazon with AWS and Microsoft with Azure. And today, telcos recognize their opportunity to become leading public cloud brokers by partnering with these market leaders. As such, they can integrate their solutions and present value-added services to their customers as well as create new business opportunities in the growing cloud market.
The question is, how do you create difference and add values on top of a common product such as the public cloud? Telcos have learned to do this with iPhones and Androids, and it seems like they are using similar packaging and delivery concepts with the public cloud. In this article, I will further explore the challenges that telcos face as well as possible solutions.
Not There Yet
With the rise of agile methodologies, modern IT organizations and businesses spinning out new online services are looking to quickly take them to market. Subsequently, traditional enterprises look to or already rely on the public cloud for their new IT ventures. After having discussed this with a few large telcos, I noticed that they’ve been aware of this trend for a few years now. They’ve seen how their veteran enterprise customers leverage the public cloud’s flexibility and reap the benefits of running efficient IT operations for less.
Today, telcos are interconnecting IT organizations with the public cloud. One of the main examples of this is AWS Direct Connect, which AWS customers use to establish a private virtual interface from their on-premises networks directly to their AWS environments. AWS telco partners enable a secure, high bandwidth network connection between enterprise data centers and their public cloud environments. This type of link is a ticket to the public cloud, not a value-added service that can be used to grow in the public cloud space.
Telcos still heavily rely on internal data centers, selling their own custom data center solutions, giving birth to the challenge of managing both parts of the market along with a growing customer push to use large public clouds such as AWS and Azure.
Becoming a Broker: Challenges Ahead
Telco leaders are not agnostic to this trend and recognize the fact that in order to play an active role in the market, it is only natural for them to become intermediaries with value-added cloud based solutions. They already make significant investments in order to stay in the game, acquiring skills and assets to serve IT organizations with their public cloud environments. However, by becoming mediators in the public cloud realm, telcos face a packaging and delivery challenge in the transition from their traditional role as data center builders.
By becoming cloud resellers or brokers, telcos have to negotiate new contracts with public cloud providers, deal with contract management issues, and make sure current public cloud pricing structures (such as AWS Reserved or Spot Instances) fit into their businesses. Contrary to the high margin associated with traditional IT integration services, the cloud’s economies of scale are associated with slim margins and therefore may present significant business risks. Due to these risks, telcos must recognize the importance of packaging public cloud services in a way that offers telco-like solutions, meeting their own business needs as well as customer requirements.
In addition, telcos need to keep and maintain their own data centers for large, custom contracts (e.g., government or financial institutions), as well as develop new management and governance capabilities for their public cloud environments. Managing both can lead to great opportunities, but also require major investments.
CloudMGR Can Help
Telcos have become very good at differentiating their services around phones and networks. The same needs to be done with the public cloud. A lot of that has to do with the right branding, packaging and customer service experience that is perceived in action.
CloudMGR offers a white label solution that enables telcos to brand an experience on AWS that reflects their customer base or their vertical. It is powered by Amazon and brokered by the telco. The solution reflects the support agreement and SLA that enterprises have with the telco. Additional significant benefits include the ability to monitor and track usage, and bill accordingly across multiple customer accounts so that telcos are able to perform their own financial operations such as customer chargebacks.
There is an opportunity for telcos, because of the sheer volume of customers they work with, that enables them to build their margins and better utilize compute and storage between their own needs and their customers’ needs. I expect to see a good number embrace the public cloud as part of their offering within the coming year. In this exciting space, CloudMGR, together with Amazon cloud, has a bright future with telcos.