Telcos in the Cloud: A Global Status Report

Transcription

1 Telcos in the Cloud: A Global Status Report Camille Mendler Lead Analyst, Enterprise Services Nov. 25, 2014

2 Introduction: Some myths need to be exploded Myth 1 Telcos are transient and trivial players in the cloud market. Myth 2 Telcos cloud strategy consists of copying Amazon Web Services (badly). Myth 3 Telcos can t innovate in cloud services. 2

3 CSPs Telcos are here to stay in the cloud market 400 CSPs selling cloud services Africa Middle East Latin America North America Eastern Europe & CIS Asia Pacific Western Europe 1H for 2014 Source: Ovum Telecoms Cloud Monitor More than 330 communication service providers (CSPs) are active in the cloud market today. Globally, a new telco cloud service is now launched every working day of the year. On average, CSPs build or buy 46 soccer pitches of datacenter space per annum. 3

4 Telcos take cloud computing into emerging markets Availability of telco cloud services by country Telco cloud service availability by country type, 2010 Telco cloud service availability by country type, % 2% High income Upper middle Lower middle 15% 5% High income Upper middle Lower middle 24% Low income Low income 52% 65% 28% N = 46 countries N = 98 countries 1H for 2014 Source: Ovum Telecoms Cloud Monitor Operators are often the largest, most visible cloud service providers in lower-income countries where global cloud players are unlikely to set up direct operations. 4

5 Telco cloud revenues are still small, but growing fast Cloud-related revenues, selected operators ($m) Cloud-related percentage of revenues NTT Communications Group 1061 NTT Communications Group 9% T-Systems 764 T-Systems 7.5% Orange Business Services 182 Orange Business Services 2% Rostelecom 116 Rostelecom 1.7% Estimated 2013 revenues. Note: Cloud definitions vary by CSP, notably treatment of UCaaS and professional services. Source: Ovum Most CSPs report annual revenue growth in 25%-30% range is tipped to be a record year for many, per our interviews. T-Systems has already reported 40% year-on-year growth in 1H14. However, cloud services often replace legacy offers, and in the short term this substitution effect may mean zero growth or decline in some telcos overall revenues. 5

6 Governments buy into operators cloud services Telco cloud customer wins by industry, 2013 Telco cloud customer wins by service, Government Manufacturing IaaS UCaaS 5% 5% 12% 5% 5% 5% 6% 9% 11% 25% 14% Retail Professional services Financial services Health Insurance Education Media and broadcast Transport & logistics Other 2% 2% 2% 2% 2% 3% 3% 13% 16% 19% 36% ICT services Healthcare mgmt Government cloud Security Storage Vehicle / fleet mgmt ERP Content distribution Other 1H for 2014 Source: Ovum Telecoms Cloud Monitor Publicly announced contracts reflect only a proportion of all activity, but are indicative of market trends. Central and municipal governments are frequent buyers of operators cloud services. IaaS (virtual private) is a highly popular service, usually sold with professional services support. 6

7 CSPs have got what many enterprises want Enterprises: Additional capabilities valued in selecting a cloud infrastructure provider Unimportant Desirable Very important Network services (e.g. MPLS, Ethernet) 8% 38% 54% Professional services (e.g. security) 8% 40% 52% End-to-end SLA across network and cloud 8% 49% 43% IT infrastructure management/outsourcing 11% 48% 41% App performance monitoring for cloud workloads 10% 51% 39% Co-location services 15% 49% 36% 0% 20% 40% 60% 80% 100% N=2,708 ICT decision makers Source: Ovum 2014 Telecoms Customer Insights Survey - Enterprises Enterprise cloud buyers are beginning to recognize the power of the network and the need to orchestrate compute and connectivity. CSPs - like AT&T with its NetBond strategy are differentiating by providing secure, flexible and increasingly on-demand cloud connectivity. Consequently, telcos are rising in the ranks as preferred cloud service providers in a few countries they are now the top choice. 7

8 Spotlight: Tata Communications IZO illustrates network-centric cloud innovation Solutions around the best effort Internet. Offers secure access to public and private clouds via the Internet using internally-developed deterministic routing technology. Available in 34 countries; 100 planned within 18 months. Claims up to 30% savings compared to static VPN connections to cloud services. IZO Internet WAN: business-class SLAs over the public internet in partnership with 20+ service providers IZO Private: private connectivity to cloud service providers including AWS and Microsoft Azure IZO Public: prioritised content for Tata Communications enterprise customers Ultimately, telcos can differentiate best by providing the widest range of options to enterprises as they match cloud type and connectivity to specific workload and budget. 8

9 Telcos acquisitions focus on space and ICT skills Telco cloud investments by region, ($m) Telco cloud acquisitions by type, ,707 4,368 10,535 19,933 Asia Pacific North America Africa Western Europe Eastern Europe & CIS Middle East Latin America & Caribbean Datacenter ICT services Unified comms & collaboration Security Application management IaaS Content distribution Other Note: investments are allocated to the investor s headquarters region 1H for 2014 Source: Ovum Telcos have spent $37.5bn on cloud-related assets since 2010, with datacenters the most common type of acquisition. There is also a distinct trend of targeted smaller purchases to build competence in a specific area, such as video collaboration, security, or system integration skills. 9

10 Spotlight: NTT Group is creating a global cloud empire NTT Group acquisitions, Division Acquisition HQ Value Comments Dimension Data NextiraOne France $600m* Ex-Alcatel convergence integrator has 43,000 clients. Teliris US $50m* Video-as-a-service provider complements DiData s UC offers. Nexus US $200m* IT consultancy boosts western US and mid-market presence. NTT Com Virtela US $525m Network services provider Virtela has network functions virtualization skills. Raging Wire US $350m Hoster has 60,000 square meters of space in high-power datacenters. Arkadin France $300m* More than 30,000 clients globally. Several operators (including CHT, HGC, Orange, and SingTel) resell Arkadin s UC services. BDG Germany $20m* Security consulting for medium to large firms. Infotrust AG Switz. $25m* Managed security services and consultancy. NTT Data Everis Spain $509m Integrator and software developer has a footprint across Latin America, a region where NTT wants to grow. Optimal Solutions Integration US $150m* SAP specialist and IT consultancy with mid-market, Fortune 1000 company focus. NTT Group Solutionary US $150m* Cloud security services provider to work across NTT Group. *Estimated deal value Source: Ovum Telecoms Cloud Monitor NTT Group is the world s most acquisitive telco cloud provider. In the past 18 months NTT has spent an estimated $3bn across its divisions. NTT s challenges are to ensure collaboration across often competing groups and to integrate its various sub brands. 10

11 Warning: A space race is on, but what s the real asset? Telco datacenter space under construction or acquired, Western Europe North America 139,000m² Eastern Europe and CIS Asia-Pacific 405,279m² 17,870m² Middle East 553,152m² Africa 15,800m² Latin America and the Caribbean 11,472m² 11,000m² KEY = 10,000m² 1H for 2014 Source: Ovum Telecoms Cloud Monitor Since 2010, operators have added more than 1 million square meters of datacenter space to their asset base. Ultimately, AWS, Google and Microsoft dwarf these investments. Unless there s proven scarcity, CSPs shouldn t be distracted by real estate and power plays. 11

12 Services launched Large enterprises are no longer the primary cloud target 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Telco cloud services by customer targeted Large enterprises SMEs Consumers Public sector Wholesale Note: some services target more than one customer segment. N = 339 operators 1H for 2014 Source: Ovum Telecoms Cloud Monitor Telcos initially targeted large enterprises, but are broadening their cloud portfolios. Small businesses (including SoHos) are the emerging hope for revenue growth. However, CSPs have not solved the conundrum of how to tell sell these organizations profitably. 12

13 Disconnect: CSPs don t value their best assets enough What are telcos biggest strengths in the cloud market? What ICT vendors say What CSPs say Client base 56% Network ownership 57% Network ownership 53% End-to-end service mgmt 36% Local presence 46% Local presence 32% End-to-end service mgmt Breadth of cloud portfolio Customer service 22% 11% 10% Client base Breadth of cloud portfolio 28% 20% Security expertise 4% Security expertise 13% Consulting / integration skills 2% Customer service 12% Other 2% N=94 ICT vendors Consulting /integration skills 1% N=135 CSPs Source: Ovum 2014 Telecoms Cloud Global Insights Survey Shameful: CSPs are overlooking the extraordinary value of a captive customer base. Many cloud operations are run separately operationally and commercially - from other services. 13

14 More work needed: Clients are not all made alike Enterprises that have bought a cloud service from an online marketplace Europe North America 16% Emerging Asia 33% Middle East & Africa 34% Developed Asia 23% 14% Key > 30% Latin America 20% to 30% < 20% 20% N=2,708 ICT decision makers Source: Ovum 2014 Telecoms Customer Insights Survey: Enterprises Willingness to buy online varies dramatically by region, by size of company and also by industry. CSPs must invest in better customer segmentation to refine sale channel choice. 14

15 Operators are overhauling their cloud sales channels Selected sales partnerships Service provider Partnership type Location Partner(s) Comments Belgacom Alliance Europe Numergy (SFR and Bull), KPN, PT The Cloud Team Alliance aims to provide a superior pan- European alternative to North American and Asian cloud service providers encroaching on the European market. Colt Technology Services Franchise Europe IT resellers and integrators Colt s Ceano franchise program provides off-the-shelf services to service providers targeting small firms. Eircom Resale Ireland Amazon Web Services (AWS) The Irish incumbent has successfully resold the AWS portfolio to many private and public sector enterprises. Interoute Two-tier distribution Europe Arrow ECS Interoute s IaaS is resold to 12,000 resellers through the distributor s Arrowsphere cloud marketplace. Safaricom Joint venture Kenya KCB JV with local bank provides all services small firms need to run including banking, voice, data, and cloud services. SE Telecom White-label brokerage Denmark Also Holding The SE Cloud Factory sells exclusively to partners using IT distributor Also s Nervogrid brokerage platform. Source: Ovum Operators are restructuring their sales channels to improve reach, volumes and margins. For most, only 1 in 10 cloud-related sales transactions are online. Telcos are using more staff with hybrid customer support and commercial skills to facilitate sales, and nontraditional channels such as banks are becoming part of the mix. 15

16 Cloud enablement partners have a critical role Microsoft Cisco VMWare EMC IBM SAP F-Secure HP Google Citrix Parallels Amazon Web Services Oracle Others Telcos top cloud technology partners 7% 5% 4% 2% 2% 1% 1% 1% 1% 1% 1% 1% 1% 0% 10% 20% 30% 40% 50% 60% 70% Trusted global brands are a core element of operators cloud portfolios a good example is the ubiquitous Microsoft Office 365. Global brands draw in customers, while niche local partners differentiate portfolios. Local ISVs usually offer more generous revenue shares, reflecting their reliance on telcos for exposure. CSPs need to keep a balance between partner types to achieve higher blended margin overall. Differentiation among cloud enablement vendors is based increasingly on go-to-market, not just technical, capabilities. 70% N = 1,473 partnerships Source: Ovum Telecoms Cloud Monitor, 1H14 16

17 Conclusions CSPs are here to stay in the global cloud market. After some false starts, CSPs are now carving out distinct market roles for their local markets and customer bases. CSPs are steadily building credibility in hybrid cloud services. There is less bluster about competing head-on with commodity public cloud players, and more discussion about orchestrating cloud services. CSPs still covet earth-bound assets. Despite fundamentally different business models, most operators maintain a colocation and hosting business while also touting various flavors of IaaS. Customer self serve is an exploded myth for now. Most customers will not buy without support and encouragement, even if cloud services are free to try. 17

18 Recommendations to CSPs Forget about leadership in the space race. CSPs will never catch up with the gargantuan investments of pure-play cloud providers Google s planned investment in a new $770m datacenter in the Netherlands is an example of the scale on which such providers invest. Focus on orchestrating hybrid clouds. Competing with price discounters such as AWS is a race to the bottom, but there is sustainable value in managing workloads between public and private clouds and helping enterprises navigate national data sovereignty rules. Do not squander the datacenter interconnect opportunity. The popularity of hybrid clouds will also fuel demand for secure, high-performance links between enterprise, telco, and other third-party service provider clouds. Invest in the art of selling using humans, not platforms. Despite the ability to automate the ordering and provisioning of some cloud services, local culture, technology knowledge, and degree of supplier trust will continue to demand human engagement in cloud sales. 18

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21 Thank you! Camille Mendler

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