The cloud-native telco takeover
September 23, 2020 - Martin Morgan
Martin Morgan, VP Marketing, on 5G and cloud delivering new revenues from a range of enterprise services that extend far beyond standard connectivity.
Cloud-native telcos are very quickly becoming mainstream and creating huge disruption as we enter the 5G era. 5G and the cloud brings real structural change to the table and could deliver new revenues from a range of enterprise services that extend far beyond standard connectivity. These enterprise services will become the core focus of many operators’ 5G strategies to capitalize on opportunities such as network slicing and edge computing to make those services a reality.
The cloud will be the key component to telcos realizing their ambitions for the 5G future. By pursuing a cloud-first approach and replacing full IT stacks for cloud-based, open and agile systems, operators will accelerate their transformation into digital businesses. Ultimately, the cloud will give operators and service providers the agility and flexibility to deliver services at the drop of a hat. Some are even beginning to build digital second brands as test beds for these new models.
Moving network and IT stacks to the cloud has some unquestionable benefits in terms of savings. A figure of 80% capex reduction is often used, but there are significant operational savings as well. A substantially reduced need for continuous hardware and software upgrades can be attributed to outsourcing elements of storage and compute. That, coupled with the additional revenue earned by having faster time-to-market and getting new, responsive offers out more quickly than the competition, is why the cloud-based telco business model has gained so much traction.
Shaking up the traditional telco business model with a cloud-first approach and reducing network and IT costs by running open agile systems, has also enabled new market entrants to undercut the incumbent competition and pass on those savings to customers. However, making the switch is not necessarily straightforward. The challenge for all telcos and service providers is understanding which type of cloud is best suited to host their software stack and applications, and to align with new dynamic network and customer requirements. Should a private, public or hybrid cloud approach be adopted?
A cloud that fits – private, public or hybrid?
For those operators and service providers that are uncertain about making a complete switch to cloud, a private cloud approach – or an on-premise, single tenant environment – might be up for consideration. This gives the service provider the opportunity to experiment with cloud technologies, perhaps for launching a new sub-brand, for example. All infrastructure in a private cloud environment is typically hosted “behind company walls” and resources are not shared in a similar way as in a public cloud environment.
Private clouds are often deployed when the operator or service provider has concerns about the security of public cloud and does not wish to relinquish control to a cloud provider. For established telcos, going down this route might be more feasible given their large amount of legacy proprietary infrastructure and access to the data centers they likely already use. Private cloud is a good option for those telcos that want to start small, adapting to a cloud-based telco model gradually.
Private cloud does come with its challenges; it lacks the flexibility of public cloud and the ability to scale up, based on shifting requirements, at the click of a button. A lot has changed this year, and network traffic has become far less predictable with so many business employees working from remote locations and joining networks from an increased number of access points. The public cloud can be instrumental in offering the ability to dial up capacity and compute to meet with increased demand for Internet-based microservices and applications. The demand for and adoption of public cloud has accelerated massively with some businesses undergoing years’ worth of transformation in a matter of months. Historically, public cloud was not even a consideration for telecoms operators but is now something they can’t afford to ignore.
The third option for cloud-native infrastructure is hybrid cloud, which is a combination of private and public cloud. The telco would maintain control over some of the infrastructure on premise with investment in additional public cloud services that essentially become an extension of the private cloud. This scenario is ideal for the telco with highly dynamic workloads, which is a characteristic that probably applies to just about every modern service provider.
Be an early adopter
Each of these three options are wholly viable, but telcos need to start early. With 5G, operators have a set of aces that were not available in previous generations. The uniqueness of 5G’s network slicing capabilities means different types of enterprise services can be delivered and allocated according to specific network requirements. Finally, with 5G, operators are no longer the “dumb pipes” over which Internet companies offer digital services.
Prioritizing cloud-native infrastructure is a must for service providers to adapt to this change and embrace the opportunity. Through that cloud-first approach, they will also enable cloud-based partner ecosystems and the emergence of enterprise marketplaces, which will allow them to seamlessly manage and monetize all services in an efficient way.
Original article in the 5G Exchange.