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Cloud Computing: Opportunities for Communication Service Providers

Cloud computing offers CSPs a great opportunity to regain an important role in delivering services to consumers

Cloud Computing is an evolution of existing technologies to deliver services to end users. Communication service providers have an early adopter opportunity to compete with new entrants, increase their bottom line and play a dominant role in delivering cloud services.

Service providers have seen many so-called next- generation technology waves in the last 15 years. Cloud computing, which was seen as a new fad, has passed the initial test. Cloud computing is for real and not a vague idea anymore. It helps drive down costs for IT organizations by making infrastructure more distributed, more efficient and massively scalable. It's being accepted by enterprises of different sizes as a smarter way to deliver services. The worldwide cloud computing market is growing fast. According to IDC, it will be a $148.8B market by 2014, of which the public cloud alone would be about $55.5B. Communication service providers (CSPs) have made a significant investment in technology, people and processes. They have customer knowledge and relationships. Public cloud computing offers a unique opportunity to CSPs to defend their hosting business and grow significantly by focusing on a much larger market than what they can do today. This article focuses on some of the areas where CSPs have an advantage over others to take the lead market share in public cloud computing.

The Connected World
We live in a world where we expect everything to happen instantly and in real-time. It's a connected world, where people expect personalized information anytime, using any access device, delivered instantly. Everyone expects information to be processed in real time. The connected world is now moving to an agile world. The days of batch processing are numbered, if you want to meet the expectations of your users or customers. The computer and network infrastructure need to be ready to respond to this new connected or real-time world.

Communication service providers (CSPs) understand this better than any other industry. From the very early days of telephony, customers always expected a dial tone when they picked up the phone. CPSs know how to ensure a dial-tone each and every time. CSPs understand and appreciate what it takes to deliver information instantly anywhere every time. They are used to designing, implementing, running and managing infrastructure that is always on. Traditional voice services could be classified as cloud services.

Now it's beyond just the dial-tone. Today, the enterprise that can deliver instantly what a customer/user expects has a competitive advantage. It's important for businesses to make sure that applications, infrastructure and processes in the back end are able to meet this expectation. Businesses need to be agile to capture opportunities presented in this instant-on world.

Cloud Computing
To address these market pressures, CIOs are looking for simplified and flexible architecture. This is where cloud computing makes sense. According to the National Institute of Standards and Technology (NIST), cloud computing is a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort.

Today the focus is shifting to service and away from infrastructure components that are getting virtualized, standardized and commoditized. Virtualization utilizes resources better. But an architecture built on disparate components in a virtualized world adds more complexity. As a result, converged infrastructure, based on industry standards, is the foundation for agile service delivery with reduced time to provision additional resources. IT neither has the time nor the budget to integrate different components and own up to the risk of integration, resulting in increased time-to-market.

With virtualization, the application is not tied to the IT infrastructure, resulting in flexibility that's needed to meet the requirements of the real-time world. The service can be delivered from a data center or from the network or a combination of the two, as long as it makes business sense and can meet user's service-level expectations.

Cloud computing is a natural evolution due to the convergence of IT delivery and network.[1] With cloud computing, networking is part of the shared resources. It plays an important role in making everything work in an instant-on manner. It needs to be based on open industry standards, not proprietary protocols, more so now than ever, to provide the required agility and flexibility at reduced operational costs.

Opportunities for Service Providers
The telecom industry understands the value proposition, technical and operational transformation required as well as the opportunities that exist with cloud computing. CSPs have a lot of intelligence about their subscribers, their preferences, the services they consume, how and when they consume, etc., which help them add more value in a personalized service delivery. CSPs have billing and mediation platforms to charge customers based on usage. Combine all these with their brand and CSPs can play a dominant role and increase their top line revenue, if they proactively embrace public cloud computing.

Today, CSPs provide network connectivity to enterprise and SMB customers. Cloud service is a natural extension to what they are already providing:

  • Cloud computing makes a lot of business sense for the SMB market, which is expected to adopt it sooner than the enterprise market. SMB is a price-sensitive market and normally doesn't carry a lot of legacy application infrastructure. It's a market that is more likely to adapt to a standard cloud offering with little or no customization. On the contrary, enterprise customers would look for a more customized cloud offering. In a global study conducted by Forrester for HP, more than 65% of SMB customers expressed an interest in getting call center as well as unified communication services as cloud services from CSPs. [2] This opens up a great opportunity for CSPs to target that market segment and deliver packaged cloud services (Compute as a Service and Communication as a Service).
  • Market adoption of cloud services is best suited for CSPs. The study done by the IDC [3] shows that top cloud services accepted by the market are collaboration applications, web-based applications, information security and back-up or archiving services. These are the areas where CSPs have core strength and have been delivering them as standalone or dedicated services.

The computing resources and applications remained mostly in data centers. CSPs have focused primarily on managing and supporting networks connecting data centers. Typically, the computing resources are managed separately. If a customer looked for a single point of contact, CSPs, in most cases, worked as sub-contractors to large IT and SI companies.

  • In the world of cloud computing, this situation is changed to the advantage of CSPs because of the flexibility of putting compute resources either in the data center or network, wherever it made business sense. Cloud computing helps CSPs add more value by delivering more than just connectivity and network support. They can compete better with traditional IT service providers, thereby improving the top line.
  • CSPs are better positioned to provide web-based application services. Network assets are important assets of service providers that, in the world of cloud computing, can manage and deliver quality of service to users. This will not only allow service providers to differentiate themselves but will maximize the value of their investment in the network and create a new revenue stream.
  • As the network becomes an important part of the overall service, and when some computing resources reside outside data centers and in the network, traditional IT service providers and SI companies will work more closely with CSPs to commit SLAs to their customers. IT service providers will look for ways to jointly go-to- market with CSPs because they play a key role in delivering SLAs.
  • Events (natural disasters, sports events, elections, civil unrest, etc.) drive a burst of network and application traffic. It's cost-effective for organizations to handle such bursts of application usage or increased traffic to their sites using cloud computing. CSPs are in the best position to set it up very quickly for a short period of time and then tear it down.
  • Enterprise and SMB customers will also experience an occasional increase in their computing needs that can be easily met by CSPs with cloud computing with a pay-per-use model, which is more cost-effective compared to permanently investing in the infrastructure to meet occasional peaks. This reduces Capex as well as Opex for businesses.

According to Gartner, "By 2012, 20% of all business will own no IT assets." [4] As CSPs play a central role in delivering quality service to customers, they have an opportunity to be a services broker for customers. They can become the CIO of many businesses and deliver applications (services) from multiple sources.

  • CSPs can offer Infrastructure as a Service (IaaS) to defend their hosting customers. They can differentiate themselves from other providers by ensuring service quality and by bundling IT service with communication services. CSPs are less likely to win the battle in this area mainly on price. The next logical step for CSPs is to start offering Platform as a Service (PaaS). But they will be able to meet the required margin targets with Software as a Service (SaaS), bundling services and ensuring service levels.

  • Some service providers are considering building a repository for health care data (storage cloud) fed wirelessly from monitoring devices, labs and other sources. The health care cloud would give secure access to doctors, clinics, hospitals, insurance companies and pharmacists. This is just one example of an early adopter working with HP in Asia.

CSPs can be trusted providers of network connectivity to cloud services providers. As we move some computing resources from the data center to the network, the network becomes a gateway to store, retrieve, process and analyze information. This increases network traffic with cloud and drives more bandwidth.

  • With content delivery solutions (CDN), CSPs can speed up the delivery of Web and cloud applications to employees, partners and customers. Combined with policy solutions, CSPs can do it more intelligently, i.e., not speed up everything but understand the content and take into account user privileges and adjust the acceleration of traffic.

CSPs can aggregate different types of services and content and deliver them as and when requested through a self-service portal to customers with required level of quality and personalization on any access device. They can also let consumers store their content in the cloud and allow them to access it on any device.

The traditional hosting business growth for CSPs is tapering off. Cloud computing (IaaS and SaaS) not only offsets this decline but fuels the overall growth for CSPs.

CSPs will improve efficiency and reduce their internal IT costs by deploying cloud, thereby improving the top line. They will also realize a positive business case for internal cloud deployment when it's coupled with revenue-generating GTM programs.

Cloud computing offers CSPs a great opportunity to regain an important role in delivering services to consumers as well as SMB and enterprise customers. The questions remain: Who will take the early adopter advantage with cloud computing and who will try to be early followers?


  1. Mike Candsfield, F. (2010, June 16). Telecom's Central Role in Cloud Computing. Retrieved June 20, 2011, from Forrester.
  2. Forrester for HP. (n.d.). Communication as a Service for Midsize Businesses. Retrieved June 20, 2011, from hp.com.
  3. IDC. (2009, September 29). Cloud Computing 2010, An IDC Update, IDC Executive Telebriefing. Retrieved June 20, 2011, from cionet.com.
  4. Gartner. (2010, Jan 13). Retrieved June 20, 2011, from Gartner Newsroom.

More Stories By Kapil Raval

Kapil Raval is an experienced technology solutions consultant with nearly 20 years of experience in the telecom industry. He thinks ‘the business’ and focuses on linking business challenges to technology solutions. He currently works for HP and drives strategic solutions in the telecom vertical.

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