Weighing Up Public Cloud Providers’ Strategies in the Telecoms Market

Google recently acquired MobiledgeX, the edge computing specialist vendor launched by Deutsche Telekom in early 2018 as an independent company. Google plans to open source the company’s code. MobiledgeX offers a federation and common orchestration layer that presents a consistent interface to app developers. This enables CSPs to monetize their 5G networks and edge computing deployments well beyond what they can accomplish in isolation. For example, to date, MobiledgeX claims to have collaborated with more than 200 software developers to deploy edge clouds for a wide range of use cases across consumer and enterprise apps. In addition, MobiledgeX has partnered with about 25 CSPs, including Telefónica, Orange, BT, and Deutsche Telekom. This acquisition equips Google with valuable telecoms market expertise that complements its strong position as a public cloud provider. It will also open new channels for Google to leverage its solutions to mobile operators.

Broadly speaking, the public cloud market is divided into three segments. The first is the “small business” community, such as social media/content companies. This segment needs cloud infrastructure without investing upfront in their own Data Centers (DCs). The second is the enterprise space. This group is not interested in migrating to the cloud wholesale, but rather adding agility to current on-premises apps. The third is telecoms, and their requirements for a telco hybrid cloud, namely the combination of public cloud and telcos’ own DCs for Network Function (NF) workloads. Amazon Web Services (AWS) and Microsoft Azure are dominant in leveraging the first and second segments, respectively. The telco hybrid cloud is a segment that promises growth for Google as CSPs seek to harness 5G’ potential through a hybrid cloud-led technology and business transformation. But Google is far from the only player in the fray. There is competition with numerous public cloud providers staking a claim for a dominant market position.

Google is arguably a leader in next-gen (consumer) services and cloud-native computing as defined in ABI Research’s report Cloud-Native Computing in 5G Networks. For example, Google launched Kubernetes and Anthos for cloud hosting. Google also launched Istio service mesh, a critical piece of the cloud-native world. Google’s strategy to drive growth in telecoms centers is based on two major pillars: 1) help CSPs monetize 5G and edge computing; and 2) support CSPs in modernizing their core network systems by moving more NF workloads to Google Cloud Platform (GCP). Google’s deals with Bell Canada, AT&T, and Reliance Jio attest to its strong progress in the market. Further, acquiring MobiledgeX and taking it open source fits well with Google’s strategy to be a leader of operator cloud-native network transformation. Google has a competitive set of cloud-native tools, and it continues to compete aggressively to win operator minds and market share. But whether it is sufficient is a function of how other big public cloud providers (AWS and Microsoft Azure) are approaching the telecoms space.

AWS competes strongly with GCP. AWS was the first to offer cloud computing Infrastructure-as-a-Service (IaaS) in 2008. This early start gave AWS ample time to experiment and improve its cloud services over the years. AWS does not merely offer infrastructure primitives, but it also seeks to be a “platform for platforms.” AWS is a master at building a platform that is self-serve with strong economies of scale. For example, AWS’ ecosystem is so complete that there are now companies of all sizes running everything on AWS from servers and storage to application servers and databases. AWS continues to release several products aimed at specific industries. In the telecoms space, AWS partners with CSPs to help them accelerate their migration to the cloud. For example, Verizon and Vodafone partner with AWS to launch edge compute, ultra-low latency services delivered with AWS Wavelength. AWS is aggressive with the hybrid telco cloud, but somewhat not as successful as its competitors, so far, outside the U.S. market. Consequently, AWS has telco hybrid cloud partnerships with companies like VMware to bolster its telco hybrid capabilities.

A second, and equally important, cloud provider that competes strongly with GCP is Microsoft. Microsoft is a pioneer in terms of enabling its customers to replicate the central cloud environment on a smaller scale in their own DCs with its Azure Stack. Azure Edge Zones is Microsoft’s edge computing platform that connects to the Azure public cloud via its global network. Microsoft is strong in the enterprise domain for public cloud services. But Microsoft has also announced several engagements with CSPs, including AT&T, Telstra, Telefónica, and Etisalat. Furthermore, as discussed in ABI Research’s report Microsoft Brings the Power of IT into Telecoms, Microsoft is obtaining cellular capabilities to design and build core network functionality. For example, Microsoft’s acquisitions of Metaswitch and Affirmed Networks equip it with expertise in mobile infrastructure virtualization, including 5G. That, along with Microsoft’s acquisition of AT&T’s Network Cloud and associated intellectual property, enables Microsoft to drive new growth on two fronts: 1) drive implementations of the public cloud in CSPs’ environments; and 2) leverage carrier-grade capabilities with existing enterprise communication networks.

Public cloud adoption in the telecoms market is on the rise as discussed in ABI Research’s report How Public Cloud Can Spur Innovation in Telecoms. But, as with any new technology uptake, decisions on public cloud adoption for CSPs must be based on an assessment of risk and reward. CSPs should pursue a strategy that is anchored on a high tolerance of risk over what they do not know about public cloud, rather than with what they do know. Further, CSPs must assert the position they wish to attain in their relationship with AWS, Azure, and GCP, as opposed to deriving one from what the market provides. A first step in that direction is a cloud provider evaluation process. CSPs should consider three criteria to evaluate their choice of a cloud provider: 1) hybrid cloud and/or multi-cloud capabilities; 2) services and support; and 3) data sovereignty and security.

If CSPs want to complement their telco cloud infrastructure with the public cloud, they should identify what support different cloud providers have for hybrid and multi-cloud. The public cloud is here to stay, so the choice is no longer public cloud or no public cloud, rather, whether via GCP, AWS, or Azure, CSPs should seek to balance their Information Technology (IT) and network workloads effectively across both public and private telco clouds. Second, services and support is also a key criterion when it comes to selecting a public cloud provider. CSPs should be comfortable with cloud interfaces and Application Programming Interfaces (APIs), as well as the layout of cloud architecture and deployment. Finally, there is data sovereignty and security. This is especially relevant for telcos that continue to have tight control of their data and network Key Performance Indicators (KPIs). In conclusion, when choosing between public cloud providers for a particular workload, CSPs need to weigh security and data sovereignty, performance, services/support, and cost, along with regulatory specifics.