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The Current State of Telco Cloud Services and the Evolution to Date

The move of computing to the cloud started relatively slowly around the turn of the century, then steadily grew as more and more large enterprises began to experience the benefits of hosting even the most mission critical business applications in the cloud. The growth of Amazon Web Services (AWS) and other cloud providers show a steady incline and today, applications that are not at least “cloud-friendly” are the exception rather than the rule.

With the enormous investment in the virtualization of network functions, spinning up networks is becoming as natural and easy as spinning up virtual machines in the cloud computing context. In fact, the IT teams in enterprises responsible for the virtualization and management of their computing environments, are now expert in cloud operations and are more open to the idea of moving not just small, real-time communications applications to the cloud, but entire global voice and collaboration platforms for all the right reasons:

  1. More agility

  2. Better quality of experience

  3. Less cost

  4. Greater internal productivity

  5. Enhanced external communications including contact centers

As the largest business customers of the world’s largest communications service providers (CSPs) shift their thinking and move all of their data (including real time voice and video) to the cloud, it only makes sense that the telco cloud evolution takes on greater meaning and value as it makes it possible to deliver services “as-a-service” to a very valuable embedded customer base.

This is great news for the CSPs who have been making incremental and increasingly fundamental investments in moving to virtualized, telco cloud environments to improve their own operating economics like lowering their costs while making the necessary transformation away from legacy equipment and software to more modern, powerful digital, and cloud-based alternatives.

CSPs are finding it much easier to design and roll out new services to consumers — services they can provision immediately, bill for automatically, and manage in a “software-defined” way. These CSPs are experiencing benefits in a world that is now being driven by policy, where real time human communications networks are programmable and support not just phone calls, but over-the-top services and applications consumers demand. The marketing and product experts within the CSPs are inventing to keep their companies competitive.

We believe we are now on a steady cadence to completing the modernization and move to the cloud by 2020, with all the follow-on applications development coming steadily over the next five years, into the year 2025 as the Internet of Things (IoT) continues to explode, and the Internet of people intersect with those connected things, causing steady growth of sessions that traverse human and machine communications.

The transformation from legacy to leading edge is moving forward smoothly, with great cooperation from standards bodies and across the competitive landscape even as we inch towards 5G and as the density of WiFi continues to increase. Similarly, the growth of social, mobile, data, and analytics continues as an unstoppable force, now punctuated with artificial intelligence (AI).

These new applications and the value that hyper-connected solutions deliver to people and businesses — smarter cities, safer communities, more sustainable farms, more efficient healthcare, and more productive factories — are creating so much financial value for the enterprises CSPs serve that there is now an inevitability that there will be “no network” that is not a “new network” in the next few years.

In other words, the pressure is back on networks (again), but with tremendous business and financial rewards signaling a healthy ROI for moving to telco cloud.

The leaders in our industry are well aware that we must evolve to a distributed telco cloud model to support what the future will hold, which is likely going to include innovations we have yet to imagine. And there seems to be very few innovations today that are not enhanced by connectivity. The “Internet of Everything” is here to stay, and virtualized networks – with their resiliency, their agility, their software defined perimeters, and policies – will no longer be an afterthought.

These networks CSPs are investing in and these telco clouds will be embedded into applications, which is where the real value in the future is being created. CSPs have very clear visions for the new wave of contributions they can make, and not in a tightly defined telco world – but in a software world where connecting clouds, applications, people, content, and things becomes an exchange of everything.

Those telcos who do not advance will continue to suffer declines in traditional service revenues (voice, messaging, data).

According to the ‘Telco 2.0 Transformation Index’, revenue declines are real and on a scale much larger than had previously been expected by much of the industry.

Here’s a quick snapshot of their forecast:

Source: STL Partners

Whether or not Telco 2.0’s view is accurate (as one of many), what we are definitely seeing is steady, exciting progress in the move to the telco cloud.

The cloud market across the board (for compute and communications) is without question a growth market some analysts believe will reach one trillion dollars by 2027. While the Cloud market, like the sub-markets cloud supports (IoT for example) constantly shifts and evolves as technologies change and more disruptors enter the fray. On average analysts suggest this market will grow at around 30 percent compounded annual growth rate (CAGR).

Just how much of that growth telcos will harness depends on how strategically they invest in network functions virtualization (NFV), cloud offerings, software-defined networking (SDN) offerings for the enterprise and business customers, and in new frontiers like connected cars, homes, cities, factories and more).

Moving to virtualization and cloud is not just a cost-savings measure (despite the compelling economics). Moving to telco cloud positions allow CSPs to participate in the hyper-connected world, today and in the years ahead.


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