Almost two years ago, major telecom service providers AT&T and Verizon announced they were getting out of the cloud business. AT&T sold its cloud assets to Oracle, while Verizon sold its various cloud-based operations to IBM, among others.
End of story, right? Most industry analysts attributed the sales to a realization by the big telecom providers that Amazon Web Services, Microsoft Azure and Google Cloud were just so good that competing with them in the public cloud marketplace made little sense.
Now, the story has a new wrinkle. The large providers have rethought and repackaged their strategies for telecom cloud services. As a result, many carriers have a more intriguing cloud story for enterprise customers.
The big providers won't be going up against AWS, Azure and Google -- at least not in the U.S. --but they've come back to the cloud services market with targeted enterprise networking services and private-labeled offerings underpinned by technologies from leading networking and productivity software companies.
"Look for the telecoms to go to market with partnerships that feature a best-of-breed mentality," said Will Townsend, a telecom analyst at Moor Insights & Strategy. "They are embracing these opportunities to flex their capacity when needed to take back some of what they have lost to the major cloud service providers."
AT&T focuses on data transfer, networking partnerships
AT&T has put together a wide array of telecom cloud services, packaged around NetBond for Cloud. The service allows enterprises to transfer data between public and private cloud environments, said Josh Goodell, AT&T's vice president of edge solutions. The carrier also offers colocation services for enterprises that want to outsource their data centers in support of digital transformation strategies.
Another set of AT&T services, called FlexWare, offers enterprise networking capabilities, such as routing, firewalls, SD-WAN and WAN optimization. FlexWare is backed by technologies from a number of vendors, including Cisco and Juniper for routing; Palo Alto Networks, Fortinet and Check Point Software Technologies for firewalls; and Riverbed Technology for WAN optimization. AT&T's private-labeled SD-WAN service is underpinned by VMware's NSX SDN by VeloCloud technology.
"We've decided that IaaS and PaaS is not our play," Goodell said. "But the cloud is a critical part of our customers' business, and our aim is to help them move to the cloud with confidence."
Along with these traditional networking services, AT&T has struck deals with more than 30 other vendors -- among them Box, Microsoft and Google -- to offer packages that combine connectivity with productivity apps that include Microsoft 365 and G Suite. The software is made available to customers through portal software downloaded to a user's desktop or laptop device.
The software, AT&T Collaborate, can also be accessed through a web browser, said Scott Velting, assistant vice president of cloud voice and collaboration at AT&T.
"They can launch an audio, video or web conference meeting, or click on the productivity app of their choice. And if a user wants to use Microsoft Outlook as their email client, but Google Drive to store documents and images, that's fine; they can do that."
Pivoting telecom cloud services to attract new customers
CenturyLink, which has also significantly beefed up its enterprise networking marketing efforts following its acquisitions of Level 3 Communications and Savvis, is attempting to use its managed services heritage as it pivots to the cloud.
"CenturyLink believes, for us to be successful, we have to get good at cloud development and services," said David Shacochis, vice president of hybrid IT product management. "It helps set the tone for how our development teams work and becomes a big part of our transformation effort. Over time, CenturyLink will become more of a services platform. Our goal is to modernize and become more efficient and cloud-relevant."
As part of its telecom cloud services game plan, CenturyLink is also handling provisioning, change management and other services for its customers that use Amazon Web Services for some of their cloud-based operations. The strategy reflects the fact that many enterprises use a variety of public cloud providers to handle their business needs.
In the meantime, Verizon has put its focus squarely on the delivery of managed services and how those services can fuel digital transformation. It has beefed up its menu of offerings and made available new customer premises equipment designed to make it easier for companies to deploy Verizon services in branch and remote offices.
"At Verizon, our mission is to deliver the promise of the digital world, deploy 5G and enable the fourth industrial revolution," said Mahmoud El Assir, senior vice president and CTO at Verizon. "At the heart of this, it's all about empowering humans to do more."
Many of its cloud-based services -- which range from security tools to an SD-WAN service in partnership with Versa Networks -- are designed to let its customers become more comfortable with having essential services delivered by a third party.
Vendors strike partnerships to grow customer base
David Shacochisvice president of hybrid IT product management at CenturyLink
For vendors working with telecom service providers, one of the main benefits is getting their software distributed to a wider pool of customers. VMware, for example, offers a suite of services -- among them SD-WAN and VPNs -- to providers that include AT&T, Embratel in Brazil and Macquarie Telecom in Australia. The carriers offer the software under their brand names, but the customers are using VMware technology.
Partnerships like this will be increasingly common, said Ajay Patel, senior vice president and general manager of VMware's cloud provider business unit, even if the providers themselves have different goals for their cloud business efforts.
In the U.S., Patel said carriers are moving away from IaaS and other cloud-oriented businesses, leaving that to the likes of AWS, Azure and Google. Instead, carriers want to drive value from their existing networks, rather than build competitive public clouds, he said.
Worldwide, however, the stakes are different, Patel said. In Europe and in other areas, regional telecoms play a much bigger role as public cloud infrastructure providers. That's because, in those locations, the telecom provider in effect is the cloud services provider. Because of data sovereignty laws and other regulations, telecoms such as Telefonica, Tieto, NTT Communications and others are building public clouds, as well as delivering a full suite of IaaS offerings.
"They are still able to compete with the AWSes and the Azures of the world due to the regulations from country to country and the relationships they have with customers," he said. "Enterprise customers outside of the United States are just going to have to depend on the carriers to provide a lot of the cloud services. Look at the situation in Israel, where the closest AWS data facility is in Cork, Ireland."
Making telecom cloud services work for enterprises
For enterprise customers looking to reduce the number of suppliers, the shift by telecom providers to offer more networking and productivity services could wind up being most welcome. Why not reduce the number of networking vendors from dozens to only a handful?
The transition may require a parallel reorganization of the IT department, which has been happening for several years anyway as IT silos get consolidated and companies embrace digital transformation strategies centered on agile development, speed to market and cost reductions.
Telecom providers understand that, to thrive in the future, they have to be part of that transformation. Look for a lot of interesting partnerships ahead.