Carriers poised to offer cloud computing services, but with some risks

Carriers that want enterprise dollars will need to shift their focus from simple enterprise hosting services to true cloud computing services. But they should proceed with caution to ensure they have the capacity, security and platform that customers demand. They should also plan for the shift in revenue model from contracted to pay-as-you-go services.

Enterprises love the flexibility that cloud computing services offer over the traditional hosting services that telecommunications carriers have enjoyed as an enterprise cash cow in recent years. Carriers must adapt or risk losing enterprise business.

Everything telephone companies build is … a much higher-quality solution. By nature, it has to be. Just look at Gmail -- how many times has Gmail failed?

Alex Winogradoff
Vice President, Gartner

Carriers must proceed cautiously, however, to ensure that they have the right cloud platform and the capacity and security that enterprises will demand from cloud computing services. Carriers should also be ready for a radically different revenue model, as cloud computing customers prefer pay-as-you-go services to being locked into contracted hosted services.

"The hosting environment is under attack, so [cloud services are] something they need to think about," said Alex Winogradoff, a vice president at Gartner Inc., and the author of Dataquest Insight: How and Why Telecommunications Carriers Must Pursue Cloud Services Opportunities Now. "If they don't go and follow suit and become cloud providers, they're going to lose any growth in the marketplace."

The cloud-based services market will be worth $150 billion by 2013, with telecommunications carriers unlikely to grab more than $5 billion to $6 billion -- about 5% -- of that pie unless they acquire existing cloud service providers, according to Gartner.

To be true cloud service providers, telecom carriers need to meet four criteria, according to Winogradoff:

  1. Customers don't own, house or control the computing assets
  2. Service is delivered as pay-per-use
  3. Resources and services are virtual and shared by many customers
  4. Service must be accessible via a user-friendly Web portal.

Last year, AT&T launched its Synaptic Hosting service, a pay-per-use managed hosting service targeted at large enterprises. In March, it expanded its cloud portfolio with a "storage as a service" product for midsized to large businesses. 

Meanwhile, Verizon unveiled its cloud suite in June, announcing a "computing as a service" with daily or monthly usage fees, allowing midsized or large business customers to provision and configure a server in Verizon's cloud in a matter of minutes. Verizon is working with vendors, including HP and VMware, to develop the cloud platform.

"To make this an enterprise-class offering, we don't just stop with the IT developer using it for some development work. Really, the vision is [that] the enterprise can put [its] most critical applications into this infrastructure over time," said Mike Marcellin, vice president of global managed solutions at Verizon Business.

Telecoms can market cloud computing services as bundled services

Large operators have several advantages over non-telecom cloud service players like Amazon and Google, not the least being their global data center footprint and their ability to bundle cloud-based services with network services and other traditional telecom products, Winogradoff said.

"Multinational customers or enterprises … have to manage too many vendors," he said. "It's a lot of work, plus you don't get the leverage or potential volume pricing discounts, so there's a lot of benefits of going with a single vendor."

Non-telecom players such as Amazon can offer cloud services, but they don't own a network to connect customers to that cloud.

"All they have is a data center with cloud capability, and the only way they get to that data center is through some physical facility that is provided by a telecom service provider," Winogradoff said. "Why wouldn't the telecom want to provide the service themselves?"

Carriers can bring more than just bundled services. They often can boast more reliable services, Winogradoff said. "Everything telephone companies build is … a much higher-quality solution. By nature, it has to be," he said. "Just look at Gmail -- how many times has Gmail failed?"

Continued: Carriers must provide cloud computing security guarantees.

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