"The cloud is not the cloud without the network." Those were the words of NTT America CTO Doug Junkins during his keynote presentation at Monday's day-long Cloud Carrier Forum, one of several breakout summits that took place on the first day of the Cloud Connect conference in Santa Clara, Calif., produced by UBM TechWeb, parent to InformationWeek.
Junkins was speaking to a standing-room-only mix of cloud industry stakeholders including telcos; cloud infrastructure and management solution providers; enterprise consumers; and software as a service (SaaS) and cloud application providers. The message--practically a constant theme throughout the day--was that carriers like AT&T and Verizon are uniquely positioned to be the preferred providers of an array of cloud-based services to enterprises--everything from virtualized networks to public and private infrastructure-as-a-service (IaaS) offerings. It's just a matter of time before the telcos recognize the opportunities, realign their currently siloed businesses, and embrace more of a "Telco 2.0" culture.
One point that was consistently made during the Forum: Not only do the carriers already own the networks across which all cloud-based data and content is already trafficked, they have a decades-old and relatively bulletproof track record in delivering secure and highly available services.
[ For more, see Four Things I'd Like To See At Cloud Connect. ]
The opportunity for both carriers and enterprises alike is not to be underestimated since the land grab for cloud computing customers is far from over. According to Heavy Reading senior analyst Ari Banerjee, cloud computing will account for a bare 13% of the global enterprise IT spend in 2013, leaving plenty of traditionally spent IT budget to be disrupted by the cloud. (Heavy Reading is the research arm of Light Reading which is also a division of InformationWeek's parent UBM TechWeb.) That percentage is likely to climb through the decade as more IT pros begin to recognize that just about everything (including their networks) can be very cost-efficiently virtualized, and more organizations follow the lead of federal programs like the U.S. government's Cloud First initiative, whereby agencies are required to consider cloud computing alternatives ahead of on-premises options.
Further explaining why carriers are well-positioned to take their piece of that pie, Banerjee detailed how the carriers "own the network, they own the subscribers, they are used to delivering five nines availability, they know how to provide turnkey applications and services to hot market segments like [small and midsize businesses] SMBs, and much like the way that Amazon got started in the business of IaaS-provision, they have data centers with extra capacity."
Deep business and operations support systems (B/OSS) experience is another arrow in the quiver of telcos. Running and billing for highly available and scalable on-demand cloud-based services depends on the presence of equally scalable and available B/OSS--just another discipline that's already in the wheelhouse of all the major telcos.
Given telcos' background and existing role in delivery, the actual business opportunities are too numerous to list. For example, the economics of the telcos' data centers aren't substantially different from those of Amazon's or Rackspace's. There's no reason telcos can't deliver compute services like Amazon's EC2 or storage services like Amazon's S3, providing all of the necessary management infrastructure for migrating workloads from private to public clouds and even between multiple public clouds.
For telcos, the whole can be greater than the sum of its parts, perhaps allowing them to achieve economies of scale across adjacent lines of business that companies like Amazon and Rackspace cannot. During one panel discussion, CloudScaling VP of strategy David Bernstein cited how KT (formerly Korea Telecom) was able to reduce mobile subscriber churn by 13% after adding cloud-based compute and storage services to its portfolio of offerings. With cloud-based storage in the mix, KT was able to offer storage services similar to those that Apple charges for in its iCloud service.
Another opportunity for telcos lies in the increasingly commoditized content delivery network (CDN) market that's currently dominated by the likes of Akamai. When it comes to CDNs, telcos have at least a couple natural advantages; existing multiple data centers (where the content can be located closer to its destination) and proximity of the content to network backbones that they own, thereby giving them a leg up over pure CDNs on both performance and cost.
Perhaps the best example of a telco in the CDN business is Level 3. According to Netflix lead cloud reliability engineer Jeremy Edberg, while Netflix relies on Amazon to handle the transactional part of retrieving content, Level 3 is the CDN. Once a user has the security keys to an asset, Netflix get out of the way and Level 3 delivers the content directly to the customer. Netflix is the largest consumer of the Internet bandwidth. In 2011, the Internet-based video provider peaked-out at 32% of North America's downstream traffic. "When you're streaming video, performance and reliability are everything," said Edberg. Referring to Level 3's role as a Tier 1 Network (in other words, it runs part of the Internet's backbone), Edberg said "you can't get the content any closer to the Internet than Level 3 can."
But as well-positioned as the telcos are to go toe-to-toe with the likes of Amazon and to scoop up the growing demand for enterprise cloud services, challenges remain. For example, collapsing currently siloed businesses into what customers perceive as a single cloud. Verizon enterprise strategy VP Mike Palmer gave an example of how customers want their SAP updates to come to them, no matter where they are. Traditionally for telcos however, sending that update over a multiprotocol label switching (MPLS) network, versus a wireless network, to a smartphone required the involvement of completely separate businesses. "It all has to be one business" said Palmer.
CloudScaling co-founder and CTO Randy Bias was a bit more skeptical saying that the carriers are just "throwing spaghetti against a wall waiting to see what sticks." During one panel discussion on choosing cloud models, Bias claimed that the telcos don't have the product management mentality needed to be successful in the IT space. "No one [at the telcos] owns this stuff," said Bias. "There are tons of opportunities for carriers to service companies with open clouds and to use their natural assets, but they are largely ill-equipped. It's just more of the central command and control that we're used to seeing from carriers."
Despite the challenges, the carriers seem undeterred. NTT America's Junkins and Verizon's Palmer detailed the many steps they are taking to capitalize on their natural advantages as carriers in an effort to garner attention from enterprises looking to benefit from the cloud. AT&T is in the mix too. Although its associate VP Toby Ford was a no-show for his slot onstage at the Cloud Carrier Forum, the company upped the cloud ante Monday when it announced a virtual provide cloud offering that allows customers to securely migrate their VMware-based workloads between their own data centers and AT&T's cloud.
David Berlind is chief content officer of TechWeb and editor-in-chief of TechWeb.com.
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