The enterprise cloud opportunity, as visualised from a carrier perspective, is big and growing. The economic slowdown that started in 2008 got the ball rolling, giving enterprises an appetite for capex-light or capex-free IT and networking solutions. The economic outlook may have perked up, but the old model of endlessly upgrading on-premise equipment – and being locked in to its supplier for two to three years – has not revived with it. Network operators like Level 3, Deutsche Telekom, Telstra and SingTel have responded by adding cloud services to their traditional connectivity offer.
“The advantage for carriers is that they have the customer relationships and the ability to add value to their offering by layering cloud services over their network,” believes Alan Rihm, CEO and founder of US-based CoreDial, a SaaS platform provider that enables carriers to sell cloud communications services to corporate customers. “When you own a data network, layering cloud-based communications services like voice or unified communications is relatively easy and allows the carrier to add margin-rich services to their portfolio.”
Enterprises have many options when choosing a partner to put their essential functions in the cloud, from systems integrators and data centre operators to the reseller partners of any number of cloud service providers.
Carrier wave
Carriers have not always been the obvious first port of call. But that is changing fast, as carrier cloud strategies catch up with a maturing market for cloud services, argues James Walker, president of the CloudEthernet Forum (CEF).
“Network service providers have gone through several phases of solution offerings as the cloud has evolved, and now they are starting to focus on the areas where they have seen they can add value,” he observes. “Initially there was a desire to host customer environments in their data centres, then development of their own cloud platforms for customers, and now the extension of the network into third-party data centres and cloud providers. Implicit in this is a realisation that no enterprise can run all its own applications just inside its own private cloud environment, and inevitably a hybrid cloud will be needed.”
The CEF’s role, he says, is to standardise the various interfaces between cloud, network and other parts of the chain, moving away from the “fragmented set of incompatible pieces”, as he describes the formative years of the cloud services market.
Carriers, of course, have options of their own, from acquiring all the elements of an end-to-end cloud supply chain in an M&A spree to developing strategic partnerships with key third parties. The latter tactic has been adopted by US network operator Masergy, which has adapted from being a pure infrastructure provider to delivering cloud networking services over its MPLS backbone.
Masergy has recently joined the Amazon Web Services Partner Network, which in effect gives it private access to Amazon’s cloud, over which it delivers managed cloud networking, unified communications as a service, integrated security and cloud-based network management services. It has further comparable partnerships with other cloud providers, such as IBM SoftLayer, RapidScale and Cirracore.
John Dumbleton, senior VP of business development with Masergy, believes enterprises are now past the cloud testing phase and ready to commit their entire data and application environments to the likes of Amazon, with operators such as Masergy acting as enablers: “Enterprises are asking ‘How can I own fewer boxes? Can I move to an opex model?’” he says. “There are lots of business issues around that. They need to know where the applications reside, so our conversations are beginning around the application layer. Our partnerships are allowing us to build infrastructure for cloud services. We bring the network to the enterprise’s doorstep in that way.”
Integrate to grow
Whether developing their own cloud offer or forming part of a wider cloud ecosystem, there is one quality that carriers must be able to offer enterprises – in a word, integration. This is emerging as a key dividing line between a credible carrier cloud offer for the enterprise and a “me too” effort grafted uneasily onto a standard carrier service portfolio.
Exponential-e has recently integrated its 100GigE carrier-class network with what it describes as “enterprise-class” cloud infrastructure. The seamlessness of the integration is its selling point, says Dominic Anschutz, Exponential-e’s head of cloud.
“Customers want to avoid a patchwork quilt, so a degree of uniformity is needed,” he argues. “What we need now is a higher level of integration between cloud providers and carriers – whether those functions are within the same organisation or separate.”
The desktop as a service market in particular, he says, demands a high level of unity between carrier and cloud service provider: “QoS is especially relevant to enterprises now,” he adds. “With cloud services over the regular internet, quality can’t be achieved. Guaranteed low latency is needed for desktop services, delivered direct to the user site. Enterprises want a truly private offer too, with no traversing of the public internet. In Germany, for example, there is a law which says traffic of certain sorts cannot leave the country, even in transit. The routing of data is key.”
He believesthe acquisition of Terremark by Verizon is a case in point of a carrier acting to deliver a unified vision for corporate cloud buyers. He sees a direct correlation between quality and integration of network and cloud and the speed of cloud uptake by businesses.
“Look at South Africa, where cloud uptake has been much slower than other markets, because it hasn’t got the infrastructure,” he points out.
Matthew Finnie, CTO of operator Interoute, concurs that integration of network and cloud is absolutely central, but argues that there is an enormous disparity in this area between carriers competing for cloud business.
“People come to us because we have got the infrastructure and we can integrate it,” he claims. “We sell connectivity, but we also help enterprises to maximise its efficiency. We bring cloud computing into the network by being relentless at integrating where others are not. A lot of new cloud entrants do not get the distinction.”
Simple ownership of the technology in the form of an acquired cloud platform must be matched by being organised from the ground up to deliver services, ideally in an automated way through a portal, he adds: “Everyone says ‘We’re integrated’, but my test would always be to ask ‘I want to buy now – give me the URL’. If you can’t do that then you’re not really integrated.”
What enterprises may also want is the same degree of flexibility when buying connectivity as they enjoy when sourcing cloud capacity – something carriers have not historically been strong at.
Mervyn Kelly, EMEA marketing director with Ciena, expects to see a rise in network-as-a-service and on-demand networking.
“Enterprises can already sign up for on-demand computing and storage, but then they need an annual connectivity contract,” he complains. “It’s a mismatch, and it’s just wrong. We’re seeing demand now for on-demand connectivity to align things better. It’s for enterprises who want a day’s computing capacity and a day of networking to match.”
Kelly says Ciena is in discussion with a number of carriers on this area, and believes on-demand networking will appear on the market over the next six to 12 months.
“It’s all doable from a technical perspective, and the business model stacks up,” he adds. “But all of it has to be integrated at the level of the back office, so the carrier knows how they are billing for it.”
Cloud off the peg
For carriers who want to deliver cloud services without recourse to a network of partners and without delving into the M&A market, there’s the option of taking products and services from cloud-based vendors and creating their own private cloud services.
This presents an obvious challenge, argues Maurizio Canton, CTO EMEA with Tibco Software, a vendor of solutions that help telcos integrate islands of data.
“Integrating all this can be a big challenge for operators wanting to take advantage of cloud services,” Canton explains. “We provide that integration, bridging environments, breaking siloes, regardless of deployment – public, private and on premise.”
An important facet of the market for carrier cloud solutions is its intriguing regional variations, observes Canton: “In Africa, for example, you might find a lot of Tier-2 and Tier-3 providers which need to grow their subscriber base and compete with other providers,” he explains. “They have to move fast and focus on acquiring these new customers, but they haven’t always got much of an in-house IT department. For them, being able to provide solutions in the cloud might be paramount. They’ve no time to put systems in place for fulfilment, exposure, charging control and promotion.”
Different worlds
It is all very different in developed communications markets, where Tier-1 operators are running private cloud environments, but want to share capabilities perhaps across several operating companies within their group.
“They want the same look and feel throughout,” says Canton. “They also want to be able to tell if their customers are having a problem before there is a problem, and being able to do something about it before it’s too late.”
Interoute’s Finnie says the operator offers enterprise cloud solutions in 126 countries: “We’re active from Alaska to Kazakhstan, including war zones,” he claims. “Yes, we have a European bias. Buying decisions are made predominantly in Europe, but by multinationals which might have facilities in China.”
Like Canton, Finnie has noted a different perception of cloud depending on where you are in the world. And he’s certain that the pace is being set in North America.
“In the US, they are now on Cloud 2.0, I’d say,” he says. “They’ve nuanced it there. Cloud 1.0 still left a lot of integration issues, and now they want those answered. We love those kind of customers – guys who know what they are trying to solve.”
Europe, he says, has hunger for a new generation of cloud solutions, but only in pockets.
“In much of Europe they still have the mentality of clinging to tradition – which has no place in the world of technology,” he insists. “Non-integration leaves cost on the table. Cloud sceptics are just showing pure ignorance, and will soon find their problems magnified.”
The vendor community is responding to the enterprise cloud opportunity with product portfolio additions of its own. Finnish vendor Nokia Solutions and Networks (NSN), for example, has unveiled an automated cloud application management service, designed to support operators running network functions on cloud-based infrastructure. The service will assist operators in preparing and implementing their own telco clouds, and in migrating existing telco services to cloud-based networks.
“We help operators deal with cloud on the infrastructure side,” says Jane Rygaard, head of CEM core and OSS marketing with NSN. “We look at how you manage network functions that you have virtualised. You’ve got one data centre on the east coast of the US and one on the west. How do you stop latency being a problem? The operator wants the freedom to choose infrastructure and not be locked in. It’s not our job to dictate and lose the flexibility of the cloud for the operator. They need flexibility to ensure they are not creating a new type of lock-in.”
Intelligent design
Business intelligence also has its part to play, says Sharon Gordon, VP of alliances and technology partnerships at Birst, a vendor of BI solutions.
“We’ve worked with SK Telecom in South Korea which is using BI as part of its cloud offering,” she says. “SK wanted to take the cloud solutions they were offering to SMEs to larger enterprises. This means they needed a way to bring together data from multiple sources. Our solution is designed from the ground up as a multi-tenant system.”
The market for carrier cloud solutions for the enterprise is evolving fast. Looking ahead, it seems reasonable to expect some carriers to completely remove on-premise equipment from their service portfolio, and start only selling cloud-based solutions. Some will offer a mix of both on-premises and cloud-based services. It is safe to say that whichever way the cake is cut, cloud will be a major driver for carrier growth. A sales model that moves carriers on from a three-year sales cycle to monthly recurring revenue is too appetising to be bypassed.
“The carriers that get it right will adopt new services rapidly and will use service agility to compete in the enterprise market,” predicts Rihm of CoreDial. “There will be carriers that are savvier than others. The savvier will know both customers and suppliers really well and be able to match the right services with the right enterprise and rapidly evolve to meet the changing needs of their customers,” he says.
