Cloud services: The hot ticket, but at what cost?

10 September 2011 | Guy Matthews


Cloud services are an attractive market for telcos, but first they need to overcome the obstacles.

Across Europe’s mature and increasingly saturated communications market, telcos are reshaping themselves to appear as little like traditional network operators as possible.

The gains to be enjoyed from conventional revenue streams are rapidly deteriorating, and the scope for expansion into new, under-developed parts of the world scarcely limitless. Services for the enterprise are now the hot ticket to be focussing your telco business around – ideally managed ICT services that deliver all the functions that enterprises used to pay for on a licence-per-user basis. No telco can these days afford to be seen not to have a strategy for the burgeoning cloud computing market.

On the face of it, Europe’s big telco names are all well positioned to reinvent themselves as cloud service providers. They’ve got the physical network infrastructure, the knowledge of how data services can be delivered profitably and the customer relationship management credentials.

But in reality they face considerable challenges when it comes to supporting and selling cloud services – according to analyst firm Ovum, which in a new report has claimed that the operational hurdles telcos face to make a success of cloud services are “significant”.

“Much has been made of the potential for telcos to leverage existing assets, such as their communications networks, data centres, OSS and BSS systems and existing customer relationships, to offer cloud services to enterprises,” says report author Mark Giles. “However, while telcos’ assets do provide them with some key advantages over other cloud providers, there are a number of significant challenges that they face.”

Giles pinpoints a perceived lack of brand identity in the supply of IT services, as well as other obstacles such as bringing internal network and IT teams together, enabling sales teams, and ensuring that OSS and BSS systems can deliver on cloud’s on-demand nature as difficulties that must be overcome. “The pace of innovation required for cloud services is very different from traditional network services and requires telcos to drastically reduce their time to market,” he warns.

The answer, suggests Giles, is for telcos to avoid going it alone. Instead, he believes they should emulate the lead of those peers who have already established a joint branding, marketing and sales partnership with an existing IT services provider, to maximise their potential impact in the market.

Guy can be contacted at: guy@transom-enterprises.co.uk