PwC has released a report which shows that a new “wholesale” method has emerged as a means for telcos to enter into the cloud services business space. Previously growing cloud services by way of acquisition or developing them in-house were the primary options.
Johan van Huyssteen, PwC Communications Industry leader for Southern Africa, says: “Telecommunications organisations globally are not receiving the same double digit growth that the global cloud sector is currently experiencing.
The global market for cloud services is expected to grow at 18% in 2013 to $131-billion and to $244-billion by 2017, which translates to a compound annual growth rate of 17,1%. That is a huge opportunity. But if telcos want to enter the cloud services market, they must consider a number of options carefully and manage them strategically if they want to achieve success.”
“Each approach carries its own risks and difficulties. For example, the acquisition route is time consuming and fraught with a number of challenges. On the other hand, developing cloud capabilities from the ground up requires a significant investment in time and resources,” adds Van Huyssteen.
According to the PwC report entitled Is the Forecast Clear on Your Wholesale Cloud Strategy?, the wholesale method enables telecommunications organisations to ‘buy into’ the cloud business of an existing cloud service provider.
The telco would then be able to offer its customers an end-to-end cloud services platform. Sometimes referred to as the ‘franchise’ approach, the telco has the opportunity to buy the underlying technology and operating directions but not adopt the branding of the cloud service provider, the report says. Ideally, the telco should retain the services under the umbrella of its own brand.
Elmo Hildebrand, PwC associate director for Advisory Services, says: “Increasing numbers of companies across every industry are leveraging the cloud to pursue business opportunities. This is not only true for the developed world, but in developing nations as well.
“This is no surprise: cloud offers African-based companies the opportunity to compete with companies in developed regions on a more level playing field: access to world-class infrastructure, software and services and a reduced dependency on scarce, expensive, technical skills previously needed to run infrastructure and software in-house.”
The telco should have the flexibility of choosing whether or not to own the physical infrastructure, depending on the specific economics of the business case for the organisation. It should also demand full implementation support to get the business up and running, adds Hildebrand
“Last but not least, the telco would want to launch its newly acquired cloud service offering under its own branding.”
The wholesale solution offers a service provider a complete, end-to-end cloud offering ‘out-of-the-box,’ allowing the service provider an unprecedented speed-to-market compared with traditional approaches.
Using this model, the established cloud service provider, provides everything that a telco would need to deliver a complete suite of cloud services to its own end-customers.
In many instances, a modular wholesale cloud offering can also fill existing gaps in a telco company’s existing cloud services.
These instances include:
* Incomplete services – a telco may offer Infrastructure-as-a-Service (IaaS) but not Software-as-a-Service (SaaS) or Platform-as-a Service (PaaS);
* Insufficient single tenant, private cloud solutions – the telco could rely on the wholesale provider to purchase a multi-tenant public cloud solution or a hybrid cloud solution;
* Self-management – if a telco does not offer self-management capabilities for its cloud offering, a wholesale cloud provider with offerings that include self-service features could be considered;
* Cloud service payment – in cases where the telco does not have easy, pay-by-credit card options, wholesale cloud providers with such capabilities could enhance the consumer’s purchasing and user experience;
* Billing capabilities – the wholesale cloud provider could offer ‘out-of-the-box’ billing solutions when the telco has a slow, manually driven customer billing process.
Choosing the appropriate wholesale cloud provider is as crucial a decision for a telco as deciding to use the wholesale approach. Many telcos attempt to integrate new cloud services with existing legacy systems that are typically not a sustainable, scalable model, the report says. The immediacy and demands of cloud services require fast, consistent service and systems.
For appropriate outcomes, wholesale cloud service providers should offer end-users a well-defined Service Level Agreement (SLA) as well as reporting capabilities to prove compliance to these SLAs.
Hester Scholz, PwC associate director for Advisory Services, says: “Telcos need to recognise their strengths and limitations in equal measure. There needs to be a strategic connection between the wholesale cloud provider’s offerings and the telco’s current capabilities, as that connection is largely representative of the likelihood of success when entering the competitive cloud market.”
