Once upon a time, technology industry analysts optimistically reported on the market opportunities for telecom service providers within the emerging public cloud computing arena. A decade later, the outlook has been softened by the realities of the competitive marketplace.
Results from the latest global market study by Technology Business Research (TBR) indicate telecom service providers are re-evaluating their public cloud strategies, due to the ongoing struggle to gain market share against the pure plays and incumbents -- such as AWS, IBM, Microsoft and Google.
Despite carrier cloud providers generating over $4.5 billion in public cloud revenue in 2015, the segment is still dominated by large incumbents, particularly AWS and Google, as aggressive pricing competition makes pure public cloud unprofitable without the hyperscale advantage.
Reassessing Market Development Strategies
"Carriers, including Verizon, AT&T and BT, are de-emphasizing public cloud and are instead focusing on private cloud and providing network connectivity and professional services," said Michael Sullivan-Trainor, executive analyst at TBR.
However, according to the TBR assessment, certain telecom operators with strong regional positions, such as Deutsche Telekom and NTT, are keeping public cloud at the crux of their strategies and are jockeying for top share in their local markets.
TBR’s study also examined the cloud market within service segments -- including IaaS, SaaS, PaaS and BPaaS. TBR analysts believe that IaaS will remain the largest, but slowest growing, segment for carrier cloud providers through 2020 as enterprises continue to transition their infrastructure to cloud-based compute and storage platforms.
Developing Other Value-Added Cloud Services
Moreover, they predict that IaaS revenue growth will decelerate through 2020, as telecom carrier cloud providers will struggle to gain market share against pure play providers that offer broader portfolios at a much lower price.
To compensate for the maturity and competitive pressures within the IaaS market, telecom carriers are expanding their product portfolios in Other Cloud segments -- including unified communications, security and business management solutions.
Emerging technologies, including Internet of Things (IoT) and analytics, will fuel revenue growth for Other Cloud services over the next five years. Telecom carrier cloud providers will build out new tools, make acquisitions and form partnerships around these technologies to quickly develop use cases and prove their business value to the market.