Now’s the time for telco central offices to offer cloud business
The future of cloud services and the role of telcos
“AT&T will virtualize 75 percent of its network functions by 2020, and to do that, we need to move to a model of sophisticated software running on commodity hardware,” says Andre Fuetsch, senior VP of Architecture and Design at AT&T. “We’re becoming a software and networking company. As a result, our central offices are going to look a lot more like data centers as we evolve our networking infrastructure.”
Telco central offices can look forward to second lives as cloud data centers. After AT&T and other major telecom operators like Verizon, DT, and China Unicom upend their sprawling network infrastructures to make them more agile with software, most will eventually look less like typical central offices and more like cloud data centers.
Data center IP traffic will grow at a CAGR of 25 percent from 2014 to 2019 to reach 10.4 zetabytes (ZB) per year by the end of 2019, up from 3.4 ZB per year in 2014. In the same time frame, global IP traffic in data centers will grow threefold over the next 5 years.
More business than ever is happening online and data centers are feeling the effects. The data center market saw tremendous growth in 2015, with independent providers in the US alone earning revenues of US$115.3 billion and experiencing growth of 6.1 percent. This trend was driven by the increased dependence of both private industry and government on outsourced data hosting and processing. For example, content providers like Netflix and Comcast are demanding more data center space as data-driven entertainment consumption becomes the norm.
In Europe, 65 percent of IT decision makers believe that IoT, Industry 4.0, and mobile digitization like self-driving cars will be the big demand drivers for data center services over the next few years.
Alongside the fast growth in traffic sits a corresponding increase in the number of data centers. Supply is growing to meet demand, but improvements in workload efficiency and server density are also contributing to the increase. Around 200,000 data centers of all sizes are running today, offering a combined installed capacity of 64 million square meters of server space. Capacity is expected to grow by about 10 percent annually to reach 93 million square meters by 2017.
Facebook is currently the world’s most popular website, with more than 4.75 billion content items shared each day. These include status updates, wall posts, photos, videos, comments, and more than 20.1 billion friend connections, 6 billion likes, and 7.8 trillion messages. More than 400 billion photos have been uploaded to the site, with another 350 million added each day. Facebook’s data center in Sweden is expected to generate 9 billion Swedish kronor (US$1.1billion) in full economic impact.
By turning legacy PSTNs and telco’s central offices into a competitive advantage, Huawei unlocks new revenue opportunities for carriers by migrating PSTN and telco central offices onto efficient, ultra-broadband IP network architecture along with Huawei’s SDN/NFV solutions and cloud strategies.
Carriers are shifting from an old PSTN world to a new IP era to become software-defined operators. The network architecture of the future will be based on data centers that transform existing mobile, fixed, and telecom service silos into a unified cloud business for carriers.
The sun’s out with Huawei cloud
Carriers now know that running mobile VAS on silo systems that don’t fully utilize IT resources cripples new service rollout due to high OPEX and CAPEX. Mobile VAS in the cloud includes various types of communications, content, commerce, and applications. Leading carriers are aiming to benefit from cost improvements, better functionality, service integration, and convergence across service types when unconstrained by device type, network type, and vendors.
The Huawei VAS cloud reconstructs traditional VAS architecture based on a cloud platform by integrating telco VAS, supporting service innovation, helping operators improve TVO, decreasing TCO, and increasing efficiency.
The shift to off-premises cloud services continues to drive changes to North America’s enterprise IT strategy and new cloud architecture for data centers, with companies planning to spend a third of their IT budgets on off-premises cloud services in 2016. By 2020, investment in data centers will hit US$110 billion, of which the government will be the big individual spender with an investment of US$21 billion. Moreover, Gartner’s 2015 Magic Quadrant for Cloud-Enabled Managed Hosting in Asia Pacific reports that 6 out of 15 cloud service providers are carriers.
The Cloud-Enabled Managed Hosting service uses multiple delivery models:
Multitenant on the provider’s premises: Most commonly, compute, storage and networking hardware are shared by many customers, housed in the service provider’s facilities, and fully managed by the provider. This scenario encompasses cloud Infrastructure as a Service (IaaS) offerings for which the provider offers management of guest OS instances.
Single-tenant on the provider’s premises: Compute and storage hardware is dedicated to one customer and housed in the service provider’s facilities.
Single-tenant on the customer’s premises: Compute, storage, and networking hardware is dedicated to one customer and housed in that customer’s data center facilities; however, it’s owned and managed by the service provider in basically the same way as the other two approaches.
The Huawei Carrier B2B Hosting Cloud solution suites cover these three delivery models to enable carriers to provide both multitenant and single-tenant solutions on carrier premises with IaaS and managed services.
For large enterprises and governments, carriers can take one step forward to solving large enterprise and government pain points in data center management and operations. By consolidating the number of data centers, unifying IT resources, and cloudifying data center infrastructure, carriers can use the competitive advantages their brand carries. They can also benefit from understanding national regulations, excellent local support services, advance network performance, and secure IT services. They can then provide cloud applications, e-business hosting, general business applications, enterprise applications, development environments, and batch computing.
Gartner’s view
The global revenue of public cloud services will soon reach US$200 billion, with 6 percent of this – US$12 billion – going to carriers. In the business market, carriers are particularly well-positioned to deliver cloud services because they already own the networks and enjoy trusted customer relationships.
Carriers can offer business cloud services under a simple pricing structure that includes connectivity, QoS, self-service provisioning, and on-demand ICT infrastructure. Carriers can also provide VAS like analytics and reporting, predictive capacity planning, and managed services, all of which are welcomed by enterprise CIOs. In carrier ICT services, carriers deliver cloud-based capabilities supported by SDN/NFV to guarantee SLAs. This approach can take advantage of their cloud infrastructures, including data centers and networks.
Seen as a trusted partner, carriers with cloud offerings are the natural choice for enterprises to take advantage of the tech. B2B cloud services are thus a new blue ocean market where carriers can increase revenue and climb the market ladder.
For carriers to be successful in the cloud by 2020, we see four foundation pillars. First, a C-level cloud business vision and strategy must be defined and implemented. The most important is the second pillar, which provides the carrier cloud business with a dedicated organization and team to drive to the market. The third pillar involves carriers segmenting their enterprise customer base. The fourth pillar is making use of carrier network and bandwidth to create differentiation and competitive advantages.
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