Operators' Revenue Growth Mainly Depends on B2B Growth
With the enterprise digitalization, more enterprises choose to move their IT information onto the cloud, causing increasing demands for cloud connections by enterprises. The WAN to Cloud traffic of enterprises is increasing with an over 20% rate each year. For operators, WAN to Cloud private line is a new growth point and great opportunity on top of the traditional enterprise interconnecting private lines. The B2B revenue of operators accounts for a large proportion of the total revenue.
For example, the B2B revenue of top operators in Europe accounts for 20%-30% or higher of their total revenue. The revenue increase also mainly comes from B2B. For example, over 40% of the revenue increase of one major operator in China comes from B2B. An increasing number of telecom operators have made new B2B strategies. One major operator in North America specifies a series of B2B strategies, among which the most important two are enterprise cloud access and network-on-demand VPN. The B2B strategy specified by one major operator in Europe is to provide cloud-based network management, integrated ICT services, and Network-on-Demand VPN for small and medium-sized enterprises.
With the increasing demands for enterprise digitalization, more enterprises are storing information on the cloud. For example, Zhejiang province set “One Hundred Thousand Enterprises Moving to Cloud” as an important annual plan in 2017. The rapid increase of enterprise WAN to Cloud private line services is a great opportunity for operators. Working out how to grasp opportunities based on existing enterprise VPN networks is a great challenge.
Analyses of Operators' Customer Groups for B2B Cloud Private Line and Cloud Services
20% of operators' B2B customers contribute 80% of the total revenue. Over 80% of the revenue lies in government, financial, medical, education, manufacturing, and retail enterprises. Therefore, operators provide cloud-based solutions with preference for enterprises in such sectors when developing cloud private lines and cloud services three major operators have all constructed financial private networks, meeting the low-latency and high-reliability requirements of the financial industry. Major operators in North American and Europe have all released an integrated ICT solution for the medical or education industry
Fierce Competition between OTTs and Operators in the B2B Market
Operators are facing challenges from OTT private lines and cloud solutions which have advantages in cloud services and network coverage. OTTs provide cloud private lines based on their own cloud-based bearer networks, providing customers with cloud and private line integrated services. For example, one major OTT in North America provides "more reliable than the Internet" WAN to Cloud services, gradually invading private line market share from operators. Customers' demands for the bandwidth of private lines are increasing year by year but they are unwilling to pay more, increasing the demand for SD-WANs.
Operators' B2B Cloud-based Business Strategy
To seize the opportunity of WAN to Cloud for millions of enterprises, operators are proactively deploying B2B cloud strategies, providing enterprise users with the integrated ICT services on cloud platforms, and larger-bandwidth VPN services. Major concerns of enterprise customers about cloud services include: unified communication, IoT, cloud computing, and hosting. Requirements by enterprises for WAN to Cloud are categorized into two types: to private clouds (for data services such as core working on industrial clouds rented from operators or OTTs), and to public clouds (for services provided to enterprises' customers on public clouds rented from operators or OTTs). Sometimes, interconnection between private cloud and public cloud is required. How to prepare for connection requirements between different clouds is a challenge for operators.
Five reasons for operators to develop WAN to Cloud Service:
- The market has vast potential.
- There are high thresholds to enter the WAN to Cloud private line market.
- Being proactive is better than defense.
- The integration of cloud and networks grasps digitalization dividends.
- Existing connectivity and networks can be reused, maximizing values.
Operators with foresight have already started to provide cloud private line services, major operators in North America, Europe and China have launched such WAN to Cloud Service for enterprises.
Two Business Modes of Operators' Cloud Private Line Development
Currently, operators' development of WAN to Cloud has two typical business modes.
1. Network and Self-owned Cloud Synergy
Synergy of operators' own networks and clouds.
These operators wish to take advantage of their own strong network capabilities and coverage to provide reliable cloud services (with cloud being one of the core strategies), proactively explore the cloud service market, and compete with OTTs. As operators can provide differentiated cloud private line services, the cloud private line prices will not affect the existing enterprise interconnection prices by implementing certain pricing strategies.
The most typical example is the Unified Cloud & Network Services provided by China Telecom. This mode meets the small and medium-sized enterprises' requirements for integrated ICT services, and provides a portal for them to self-subscribe to VASs, simplifying purchases.
2. Network and Third Party Cloud Collaboration
Exploiting operators' own strength in networks and connects to clouds provided by different OTTs.
Enterprise users use operators' own networks regardless of which OTT cloud they are using. For example, one major operator in North America interconnects its own networks to the clouds of all the major OTT providers. Meanwhile, enterprise users can choose the private line connection on the OTT cloud portal (to which operators have expanded their networks).
This mode is applicable to areas where OTTs have the monopoly on cloud. In this case, operators focus on WAN to Cloud private lines, constructing service platforms for enterprise WAN to Cloud with multiple third-party clouds. Such a competing and collaborating mode between operators and OTTs helps improve the competitiveness of cloud services. The synergy of own networks and third-party clouds meets the multi-cloud service requirements of users. The construction of cloud access service platforms helps maintain the private line competitiveness. Operators that mainly provide mobile services need to make up the shortage of metro network resources and grasp the opportunity of the enterprise WAN to Cloud. For example, one operator in China provides the synergy of SD-UTN networks and medical clouds for the medical industry, raising its competitiveness in the industry.
Operators can choose mode 1 or 2 to provide enterprise WAN to Cloud private line services taking into account of their own circumstances.
Millions of enterprises demand WAN to Cloud services which bring Private Line Service growth opportunities for operators. Operators should use their own network advantages to vigorously develop WAN to Cloud service. Now there are 2 major business modes to develop WAN to Cloud Service: Network and Self-owned Cloud, Network and Third party Cloud. More and more operators realize that WAN to Cloud is a good business opportunity and have already launched WAN to Cloud Service for enterprises.