Cloud Service Providers Increase Telecom Revenue; Telcos Move to Cloud Native
MTN Consulting publishes quarterly vendor share in the telecom vertical, covering more than 100 suppliers of hardware, software and services. Many of them are starting to call out the cloud service providers as among their key competitors. VMware is an obvious one. It notes that “providers of public cloud infrastructure and SaaS-based offerings, such as Amazon AWS, Google GCP, Oracle Cloud and Microsoft Azure” are direct competitors.
Nearly a decade ago, as cloud services began gaining popularity, many telcos hoped to be direct beneficiaries on the revenue side. The cloud market went a much different direction, though, with large internet-based providers proving to have the global scale and deep pockets able to develop the market effectively. From 2011-2020 webscale operators invested over $700 billion in capex, a big portion of it devoted to building out their cloud infrastructure.
Amazon Web Services (AWS) made the earliest strides in telecom, in 2015 (with Verizon), but Azure and GCP were serious about the market by 2017.
By 2020, cloud service providers had made significant progress in the telecom sector. The figure below, courtesy of MTN Consulting, provides an estimate of cloud revenues in the telecom vertical for the three top U.S. based cloud service providers as well as China-based Alibaba and Tencent.
Here is how cloud computing helps telecom operators thrive and provide better services:
- Ensure high scalability: telcos who have made their journey to the cloud can easily scale up for today and scale back down once the demand for telecommunication services returns to its normal.
- Guarantee resilience: cloud computing helps telecom companies quickly recover from stressful situations such as sporadic high loads, hacker attacks, hardware failures, etc. It is based on a well-architected approach that allows the self-healing of a system in time. Anomaly detection, automation, and adaptiveness are the key concepts of it.
- Offer quick disaster recovery: anything from a power outage at a data center to a security breach may cause data loss. If you have backups of databases stored in the cloud, you can quickly restore all the data.
- Improve time-to-market: with cloud computing, telecom companies can deliver their products and services faster, because they no longer have to procure individual pieces of hardware for each function in the network. They can now develop network functions from the outset as software and run them on servers hosted in a cloud environment.
- Cut expenses: in terms of cost economics, cloud reduces the operating expense of a company setting up and managing its own data center. This includes various costs associated with hardware, software, servers, energy bills, IT experts, etc. With cloud infrastructure, a telecom company simply pays only for services it uses.
- Enhance customer experience: cloud computing helps telecom operators minimize latency, strengthen security, provide automated customer support, predict customer preferences, and offer new omnichannel digital experiences.
- Enable network automation: cloud helps automate today’s manual processes regarding designing and testing new network components; deploying, orchestrating, and monitoring networks. This becomes possible thanks to continuous integration, continuous testing, and continuous deployment. Modern networks are able to analyze their performance and respond to issues in real-time that only boosts customer satisfaction.
- Make use of data: telecom companies process huge volumes of customer data. And cloud enables operators to drive valuable insights from this data with the help of data science and data analytics. As a result, telcos can use these insights to further improve their operations. For example, during the pandemic, telecom operators provide data to monitor how people and crowds are spreading the virus.
- Generate new revenue streams: telecom operators can monetize their physical infrastructures by partnering with cloud service providers. Until recently, operators and hyperscalers were seen as competitors. But partnerships between telecommunications companies and cloud providers will only support further market growth. Telcos can offer their infrastructures to cloud providers to help them get closer to customers at the edge by launching platform solutions dedicated to telecoms infrastructure and integrate directly with 5G networks.
- The latest of such solutions include: Wavelength from AWS, Azure Edge Zones from Microsoft and Anthos for Telecom from Google Cloud.
Several new telco-cloud collaboration announcements in the last few weeks:
- Telefonica signed a collaboration agreement with Microsoft for Azure Private Edge Zone, combining private 5G connections from Telefonica with Azure edge computing capabilities on the customer premise. (May 11)
- Vodafone expanded on existing work with Google Cloud to create a six-year partnership to jointly build a new integrated data platform to help Vodafone “more quickly offer its customers new, personalized products and services across multiple markets” (May 3)
- Dish Network, a greenfield open RAN-based operator in the U.S., agreed to build its 5G core network on AWS: Local Zones to support low latency, Outposts to extend capabilities to customer premises, Graviton2-based instances for compute workloads, and EKS to run containerized workloads. (April 21)
- Google Cloud and AT&T announced a collaboration to help enterprises take advantage of Google Cloud’s technologies and capabilities using AT&T network connectivity at the edge, including 5G. Additionally, AT&T and Google Cloud intend to deliver a portfolio of 5G edge computing solutions that bring together AT&T’s network, Google Cloud’s leading technologies, and edge computing to help enterprises address real business challenges.
The cloud service providers are leaving no stone unturned in their efforts to go after business in the telecom vertical. Moreover, they are also partnering with the traditional vendors to the telecom vertical to develop joint offerings. Nokia announced three such deals last quarter, one each with AWS, Azure and GCP. There are many other examples. NEC and AWS teamed up in 2019 on a mobile core solution, for instance, and Amdocs has collaborations in place with each of the big three. Just last month Amdocs won a digital transformation deal at Singapore’s M1 which leverages their Azure relationship.
Matt Walker, founder and Chief Analyst of MTN Consulting LLC wrote in a Fierce Telecom article: “Whether the cloud players are competitors, partners, suppliers or all of those, they’re going to continue to reshape telecom’s landscape for years to come.”
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Telco’s Move from Virtual Network Functions (VNFs) to Cloud Native Core Networks:
With VNFs, many network operators (e.g. AT&T) have automated portions of their infrastructures. But to satisfy new performance demands and meet the needs of modern customers, telcos are now migrating to fully cloud-native infrastructures.
Cloud-native network functions (CNFs) are a new way of providing a required network functionality using containers.
CNFs are dynamic, flexible, and easily scaled, making them a favored solution in the transition to 5G. While a VM with its own operating system may consume several gigabytes of storage space, a container might only be tens of megabytes in size. Therefore, a single server can host more containers than VMs, significantly boosting data-center efficiency while reducing equipment, maintenance, power, and other costs.
In the near future, it is expected that many of the deployments on the road to 5G will consist of a mix of CNFs and VNFs as we are now at the transition stage of moving to fully cloud-native architectures.
Image courtesy of N-iX (a Ukraine and Poland based provider of software development outsourcing and professional services)
Here are some suggestions to facilitate telco’s move to cloud native core networks from N-iX:
- Decide on the cloud strategy: choose the best deployment model: public, private, or hybrid clouds, select the most suitable approach: single cloud or multi-cloud, settle on the cloud provider (s).
- Create a clear migration plan: it should include your goals, costs estimates, timelines, services and technology to use, etc.
- Choose a VNF migration strategy: define which network functions need to remain as VMs and which can be re-architected as cloud-native microservices.
- Assess and prioritize your apps, processes, and operations: understand app dependencies; categorize your apps into mission-critical applications, business-critical applications, customer-facing applications, and other non-critical apps; define operations that can be automated; simplify processes so that they consist of fewer steps.
- Adopt microservices architecture: transform your monolith architecture into a number of loosely coupled microservices to be able to quickly develop, test, and deploy new features and fixes without impacting other components of the application.
- Make use of containers: Containers make it easy to move applications between environments while retaining full functionality. They also make it possible to build and run scalable applications across public, private, and hybrid clouds.
- Leverage edge computing: edge computing is among the top telecom trends. Telcos should make use of edge networks to reduce latency and improve network performance by bringing workloads closer to the users who need to access them. As opposed to the content delivery network (CDN), which is considered to be the predecessor of edge computing and only stores cached data, edge networks, by contrast, can accommodate a wider array of functionality (they can store and process data in real-time) and device types.
Nokia is a strong supporter of Cloud Native. Here’s what they say:
For 5G, service providers need more from cloud. Cloud must be re-architected to cloud-native so that they can get breakthrough business agility in rapidly onboarding new apps and deploying & operating new services.
The scale of 5G brings many more devices and a very diverse mix of services, there’s no way legacy operations can keep up, they need much more automation, especially for slicing. 5G brings new performance demands, so the cloud needs to move towards the edge, for the sake of low-latency, localized reliability, and traffic steering; for that CSP need cloud-native’s efficiency.
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References:
https://www.n-ix.com/cloud-computing-telecom/
https://www.nokia.com/networks/portfolio/cloud-native-solutions/
Heavy Reading: “The Journey to Cloud Native” – Will it be a long one?
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Mavenir to deploy cloud-based 4G/5G radio units & telco software on Amazon Web Services
https://techblog.comsoc.org/2021/05/29/mavenir-to-deploy-cloud-based-4g-5g-radio-units-telco-software-on-amazon-web-services/
The importance of ‘cloudification’
There is an estimated £3.35 trillion in value to be unlocked across enterprise use-cases over the next five years, across finance, manufacturing and retail, to name but a few. The ‘cloudification’ of networks will play a key role for telcos looking to access these new revenue streams. ‘Cloudification’, or the ‘telco cloud’, is defined as “a software-defined, highly resilient cloud infrastructure that allows telcos to add services more quickly, respond faster to changes in demand, and centrally manage their resources more efficiently.” The telco cloud means a shift from providing network functions, to providing a platform that enterprises can build and innovate on.
As the needs of a diverse range of customers rapidly evolve, so too must the telcos themselves – deploying software at a matching pace. The cloudification of the network is helping to make the scalability of applications easier, opening the door to new services and helping deliver innovation to enterprise customers at the rate they now expect.
However, it’s important to remember that real cloudification is about far more than simply transferring network functions from proprietary hardware to software running on commercial, off-the-shelf, hardware in the same locations. It is about opening the network architecture to facilitate diversity, from network-in-a-box to networks running entirely in the public cloud – and every combination in between. The advantages of an open approach are vast, and the momentum behind merging telco and IT operations is growing.
https://telecoms.com/opinion/for-5g-to-succeed-telcos-must-adopt-a-software-mindset/
June 30, 2021 Update from Light Reading:
AWS and other cloud players will need “many years” to catch up with Japan’s Rakuten in building and running cloud mobile networks, Rakuten CTO Tareq Amin has warned.
Amin said reports that AWS could deliver costs below Rakuten for the Dish network were “completely wrong.”
“Let me just tell you a secret today,” he told a recent press briefing. “There is no magic that AWS have that could make a telco workload elastic by itself. It just doesn’t exist.”
It would require “a far more cloud-native architecture” to enable elasticity, he said.
He added that while he would “love to compare” Rakuten’s costs with those of the AWS Dish platform, the cloud giant’s partnership with the US startup was good for the industry.
“Competition is a good thing, so we want to see a lot more public cloud entering this space.”
But cloud players would be on a learning curve, he cautioned.
Rakuten’s communications platform had some “unique attributes” and it would take AWS and others “many, many years to learn how to manage and run large-scale networks.”
Amin said their strength was in running huge enterprise IT workloads and they lacked the expertise in handling the “uniqueness in the radio domain that has never existed in a typical IT workload.”
For example, a radio domain required predictable 1 microsecond latency, which required enhancements of the real-time kernel and the virtualization environment.
“These are not trivial workloads. They are going to discover is that radio is not simple to do.”
https://www.lightreading.com/service-provider-cloud/aws-many-years-behind-in-cloud-mobile-says-rakuten-cto/d/d-id/770579?
July 30, 2021 UPDATE:
Global spending on cloud infrastructure services totaled USD 42-47 billion in the second quarter of 2021, according to two of the latest research reports from Canalys and Synergy. That’s a rise of 36-39% from the same period a year earlier.
The industry attracted spending of 47 billion in the period, up 36 percent from a year earlier and USD 5 billion higher than the previous quarter, thanks to workload migration and the acceleration of cloud native application development, a study by Canalys showed.
The pandemic and, more recently, extreme weather events have raised concerns over the long-term disruption from environmental risks, boosting the importance of cloud services, the researchers found.
The top three cloud service providers attracted 61 percent of total spending in the second quarter, led by Amazon Web Services (AWS) whose income rose 37 percent year on year and had a 31 percent market share, Canalys researchers estimated.
Microsoft Azure was the second largest cloud service provider, with a 22 percent market share, and its income grew 51 percent year on year while Google was third with an 8 percent market share and with a 66 percent annual rise in income over the quarter.
According to data from Synergy Research Group, meanwhile, second-quarter enterprise spending on cloud infrastructure services totaled USD 42 billion, up USD 2.7 billion quarter on quarter and 39 percent higher than the year-earlier period, marking the fourth successive quarter of year-on-year growth.
According to Synergy Research’s calculations, Amazon re-established its strong lead in the second quarter with a 33 percent share of the cloud market, thanks to sequential growth of 10 percent. Microsoft and Google accounted for another 30 percent of the market. Synergy added, and the next 20 cloud providers combined had a 28 percent market share.
Among the companies chasing the top three, those with above average growth rates include Alibaba and four other leading Chinese cloud providers, Synergy said.
https://www.telecompaper.com/news/global-cloud-infrastructure-industry-worth-usd-42-47-bln-in-q2-research–1392136
“The goal here is to work with the carriers,” explained Sunay Tripathi, Google’s new director and head of products for telecom and the “distributed cloud edge.”
Tripathi, who spoke at a 5G Future Forum event here, typified the new trend: He cut his teeth at Sun Microsystems before helping to found software-defined networking company Pluribus Networks. For the past three years, he was the CTO of Deutsche Telekom’s MobiledgeX. According to his LinkedIn profile, he joined Google in July. “We are rearchitecting a lot of the underlying network, and that creates a lot of opportunity,” Tripathi explained.
Google, Microsoft and Amazon have long played in the telecom industry as software, IT and cloud suppliers. And like most modern enterprises across all industries, mobile network operators have increasingly pushed their IT operations into the public cloud.
But during the past two years, Google, Microsoft and Amazon have all begun developing cloud computing products specifically designed to host wireless providers’ network functions. Whether it’s Microsoft’s Azure for Operators or Google’s Anthos for Telecom, it’s intended to get network operators to put their crown jewels – their core network functions – into a hyperscale cloud.
And it’s something all three cloud companies are serious about, judging from their telecom hiring sprees or their acquisitions in the space. Microsoft, for example, last year spent an estimated $1.8 billion buying longtime telecom vendors Affirmed Networks and Metaswitch Networks.
New ideas and new disruption
According to analysts, the entry of the public cloud hyperscalers represents a major new strategic turn in the industry, considering network operators have historically retained tight control over their networking systems. And though most have been moving toward cloud technologies they own and operate, few have agreed to run their networking software in a public cloud operated by a hyperscaler.
“In outsourcing the infrastructure to cloud providers, telcos risk losing control of different aspects of their network and technology roadmap over the long term,” warned analyst Frank Rayal of Xona Partners in a post to his website titled “How telcos outsourced their brains.”
Nonetheless, there are increasing indications that operators around the world are more than open to the idea. “The technologies that we will build [with the cloud] will let others consume our network,” explained Luciano Ramos, SVP of network development, planning and engineering for Rogers Comunications in Canada.
Indeed, AT&T recently announced it would transition its 5G core network operations into Microsoft’s cloud over the next three years. And Dish Network plans to run all of its network operations in the Amazon Web Services cloud.
According to Rakuten’s outspoken mobile chief, Tareq Amin, it’s ultimately necessary. He said he designed Rakuten’s mobile network in Japan to natively run in the cloud, and that it required a major shift in his team’s thinking. “I wanted to pick the right mentality” when staffing up Rakuten Mobile, he said. “It was easier to deploy cloud because the Rakuten people wanted to be open to new ideas,” he said. “They were open to new ideas and new disruption.”
Amin made his comments during a keynote address at the MWC LA show here. He made sure to point out that Rakuten Mobile in Japan now counts around 5 million customers, and boasts leading network metrics. It was essentially Amin’s victory lap after announcing his plan to build such a network just a few years ago, at the MWC Barcelona show in 2019.
https://www.lightreading.com/service-provider-cloud/that-time-public-cloud-hyperscalers-invaded-mwc-la/a/d-id/773111?
Sterlite, Robin.io to provide tech for 5G stack for enterprise -Robin.io will provide the cloud-native platform for deploying applications and network functions on the STL Enterprise Marketplace platform.
Robin.io, a Kubernetes data management platform, will collaborate with Sterlite Technologies (STL) to offer Xaas solution for enterprise applications and 5G services effectively.
“Built on the foundation of cloud-native, zero-touch automation and open architectures, the integrated marketplace solution will enable CSPs to deliver new revenue models and accelerate customer onboarding while keeping service delivery costs in check,” said Partha Seetala, founder and CEO of Robin.io.
There is a growing trend among the Communication Service Providers (CSPs) to become an enterprise platform provider to leverage the massive opportunities it provides.
STL Enterprise Marketplace is a new-age, platform-based model that simplifies collaboration and has the potential to open up multi-sided marketplace opportunities. STL offers end-to-end software solutions for creating new-age digital services, building new business models, and opening new revenue streams.
The Platform brings together service providers, partners and enterprise customers from different verticals on the same Platform. Robin CNP provides storage, network management and scheduling to run complex network workloads from application vendors and partners across a wide spectrum of use cases.
Commenting on the collaboration, Saikat Mitra, COO of STL Network Software, said, “Extreme automation and true cloud-native platforms are key to accelerating digital transformation. In its endeavor to bring innovative XaaS
offerings faster to the market, STL has been supporting a hybrid network ecosystem with its 5G Enterprise Marketplace and 5G monetization initiatives.
In this strategic partnership, we are bringing our Enterprise Marketplace Platform enabling Robin.io to achieve seamless cloud infrastructure management for multi-datacenter, multi-cloud and multi-edge ecosystems and actualize their vision on 5G, IoT and WiFi.”
https://www.dqindia.com/sterlite-robin-io-to-provide-tech-for-5g-stack-for-enterprise/
https://www.stl.tech/