This report surveys Gartner's recent research on the increasing role that communications service providers are playing in cloud computing. The documents referenced will help CSPs understand cloud service market segments, the types of service, regional differences, and the market's size and trends.
Cloud computing is a hot topic among vendors, even more so than among end users. One sector that has been especially active in the cloud computing space — and grown both organically and through acquisitions — is the communications service provider (CSP) industry. With traditional communications increasingly becoming "just another cloud service" and enterprise revenue in many markets under pressure, this multitrillion-dollar industry — described further in "Market Insight: Telecom Industry Primer, 2012" — seems determined to make the abbreviation CSP stand also for "cloud service provider." And rightfully so, as Gartner finds the biggest nontraditional opportunity for this industry to be cloud computing and IT services (see "Market Trends: New Revenue Opportunities and Profitability for Telecom Carriers (Developed and Developing Markets), 2015" ).
As described in "The Nexus of Forces: Social, Mobile, Cloud and Information," cloud computing is one of four major forces leading the future of IT (for more on the role of specific role of cloud computing within this Nexus, see "Cloud and the Nexus of Forces: A Foundation for Global Class Deployment" ). This document focuses on the role of CSPs in cloud computing, but it is worth noting here that CSPs have also been significant contributors to the Mobile force, and less so for the Social and Information forces included in the Nexus.
For an overview of other infrastructure trends impacting the CSP industry, see "Hype Cycle for Communications Service Provider Infrastructure, 2012" and "Hype Cycle for the Telecommunications Industry, 2012."
In "Technology Overview for Integrated Cloud Service Delivery and Enablement Environment" we describe the relationship between cloud and next-generation service delivery platforms.
In "CSPs Should Streamline Their IT and Network Organizations to Meet New Market Challenges" we describe organizational approaches to offering new services such as cloud computing.
In "Market Trends: Worldwide, Cloud + SOA is a Recipe for CSP Success, 2011" we discuss possible ways in which CSPs can use cloud computing to generate growth from potential revenue opportunities.
The cloud computing opportunity for CSPs spans a number of industry segments, the first — and by far most influential for the development of cloud computing — being the consumer segment.
More than any other segment, the consumer segment (see "Agenda for Consumer Services and Applications, 2012" ) has been a driving force behind cloud computing. The increasingly leading role played by the consumer segment in technology innovation has not only resulted in the phenomenon of the consumerization of IT (with employees bringing consumer devices and other innovations into the workplace) but also forms a major opportunity for CSPs to address directly (see "The New PC Era: The Personal Cloud" and "Predicts 2012: Personal Cloud Will Reshape the Consumer Services and Applications Landscape" ).
CSPs can capitalize on the personal cloud opportunity by exploiting their strengths (see "How Mobile Networks Can Play a Bigger Role in Personal Clouds" and "Market Insight: The Importance of Mobile Networks to the Personal Cloud Experience" ), although only one CSP has made it into "Competitive Landscape: Consumer Cloud Storage." In "Marketing Essentials: Five Strategic Options to Increase Consumer Storage Adoption" we discuss potential options CSPs can explore to address this.
Many of the largest and fastest-growing organizations deploying cloud computing have been consumer "plays" — companies such as Zynga, Netflix, Instagram, Pinterest, Tumblr and other startups targeting consumers with almost exclusively digital services in areas such as video streaming, gaming and social networking. But as described in "Digitalizing the Business," this trend toward digital business services — and not merely digital support of traditional services — is also rapidly taking hold outside the consumer area. More and more companies are not just replacing physical "atoms" with digital bits to become "better, faster and cheaper," but are creating new purely digital services that create customer value that in the past simply did not exist or could not even have been imagined.
Although there are millions of consumer sites on the Web, the online sector is dominated by a small number of companies, none of them CSPs (see "The Competitive Dynamics of the Consumer Web: Five Graphs Deliver a Sustainable Advantage" ). In the media arena — which is becoming increasingly mobile — we see only a handful of players, all fighting over the same sets of consumer eyes (see "Amazon, Apple, Facebook, Google, Microsoft and Sony Lead the Fight for Media Supremacy in the Clouds" ).
As a result, CSPs are under increasing competitive pressure (see "Market Trends: Competition Between CSPs and Nontraditional Competitors Will Intensify" ) and are trying to address their new competitors, as described in "Market Insight: Facebook's Impact on Communications Service Providers," "Market Trends: Worldwide, CSPs Are Attempting to Harness Google's Rapid Progress in Mobile, 2012" and "Market Trends: CSPs Worldwide Are Assessing the Impact of the Microsoft-Nokia Alliance on Their Business, 2012." For research on potential areas of new CSP revenue in the consumer area, see "Marketing Essentials: Three New Revenue Opportunities for CSPs, 2012-2015" and "Marketing Essentials: Strategic Alternatives for CSPs in Online Music."
The business segment for CSPs is covered by Gartner's "Agenda for Enterprise Communications Markets, 2012."
In "Marketing Essentials: Four Strategic Options for CSPs to Explore Cloud Computing Opportunities" we described a number of possible go-to-market strategies for CSPs, including the option to provide traditional telco services, such as network connectivity, bandwidth and data center services to enable other providers to deliver cloud services.
Below and in Figure 1 we look at research into the options CSPs have for providing cloud services, such as IT-infrastructure-centric, solution-centric and aggregation-centric cloud services. We also look at cloud-based communication services. In addition, we consider specific cloud opportunities for CSPs in the small and midsize business (SMB) segment.
CSB = cloud services broker; CSP = communications service provider; IaaS = infrastructure as a service; PaaS = platform as a service; SaaS = software as a service
Source: Gartner (September 2012)
IT infrastructure services cover a wide range of cloud-based computing, storage and network services. "Magic Quadrant for Public Cloud Infrastructure as a Service" describes this market, including the role of several CSPs and their recent cloud provider acquisitions. For more in-depth research on the infrastructure as a service (IaaS) segment, see "Research Roundup for Cloud Infrastructure as a Service, 2012." In "Competitive Landscape: New Entrants to the Cloud IaaS Market Face Tough Competitive Challenges" the challenges of various market players (including CSPs) are discussed. Apart from computing services, the cloud IaaS market also includes storage as a service and print infrastructure services (for which see "User Survey Analysis: The Cloud Printing Service Opportunity, 2011)." Another potential area of opportunity is described in "Market Trends: Worldwide, Dynamic Networking Could Become the Third Element in Programmable Public Cloud IaaS, 2012."
In North America, CSPs have largely focused on bringing IaaS offerings to market, in many cases through acquisitions of hosting companies with established cloud services (for an example of this approach, see "SWOT: Verizon Hosting, Cloud and Colocation Services, Worldwide" ). CSPs in other regions have embraced solution-centric services and aggregation of services using a cloud service brokerage (CSB) approach as an important model.
When discussing cloud computing, groups with an IT background often position it as a way to perform existing functions "better, faster and cheaper." But much more exciting opportunities are presented by functions that were not possible or even imaginable before cloud computing. By enabling much broader collaboration, deeper integration and increased scope, cloud computing can enable cloud-based multienterprise processes, in which CSPs can play a pivotal role (for more on multienterprise processes and the role of cloud service providers and brokers, see "The Role of CSBs in Cloud-Based Multienterprise Processes" ). Examples of such new processes can be found across a multitude of industries, such as automotive, healthcare and government. In many cases associated projects combine cloud computing with emerging technologies, such as machine-to-machine (M2M) communications (for examples, see "Competitive Landscape: M2M Services in the Automotive Industry" and "Market Trends: Worldwide, CSPs Advance Their Positions in the B2B Healthcare Segment, 2011" ). To seize these emerging opportunities CSPs will need to develop partnering skills and look beyond simple short-term business cases (see "Market Trends: Many CSP Partnerships With Non-CSPs Will Strengthen Over Time, Worldwide, 2012" and "Market Trends: CSPs Find the Sustainable ICT Market Challenging" ). But it is clear that these markets hold great potential for increasing the societal relevance and long-term profitability of CSPs (see "Survey Analysis: The Increasing Role of External Service Providers in the Adoption of Machine-to-Machine Communications" ).
In "Predicts 2012: CSPs Need to Redefine Their Business Scope and Focus on Operational Efficiency" we included the Strategic Planning Assumption that "By 2015, 50% of the top 100 CSPs will support cloud infrastructure brokerage services, while virtually all will broker cloud application services." In "Emerging Services Analysis: Communications Service Providers as Cloud Services Brokers" we described the CSB model in more detail, and earlier this year we published an update in "CSPs as Cloud Services Brokers." For some early adopters of this approach, see "Competitive Landscape: How SingTel and Telstra Approach the Cloud Computing Opportunity," "Competitive Landscape: Two CSP Approaches to Cloud Computing, Europe" and "Deutsche Telekom Brings the Cloud to European SMBs."
Communication services are increasingly delivered as cloud services in the business arena (see "Communications as a Service in the Cloud Services Value Chain" and "Emerging Technology Analysis: Cloud Unified Communications as a Service" ). This is leading to significant market changes (see "Market Trends: Worldwide, Cloud Unified Communications Players Attack the Enterprise Market, 2012" ). However, it is still very early days for this market — with no provider having reached the Leaders quadrant in the latest "Magic Quadrant for Unified Communications as a Service, North America."
"Cloud-Based Unified Communications in Europe: Why the UCaaS Proposition Needs Time to Mature" and "MarketScope for Unified Communications for the SMB Market, North America" provide more insights into the unified communications market in each geography. "SWOT: Microsoft, Unified Communications as a Service, Worldwide" and "Understanding the Microsoft Exchange Hosting Landscape" drill down into the role of Microsoft Exchange and of third-party players in this segment. "Planned Research for Unified Communications and Collaboration, 2012" gives an overview of upcoming research in this area.
As well as facilitating unified communications, cloud computing is playing an increasing role with regard to CSP contact center outsourcing services (see "Emerging Technology Analysis: Contact Center as a Service" and "Market Trends: Contact Center as a Service, North America, 2012" ).
And while all this is happening, CSPs also have to pay close attention to dramatic shifts in their core communications businesses through technologies like software-defined networking (see "Emerging Technology Analysis: OpenFlow and Software-Defined Networking for CSPs" ).
SMBs take an individual approach to cloud computing (see "Survey Analysis: What Midsize Businesses Are Investing in When It Comes to Cloud Services" ). They therefore expect a distinct approach from their providers (see "Marketing Essentials: Strategic Options for Bringing Cloud Computing Solutions to Midsize Businesses" and "Market Trends: Selling Infrastructure as a Service to European Midsize Businesses" ).
For cases of CSPs offering cloud services to this segment, see "Competitive Landscape: How Telstra and SingTel Use Cloud Computing to Address the SMB Market." The case study "Deutsche Telekom Brings the Cloud to European SMBs" describes how an incumbent provider approached the challenge of becoming a trusted provider of business applications by taking an innovative approach to cloud service brokerage.
In any SMB strategy the channel plays an important role. "Marketing Essentials: How CSPs Can Develop a Strong SMB Channel Partner Program and Help Their Partners Sell Cloud Services" describes how CSPs can best approach this opportunity. "Market Trends: Midsize Outsourcing Preferences and Market Opportunities, Worldwide, 2012" describes the various spending preferences of different SMB subsegments.
The SMB segment has also been an important market for CSPs' communication services, but this is undergoing significant change, as described in "Market Trends: North America, Network and Access Solutions for Cloud Delivery to the SMB Market, 2011." Relatively new segments like SMB video conferencing are also heavily impacted by cloud computing (see "Competitive Landscape: SMB Videoconferencing Will Come from the Cloud, Worldwide" ).
As discussed in "Data Center Services: Regional Differences in the Move Toward the Cloud, 2012," there are distinct differences in how different regions approach cloud computing. While European organizations are slowed by regulatory, economic and currency concerns (see "In a Diverse Europe, Cloud Adoption Will Be Slower" and "European Enterprises Should Exercise Caution When Adopting IaaS" ). Other regions are taking a more aggressive approach (see "Key Considerations for Selecting Cloud Providers for Enterprise Requirements in Asia/Pacific," "Market Trends: Japan, CSP Cloud Offerings Are Moving Beyond the Hype, 2011" and "Top Six Adoption Trends for Cloud Compute IaaS in India" ).
The cloud computing provider landscape in Asia/Pacific is analyzed in "Competitive Landscape: Cloud IaaS Services, Asia/Pacific," "Competitive Landscape: Leading IT Services Firms Driving Cloud, Monetization and Innovation to Telecom Carriers, Asia/Pacific" and "Competitive Landscape: CSPs' Hosting Services and Transition to the Cloud, Asia/Pacific, 2011." In "Marketing Essentials: How to Build an IaaS Presence in China's Cloud Market" Gartner offers guidance on how to establish a cloud presence in China.
For guidance on providers' strategies toward privacy in different regions, see "Privacy as a Differentiator: The Impact of Privacy Rules on Cloud Services Providers."
Market trends are forcing CSPs to expand into new markets in order to offset declining revenues from legacy voice and data products. As indicated in "Forecast Analysis: Enterprise Network Services, Worldwide, 2009-2016, 3Q12 Update," we forecast that the total market for enterprise network services will decline by 5.6% in 2012, and show an overall compound annual decline of 3.7% through 2016. While some emerging markets will still see mild growth in the years ahead, many mature markets face year-over-year declines, with no end in sight.
Mobile services — one of the key drivers of the Nexus of Forces — are compensating for some of this revenue attrition, with a compound annual growth rate of 6.3% forecast through 2016 (see "Forecast Analysis: Mobile Services, Worldwide, 2008-2016, 2Q12 Update" ). But mobile services alone may not be enough, which will prompt CSPs to look to higher-growth markets such as cloud computing in search of new revenue (see "Market Trends: New Revenue Opportunities for Telecom Carriers in 2015" ). As shown in "Forecast: Public Cloud Services, Worldwide, 2010-2016, 2Q12 Update," we forecast public cloud services to grow at a compound rate of 17.7% through 2016.
The move "up-market" into cloud-based IT services is not a change that CSPs can make overnight. Although CSPs often have the capital to develop IT services, successful delivery of those services requires a very client-oriented culture — see "Top Success Factors for Communications Service Providers Offering IT Services for Enterprises Through 2015."
CSPs will also need to look beyond infrastructure and communication-centric opportunities and embrace solution-centric and business process services.
For an overview of existing and upcoming research topics, see the agendas of Gartner's CSP-focused analyst teams: