Telcos vs OTT: Cloud Markets

Julien GaudemerJulien GAUDEMER

Consultant at IDATE

Opportunities for telcos: Personal Cloud, IaaS, PaaS and SaaS

The cloud computing market is currently growing at a significant rate, on both the consumer and business sides.

The Software-as-a-Service (SaaS) segment, which provides software services online through a Web interface, is the most important cloud segment. Infrastructure-as-a-Service (IaaS), which provides on-demand calculation and storage capacities online, is the second market segment after SaaS, but it should reach the SaaS level in 2016, with IaaS and SaaS each representing just short of one-half of the market. Platform-as-a-Service (PaaS), where on-demand servers are dedicated to application trials and rollouts, represents a marginal share of the overall cloud computing market, but is usually bundled with SaaS or IaaS, in order to attract developers and generate more revenue on SaaS or IaaS.

Globally speaking, it is the large OTT players that are leading on the cloud
computing markets, while telcos do have a role to play.

Dropbox, Apple and Google are the leading personal cloud providers, whereas Salesforce.com, Google and Microsoft lead on the SaaS market. Amazon is one of the most-used PaaS and IaaS providers. Telcos, in contrast, only entered the cloud computing market a few years ago and later
than the OTT players, and have remained marginal - but they do have several parts to play. In fact, they may especially have a competitive advantage at the local level, where they can benefit from a local commercial presence, contrary to many OTT players.
Moreover, most telcos have now rolled out data centres in a majority of countries, with major investments. Thanks to their network, they can claim to have an end-to-end approach to guarantee the continuity and Quality of Service. This aspect is not a key issue for most customers who may be more interested in the data protection ensured by a local provider. As such, telcos have the infrastructure required to provide IaaS products, or can be helped by third parties, whether companies that they have acquired, as with Verizon and Terremark, or a partnership with a IaaS pure player, as Telefónica has established with Joyent. Besides, telcos also provide communication-based SaaS that most OTT
players cannot at this scale, with elements such as unified fixed-mobile communication or video conferencing. On the personal cloud market segment, most telcos currently provide storage service bundled with mobile or fixed rate plans, as a way to limit churn and generate indirect revenues.

Positioning of some telcos on cloud services

Telco cloud services (IaaS, PaaS, SaaS, Personal) positioning (Absent, Minimalist, Opportunistic, Determined)

Source: IDATE

To consolidate their position on the cloud computing market, telcos should develop partnerships with a diversity of cloud players.

Such partnerships could position telcos as intermediaries for providing cloud services, in a variety of ways. Firstly, telcos can get help from white label providers in order to provide cloud services with a faster time-to market. Rackspace, for instance, provides a white label telco cloud that consists of a preconfigured cloud base for quick rollouts of various cloud services. Second, telcos can be involved in the cloud computing market as a 'cloud broker’. In the SaaS segment, telcos are not usually product leaders: providing a SaaS marketplace could enable telecom operators to become key players by aggregating various products from multiple providers. Such a concept is particularly interesting as telcos can target a large range of customers that OTT players cannot necessarily reach. A word of caution: marketplaces are not only provided by telcos. OTT players, despite pushing their own services, also provide marketplaces, in particular PaaS leaders such as Microsoft or Salesforce. Furthermore, a partnership with infrastructure providers may help telcos to provide a strong IaaS offering, much like Verizon and Terremark or Telefónica with Joyent. In the personal cloud segment,
partnerships with OTT pure players can also be considered: SFR bundles free extra Dropbox storage in some of its mobile rate plans, as does NTT DOCOMO with Evernote.

This is an excerpt of our insight Cloud Markets" being a part of our ongoing monitoring service Telco vs OTT watch