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Cloud 2.0: what is it, why it matters, and what’s next

In the lead up to our free online event on 14th February where we look at Cloud strategies in the telco space (and our more detailed exploration of the opportunities in Silicon Valley and London), here’s what we think ‘Cloud’ means, why it’s important to telcos and Telco 2.0 in particular, and what we’re going to be researching on it over the next few months.

Cloud: woolly words and nebulous concepts

The word ‘Cloud’ is becoming incredibly prevalent and increasingly meaningless.

One seemingly common element of its intended meaning is that whatever it is associated with is incredibly smart and sophisticated, regardless of what it actually is. Another common element of ‘Cloudspeak’ is to make anything sound ten times more complicated than it needs to be.

As a notable counter-example of getting it right, AT&T deserves credit for this remarkably clear and jargon free bit of cloud marketing copy. [NB To view the images in this article full-size, either click on the image or follow the associated links.]

ATT Cloud explanation Feb 2012.png

Indeed, here at Telco 2.0, we think the sprawling fog of misdirection and ambiguity is one of the biggest barriers to greater customer acceptance and adoption of a lot of Cloud-y things that would probably be quite useful and get a lot more traction - if only anyone without a degree in Cloudspeak could understand them. So, in the interest of the greater good, here’s our attempt to disperse some of the, er, clouds of confusion. (Sorry, we find it quite hard to resist ‘Cloudpuns’.)

Where did the Cloud come from?

Derived from the cloud shapes decorating every whiteboard in every IT department around the globe, the cloud symbol originally meant ‘you stick this wire into the Internet, then this wire (or perhaps a bolt of lightning) comes out here’.

Hence at first the cloud (note the small c at this stage) came to mean something akin to the Internet.

The next development was ‘Virtualisation’, which is the ability to make lots of computers work together as one, giving massive computing power (in a ‘Virtual’ computer made up of lots of linked computers) at a much lower cost than building one really big computer. Huge online players like Amazon and Google were among the pioneers of this approach.

These massive virtualised computers can now run lots of applications at the same time, and are ideally suited for sharing between more than one user as there’s usually masses of available capacity. The costs are so low that, unlike ‘hosting’ where you have to reserve a specific bit of computer hardware that someone else owns, the computer’s owners can afford to let other businesses use parts of their capacity on a low-cost, pay as you go basis.

amazon data center feb 2012.jpg

Paradoxically, large parts of the Cloud now live in huge warehouses full of computers, like this Amazon data centre in Oregon.

Why might ‘Cloud’ matter to customers?

Over time, the huge increase of available, remote computing power, and the growing ubiquity of digital connectivity, has resulted in the evolution of two rather different Cloud concepts - this time with a capital C.

  • The Enterprise Cloud provides a way to make a company’s IT cheaper and more scalable. It makes it easier to do more - or less - of whatever computing is needed at any one time without permanently increasing IT costs or losing the functionality. It is provided by ‘virtualised’ computing, either across a company’s own computers, or on a third party’s computer and network, on a flexible / pay-as-you-go basis. “It’s just managed IT services with a nicer interface and more flexible options to pay” in the soothing words of a Cisco Exec at a recent event we moderated. (NB This video of an Oracle presentation at our December 2010 Brainstorm Seven Clear Cloud Examples may help put this in context.)

  • The Consumer Cloud is a safe place in the Internet in which consumers’ digital ‘stuff’ gets kept, as popularised by Apple’s iCloud service.

Why is Cloud important to telcos - and Telco 2.0?

1) Cloud services rely on communications to work, and need both internal networks to connect the many machines that make up a cloud computer, and external networks to connect these machines to the people and other, remote computers, that want to use it. As a minimum therefore, telcos have the opportunity to be an enabler of cloud computing systems using their communications networks - although an increasing number of specialised players such as Content Delivery Networks (CDNs), like Akamai, can also do this.

2) Telcos also have the opportunity to participate in providing Enterprise cloud computing services, such as storage and processing. They can do this by owning and operating cloud computing facilities, or by partnering with other parties possessing them. Enterprise Cloud Computing was a c.$25Bn market in 2011 and is forecast to grow by 25% yearly for the next two years at least, so it is a sizeable market.
Cloud 2 forcast growth sep 2011.png

To this end, for example, Verizon acquired Terremark, Qwest acquired Savvis and Equinix (speaking at the Silicon Valley Brainstorm, and Orange partnered with Cisco, VMWare virtualisation, and EMC2 storage (and spoke at the EMEA Brainstorm in May 2011).

3) From a Telco 2.0 point of view, Telcos can also participate in Consumer Cloud Services, (becoming known as the ‘Personal Cloud’) providing safe storage for both consumer identity data - see Telcos must vie for a slice of the $Multi-Billion PIE (Personal Information Economy)’ and digital entertainment services. Some think that this is essential for telcos wishing to remain relevant to consumers in the post-PSTN voice era where data-centric services will be much more important to customers. Here’s a video interview with AT&T on this.

4) The Enterprise Cloud, particularly a variant called Platform-as-a-Service (Paas), also potentially provides an important delivery strategy for Telco 2.0 ‘3rd Party enablers’, (see below) where telcos provide information such as location data in a secure and appropriate form to other businesses to help improve the design and delivery of business processes. This theme was explored by Vodafone at the EMEA Brainstorm in November 2011.

The Six Telco 2.0 Opportunity Types
6 Categories V3 Roadmap April 2011.png

Next Steps

At New Digital Economics Online, February 14th (apply here for this free, invitation only online event), we’ll discuss more on market size and share forecasts, the key challenges for telcos in the cloud, and hear Ericsson’s views on how they could be addressed.

At the Silicon Valley Brainstorm on 27-28 March, we’ll hear from Bain, Cisco, Equinix, Ericsson and Parallels in the Digital Infrastructure 2.0 session, where we’ll be exploring latest market forecasts, and how should telcos and other Cloud players: 1) address cloud services as a whole; 2) partner / enable / compete with each other; and 3) use Cloud Services as an enabler for Telco 2.0 business models. We’ll be following up on this from an EMEA perspective at the London Brainstorm in June.

We’ll also shortly publish further research in our Telco 2.0 Executive Briefing Service on the key changes ahead for telcos to unlock the cloud opportunity, including case studies from key telco practitioners and views from thought-leaders in the field.

Email us at contact@stlpartners.com or call +44 (0) 207 247 5003 for more.

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