For telcos, the whole can be greater than the sum of its parts, perhaps allowing them to achieve economies of scale across adjacent lines of business that companies like Amazon and Rackspace cannot. During one panel discussion, CloudScaling VP of strategy David Bernstein cited how KT (formerly Korea Telecom) was able to reduce mobile subscriber churn by 13% after adding cloud-based compute and storage services to its portfolio of offerings. With cloud-based storage in the mix, KT was able to offer storage services similar to those that Apple charges for in its iCloud service.
Another opportunity for telcos lies in the increasingly commoditized content delivery network (CDN) market that's currently dominated by the likes of Akamai. When it comes to CDNs, telcos have at least a couple natural advantages; existing multiple data centers (where the content can be located closer to its destination) and proximity of the content to network backbones that they own, thereby giving them a leg up over pure CDNs on both performance and cost.
Perhaps the best example of a telco in the CDN business is Level 3. According to Netflix lead cloud reliability engineer Jeremy Edberg, while Netflix relies on Amazon to handle the transactional part of retrieving content, Level 3 is the CDN. Once a user has the security keys to an asset, Netflix get out of the way and Level 3 delivers the content directly to the customer. Netflix is the largest consumer of the Internet bandwidth. In 2011, the Internet-based video provider peaked-out at 32% of North America's downstream traffic. "When you're streaming video, performance and reliability are everything," said Edberg. Referring to Level 3's role as a Tier 1 Network (in other words, it runs part of the Internet's backbone), Edberg said "you can't get the content any closer to the Internet than Level 3 can."
But as well-positioned as the telcos are to go toe-to-toe with the likes of Amazon and to scoop up the growing demand for enterprise cloud services, challenges remain. For example, collapsing currently siloed businesses into what customers perceive as a single cloud. Verizon enterprise strategy VP Mike Palmer gave an example of how customers want their SAP updates to come to them, no matter where they are. Traditionally for telcos however, sending that update over a multiprotocol label switching (MPLS) network, versus a wireless network, to a smartphone required the involvement of completely separate businesses. "It all has to be one business" said Palmer.
CloudScaling co-founder and CTO Randy Bias was a bit more skeptical saying that the carriers are just "throwing spaghetti against a wall waiting to see what sticks." During one panel discussion on choosing cloud models, Bias claimed that the telcos don't have the product management mentality needed to be successful in the IT space. "No one [at the telcos] owns this stuff," said Bias. "There are tons of opportunities for carriers to service companies with open clouds and to use their natural assets, but they are largely ill-equipped. It's just more of the central command and control that we're used to seeing from carriers."
Despite the challenges, the carriers seem undeterred. NTT America's Junkins and Verizon's Palmer detailed the many steps they are taking to capitalize on their natural advantages as carriers in an effort to garner attention from enterprises looking to benefit from the cloud. AT&T is in the mix too. Although its associate VP Toby Ford was a no-show for his slot onstage at the Cloud Carrier Forum, the company upped the cloud ante Monday when it announced a virtual provide cloud offering that allows customers to securely migrate their VMware-based workloads between their own data centers and AT&T's cloud.
David Berlind is chief content officer of TechWeb and editor-in-chief of TechWeb.com.
To find out more about David Berlind, please visit his page.
Nominate your company for the 2012 InformationWeek 500--our 24rd annual ranking of the nation's very best business technology innovators. Deadline is April 27. Organizations with $250 million or more in revenue may apply for the 2012 InformationWeek 500 now.