Cloud Services: The Next Big Thing for Telcos

By Keith Willetts, Chairman and CEO, TM Forum

Somehow when no one was looking, cloud services seem to have gone mainstream. Those Google Docs you use? Cloud services. What about places that host your music to free up your smartphone's capacity or that hold onto your digital pictures for safekeeping? Cloud services again! Have you seen how many online business applications you can plug into cloud leader Salesforce.com? Even Apple is riding the cloud with speculation running high that it will optimize iTunes to operate within the cloud – welcome news indeed for those of us who are tired of its current slow and clunky nature!

Consumers and small/medium businesses are adopting the idea of cloud services, even if they didn't know that particular term or anything beyond the fact that they were using something more convenient and usually cheaper than buying software. While larger enterprises are taking a more cautious journey into the clouds – for obvious reasons such as security and privacy – there's been enough acceptance and adoption of this business model to put some real substance behind the hype.

The Telco Challenge
So what's the angle from a telco perspective? The original cloud was, of course, the network. A customer didn't have to own their own wires or boxes; instead a service came into your home and someone else looked after it.

Today, an increasing number of communications players are getting excited about using cloud services internally but are also piloting cloud services for their customers in one form or another. They have a lot of advantages after all – they usually have a big consumer and small/medium business customer base that are the most likely early adopters of cloud because they want the simplicity and low costs that cloud promises.

They can engineer network capabilities to fully support cloud services – poor latency kills the user experience in a heartbeat – and they also have a rare talent – they know how to run large-scale services reliably. Sounds simple, but many of the early cloud providers today are product companies that are learning on the job how to deliver complicated services at scale that people can entrust their business to. Telcos have the brand recognition, a large volume of customers and the resources to deliver services – straight out of the gate – that gives them a huge advantage over other would-be cloud service providers.

But (there's always a but!) they also come to the table with a lot of baggage – generally a pretty poor reputation for customer service; a history of actually exposing technical complexity rather than hiding it; a propensity to be slow to make decisions; and the dead weight of regulations and the government looking over their shoulders.

For sure the market won't wait while telcos ponder the market. As with so many other digital services like video, music and so on, cloud providers can simply go 'over-the-top' and relegate the telco role to that of commodity pipe provider hamstrung by net neutrality laws.

But the opportunity for telcos in cloud is huge if they move quickly. And moving quickly means not trying to do the whole job themselves in building the service from scratch; putting in place the delivery systems, customer support, etc. Cloud is a great example of a two-sided business model we've been talking about for a while now, where the telco partners with 'upstream' cloud providers and acts as a go-to-market service enabler. This can take many forms with the relative roles of each service provider in the chain being flexible to suit different commercial and operational needs.

For example, at the lowest level, the telco could just provide the managed bandwidth that the cloud service needs. But it could also provide a lot of value – for example providing the cloud store 'front window' (catalogs, etc.); it could provide security and authentication; it could do the billing and customer care. This kind of 'smart wholesale' model where the communications service provider leverages its core competencies and takes a slice of the service revenue in return for providing those capabilities.

This means a partnering model that telcos traditionally aren't great at doing. Remember walled gardens and all of that kind of approach to 'partnering'. Well Apple certainly has broken that mold, and the communications industry is learning fast about making revenue sharing partnerships really work.

With our membership of most of the world's largest fixed, mobile and cable payers, TM Forum has naturally been very interested in this emerging market. In fact we jumped whole hog into the cloud space over a year ago, and today we're seeing many fruits of that decision. We have 2 primary cloud thrusts: first we've established a group of major cloud users to ensure the emergence of a clear view of the barriers to adoption of cloud services and that the necessary standards to make clouds open are in place. This group, the Enterprise Cloud Leadership Council (ECLC) continues to expand with some household names in finance, retailing, manufacturing and other types of business. The ECLC recently released a clearly-defined set of business and technical requirements for external private cloud services.

Second, we have been looking at the operational aspects of what is needed to enable and deliver cloud services, especially by communications service providers. This has resulted in working examples of cloud service brokers; advanced work on software-enabled service platforms and common service management APIs for cloud and other virtual services. Our flagship event – Management World 2011, which takes place this May in Dublin – will include a 3-day Next Steps in Cloud Services Summit featuring speakers from AT&T, Verizon, Oracle, COLT, Vodafone, Amazon and many others.

Cloud services are transforming the way people work. Behind the hype, people are quietly getting on with using them. Many consumers neither know nor care that their photos, genealogical history, music and documents are held in a cloud service – it just works and they can get on with their life. Businesses too are starting to see the benefits of cloud, particularly if it can reduce complexity and hassle while coming in at a cheaper price. With so many of the cards in their hands, cloud has to be a major opportunity for telcos, but they have to learn to partner; they have to move quickly; and they have to better package and support those services.

If they do that, then they'll see the cloud really does have a silver lining!