Telcos becoming cloud providers doesn’t seem to work

Since the late 2000’s, one of the cloud strategy theories was that existing telcos and network providers could become public cloud providers. Many, if not all have tried and/or trying. Thus far, it’s been a rocky road: few synergies seem to be sleeping on the ground, ready to roused up to go fight the giants, or, at least, carve out niche spaces. As summarized in a 451 report on CenturyLink:

That’s the idea that a connectivity provider should be better positioned to take advantage of cloud computing infrastructure because it controls the means of access to those resources, leading to a natural synergy. So far, none of the major carriers has managed to make that work, hampered by scale, traditional mindsets in network operations, and sales. Companies like AT&T, Verizon, Orange, BT and other global carriers got started on similar telco transformation efforts many years ago with varying degrees of success, and with major detours toward trying to out-Amazon Amazon in the IaaS space with network-focused cloud services. Instead vendors like Amazon Web Services and others have all but run away with the managed infrastructure and cloud markets, which are slated to reach a combined $100bn by 2020, according to 451 Research’s Market Monitor.

Furthermore, from another report on Verizon:

Verizon is not the first company of its kind to move away from infrastructure services in this way. Rackspace, at the time the world’s largest independently managed infrastructure and cloud provider, pivoted away from selling basic cloud infrastructure (and spinning off its low-cost web-hosting operations, Cloud Sites, to LiquidWeb), taking a more services-led approach. UK-based Colt Technology Services canceled its Managed Cloud offering (the go-to-market brand for its IT Services’ €80m revenue business) in 2016, selling it to German IT services company Getronics. Other IT vendors such as Hewlett Packard Enterprise (HPE) have chosen to keep out of the commodified public cloud service market, choosing instead to focus on hybrid and third-party services.

That said, there’s plenty of work – and spending – to be done to keep the tubes flowing and (eventually) costs optimized, e.g.:

[CenturyLink] has spent $700m on upgrades and improvements in its network, partly to serve NFV needs but also to address rates of failure in service delivery, repair times and other customer satisfaction areas.

And, for Verizon, there’s always money in the banana stand:

Focusing its efforts on managed networking services, managed security and professional services is a smart move for Verizon, given the lower costs, higher margins and double-digit growth rates of these sectors…. Managed security services and managed network services (in the ‘other’ category) – are expected to grow at 16.3% and 21.5% respectively during the same time.

We’ll see if one of the telco’s whacks it out, but the market window seems, if not painted shut, pretty firmly slid closed.

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