Are telcos and cloud providers destined to be frenemies?
Telcos and cloud providers are both customers and competitors. The move to 5G commercialization and private networks could deepen all sides of these complicated relationships.
As I was brushing up on what has transpired in the industry during my year away, I was struck by the number of announcements regarding alliances between Tier 1 CSPs and the three leading hyperscale cloud providers. Google, Amazon and Microsoft all touted new platforms and services targeting the telco/5G market, with AT&T, Verizon, Vodafone, Telefonica and others entering strategic partnerships with those companies to develop new offerings. In Light Reading’s interview with Glen Gore, director of solutions architecture at AWS, Gore characterized the relationship with telcos as “It’s not about replacing the telco. It’s about augmenting and helping.”
Given that both are customers of one other, I think it’s more tricky/sensitive/fraught/pick your adjective than that. Both see the potential of 5G. Both embrace cloud-native. Of course, there are degrees of “seeing potential” and “embracing cloud-native.” And therein lies the rub. We all remember the hard feelings generated during previous transformations when the telcos footed the bill for massive network upgrades and the over-the-top players took a joyride on infrastructure they didn’t pay for – reaping most of the profits while CSPs were stuck with most of the costs. The telcos are hellbent on ensuring 5G won’t be a repeat.
It’s important to understand that this is a technology story as well as a business/commercial story. And it will differ whether we are talking about enterprises or consumers. Consider: Who has the trust of the enterprise? It largely depends on how mission-critical/strategic it is. The maturity of the company might play a role, too. What about the trust of the consumer? Consumers bash telecom providers (to be fair – consumer complaints are usually about pricing/billing and not about the service itself) but enterprises have long trusted telcos for their reliability and security – two things (especially the latter) that are unlikely to be uttered about the cloud providers.
On the flip side, enterprises will trust them to provide a robust environment for developing applications. And that’s something unlikely to be uttered about the telcos. To date, most of the hype around 5G is about enterprises. Indications from South Korea and China suggest that consumers don’t yet see a compelling need to switch to 5G – so I’ll keep the rest of my commentary focused on the enterprise market.
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