As the gravitational pull between telecom providers and cloud services grows stronger, 2012 may be the year that carriers determine which cloud solutions are going to help them shake off their transport-only roots and become fierce competitors in the cloud market.
Whereas Tier 1 providers like Verizon and CenturyLink may have deep enough pockets to acquire companies such as Terremark and Savvis, other large telecom operators, such as AT&T, are building their cloud stacks themselves. But beyond the biggest players, many service providers are increasingly using pre-assembled, carrier-grade cloud solutions to avoid large CAPEX investments and achieve faster time to market. This 'buy rather than build' movement may be particularly relevant in emerging markets.
Several factors feed into this momentum for turnkey cloud solutions in emerging markets, but among the most important is the scarcity of qualified IT professionals for hire to build cloud solutions in emerging markets, as well as carriers' reluctance to tie up capital for cloud infrastructure when return on the investment could be in the distant future. Moreover, the cloud services opportunity for telecom providers is proving to be much larger in developing and some mature economies within Asia-Pacific (APAC) and Europe, the Middle East and Africa (EMEA) markets than in the U.S., for example.
Joyent cloud software update speaks to unique telecom provider needs
The race to the cloud in emerging markets has produced a major change in focus for some existing cloud providers. Cloud provider Joyent recently announced several service providers -- the majority serving APAC and EMEA -- that are using the latest version of Joyent's in-house cloud software stack, SmartDataCenter version 6.5, to launch Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) products. The software stack, which was designed as a carrier- and military-grade offering, includes cloud service management, analytics, security, billing and self-service portal tools.
Unlike other cloud-in-a-box strategies, Joyent's solution goes from IaaS through ... Platform and Software as a Service, which is where providers will find the most benefit in terms of services revenue.
President, CIMI Corp.
While Joyent is primarily known as a cloud provider competing with Amazon Web Services (AWS), its telecom, military and government segments are growing fast. Part of that anticipated growth is due to the cloud analytics capabilities, which give visibility into the network and compute resources -- an advantage for carriers that need to meet stringent customer service-level guarantees.
Joyent's decision to sell the in-house cloud software it has used itself for six years to other providers -- and potential competitors -- is relatively unique. But the move is resonating with carriers that are eager to get into the market, according to Joyent chief scientist Jason Hoffman.
"We're finding that a lot of companies that own fiber in the ground and facilities are recognizing that just as the Internet introduced utility networking, the point of cloud computing is to do utility computing," Hoffman said.
Telecom companies don't have a specific vendor to help them get into cloud services, according to Hoffman. Many also lack the ability to develop complex cloud software solutions themselves, particularly as they increasingly outsource network management and in-house expertise, focusing instead on sales, marketing and customer management.
"Joyent has a fairly comprehensive cloud stack and takes a more holistic approach to the cloud that appeals to the service provider sector and the government audience," according to telecom and networking consultant Tom Nolle, president of CIMI Corp. "Unlike other cloud-in-a-box strategies, Joyent's solution goes from IaaS through the software layer and can facilitate Platform and Software as a Service, which is where providers will find the most benefit in terms of services revenue.”
The difference between Joyent and other cloud providers is that its in-house software engineers are former Sun, Intel, Oracle, Google and Apple kernel engineers who built SmartDataCenter to run on multiple operating systems, Hoffman said. "For people with unique security needs, it's actually the most secure virtualization they'll find," he said.
Emerging markets garner biggest percentage of cloud opportunity
Beyond the specifics of how cloud solutions are built, a carrier's geographic market makes a difference when deciding whether to build or buy the software. A recent CIMI Corp. survey showed the cloud market opportunity is much higher in three emerging markets -- Eastern Europe, Africa and Latin America. In developed markets like the U.S., the percentage of IT spending on cloud services almost never surpasses 25%, according to Nolle. In emerging geographies, enterprises are interested in committing more than 50% and up to as much as 75% of their IT budget to cloudsourcing.
The downside of that enormous cloud opportunity is the same reason there's a lot of difficulty on the cloud production side -- there's a relatively small skilled-labor pool to draw from. "If the IT needs of a company can't be easily met by drawing from the local labor pool, it will also be difficult to support internal IT, so putting applications in the public cloud becomes disproportionately valuable," Nolle said.
Joyent has a handle on the two things it takes to be a successful cloud solutions player -- a completely integrated cloud stack, and an actual cloud that service providers can use to pilot some applications and roll them over to their own infrastructure when they have a credible customer base, according to Nolle.
"Otherwise when you try to build your data center out, your costs at first are nightmarishly large and your time to profit is nightmarishly long," Nolle said.
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