Sunshine Behind the Cloud

Perspective Olaf Acker Germar Schröder Thomas Aichberger Adrian Blockus Sunshine Behind the Cloud The Cloud Opportunity for Telecom Operators Contact Information Beirut Frankfurt/Dubai London San Francisco Ramez Shehadi Olaf Acker Michael Knott Matthew Le Merle Partner Partner Partner Partner +961-1-985-655 +49-69-97167-453 +44-20-7393-3527 +1-415-994-4320 ramez.shehadi@booz.com olaf.acker@booz.com michael.knott@booz.com matthew.lemerle@booz.com Dallas Frankfurt Moscow Sydney Joe Sims Dr. Germar Schröder Dr. Steffen Leistner David Hovenden Partner Principal Partner Partner +1-214-712-6636 +49-69-97167-426 +7-985-368-7888 +61-2-9321-1966 joe.sims@booz.com germar.schroeder@booz.com steffen.leistner@booz.com david.hovenden@booz.com Dubai Hong Kong Paris Tokyo Karim Sabbagh Edward Tse Pierre Péladeau Toshiya Imai Senior Partner Senior Partner Partner Senior Executive Advisor +971-4-390-0260 +852-3650-6100 +33-1-44-34-3074 +81-3-6757-8600 karim.sabbagh@booz.com edward.tse@booz.com pierre.peladeau@booz.com toshiya.imai@booz.com Düsseldorf Houston Rio de Janeiro Vienna Roman Friedrich Kenny Kurtzman Paolo Pigorini Thomas Aichberger Partner Partner Partner Senior Associate +49-211-3890-165 +1-713-650-4175 +55-21-2237-8409 +43-1-518-22-909 roman.friedrich@booz.com kenny.kurtzman@booz.com paolo.pigorini@booz.com thomas.aichberger@booz.com Booz & Company EXECUTIVE The market for cloud computing infrastructure and services is growing rapidly, and some telecom operators are SUMMARY already designing ways to play. But most are still sitting on the sidelines, apparently waiting to see how the market develops—even as they risk being left behind by the many other players looking to profit from this market. This is not a winning strategy. Thanks to its unique set of assets, every telecom company has the potential to capture significant value in the cloud. Those assets include the virtually ubiquitous connectivity to businesses and homes, quality of service, the ability to aggregate and deliver a wide variety of services, and the sales channels needed to sell services in the cloud. Given their assets, telecom operators have several ways they can play in the evolving cloud ecosystem, ranging in complexity from enablers of cloud infrastructure to full-service providers of both public and private clouds to aggregators of end-to-end cloud-based applications and services. And they can offer such services to all their customers, from consumers and small businesses to the largest corporations and organizations, in virtually any market, developed or emerging. Succeeding in the cloud, however, will require not just a feasible strategy but the ability to develop strong business plans suited to different customers, and a willingness to partner with other cloud players to fill out the offerings that make up those plans. And finally, it will require that telecom companies act now—the cloud ecosystem is already filling up with eager competitors. Booz & Company 1 ACTION IN The cloud marketplace is grow- ing quickly, and a wide variety of To thrive in the cloud market, and avoid being reduced to commodity THE CLOUD players—some old, some new—are providers of the pipes through which rushing in to grab a share of the all the real action travels, they must opportunity. The market is expected establish and solidify their positions to grow four times faster than any as value-adding players. Otherwise, other IT segment over the next sev- they risk being pushed aside by both eral years, and no player looking to traditional players and entirely new benefit can afford to wait any longer. entrants to the market. This is particularly true of the large To win in this new game, telecom telecom operators, which have the operators must make sure they potential to play a powerful role in understand where in the new cloud the new cloud ecosystem. So far, ecosystem they can play most suc- however, they have been focusing cessfully, given their formidable on relatively narrow segments of strategic assets, and then consider the market, putting themselves in carefully how best to play. Finally, direct competition with the large they need to determine which other Internet service providers (ISPs) and players they can partner with most systems integrators (SIs), which are effectively in order to build the best already several years ahead of them. cloud offerings possible. To win in the cloud marketplace, telecom operators must determine where in this new ecosystem they can play most successfully. 2 Booz & Company THE NEW CLOUD Until quite recently, the ecosystem within which software and other IT on demand, and accessed entirely over the Web. This shift is rapidly ECOSYSTEM services were distributed—from devel- creating a new and very different opers to end-users—was driven by the ecosystem, one driven by a new set of need to move much of the product players that provide essential cloud through the physical world. As such, offerings, including software develop- the ecosystem depended on a number ment, large-scale end-to-end services, of middlemen—SIs, distributors, large- integration, hosting, and application account resellers (LARs), value-added aggregation.1 resellers (VARs), and consumer retail outlets—to ensure that the software Three kinds of services are currently reached its intended destination, and available in this new ecosystem: worked when it got there. software-as-a-service (SaaS), platform- as-a-service (PaaS), and infrastructure- With the advent of the cloud, how- as-a-service (IaaS). Telecom ever, the need to operate in the physi- companies have only begun moving cal world is being replaced by the into the cloud space in the past delivery of software over the Internet, couple of years, primarily offering either as downloadable packages or IaaS in the form of networking and Booz & Company 3 hosting services (see Exhibit 1). medium-sized businesses (SMBs). through innovation and partnerships, Some telecom operators, however, So far, however, these offerings have and expand into new, higher-value have been moving into more value- not taken full advantage of telecom roles, such as reseller and even app added services, including basic SaaS operators’ most strategic assets. aggregator and integrator.