Cloud Computing In Telecommunications Sector

Published Date: 02 Nov 2017

In an attempt to understanding cloud computing it’s a good idea to know evolution of the computing technology.Cloud computing evolution goes back to 1980’s when it started with grid computing by solving large problems with parallel computing and making mainstream by Globus Alliance. In 1990’s utility computing offered clusters as virtual platforms for computing with a metered business model. In early 2000s – SaaS raised the level of virtualization to the application, with a business model of charging by the value of the application to subscribers. Late 2000s marked the focus on infrastructure and applications for users can gain access to applications at any time, from any place through their connected devices. By 2010s - The cloud computing evolves and matures with better security, more prevalent standards, improved process optimization, composite SLAs and expanded connectivity( IBM confidential).

Literature review helped us understand the significance of cloud to the business of today. The literature recognises cloud computing to be a fundamental shift in IT that will alter the way business will work in the next 20 year.

Surveys by KPMG (Chung & Hermans, 2010), F5 Networks (2009) and Sanhill (Pemmaraju & Rangaswami, 2010) highlight some of the primary benefits which have been already discussed while understanding the cloud concept in the theoretical framework.

Another additional advantage brought forward in the literature by Roger Smith is the benefit of cloud to entrepreneurs. The cost of IT being a barrier to new companies was initially overcome through the use of venture capitalist financing for the equipment. Cloud works to eliminate this barrier by turning computing into a utility that companies can purchase based on specific demand (Roger Smith, 2009)

Ernst and Young stresses the importance of cloud to instantly deliver simple, easy-to-use, sophisticated and high-powered computer applications and information that consumers could not otherwise access. It recognises the proliferation of smart mobile devices, that are actually handheld wireless computers, as a reason that has accelerated the development and importance of cloud services. (Ernst and Young, 2011)

The growing importance and relevance of cloud is also seen in the decision of the UK government announced in June 2009 that all future it purchases must be "consistent with cloud computing", so that all digital services can be moved into its

private, secure, so-called ‘g-Cloud’, dedicated to government agencies. The UK government hopes this will realise a return on investment in three years, after which the benefits of elastic scaling, rapid provisioning and infrastructure savings through advanced virtualisation will reduce it procurement costs substantially. (Philip Hunter, 2009)

Cloud has a great potential to make peoples life easier & businesses more efficient.

Cloud computing technology is now gradually being introduced to the telecommunications industry as demand from operators for mobile Internet services has started to take off (Lv A Bin, Europe II 2011)

For telecom consumers cloud means they don’t have to store anything not applications, not phots, not videos etc .So in case the data is lost, customers need not worry as the data is all there in the cloud. For business cloud can enable powerful computing on devices such as Mobile, PC, Tablet etc.(AT&T,2011)

The next key idea in the literature was the importance of cloud services in the telecom sector. As mentioned by Steve Gold (2012), an example of one of such innovative service offering was the use of Voice over IP, or Internet telephony, to host regular geographic UK numbers (01xxx and 02xxx) in the cloud, and then deliver inbound calls to the device of choice – this could be a regular landline, a mobile phone using ‘conventional’ GSM/3G cellular, or a mobile using VoIP technology delivered across 3G or Wi-Fi channel.

‘Cloud computing is a fundamental shift in IT that

Existing (Jan 16, 2013)

both originate and be delivered across a wide range of devices, including a laptop or desktop PC, or one of the growing range of tablet computing devices, as most of these devices support Wi-Fi connectivity.

By porting the landline into the cloud we get non-existent or minimal monthly line rental and discounted outbound phone calls, as well as the ability to deliver a call to one or more devices, either simultaneously or on a sequenced ringing basis.

Literature has also shown the foray of telecom firms not only in cloud services as SAAS but now even as IAAS. (Datamonitor, 2010) Our study of telecom providers in Sydney brought us to Telstra which is in a race to establish enterprise-grade cloud computing services in the Australian market.

Australia’s premier service provider, Telstra has been quietly (re-word) building its cloud computing capabilities for the joint goal of both transforming the company's internal approach to IT and creating a new service offering for enterprise customers. The Komatsu deal is the second major cloud computing deal won by Telstra in the past year, following on from a A$50 million deal struck with Visy Industries. Komatsu is extending an existing three-year managed network relationship with Telstra to include a wider scope of telecoms services and will also roll all its IT services into Telstra's existing infrastructure-as-a-service environment by the end of June. Reasons to consider a new approach to IT sourcing for Komatsu included ageing infrastructure, expiring contracts, and the need to gear up for a doubling of processing and storage capacity as part of a business transformation project and SAP expansion. In addition, the company is growing rapidly, so speed of deployment is important. Geographically dispersed operations in mining and construction locations meant that Komatsu was seeking a vendor that could deliver reliable services integrated end-to-end (Datamonitor, 2010).

Business benefit of adopting Cloud services

It’s critical to understand why cloud computing has become the need of the hour. Its significance to consumers and businesses is frequently addressed in various literatures.

‘Cloud computing is a fundamental shift in IT that will alter the technology industry power

structure, improve business agility for all industries and increase everyone’s access to computing, storage and communications power’ (Cloud Computing issues and impacts, Ernst and Young,2011)

discuss the key benefit the cloud services provide to businesses on adoption.

Costs : Reduces upfront IT CAPEX investments for users of both hardware & software since vendors spread their own costs across customers. The key driver of Cloud computing is its pay as you go pricing model, where charges are based on its consumption via a subscription model or utilization-based alternative. Also, consumers can pay in parts to subscribe with minimal upfront costs instead of paying for hardware and licenses upfront. Also, cost related to software upgrade, maintenance cost etc. could be transferred to cloud service providers . It also streamlines the IT procurement process by reducing the investment costs & by avoiding administrative costs of multiple level approval process which is traditionally the IT Way.

Return on Investment : Accelerates payback and improves Return on Investment (ROI): A lower initial investment and faster deployment time for Cloud deployments leads to quicker benefits and positive ROI. The efficiency gains are primarily linked to the scalability (or elasticity) of Cloud deployments.

Risks : Reduces the risks linked to IT deployments, by transferring them (in part) to Cloud providers.

Accelerated deployment : Business cycles are accelerating in a web-enabled world, with businesses requiring immediate deployment of their supporting IT environment. Achieving this is possible only by leveraging out of the box solutions benefiting from optimized procurement, set-up, and migration time, as well as relatively high standardization. This reduced lag between business & IT, helps business focus on the real business issues. IT within organizations should be focussed change agents instead of wasting efforts maintaining the internal IT structure.

Extreme Scalability : Firms can instantaneously scale up or down their IT infrastructure (processing power, or storage and networking or number of users) as per consumption needs, without costly upgrades or wait times and no capacity constraints.

The figure 3.a represents the payback period and ROI curve of cloud computing versus in house computing decisions.

Source: Deloitte

Fig : 3.a – ROI curves for Cloud Computing vs On premise Computing

These business needs drive the need for a shift of services to the cloud in most firms. Additionally, specifically for the telecommunication industry, the clouds ability to instantly deliver simple, easy-to-use, sophisticated and high-powered computer applications and information, will help meet the business need generated by the proliferation of smart mobile devices, which are similar to handheld wireless computers. (Ernst and Young, 2011)

Business Opportunity for Service Providers

The literature has further explored the multibillion dollar business opportunity available to cloud service providers (CSP). Analysis by Informa, on the cloud strategy of more than 130 CSPs across the world has revealed an accelerating investment and activity to secure revenues from their network assets. (Navigating the Telecom Cloud, 2012).

Fig 3.b : spend on cloud pursuits in various continents

The figure 3.b highlights the spend on cloud pursuits in various continents. While revenue growth rates comfortably beyond 100% per annum are common, only a handful make higher than 5% of overall revenues from cloud services. The literature recognises the need for CSPs to act now to secure long-term profits from cloud services since demand for cloud services is shifting to emerging markets and across customer segments. (Navigating the Telecom Cloud, 2012).

Recognizing the cloud as an untapped source of business, telecom operators are getting ready to increase their Information and communications technology (ICT) wallet share by exploiting this next wave of opportunity. The global investments in cloud services projected to more than double from an estimated US$55 billion in 2011 to almost US$130 billion annually by 2015. U.S.-based Verizon, has already spent over US$2 billion in 2011, including a major acquisition, to capture a significant share of the global cloud services opportunity. France Telecom’s Orange Business Services has invested €750 million in its global network backbone in 2011 to facilitate cloud based service delivery. Telstra, in Australia, has partnered with leading software, hardware and IT services companies, and acknowledged that cloud offerings will produce 25 to 30 percent of its total revenue within the next five years. The Australian operator plans to make $800 million, cloud-related investments during that period (A world of communication- Ericsson, 2012)

Further literature review to the CSP’s use of cloud Enablement Framework to enhance the value chain and customer value propositions: They identify 3 main enablers, and company need’s to identify where it fits in the framework based on their strategies, risk appetite & their goals. (Fox, 2012)

Optimizers use Cloud to perform current business more efficiently and effectively, in this way they can increase their customer value propositions by improving the connectivity, speed or the storage space etc. (Fox, 2012)

Innovators use Cloud to significantly improve customer satisfaction through leveraging unique assets of CSP while delivery current services, resulting in new revenue generating streams based on new business models, which increases the roles and responsibilities of service provider within the value chain(Fox, 2012)

Disruptors rely on Cloud to develop radically different value propositions or what’s called the out of Box ideas. Understand customer needs to generate new market segments, by enhancing the end-customer experience through creating new Business. (Fox, 2012)

Key Trends:

2012 Forecast/Growth Rate (Gartner, 2012): Widespread consumerism with Cloud computing

Telecom operators have recognised it as a source of new revenues, with global investments in cloud services projected to more than double from an estimated US$55 billion in 2011 to almost US$130 billion annually by 2015 (Ericson, 2012)

Following the industry trend, below are examples of telecom industry, which reference to our theoretical framework of adopters & providers:

Cloud as Adopter/Optimizer: O2 will offer Microsoft Cloud services as part of a new partnership between Microsoft and O2 in Ireland. The first service available to O2 business customers from Microsoft is Office 365, cloud productivity solution of Microsoft. O2 can explore the full potential of office 365 and will be able to avail services including Microsoft Office, email and communications on a basis of subscription from O2. This particular deal removes upfront costs of software buying, instead offering customers access to the service on a payment basis through a single bill from O2. Services such as mobile broadband , voice, and fixed phone lines will be offered with Office 365 software. Subscribers will find it beneficial from packaged offering from O2( O2 TO OFFER MICROSOFT CLOUD SERVICES THROUGH NEW STRATEGIC PARTNERSHIP DUBLIN, 30th May 2011)

Cloud as Provider/Innovator: This is a current example of Telecom Company providing a combination of services such as Paas, Saas, Iaas .Singapore’s SingTel has been chosen to deploy a private cloud computing infrastructure on a whole-of-government basis. To cover all government bodies in Singapore, G-Cloud provides the first private cloud infrastructure to be developed on large scale.

For an initial five years SingTel will provide and maintain G-Cloud with an option for renewal of a further five years. The G-Cloud is a whole-of-government private cloud infrastructure that is multi-tenanted, and it meets the required security assurance for the government. of cloud computing advantages will be delivered through G-Cloud. The benefits include virtualisation, multi-tenancy, automation with on-demand provisioning and rapid scalability. The G-Cloud will need to address the different levels of governance & security needs of the Singapore government. This will create standards across the board by sharing of computing resources and applications across all government agencies thus leading to faster response and reduction in IT operating costs. With innovation being one of the foundations of the G-Cloud’s design, its extensible & unique platform can also be used for trying & piloting new and innovative applications without any heavy initial cost and asset of ownership.

G-Cloud services redefines the government sector’s delivery of e-services, both internally and to the public. G-Cloud opens the entryway for more government owned e-services to be delivered quickly, securely, on-demand & at less costs plus anywhere and anytime.( SingTel Breaks New Ground with Private Cloud Infrastructure for the Whole of Singapore Government -Singapore, 15 May 2012, http://info.singtel.com/node/11977)

Challenges and Debates in Cloud Adoption

Armbrust. M, Fox. A, Griffith. R and Others (2010) discuss some key challenges which providers of cloud face when selling these services to potential customers.

Business Continuity and Service Availability : The primary concern with adopting cloud computing services is its continuous availability and chances of disruption. In spite of multiple data canters in different geographic regions with different network providers, there may be common software infrastructure and accounting systems which put customers at risk if the firm goes bankrupt. Large customers need the assurance of a business continuity strategy for crisis situations before migration. (Armbrust. M, Fox. A, Griffith. R and Others (2010)) . This argument against cloud is however debatable with authors citing the offsite nature of cloud services as a plus for firms who have data stored in in-office servers. Cloud environments additionally meet regulations for business continuity, by bodies such as Securities and Exchange Commission. (Buttell, A. , 2010)

Data Lock-In : The storage for cloud computing are essentially proprietary or not standardized, thus making it difficult for customers to extract data from one website and run on another. Such a dependency may lock-in customers and be attractive to cloud computing providers, but their users are vulnerable to price increases, reliability issues, and risks of providers going out of business. (Armbrust. M, Fox. A, Griffith. R and Others (2010))

Data Confidentiality/Auditability : Data security is the primary objections to cloud computing. Additionally, requirements for auditability, such as Sarbanes-Oxley and Health and Human Services Health Insurance Portability and Accountability Act (HIPAA) regulations are must before moving corporate data to the cloud. Clouds use virtualization as a primary security mechanism. It protects against attempts by users to attack the underlying cloud infrastructure. But limitations and bugs in virtualization software or incorrect network virtualization may cause user access to sensitive portions of the provider’s infrastructure. (Armbrust. M, Fox. A, Griffith. R and Others (2010)) (Cloud Computing issues and impacts, Ernst and Young,2011)

Limitation of Session oriented services: A challenge specific to the telecommunication industry is the virtualization of telecommunication (telecom) services, which are session-oriented by nature and currently run on dedicated hardware. Existing mechanisms for running services in the cloud are typically web services with short-lived sessions making them resilient to intermittent failures of the network or endpoints. However, Chang, Y ; Hari, A ; Koppol, P;Martin, A & Stathopoulos, T (2012) have identified that such mechanisms are insufficient for implementations of typical telecom services where sessions are long-lived and service users are intolerant of service and network interruptions. Hence telecom providers need to work towards meeting this challenge. (Chang, Y ; Hari, A ; Koppol, P;Martin, A & Stathopoulos, T (2012))

Cloud Computing is the Future of Telecom

As the world is moving towards wireless smart phone world, it is causing rundown for some telecom companies, but it’s also creating opportunities for many telecom companies. One such company is Kuwait Telecom Company. Koreans spend lot of their time at work compared to US or European counterparts. The company is building "Smart work centers" using Cloud Computing and smart technology to decentralize Work places. Because they can work from anywhere, closer to home and customers. This saves the time that is wasted in commuting to & from workplaces, reduces carbon emission, traffic congestion etc. It provides work from home options which many companies adapt these days as a cost saving methodology. (Hugos , 2011)

There are valuable future opportunities for Australian telecommunication sector as well in cloud computing: But the Australian Government needs to ensure that these opportunities are grasped and unnecessary barriers removed. Given the low cost of infrastructure for users of the cloud, Australian start-ups can compete on ideas, rather than on the amount of resources (cash or equipment) they have. The cloud will catalyse development of new products and services. ( J Craig Mudge FTSE, 2010)