Future of Telco Clouds in Africa : A Strategic Coolio !!

Presentation1
In developed and developing countries alike, market saturation in telecoms is limiting customer acquisitions and value added services have not been able to generate the same revenue as voice services.Cloud offers a unique opportunity to service providers that want to offer value added services like voice, video and collaboration on cloud platforms, but success will come only with simplicity and a recognition that the economics of the cloud are very different than traditional telco models. You maye be surprised to learn that cloud models have utilization patterns like airlines which means : they are capital intensive, time and context sensitive and as such supply and demand differentiation becomes critical to maximizing yields.

Telcos today have around 5% of the public cloud market, according to analysts’ estimates. They could potentially increase their market share by going beyond the provision of connectivity to provide additional services, such as authentication, billing, systems integration and even professional IT services. While most telcos can’t match the IT expertise of IBM or HP, they have some advantages, such as long-standing relationships with both large and small businesses, well-known brand names and extensive customer care facilities. Technologies are considered to have become “mainstream” once they have achieved 25% penetration. As cloud follows this same trajectory, with a slew of telcos, cable operators, data centre specialists and colocation providers entering the market, significant consolidation will be inevitable, since cloud economics are inextricably linked to scale.

Cloud Computing attracts investments and overseas businesses and provides a significant boost to e-government initiatives. A Cloud Readiness Index is a good idea since it can track Africa’s cloud adoption progress . By mapping the conditions and criteria required for successful implementation and uptake, one can identify potential bottlenecks that could slow cloud computing adoption. This “Cloud Readiness Index” would analyze key criteria that impact the deployment and use of cloud computing technology across different countries/cities : such criteria might include : Regulatory conditions , Data protection policy , Broadband quality, Power grid quality, Internet filtering , Government prioritization and ICT policy etc.

Without a doubt countries with the most insightful, transparent and fair regulatory environments supported by a the highest political echelons will be the most successful in capitalizing on this new opportunity. Using this criterion only 2 African countries seem ready for full blown Cloud Computing : Rwanda where the President is leading the broadband charge followed by Kenya which is emulating Rwanda : Fttx + Open Access 4 G and Govt sponsorship. With ICT for Development representing an area of high interest for the International Telecommunications Union, the World Bank, and other development agencies, it is inevitable that the services of cloud computing would be applied towards various areas of socio economic development. These area include e-education, e-health, e-commerce, e-governance, e-environment, and telecommuting.

African terrestrial and wireless broadband networks are ramping up catalysed by the arrival of several submarine cables at various landing points along the continental coastline. What may slow cloud uptake is lack of 4G Digital Dividend Spectrum and delays in terrestrial fibre without which Mobile Cloud Computing will remain a sluggish experience. Unreliable networks undermine the entire cloud concept and unfortunately most networks in Africa are battling with infrastructure bottlenecks and capex constraints.

Mobile operators can build their own dedicated, private cloud or they can outsource it to a third-party to host. Operators around the world are giving strong consideration to outsourcing due to the economies of scale that cloud service providers offer and the capability to shift CAPEX to OPEX to better manage costs. As providers of cloud services, telecom operators can manage connectivity, deliver cloud capabilities, and leverage network assets to enhance cloud offerings. Given their core competency, managing cloud connectivity appears to be the most natural value-adding activity.

Identity management and security also came through as strong themes and there is a natural role for telcos to play in the cloud Telcos already have a trusted billing relationship and hold personal customer information. Extending this capability to offer pre-population of forms, acting as an authentication broker on behalf of other services and integrating information about location and context through APIs would represent additional business and revenue generating opportunities. Another opportunity is driving productivity and efficiency gains for Enterprises, together with improved customer service and increased revenues : by allowing them to incorporate CSPs’ communications and context-based capabilities directly into business applications such as Field Service Management.

Recent forecasts suggest that there will be up to 50 billion mobile connected “machines” over the coming years, including appliances, smart meters, security systems, healthcare devices and many others – all of which can benefit from network capabilities accessed on-demand from the mobile cloud. A global pioneer in M2M, Norway’s Telenor Connexion is offering its M2M services through a dedicated platform that enables Telenor Connexion to focus on delivering highly responsive market offerings and developing differentiating value-adds, such as customisation services closely tied with connectivity. It serves M2M customers in automotive, fleet management, security, utilities and healthcare.

With a culture of aiming for five nines (99.999% uptime) reliability, telcos are well-suited to the delivery of cloud services dependent on continual connectivity. By leveraging their network assets, operators add value by exploiting user attributes such as profiles and activities, making cloud services relevant and meaningful to users and providing the linkage between the upstream and downstream components of two-sided business models. Telcos clearly have a pivotal role in the cloud value chain and Verizon Communications, Deutsche Telekom , SingTel , Etisalat and other telcos are moving aggressively into this market.

For example Telefónica was facing growing pressures on its revenues and profits. Meanwhile, companies in the critical field of small and medium-sized enterprises (SME) were requesting new services to strengthen their business capabilities.Telefónica gradually settled on software as a service (SaaS) as the potentially optimum way to meet the needs of these customers quickly while keeping costs to the minimum. The two key cloud platform technologies to satisfy Telefónica’ s demands regarding its SaaS solution were “Aggregation Skills” and “Multi-Tenancy “.The aggregation skill includes not only technology but business processors to aggregate and bring applications to the platform. These make it possible to deploy new applications very quickly and even globally if required thereby enabling the Telco to achieve benefits from the economies of scale . Multi-tenancy enables telco systems to accept upstream customers as operator-like entities, which could inject their own business rules into the system, use its development APIs, and run their product management independently.

Sometimes becoming a cloud service brokerage and bundling those services with their existing traditional telecom services confers certain advantages. One of the main benefits is service velocity, as XaaS services (Software-as-a-Service, Infrastructure-as-a-Service, etc.) can be on-boarded for pricing, fulfillment and billing in weeks, as opposed to the typical months-to-years timeframe. In addition, the costs to implement the services are dramatically reduced as well. That’s what Deutche Telekom did with their Business Market place cloud for SME market in Germany.

Just as telecom operators are promoting cloud as a change agent for business, they too can benefit from its adoption. With operators seeking to transform themselves from their legacy environments and mindsets, adoption of cloud services can lead to efficiency gains, operational flexibility, and substantial cost savings. Perhaps that is where African Telcos should focus on to start with while the spectrum , fttx , Government support and other bottlenecks are sorted out.

Some key questions that must be answered while developing Telco Cloud strategies include : How can we best monetise the new service mix? How can the sort of margins available from voice services be realised for data? How can our business model evolve towards the sort of media retail models proposed by so many industry commentators? France Telecom Orange believe that in the initial phase Cloud services may not generate that much direct revenue but it reduces churn and that is good enough benefit to start with.

A ubiquitous mobile cloud will benefit the African telecoms industry as a whole, by making it much more attractive for application service providers to create new services, or to enrich existing services, that use capabilities, information and intelligence provided by mobile and fixed telecoms operators. Eliminating fragmentation will result in a much larger addressable market of ASPs, resulting in increased service innovation, customer satisfaction, and new revenue sources for the industry as a whole, and consequently for individual operators.

Sadiq Malik ( Telco Strategist

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