Telecoms providers need to expand the cloud services they offer to small and medium enterprises (SMEs) if they are to realise massive new revenue from the market.
A recent report by cloud provider BSCG predicted operators stand to realise upwards of $22 billion (€19.6 billion) by diversifying into cloud provisioning for SMEs in the UK and US markets alone.
Meanwhile, Cisco’s latest Global Cloud Index predicts global cloud traffic will jump four-fold to 8.6ZB (zettabytes) by the end of 2019, with Western Europe accounting for 1.5ZB.
Dominic Elliot, Cisco’s CTO of UK Service Provider and Media, says telecoms providers must do more to take a share of this uplift in traffic.
“The solutions being offered by telcos are all quite similar, ranging from Infrastructure as a Service (IaaS) to Software as a Service (SaaS). It’s vital opportunities in the future are more expansive – for example cloud VPN, and broader IT and collaboration,” he says.
Stephan Gatien, Global Head of Telecom for SAP, agrees. “Many telcos have focused their attention on more traditional communication services or value added services, choosing to develop their cloud service portfolio starting from their core connectivity business,” he says.
“But a number is increasingly looking at responding to the broader needs of SMEs, particularly in the business applications space.”
Operators need to develop both all-you-can-eat and a la carte menus of cloud-based business applications for SMEs, reckons Gatien.
“This could allow some enterprises to consume a complete business package to run their activities, while allowing others to zero in on specific functional domains such talent management or analytics,” he says.
For Deutsche Telekom, there’s something of an issue of association for telecoms operators selling cloud services.
“Telcos aren’t usually perceived as ‘IT specialists’, so they have to work harder on their market perception as ITC providers,” admits Lutz Fröhlich, VP of Cloud Business Marketplace at the Germany-based operator.
“In light of the increasing requirements on IT to react to business needs – such as increased pressure on costs, higher flexibility, and changing working environments – we see cloud adoption emerging.”
But he adds: “A majority of German SMEs remain stuck with their existing IT solutions to avoid business interruption or...simply because of a lack of internal IT know-how.”
Data privacy and data security also need to be carefully considered before applying cloud services to business critical processes and data, according to Fröhlich.
“This points to the need of custom-fit solutions – easy, secure and appropriate to companies of all sizes,” he says.
In the Netherlands, KPN has recently expanded its managed hosting capabilities with the purchase of Dutch cloud company IS Group, which provides cloud-based workspace solutions for SMEs.
The operator says the local IaaS/SaaS market is slated to grow 10-20 percent annually.
“It may be the only affordable way of accessing certain technologies, particularly if they can be adopted with minimal capital outlay,” says a spokesperson.
“The ability to increase and reduce resources, such as seats in a hosted contact centre, based on seasonal demand also means the cost of adopting new services can be controlled.
“Cloud is becoming the default behaviour for enterprises, and this trend will only increase as generations who have grown up with smartphones enter the workplace.”
Paul Lawton, General Manager of SME at O2 UK, thinks operators are best positioned to provide such services.
He says: “Our flexibility and range of services is unique in the market, and addresses the needs of the modern day SME.
“We see ourselves as very well placed to help businesses move to the cloud, given the demand for good connectivity everywhere and for applications that provide a good experience on mobile devices.
“We recognise the need for further automation to improve setup and predict further growth in cloud security and collaboration tools, particularly in the small business sector where simplicity and flexibility will accelerate adoption rates.”
But one idea – as championed by DT and Orange in particular – to create a European cloud company to take on the big US cloud providers, is not something that is receiving wider support.
Digital Europe, the trade association for the European IT industry, dismisses the idea out of hand.
“Once a small business decides to move to the cloud it’s key concerns are exactly the same as for any supplier relationship: it wants a market place for cloud services that is competitive on price and service quality, which means an open marketplace with as many suppliers as possible, regardless of where they are headquartered,” says Comms Director Paul Meller.
“Talk of a European cloud is therefore anathema to an entrepreneur running a SME because, by definition, it excludes potential suppliers.”