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Vodafone and Alibaba Renew Their Vows |
NEWS |
Vodafone and Alibaba Cloud announced their partnership in December 2016, which is when Alibaba opened its first data center—hosted within Vodafone’s facility in Frankfurt—in Europe. Since then, Alibaba has increased its footprint across the globe and now claims to have 45 data centers in 18 regions, with Frankfurt being its European point of presence. Alibaba Cloud itself is a growing business; they have claimed a 23% revenue increase annually, have nearly 50% of the Infrastructure as a Service (IaaS) market in China, and have been investing heavily in Artificial Intelligence (AI), which is in line with the Chinese central government’s goal to become an AI leader by 2030.
Vodafone operates its own cloud offerings, which include Internet of Things (IoT) use cases; managed hosting; private and specialized clouds; and a variety of connectivity options, including Software-Defined Networking (SDN) and Multiprotocol Label Switching (MPLS). Alibaba Cloud is a fully integrated part in the Vodafone cloud model and includes Vodafone’s security features. Vodafone started as a reseller of Alibaba Cloud in December 2016 and now claims its sales in this area is increasing rapidly—sales have increased from 10 units at the end of 2016 to more than 340 units by mid-2018. On top of reseller fees, Vodafone can bundle its connectivity products on top of Alibaba Cloud’s offerings and can act as a systems integrator for complex applications. Vodafone also benefits from Alibaba Cloud’s engineering and innovation, as Alibaba allows Vodafone to offer cloud services and components it could not offer through its own cloud.
Venturing into New Areas Together |
IMPACT |
Both Vodafone and Alibaba are now venturing into areas they could not address as separate companies. For example, Vodafone alone could not be price competitive against larger web-scale companies such as Amazon with its own private cloud and could not keep up with the pace of innovation of the World Wide Web. At the same time, Alibaba Cloud—being a Chinese company—could not have entered the European market on its own, especially during a period of general skepticism against anything Chinese. Alibaba has implemented stringent security requirements and is compliant to German data protection laws, and its security certificate is applicable throughout the European region. Moreover, data transport can be secured through Vodafone’s MPLS network, allowing end-to-end security for a variety of use cases and Alibaba takes advantage of Vodafone’s 24/7 German customer support and the carrier’s unified billing platform
The partnership is the best of both worlds. Alibaba Cloud can benefit from both Vodafone’s reach into the German market and Vodafone’s enterprise sales force that can resell Alibaba Cloud in many different verticals, while Vodafone will get access to Alibaba innovations and will host a public data center on its own premises. Arguably, this deployment and business model for cloud computing is a success story not usually found in the telecoms domain and opens a window of new business opportunity for Vodafone’s German clients in Asia
For UnTelco, Partnerships Provide Exceptional Value |
RECOMMENDATIONS |
In many cases, cloud services are an integral component of UnTelco business models for both consumer and enterprise markets. Vodafone claims to have benefited from partnering with a cloud giant in many different cases, as illustrated below.
All of these partnerships and commercial engagements have allowed Vodafone to enter markets in which they could not previously access or expand their footprint—namely, in the transport, media, health, and automotive segments. Vodafone claims to be taking its learnings from the German partnership and expanding globally. These examples illustrate successful UnTelco business models that are grounded in connectivity and local reach that only mobile service providers can offer. Vodafone is implementing the coveted end-market business models the industry is currently discussing for 5G and network slicing—long before these new technologies are in place. ABI Research expects more of these types of partnerships to flourish and expects more mobile service providers to partner with cloud computing leaders to address end-market applications. On the other side of the equation, mobile service providers can be a viable route to market for cloud giants that could not otherwise enter these markets—such as Alibaba’s entry into the European market. Alibaba complies with the very strict German security laws and has managed to create a healthy pipeline in a closed market. Partnerships with mobile service providers could expose western European markets to innovations created in China and create partnerships that have exponential value for both parties.