Current Telco Cloud Developments and 5G Enterprise App Stores

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By Dimitris Mavrakis | 3Q 2019 | IN-5566

Several Tier-1 Mobile Service Providers (MSPs) have recently offloaded or outsourced data centers previously used for non-telecom network use cases. At the same time, a number of Tier-1 MSPs have announced partnership deals with Webscale and IT companies for the development of cloud apps.

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Leading Tier-1 Operator Deals with Cloud Giants

NEWS


Several Tier-1 Mobile Service Providers (MSPs) have recently offloaded or outsourced data centers previously used for non-telecom network use cases. At the same time, a number of Tier-1 MSPs have announced partnership deals with Webscale and IT companies for the development of cloud apps.

The first of these was Verizon with its data center sale to Equinix in April 2017, a deal that included 27 data centers located in the United States and Latin America. More recently, Vodafone announced partnerships with Alibaba Cloud and IBM to get access to software development tools and cloud services. IBM will also provide managed services for Vodafone’s cloud and hosting unit in an eight-year engagement worth US$550 million, and Vodafone will get access to IBM’s expertise in enterprise verticals in order to develop applications for 5G, the Internet of Things (IoT), and edge computing.

A more recent—and aggressive—partnership was struck between AT&T, arguably one of the biggest and most profitable Tier-1s worldwide, and Microsoft. AT&T will now be “public cloud first” and will migrate all its non-network cloud workloads to the public cloud (specifically, the Microsoft Azure cloud) by 2024. This means that AT&T will now rely on third parties for non-core telecoms application hosting and development. Most—if not all—MSPs are expected to follow the same strategy sooner or later, once they understand that their core expertise is running carrier-grade networks, not managing cloud businesses or enabling application developer ecosystems.

Where Does This Leave 5G Enterprise Applications?

IMPACT


Selling data centers that were used for cloud hosting is one thing; completely outsourcing non-network workloads is another. In the era of 3G and 4G, cloud environments were limited to the application and Web hosting space. With 5G, however, enterprise vertical applications will need to be deployed in a reliable, low-latency environment (namely, the telco cloud). Nevertheless, the development of telco cloud for network workloads is not developing as fast as expected.

The European Telecommunication Standards Institute’s Network Function Virtualization (ETSI NFV) was founded in November 2012 to drive the use of commoditized hardware (namely x86 servers) and software at the heart of the telecom network. Seven years later, NFV deployments have morphed to what are now called cloud-native networks, where resource pooling, modular software, and containers are considered to be the de-facto standard. However, the deployment of these concepts is still lacking, and several MSPs are still contemplating the risks and rewards of moving from a hardware-based architecture to this cloud-native one. 5G will necessitate cloud-native deployments since network slicing, ultra-low latency applications and the nature of enterprise vertical applications will require both flexibility (that comes with cloud) as well as reliability (that comes with carrier-grade infrastructure).

An important question for both MSPs and enterprise end users, therefore, is where 5G applications will run from. Many of them will require trusted, reliable, and low-latency environments close to the enterprise end users. So far, application hosting on the public cloud has been incoherent and relatively unreliable compared to the 99.999% reliability MSPs aim to offer and enterprise users are expecting. However, if Tier-1s no longer have telco cloud capabilities, what will their future role in the 5G enterprise app ecosystem be?

5G Enterprise Apps Will Live in Public or Hybrid Clouds

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It is now becoming clear that mobile service providers are realizing they cannot be the central components of the new enterprise ecosystems created by 5G and partnering to make sure they at least have some control. The AT&T and Microsoft partnership—making AT&T public-cloud-first—is a sign of this. This is not necessarily an ominous development for MSPs or Webscale companies for a number of reasons:

  • MSPs have realized that they cannot enable developer ecosystems for enterprise applications. It is natural for AT&T to partner with a leading Webscale company to achieve this and Microsoft is a perfect fit.
  • In the long term, Microsoft will gain access to a high bandwidth, low latency, and edge computing platform where many of its existing applications can run.
  • Microsoft may have the opportunity to create a new market for hybrid clouds that offer near-carrier-grade reliability for 5G applications. The target market may consist of both MSPs and enterprises themselves.

These newly emerging partnerships indicate that the 5G enterprise application market will develop in new ways, perhaps driven by non-telecom companies. This may be necessary in the proprietary and waterfall development driven telecoms environment, and Webscale companies could indeed provide the next wave of innovation for 5G. Leading Tier-1 MSPs should partner with Web giants and take advantage of the agility and developer ecosystems they have created.

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