In the digital world, telcos face a much more dynamic market with emerging services and technologies, changing market demands, and new business models compared with the traditional one. In the competitive battleground for new customers, growing telco revenue beyond connectivity is a top priority for today’s service providers. 

Previously, telcos were limited in their revenue-generating avenues to connectivity service — only able to charge end users for voice, broadband, etc. Digital service has opened up a new revenue stream for telcos, and the launch of cloud, mobile payment, e-Commerce business create an abundance of opportunities. Many telcos are now leveraging their existing customer base to grow their digital revenues.

	Connectivity service Voice, Broadband, ITV, etc.	Digital Service Cloud, Payment, e-Commerce, etc.
Service	Strengthen core competencies	Innovate and explore new opportunities
Strategy	Solve customer needs	Proactively identify and meet customer needs
Ways of thinking	Known unknowns	Unknown unknowns
Level of difficulty	Moderate	Challenging

Hyperscalers such as Microsoft, Amazon, Google and Alibaba Cloud, meanwhile, are growing their own digital revenue in a big way. They have increased their investments and presence in the telecom industry while telcos show strong interests in the partnership, but remain cautious.

Telcos have yet to develop a clear strategy on how to leverage the partnership to build a stronger value proposition. Many of the existing collaborations are a bit hit and miss. How to take its own path toward digital business and grow digital revenues in telco-style? This has been a big challenge for telcos.

Which digital services are the ones that operators should focus on? According to our analysis, cloud business is the most promising, as moving to the cloud is more or less considered by most enterprises today as an effective way to achieve business resilience and cost efficiency. And more than 90% of enterprises have adopted cloud in some form, especially customer journey-related applications. Gartner’s research says by 2025, at least 30% of Tier-1 CSPs will partner with hyperscale cloud providers to satisfy their demands for both public cloud and private cloud.

How are hyperscalers doing in their own cloud business? According to Gartner, the top four in the global cloud computing market in 2021 are Amazon, Microsoft, Alibaba, and Google, where AWS controlled 33% of the market and Microsoft took second place with 21% market share. It is worth noting that Microsoft is a latecomer. Its market share was small in its incipient stage, and then expanded step by step until it occupied 1/5 of the global market share.

Microsoft’s cloud strategy differs considerably from Amazon’s. AWS provides Infrastructure as a Service (IaaS) – building data centers in each region, purchasing servers and storage, and then leasing them to customers. Microsoft, a giant in the computer software industry, entered the cloud computing market by offering Platform as a Service (PaaS), which not only provides cloud computing infrastructure, but also allows customers to configure operating systems, middleware, etc., thus building a software development platform where customers can focus on developing their applications without considering underlying complexity. Furthermore, Microsoft grows Software as a Service (SaaS), and has launched numerous successful products, such as Office 365, Dynamics, Teams, etc.

Microsoft offers better services, higher prices, and thus reaps higher profits. The approach that Microsoft has taken to grow its cloud business is worthy of all cloud vendors, telcos as well. But unfortunately, whether it’s AWS or Microsoft, telcos are limited in how they can work with them on cloud business.

For telcos, there are two ways to develop ‘Telco Cloud’, namely Resell and White Label. Reselling business model is a low-investment, low trial-and-error cost, hit-and-miss collaboration model where telcos resell cloud offers of cloud vendors. Telcos are actually the agents of cloud vendors. While white labeling is selling cloud offers under telcos’ own brands, backed by their own BOSS system and operating capabilities, as well as hyperscalers’ technology infrastructure.

In the early stages of business development, telcos are better suited to the reselling model, but once they find a certain path, they should adopt white labeling. Among the top four hyperscalers, only Alibaba supports white labeling, which gives telcos more freedom and makes it easier for them to create their own style. Many telcos such as China Telecom (Tianyi Cloud), Telkomsigma (Flou Cloud), Zain KSA (Zain Cloud), etc., are cooperating with Alibaba, and have been determined to create their own cloud brands from the beginning, building an economic moat that promises to develop into a second curve for telcos.

According to our analysis, when telcos develop cloud business, they can employ the 3 very important strategies – multi-cloud, cloud and network convergence, PaaS/SaaS – to unlock the full potential of cloud business.

• Multi-cloud deployment: Multi-cloud is the practice of using more than one cloud platform for best fit-for-purpose or to prevent vendor lock-in. In their traditional business, telcos tend to choose multiple vendors to reduce risks – network and IT systems are provided by different vendors, and even IT systems are jointly provided by multiple vendors. Similarly, in the cloud business, telcos need a multi-cloud strategy to avoid being at a competitive disadvantage with hyperscalers. Telcos can use the technology infrastructure from multiple cloud vendors while leveraging a set of BSS/OSS to achieve unified multi-cloud management, boost cloud monetization, and ensure a consistent customer experience.

• Cloud-network convergence: Cloud-network convergence is a strategic priority for telcos. Public cloud service is inseparable from network connectivity. Rather than selling their networks to cloud vendors for reselling, telcos can integrate their networks and clouds more efficiently. Telcos can create synergy in the construction of the connectivity and cloud, enabling unified management and real-time monitoring, as well as on-demand and dynamic control of both resources. Their BSS/OSS systems should also have the capabilities to manage cloud and network in a unified way and drive the monetization.

• PaaS/SaaS: The PaaS/SaaS capability is the key to win the second half of cloud computing business. Telcos can make the most of their existing PaaS capabilities in communications, messaging, big data, AI, etc. to empower developers, or work with cloud vendors to rebrand and resell their SaaS applications. For example, China Telecom rebrands Alibaba’s DingTalk, a collaboration tool similar to Microsoft Teams, and then creates their own SaaS application “Tianyi DingTalk”.

To sum up, in the cooperation of digital business, telcos can rebrand and resell hyperscalers’ technology platforms, even learn from their operational capabilities, to build their own business strategies and find their unique positioning and value. In this context, Whale Cloud, a leading technology company straddling both telecoms and Internet, will be your ideal choice to maximize the cooperation between telcos and hyperscalers.

Find more: online.iwhalecloud.com

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