According to a Huawei article the digital transformation of industries can be divided into three stages: connectivity (of equipment and processes); system monitoring/optimization; and intelligence. As applications and networks evolve toward SaaS and SDN, companies are demanding greater connectivity. At the same time, the fast pace of technology obsolescence means that enterprises want to consume connectivity as a service rather than building their own infrastructure.

Large companies focus on international network access acceleration and the deployment of hybrid cloud. Midsized companies seek the flexibility of dynamic bandwidth and elastic computing. Small companies need one-stop ICT services to avoid getting bogged down in non-core activities. These differing requirements present opportunities for ICT service providers including telcos, especially the system monitoring aspect which has traditionally been an area of greater transparency for telecom operators than cloud platform providers. Adding intelligence (AI, big data analysis) into the mix is arguably a greater challenge for telcos; one where enterprise software vendors and IT service providers are better positioned.

According to a UN report on the "information economy," the ICT industry has historically been supply- rather than demand-driven. Vendors have pushed services based on the available technologies rather than on customers' needs. However, the ICT industry is shifting to be more demand-driven. Cloud services in the future will not be limited to data centers, but will rely more on connectivity and provided in an end-to-end manner. From the UN's perspective, this is important for its fight against poverty by enabling a reduction in information search and transaction costs, and improved communications within supply chains leading to increased market efficiency.

The telcos' advantages in the enterprise market versus cloud providers include localized professional services, security, bandwidth and quality of service. The challenge for telcos is to achieve cloud-network synergy: making cloud the gateway to develop new B2B services. Telcos must leverage their strengths to help governments and enterprises around the world go digital.

One example is the solution Huawei provided for Guangdong Telecom, which spanned Cloud Communications (PBX, video conferencing, contact center), Cloud Connectivity (VPN, mobile, leased line), Cloud Services (server, storage, desktop), and Cloud Applications (IoT, CRM, office mobility). Huawei claims the solution reduced the total cost of ownership for enterprises by packaging together cloud services and traditional fiber services. It also reduced the upfront cost and obsolescence risk for enterprises by allowing them to lease the customer premises equipment. Huawei claims that Guangdong was able to increase its enterprise customer base by 300,000 and raise ARPU by 1% by adding these cloud services to its portfolio. Guangdong was also able to reduce opex significantly by replacing the old TDM PBX infrastructure. Enterprise customers were happier too with churn reducing by 1.5 percentage points.

Based on this case study it would appear the primary benefits for Guangdong Telecom of adding cloud services to its portfolio were new customer wins, reduced customer churn and reduced opex.

This blog is sponsored by Huawei.

— James Crawshaw, Senior Analyst, Heavy Reading