Telecom companies that have invested in the cloud space -- and many have -- are now facing a new challenge: Can they deliver applications and business solutions via the cloud fast enough to compete with the likes of Amazon Web Services Inc. , IBM Corp. (NYSE: IBM), Microsoft Corp. (Nasdaq: MSFT), and even relative newcomer Google (Nasdaq: GOOG)?
Industry analysts see the current generation of cloud service buyers as more interested in buying business applications and solutions, not raw compute power. And that means they are less interested in infrastructure-as-a-service (IaaS) than in applications or software, delivered via cloud.
"The first generation of cloud buyers was more tech savvy," says Jillian Mirandi, analyst with Technology Business Research Inc. (TBR) . "It has taken quite a few years to cement cloud, but it's there now, and the next wave of users doesn't want raw compute power, they want the outcome -- better sales, improved customer relationships."
That pits the telecom cloud providers against the faster-moving, more IT-focused companies, notes Heavy Reading senior analyst Caroline Chappell.
"The telcos have been very much stuck on infrastructure-as-a-service," she says. "I expect them to do more software-as-a-service and platform-as-a-service offers, but most of them haven't gotten to that point just yet."
Where telcos have delivered applications, they have mostly been Microsoft apps, she says. Chappell does reference AT&T Inc. (NYSE: T)'s cloud collaborations via its PaaS offer, and Verizon Terremark 's recent foray into business-applications-as-a-service as positive signs. And she notes that telecom cloud players do have the expertise to help businesses move into a sometimes complex cloud environment -- but they tend to offer that help as part of a custom service, not a storefront of cloud-based application options. (See AT&T Lands Another Cloud Collaborator, Verizon: Major Apps Move Cloud-ward in 2014, and Verizon Scores Oracle Cloud Breakthrough.)
The problem, says Mirandi, is that Amazon, IBM, and Microsoft, in particular, are moving much faster to address the needs of the second wave of cloud buyers with cloud-based apps, and that's a concern for the telecom players.
"They are allowing customers to work with them, or work with partners to help run their cloud for them," she notes. "And in the process, they are making it easier for customers to consume their cloud."
Telecom operators aren't the only ones working hard to keep up or catch up -- in her recent reports, Mirandi has cited Google's efforts at playing catch-up in the cloud, and noted that Rackspace may find itself falling behind the larger cloud operators. Mirandi is impressed by Verizon's re-architecting of its cloud offer, carried out in October 2013, but feels they are still mostly aimed at larger enterprises and those with IT expertise. (See Why Verizon Needed a Cloud Reboot.)
"Verizon is taking steps to improve their partner ecosystem and simplify their cloud," she notes. "In terms of breadth and datacenter products and brand names -- they have the infra and networking in place -- it is going to have a lot of do with messaging and building out their partner relationships."
On the positive side, telecom operators have a base of hosted services customers they can leverage, Mirandi says, if they go to market with the right value proposition and marketing that addresses the needs of the IT departments, as well as the lines-of-business folks that represent the second generation of cloud buyers.
Another possible glimmer of hope: While businesses want their cloud-based apps to work seamlessly, they also want to have a truly hybrid environment in which all apps aren't necessarily based in a single vendor's cloud, Mirandi says. That could play to the advantage of a telecom cloud player looking to be a number two provider behind Amazon, IBM or another cloud operator.
— Carol Wilson, Editor-at-Large, Light Reading