Boosting Telco Cloud Economics


IDC’s survey says, something like 60% of enterprises in this part of the world have at least two clouds, so that’s an extraordinary number. I was with IDC for the longest time and that number was very, very small two or three years ago. So a lot of enterprises, there’s a huge amount of enterprises out there interested in cloud and adopting cloud as well.
Now, from a service provider standpoint, anyone from an telco integrator, an OTTP player, there has been a huge amount of data centre build up in this part of the world. If you look at some of the press releases over the last six to 12 months, IBM, Google, Microsoft, Amazon and so on they’re building what we call onshore data centres in this part of the world. They recognise the fact that data sovereignty, security, are big major issues among enterprises. They are putting a lot of investments in building up these data centres right here in Asia serving Asian based enterprises.
Now, that’s one part of the equation. The other part of the equation that shows us that cloud is really attracting a lot of dollars is what we call VC funding from an industry watcher’s standpoint, any analyst, we track, we follow very closely where VC dollars are going, because usually where VC dollars going that’s where the growth is. So if you look at VC funding overall internet or anything mobility usually attract the largest amount of VC funding in the last 12 to 24 months, second is cloud, third is big data.
So, from cloud perspective these are some of the big announcements over the last 12 months. New Relic, which is a start-up in Silicone Valley, they are a big data analytical software service cloud provider. So if you have two big topics, big data, cloud, you get a lot of VC attention, they just had $100m series B funding.
Another good example is [Anaplan] basically they are a processing company challenging Excel, they got another $100m worth of funding. So, like all start-ups basically if you don’t get bought up, I know a few start-ups who are just sitting around waiting to be bought up. I spoke to Wedge yesterday, they don’t seem to exist in two to three years time, they think they will be bought up by someone. If they don’t go down that route I think the IPO route is basically the next route.
So this is probably one of the most successful cloud IPOs in the last two or three years, Workday basically. They are worth something like $18b market cap at its peak and they have something like $350m worth of revenue., so the multiples are humungous.
The kind of valuation we’re seeing from a cloud perspective is just huge. So that’s the kind of money that people are willing to pour into cloud technology start-ups and cloud in general.
Now, we’ve talked about a lot of discussions over the last two days basically how conversations among cloud have changed as well. It’s very rarely a CIO discussion, it moves throughout the entire enterprise from a CMO, CFO, CTO and so on. So cloud, the fundamentally driving push for cloud adoption for the last five years has always been cost optimization, it’s cheaper, you save a lot of costs. Someone mentioned yesterday that because of all these clouds the integration factor, the integration cost is so much more expensive it makes your whole cloud endeavour actually more costly than previously.
So this is one good example about a cloud deployment whereby it was not entirely cost driven. So, Panviva, it is actually a Verizon customer. They are an Australian start-up which is a great hunting ground for cloud customers actually. They were a on-premise software provider and with global aspirations of the Australian, basically 50 of them from a headcount perspective scattered across the world. Now, like all start-ups they struggle, they struggle with funding, they struggle with competing against more established rivals, more oil slick marketing that they have to gain up to and again faster than their competitors.
Now, their challenge has always been how do I move faster than my competitors being a start-up as well? So, Panviva decided to go down the cloud route in two ways basically. They moved their service delivery into the cloud, so basically in the past they were an on-premise software provider. Now today they are software as a service provider, they are leveraging a third Verizon cloud, the infrastructure basically to deliver their software as a service. The result basically they’re faster, they’re quicker deployment. In the past it was a six month endeavour to deploy anything on-premise, today they can provision that in a matter of minutes, a matter of hours.
The other benefit is basically lower cost of delivery especially for a start-up whereby cash flow is very important, lower cost of delivery is essential. Now, the second way they’re trying to leverage cloud is basically like most start-ups they’re moving their internal infrastructure to the cloud share point and eventually all their ERP applications will be moved into the cloud. Reasons for that is not cost savings, it’s better global collaboration. So basically the entire team globally can have that same document anywhere, any time, any place and as a result of that they are more customer centric. So all that time they save can actually be used to service their customer better.
So cloud is basically a customer centric IT, it actually allows them to be more agile, it’s no longer a predominantly cost saving argument for a lot of enterprises in this part of the world. So I think IDC showed you their growth trajectory for cloud, something like $15b in 2017 for Asia Pacific with Japan as well $16b that’s our Ovum projection basically. And these are all the countries in there, it’s basically something like 22% growth across the region. I don’t think that there’s any country in this part of the world that is really not experiencing anything less than double-digit growth, so that is the truth. We are really right at the beginning of a huge growth trajectory for cloud services.
Now, back to my original argument, despite all that growth trajectory, despite all the fact that’s stated for the last five years that cloud is really a game for telco to lose, because of all the data centres up there, you have huge investments in data centres really, owned and network is really cloud should be a telco game. But based on our market share for cloud services globally, the top 10 players here, there’s not a single telco in the top 10 player as a cloud service provider. The closest to the top 10 for a telco is T-Systems they’re ranked 12th or 13th. But technically T-Systems is an integrator rather than a cloud provider.
Adrian Ho, Principal Analyst, Enterprise Telecoms, Ovum
Courtesy: NetEvents



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