Why mobile network operator CFOs are rethinking their business models to cash in on public cloud – Part 1
Mobile network operator CFOs don’t have to be as number obsessed as Pythagoras to add up that operating their own data centres burns a big black hole in the balance sheet, writes Carsten Brinkschulte, the chief executive of Core Network Dynamics, in the first section of a two part article. Nor do they need to be as observant as Galileo to notice that the world’s top three public cloud operators – Amazon, Google and Microsoft – are spending stratospheric amounts of money on data centres for their rapidly expanding cloud businesses.
Add these two points up together and the logical answer is it’s just a matter of time before CFOs of mobile network operators (MNOs) insist their companies ditch expensive data centres and run their mobile core networks in the public cloud.
While MNOs are largely resisting a move to the public cloud for now, they are fighting a losing battle and being outgunned and outspent by public cloud providers. Regardless of how physically, emotionally, strategically or habitually tied to their data centres MNOs are currently, money talks and financial necessity will win the day.
With public cloud providers outspending carriers on infrastructure by a factor of ten, the financial rationale for adopting a public cloud model will soon become irresistible – if not vital – for carriers. And, as well as offering greater cost efficiencies alongside a more advanced infrastructure, the cloud offers more flexibility, scalability and ultra-low latency so carriers can remain innovative and nimble, staying one step ahead of their competitors.
MNO CFOs count the costs
According to a recent report by CBRW, the world’s top three public cloud operators have helped boost spending on data centres to record levels: during the first three months of 2018 over US$4 billion has been spent on data centres in North America alone. And as Amazon, Google and Microsoft continue to compete to increase their data centre footprint across Europe and the rest of the globe as well, their spending is set to skyrocket.
On the other hand, the continuing trend for divesting data centre assets continues. Verizon and CenturyLink both sold their telecoms data centre assets for billions of dollars in 2017. Likewise, other Fortune 500 companies are cashing in and selling their data infrastructure assets to the top three cloud giants and other providers who can furnish them with the services they require much more cost-effectively. Even financial firms and banks renowned for their caution are shifting their mind-set and have moved mission-critical applications to the cloud. Hot-on-the-heels of JPMorgan’s news that it had already begun migrating wholesale trading applications to the public cloud, UBS Group announced it was moving risk management, the most important part of its business, to Azure.
It’s no wonder that industry analysts, including Gartner, are projecting that the worldwide public cloud services market will rocket up from US$153.5 billion in 2017 to US$186.4 billion in 2018.
Project Belgrade: A bright star
As a shining example that running virtualised EPCs in the cloud is not just on the horizon but already here, Core Network Dynamics has worked successfully with Microsoft Research on Project Belgrade to build and deploy a sizeable LTE network testbed running on the Azure public cloud in the city of Cambridge, UK. Microsoft adapted a simplified cellular core to operate on the Azure public cloud and modified a small cell to reliably interface with it. The testbed, which uses TV White Space (TVWS) frequencies, is up and running and includes an optimised version of CND’s OpenEPC core network software.