Telecom operators are demonstrating that the bottom line is becoming their priority as they move into new verticals. Business technology journalist, Antony Savvas looks at their efforts.
Monetisation
Most telcos are eager to open up their networks to properly monetise their 5G networks, according to communications analyst Analysys Mason.
It found that three quarters (73%) of communications service providers (CSPs) see opening up with APIs (application programming interfaces) through ecosystem partners as an “operational priority”.
APIs and SDKs (software development kits) will enable software developers to create programmes that offer new 5G services to customers, says the analyst.
Such services, including focusing on higher-margin tailored offerings, will help telcos move away from simply stacking up customer numbers with the promise of faster 5G connectivity as part of basic packages. Such packages will not make any real incremental difference to their bottom line.
A $34 billion market
On behalf of CSP infrastructure provider Nokia, Analysys Mason questioned 44 CSPs and 67 software development firms worldwide about services delivered through programmable networks. Nokia reckons the market for these services is expected to grow from $12 billion (€10.78 billion) in 2022 to a gigantic $34 billion (€30.56 billion) by 2026.
APIs have a significant role to play in monetising 5G because they can expose the deep functionality and data within telecom networks, allowing developers to then develop new use cases for their customers, both in the enterprise and consumer space.
However, around half the developers questioned cite “network issues” that could cause a block to progress in this market. They say they need more insight and control over how network quality may affect the performance of their applications, when trying to utilise cloud and SaaS (software-as-a-service) services to deliver their offerings.
In addition, three-quarters (76%) of developers say network APIs (application program interfaces) must be easy to use, and that complexity and the lack of API documentation from CSPs currently deters them from using network APIs.
“CSPs have the opportunity to generate incremental revenue through collaboration with developers and other CSPs to create a larger ecosystem,” says Caroline Chappell, a partner at Analysys Mason. “CSPs should strongly consider contributing their APIs to a third-party, engaging with developers, and building an ecosystem that includes other CSPs, in order to prevent fragmentation that could hinder the viability of this opportunity.”
Shkumbin Hamiti, head of network monetisation platform, cloud and network services, at Nokia, added: “In the 5G world, a new digital ecosystem is emerging, with multiple service chains of hyperscalers, infrastructure, networks, and applications being created on a case-by-case basis to create end-user value.
“These findings underscore the appetite to drive this ecosystem forward, but also highlight the work to be done to facilitate a deeper understanding between CSPs and developers.”
With the telco cloud edge being a prime target for new services amongst the developer community, the opportunity, and CSPs’ need to modernise to link with new ecosystems, could not be clearer.
Vertical expansion
Virgin Media O2 Business is aiming to bolster its product line-up with the help of Telefonica Tech, the digital business unit of global telco Telefónica. The effort will see the telco benefit from increased business in cloud and security services supplied to enterprises and public sector organisations.
Customers will be supported by Telefónica Tech’s cloud managed services team, which is based in the UK. Telefónica Tech UK and Ireland now has more than 1,000 technology professionals following the acquisitions of CANCOM UK&I and Incremental.
“Our growing cloud networking expertise, coupled with our new partnership with Telefónica Tech, will help customers to migrate and manage their data and systems in the cloud, enabling them to be more efficient, productive and secure,” says Jo Bertram, managing director, business and wholesale at Virgin Media O2 Business.
María Jesus Almazor, CEO of cyber security and cloud at Telefonica Tech, adds: “Our managed cloud and cyber security services will enable Virgin Media O2 Business to offer its customers the most comprehensive threat prevention, detection and response techniques to ensure a secure digital transformation.”
Again, this is the sort of higher-margin business that every telco should be aiming for, and the contribution of Telefónica Tech to its group’s growth is clear.
“It has been just over 18 months since CANCOM UK&I was acquired by Telefonica Tech. The business has been on a mission to improve its brand recognition and demonstrate the significant range of IT services and expertise it has to offer,” says TechMarketView analyst, Simon Baxter.
“The company is targeting revenue to grow to £350 million (€398 million) in 2026, representing annualised growth of around 20%.” Healthcare, financial services, manufacturing, retail, construction and the wider public sector are the key target verticals for Telefonica Tech.
Mixed cloud bag
While nimbletelcos can certainly take advantage of the new opportunities out there, the big three cloud providers of Amazon, Microsoft and Google are facing a slowing cloud services market at their end.
While all three saw cloud sales increase over their latest quarters year-on-year, the figures in all cases show growth decreasing. In Google’s case, the major bright spot is that it is now profitable for its Google Cloud Platform for the first time, after all the infrastructure outlays it has made to try and make up ground on the top two.
Industry reaction to the performance of the big three is mixed. “Despite economic uncertainty, the cloud market remains fundamentally strong, serving as the backbone for business operations and growth,” says James Campanini, CEO of Amazon Web Services partner VeUP.
“While many organisations are looking to reduce overheads in anticipation of further challenges ahead, the elephant in the room is cost optimisation. The truth is that many companies lack the resources and expertise to optimise their spend in this area.
“Addressing this issue requires businesses to work with dedicated cloud partners who can enable them to realign, access a broader array of services and operate more efficiently to get the most out of cloud and their cloud provider.”
Mark Boost, CEO of Civo, the open source cloud software provider, says: “It’s telling that Google Cloud’s first profitable quarter comes at a time of high economic pressure for businesses across the economy. The first quarter has been a time of tightening budgets and minimising costs, yet Civo’s research finds the cost of cloud has jumped 66% on average when compared to previous years.”
Boost maintains: “Public cloud has huge potential for organisations of all sizes, but not if the costs are unmanageable. Cloud should be an open route to innovation, not a burden where the price outweighs the benefits.
“The fact there is a whole business space, FinOps [financial operations], dedicated to cloud price estimation services, highlights how price obfuscation and a lack of transparency has become the status quo, a situation that would be regarded as unacceptable in other industries.”
Matt Hawkins, CEO of cloud services specialist Cudo Ventures, adds: “Thankfully, there are thousands of network providers with spare capacity out there that provide sustainable computing power, and by linking these smaller players together, rather than relying on the big players like Microsoft, AWS or Google, the industry will benefit from a network that is both sustainable through better use of existing computing power and more cost-effective.”
The cloud services industry is evolving, and the hyperscalers themselves are part of ecosystems designed to address niche service needs, not least at the telco edge, so their current major dominance is by no means definitely permanent.
The author is Antony Savvas, a global freelance business technology journalist.
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