The most significant role of telecommunications companies is keeping people connected: keeping companies in touch with clients globally, keeping colleagues in sync while working from home, and keeping relatives in contact. During the COVID-19 crisis, this role has become even more evident and crucial. We’ve watched how telcos have managed to facilitate remote work and learning, enhanced support of healthcare systems, aided governments at both national and local levels, and provided a solid backup for corporate customers — all to keep vital processes going.
Even though telcos are used to relying on hardware to provide their network connections, the last few years have brought many changes. With the rise of cloud-native 5G technology, an unexpected spike in data traffic due to the global pandemic, a surge in broadband services usage, and increasing customer demands, telecom companies are challenged to find ways to modernize networks. To do so, they turn to virtualized and cloud architectures.
Justifying the need for cloud adoption
The main reason for telecommunications providers to start adopting cloud computing is the need to save money. I don’t mean general reductions in spending only — which by all means is a goal in itself — but rather cutting expenses of various parts of the organization. On-premises systems and related license costs take a lot of money and dedication to maintain. On the contrary, cloud deployments with on-demand scalability and additional services (and without the need to maintain costly servers) are cheaper.
Additional key factors here are the flexibility, scalability and agility of cloud systems compared to on-premises systems. As we see in real-world cases, telecom systems face activity peaks, both operationally and in terms of data storage. This happens, for example, on Christmas or any other holiday. Most of the time, activity is much lower. Thus, on-premises systems have to be configured to withstand those peaks, requiring a bunch of servers at a cost of billions of dollars that are unused on regular days. With a cloud deployment, you pay as you go, using automatic vertical and horizontal scaling to keep expenses lower on “regular” days while ensuring the immediate availability of additional capacity.
Apart from the scalability factor, the cloud adopts AI/ML tools as COTS, which tempts telcos to create cloud-native data lakes, exploring enterprise data end to end while still saving on database license costs. Obviously, every case should be considered separately, including regulatory requirements and total costs. But the synergy of cloud tools cannot be ignored.
Latest cloud adoption trends among telcos
It’s fair to say that telcos are not new to cloud computing, as the first big shift to the cloud happened in 2012. Some major telecom operators like AT&T, Orange, Telecom Italia, Deutsche Telecom and Telefonica have introduced a network functions virtualization (NFV) concept and transitioned from purely physical networking to virtual network functions (VNFs) to automate portions of their infrastructure.
Cloud-native network functions (CNFs) essentially offer a new way of providing network functionality and configuring VNFs that is more dynamic, flexible, and easily scaled. They also appear to make a better solution for a smooth transition to 5G. According to Analysys Mason, “CSPs will cumulatively spend $114 billion on network cloud (which includes network functions, cloud software, hardware, and related professional services) between 2019 and 2025.” The next few years are about to bring a massive shift of telcos to the cloud, which will mean greater focus on essential business services rather than on IT, server updates, and maintenance.
Cloud benefits for telecom providers
- Lower operating costs. Cloud computing is showing the ability to cut operational expenses on hardware and software maintenance and allow greater infrastructure scalability.
- Data center efficiency. Cloud services are created to enhance data center efficiency for carriers. Adoption of cloud technologies by telecom providers increases the longevity of data centers and servers.
- IT independence. Reducing the number of on-premises systems and hardware maintenance gives telcos the ability to widen the array of services they provide via a vast cloud computing network.
Main barriers to cloud adoption
- Lack of internal skills and expertise. The first barrier to cloud adoption today is that telcos lack internal expertise and experience in cloud-related areas. IT departments of telecom companies have limited knowledge of cloud adoption and migration strategies, so operators tend to seek external providers to cover the gaps.
- Choosing a cloud services provider. The situation is complicated by the choice of cloud service providers. Right now, the most popular are Azure, AWS, GCP, Oracle, and IBM cloud — which is vastly used in the telecom industry, by the way. This is where gaps in internal competencies and resource availability appear, especially in big projects involving cloud migration or cloud-native re-engineering. That’s been exactly the case for one of the biggest telecom operators in Ukraine. 130 Intellias experts helped them with re-engineering their data warehouse in the cloud, and it took one year to complete the task. Telecom operators simply lack people with expertise in various systems like AWS and Azure to implement a program like this.
- Security and privacy. Another barrier to cloud adoption for telcos is regulatory issues. Storing data openly and without proper encryption, especially in countries with no local AWS, Azure, or GCP data centers, is quite risky in terms of regulatory compliance. Systems are still considered quite vulnerable to hyper jacking. The cloud and associated technologies evolve rapidly, and the gap between cloud services and legacy systems creates vulnerabilities criminals would like to exploit.
- Costs and maintenance. One of the major barriers to cloud adoption is a lack of trust. And when I mention trust, I also mean that telcos are still unsure whether cloud services would be more beneficial than on-premises systems in terms of cost-savings. There is major uncertainty that the costs spent on a cloud system will be less than the total cost of ownership for an on-premises system. There is still mistrust of cloud systems, and bill shock is a significant part of it.
Ways to overcome cloud adoption obstacles
The first thing telcos have to do is build on their internal expertise with the help of top IT companies. Telcos can use IT companies for quick solutions or system implementation and to gain skills and increase the level of their own expertise. This is what the Ukrainian telecom services provider we worked with did, relying on our help as an expert in the field.
In this way, operators gain experience from IT companies, get a background in cloud solutions, accumulate expertise and keep all the key roles — architects, managers of similar projects, security architects — inside the company.
- Proof of concept implementation. As for commercial issues and bill shock, these obstacles can be overcome with proof-of-concept (PoC) projects. Telcos tend to perform stress testing of cloud solutions by using synthetic data or actual sample data to see how much it would cost to implement a system in the cloud. Then they compare it to the cost of an on-premises implementation in their own data center to eliminate the chances of bill shock and find out whether a cloud solution would be cheaper. PoC projects are quite helpful here, as they provide the study loop and lessons learned on deducting cloud costs after the migration exercise.
- Building strong partnerships. We also see the tendency to create closer partnerships between telcos and IT companies and closer partnerships between telcos and cloud services providers, where cloud services providers see telcos as strategic partners and offer substantial discounts and consultancy for implementing cloud projects.
- Securing personal data. Regulatory issues are the main obstacle to cloud adoption in countries with no local data center operators. In these situations, telcos have already started integrating data anonymization solutions to protect sensitive data and subscribers’ personal information. Basically, operators upload data in an encrypted format. As such masquerading systems are implemented, they lower the risk of data exposure and help with regulatory compliance.
The bottom line
Cloud computing has already had a significant impact on the revenues and budgets of telco businesses. Cloud computing has proven to be more cost-efficient and a more flexible and agile way to store and work with data. With the help of cloud services providers, telcos can increase the popularity of their services, broaden their offering and improve overall business performance.
The final success of cloud adoption by telcos is related to several variables. First is the gradual development of internal expertise with the help of top IT companies. Here, telcos can learn from experience and use IT services as an agile on-demand resource to run their own projects.
Apart from that, it is immensely important to build close partnerships with cloud service providers, providing solid discounts for creating and implementing common strategic projects to cultivate the local market. These two strategies will ensure growth in the number of telcos shifting their workloads from on-premises data centers to public clouds.