Are telcos agile enough to offer cloud services?

Given all the hype around cloud services, fewer telecom providers than you might imagine actually have a specific strategy to deploy cloud infrastructure or an understanding of how to make money in the cloud, according to a new report from the TM Forum.

Based on survey from the recent Management World show in Dublin, the report found that that only 27% of telcos had a specific strategy for cloud services and had had the monetization model approved.

Interestingly, just over half of the telcos surveyed for the report said that they would consider a ‘dumb pipe’ model – focused on network services rather than the cloud apps and content running over them.

Even with a focus on simply distributing content, key competencies within the telco world are still necessary to make it work – network quality, complex billing and charging and customer service. And certainly the issue of culture can never be underestimated. If it is simply going to be too hard to transform the culture of the company into a ‘content provider,’ then the best strategy may be to stick to what a company does best, the report found.

When asked to choose between the importance of providing new services or adopting new business models as a step towards becoming an innovative telco, although most that did choose leaned towards ‘business model’ the overwhelming majority said ‘both’.

When asked about which segments of the market they thought would be the most responsive to cloud based offerings, the small and medium enterprise market came in first, at 40%. However, 36% of respondents said cloud services would impact businesses of all sizes.

The strengths and weaknesses of telcos offering cloud services were also discussed. Financial strength was top of the list. The ability to scale is crucial and telcos are certainly good at that. Customer information was seen as a key differentiator but although telcos have an enormous amount of customer data, they need to become more sophisticated in how they use it (CP: Telco analytics not in its infancy, improving every day).

Telco weaknesses in the cloud business centered on speed of reaction – the market is being driven by smaller, agile companies and there were questions around whether telcos are agile enough to compete effectively. Acquisition is one solution to this problem (and many carriers including Verizon and others have done big cloud deals), but the volatility of the market can make finding the right deals challenging. Other weaknesses included the ability to compete on cost, internal skills and culture, the ability to partner effectively and the fact that a telco’s core competency historically lies in running a network.

Interestingly ‘customer perception’ was seen as both a strength and a weakness but cloud services are essentially communications services and for that customers would tend to choose a communications service provider.