Cloud opportunities force telcos outside ‘comfort zone’

Service providershave a great opportunity in the small and medium enterprise cloud services market because of the many communications touch points they already have into enterprises for communications services.

“If they can build credibility over time for more than just communications services, they can truly become the ‘trusted advisor’ for more,” including managed cloud services, said Scott Hamilton, head of enterprise research for Analysys Mason, author of a new report detailing service provider opportunities in the cloud.

Though many of the service providers Hamilton interviewed for the report boasted they already play such a “trusted advisor” role, Hamilton contends they are overstating their influence. But, emerging cloud services offer a way for CSPs to gain that status.

“When you look at companies like Vodafone, Orange, France Telecom and Comcast —you see how they are structuring the relationships to add pieces of cloud solutions and increase stickiness over time,” said Hamilton, noting that smaller players like Cbeyond, XO and even CLECs and rural providers in some states are also aggressive in the way they are approaching managed and hosted services as a foray into expanded cloud offerings down the road.

“It starts as a nice marginal business that increases loyalty and adds incremental revenues without a lot of up-front sales costs because you are already in there providing communications; eventually, you can get into more IT services and creative bundles that go beyond just communications,” he envisions.

To become known as more than communications players, Hamilton believes service providers must form partnerships with well-known IT partners (for example, a cable provider selling Microsoft-branded hosted solutions or a telco offering high-performance IP network services alongside Cisco). Such partnerships build credibility first and over time allow them to become a key technology advisor, not just a communications source.

Because service providers already have data centers and experience managing large amounts of equipment, technicians and fleets, not to mention the OSS/BSS aspects associated with those networks, they have an advantage over other pure IT players or cloud plays. “The CSP issue is more of a marketing and sales question. How do they market themselves as more than providers of Internet, broadband connectivity, mobile and voice? To say they will also sell IT-related services and applications will take some marketing effort and good partnerships to build credibility outside communications at first,” said Hamilton.