How telcos could conquer the cloud

"I believe cloud computing is going to be the real trend we've been waiting for," Nolle said.

Leveraging the network

One of the questions for telecom service providers is to what extent they can leverage their position at the bottom of the value chain in a cloud-based world – i.e., the infrastructure providers – to move higher up the value chain, toward the platform and application levels that allow for more differentiation and more value creation for end users. "[Carriers'] ability to add value, charge for value and differentiate from others is more challenged because they're at the bottom," said Andy Ingram, vice president of product marketing and business development for Juniper's data center business. "Amazon is in all three levels. The challenge for network service providers is: Can they move up the value chain?"

Some would say carriers could begin to one-up players like Amazon by using the service quality control that their networks provide. For small businesses using Amazon's cloud services, the quality of the service is determined in part by each business's own broadband connection, over which Amazon has no control. In that sense, Amazon's is a more "ad hoc, fly-by-night" approach, Ingram said. "On a more permanent basis, I can do something like MPLS or VPLS to provide a more secure, more traffic-managed connection between the data center elements."

Earlier this year Juniper and IBM demonstrated a case in which a carrier with a data center could scale its cloud power dynamically by redistributing lower-priority computing tasks, when needed, to a partner's data center over a VPLS network.

"I might have my own data center and pay IBM to be my overflow site," Ingram said. "I'll pay IBM a base amount to have the right to use [the overflow site], and then when I actually use it, I'll pay a higher rate."

Juniper's rival Cisco might say that integrating the network with the storage and computing functions most critical to the cloud – as their recent new product offering proposed -- could let carriers insert themselves more deeply into the cloud value chain. But critics have argued that the integration strategy Cisco announced recently seems more like a bid to expand the vendor's own market share than one to meet its customer's demands.

"My gut [feeling] is that [Cisco's data-center move] is a failed strategy in the long run," said Cogent's Schaeffer, a longtime Cisco customer. "There's an advantage to a holistic approach toward optimization, but I don't necessarily think the right approach is to build these God boxes that perform multiple functions because they tend not to be very good at any of them. The network operator can [leverage their natural advantages more by integrating the network with storage and computing], but I don't think it needs that device to do it. It just takes a little bit of gray matter on your shoulders and some hard work."

Moreover, rather than ask whether service providers can climb the cloud services value chain, Schaffer asks whether they should.

"It's not clear to me that moving up the stack is a better place to be," he said. "If you're a network operator, your inherent competitive advantage lies in your network, not necessarily in the guys in white lab coats running applications."