With organisations of all sizes increasingly moving to cloud-based IT services, telecoms operators have the potential to tap this lucrative growth area. CommsMEA asks the experts about the nature of the cloud market in the Middle East and how operators can best take a piece of the action.
Viktor Kovàcs, Founder and chairman of Neostratus
Glen Ogden, Regional sales director Middle East, A10 Networks
Marwan Al Ahmadi, Chief business officer, Mobily
CommsMEA: How have cloud services developed in the Middle East in the past year?
Kovàcs: Awareness of the value of cloud IT services has risen dramatically. Lack of local options for cloud services is driving businesses to global players like Google, Amazon and Microsoft. Local and regional telcos are finally seeing an opportunity and a niche in the market for local services and are beginning to deploy services portfolios to the market.
Al Ahmadi: With cloud services, it is not a case of if organisations will adopt it, but when they will adopt it. It is a trend that is happening regardless. For small to medium sized enterprises, the benefits are particularly pronounced. It gives you speed and shortens time to market, and it reduces your costs. Moving to cloud reduces your total cost of ownership by at least 50%.
For SMEs, cloud IT services is a great value proposition as they don’t have to invest in expensive talent to manage it. I would say SMEs will be the fastest to adopt the cloud. Larger enterprises and organisations are also adopting the cloud with various applications. Some of the regulated industries like banking and governments are adopting more of the private cloud than public cloud.
CommsMEA: What services [offered via telecom operators] are proving particularly popular?
Ogden: SaaS is predicated to be by far the largest growth area in cloud. One should expect to see new SaaS applications emerging regularly over the next few years as service providers and application developers spot niche opportunities that can leverage the new cloud infrastructure. At this stage nobody is entirely clear on what the cloud terrain will look like in the future, however cloud definitely seems to have tipped over the hype curve into real practical valuable solutions that meet business needs, especially for small to medium enterprise where they continue to struggle managing IT and security complexity.
Kovàcs: We see telecom operators in the region start focusing on Software-as-a-Services as well as Infrastructure-as-a-Service. Most operators in the region today are offering primarily IaaS packages. Neostratus is currently working with a number of major players to help them introduce SaaS portfolios to local and regional markets.
CommsMEA: How important are telecom operators as providers of cloud based services?
Kovàcs: Telecom operators play an important role in the cloud business as they provide access and the underlying network infrastructure on one hand, but more importantly drive cloud by mobilising users by providing mobile devices and usage scenarios. On top of that they are perfectly set up for combining cloud services bundled with access and devices to build highly integrated offers that help them transform their service offerings to the new world of cloud based services.
Ogden: Cloud services are demand driven and typically follow an incremental revenue model which places significant burden on private or public cloud offerings until critical mass is achieved when sunk costs are recovered and profits achieved. Therefore, it is critical in the Middle East that operators provide cloud services to ensure either private or public offerings can be rolled out cost-effectively at both the company and end-user level. Without the support of operators in this space to provide this cloud roll and adoption will be stifled.
CommsMEA: Could telecom operators make greater inroads into the cloud services arena?
Kovàcs: Yes, for sure. Based on their current customer relationships and service offerings, telcos should look into how they could better leverage this as a foundation for upselling and transforming their existing service offerings to cloud based services. Also combining specific network products like MPLS with services like IAAS for enterprise customers could give them unique service opportunities. As far as MEA telecom cloud offerings go, they are currently two to three years behind their European counterparts.
CommsMEA: What should telecom operators do to tap demand for cloud services in the region?
Kovàcs: They should not see cloud as a standalone product but rather embrace the opportunity of transformation into a much richer and more powerful portfolio for them. Being innovative on top of the huge possibilities of new business models, service offerings and channels, telcos could take leverage of the overall change driven through cloud. Embracing cloud technologies for innovation of new kinds of products as well as enabling customers to use cloud by providing proper tariffs and devices will also drive demand.
Ogden: To compensate for lower licence revenues with value add services, resellers need to think about a different kind of business model, one based on incremental revenue from value add services and support, and the ability for customers to self provision and ‘try before they buy’. Key to this is the value a reseller can achieve through increased financial stability, with a more predictable recurring revenue model, and a customer base willing to consider smaller incremental purchasing for added value services, with the additional possibility to market additional products to the customer base in a very focused way. Cloud is about building a critical mass of customers and providing excellent service for the long term, whilst continually evolving the service around business needs.
CommsMEA: What security concerns arise from cloud services, and is this another area that telecom operators could tap?
Ogden: Security is a critical component of a highly available and stable service. Therefore issues arise around DDoS protection, data security and retention policies alongside infrastructure compliance with best security practice. DDoS, specifically, is an area that operators could tap immediately, providing on demand DDoS protection for those companies that can’t afford to provide this locally. Utility billed DDoS is an area that all operators could leverage as an extension to their existing cloud services.
Kovàcs: Operators can contribute positively to the ongoing security discussion. Though security is a wide topic telecom operators could help make security a commodity or at least parts of the overall security challenges. Providing security services as part of the underlying access could help reduce spam, malware and virus threats and help isolate fraudulent attacks to users. Operating data centres locally or regionally will also provide trust, transparency of data storage and management, and contribute positively to the privacy discussion.