In the looming battle for the next-generation enterprise edge, who will reign supreme, telecoms or hyperscale cloud providers? Here’s an angle worth considering: How about both?
It’s natural to assume that telecoms and hyperscalers would square off, especially when pursuing new lines of business (like private cellular networks), where it’s not yet clear which models will prove most attractive to customers. Yet, when it comes to private networks, artificial intelligence (AI), and other transformational new edge solutions, leading telecoms and hyperscalers are finding that cooperation, rather than competition, can yield greater value for everyone.
In our role as one of the world’s leading testing and validation partners, we get an inside view of how hyperscalers, telecoms, and the vendors supporting them are approaching new edge opportunities. On the whole, we’re finding surprisingly little animosity among the titans of the digital ecosystem. Instead, both cloud providers and telecoms increasingly express appreciation for what each party brings to the table. Across private networks and other evolving markets, we expect constructive collaboration to be the theme of 2024.
#1: Planting the Seeds of Cooperation
In the fiercely competitive digital marketplace, when huge technology companies are working out how best to attack new opportunities, you would expect major ecosystem players to regard each other with skepticism. Yet over the last several years - especially the last 12 months - hyperscalers and telecoms seem to have realized something important: they need each other. Areas of overlap remain, but on the whole, leaders in both cloud provider and service provider organizations increasingly recognize that both parties bring unique, often complementary capabilities.
Telecom service providers offer an unrivaled geographic footprint and pathway to customers, along with deep expertise in network and connectivity services. Meanwhile, hyperscalers bring the computing and application processing that make the digital world run, plus deep trust and familiarity with enterprises. Circa 2024, cloud and connectivity services have become very different, highly specialized technology areas. So, why would enterprise customers want a single provider to handle everything? Especially for emerging technologies like AI, augmented reality (AR), industrial automation, and others with stringent performance requirements, it just makes sense to work with experts in both areas.
We’re also seeing a growing appreciation within telecoms for what hyperscalers can offer their own business, and vice-versa. For hyperscalers, connectivity is still critically important to their services, especially mobile connectivity. As they look ahead, major hyperscale players want to be able to maintain continuous engagement with customers across all locations and devices (for purchasing, advertising, relationship management, and more). Only telecoms can deliver ubiquitous, always-on connectivity to core cloud services. Meanwhile, hyperscalers bring cutting-edge technology, the full cloud and application software stack, and strong relationships with developers worldwide - relationships that are critical to telecom’s future innovation.
#2: Blazing a Trail to the Enterprise Edge
The first and most important venue for new hyperscale/telecom collaboration will be the enterprise edge. It’s here that enterprises are facing the biggest demands for innovation. Businesses need:
- High performance: To support the most in-demand emerging digital solutions—generative AI, XR-enabled remote maintenance and guided repairs, high-definition video monitoring and fault detection for industrial supply lines - enterprises need application processing as close to end devices as possible.
- Privacy and security: Businesses want to apply cloud services to more of their business, but in a way that allows them to maintain tight control of their data on premises.
- Lower costs: Emerging applications can generate vast amounts of data, which would be cost-prohibitive to backhaul across a public network.
Private networks that can support local cloud capabilities, but are tuned to the specific latency, throughput, and security requirements of the business, are the logical solution. As recently as last year, it looked like we would see fierce competition among telecoms, cloud providers, network equipment vendors, and system integrators to deliver them. Now though, we’re seeing a more collaborative ecosystem coming together. Whether enterprises initially reach out to a hyperscaler or a service provider, they’re likely to end up with a combined connectivity + edge computing solution delivered by multiple partners working together. In fact, we expect these combined offerings to become the default approach to private networks, starting this year.
#3: Fueling Telecom Transformation
For both telecoms and hyperscalers, there are big potential benefits in building cozier relationships. After all, telecoms are large enterprises themselves, with their own digital transformation initiatives. Hyperscalers can potentially play a big role in these efforts, helping service providers lower costs and tap into new innovation, while opening up important new revenue streams for their own business. Potential opportunities include:
- Telecom cloud migration: Most telecom cloud initiatives this year will focus on migrating Operational Support System (OSS) and other IT-type workloads to the public cloud. Longer term, however, telecoms are interested in the possibility of moving 5G Core and other macro network functions (NFs) there as well. OSS/IT migration can provide an excellent test case, where telecoms can learn to work more closely with network vendors to support next-generation cloud-hosted NFs. Once these common, shared environments are established, all parties - telecoms, hyperscalers, and network vendors - can explore the best ways to work together in the future.
- AI: Telecoms see tremendous opportunity in AI - for network and capacity planning, automating manual device lifecycle tasks, incorporating GenAI into customer engagement, and more. The cost of building their own AI infrastructures, however, is exorbitant, and the results potentially limited if they’re only training models on their own data sets. This year, look for leading telecoms and hyperscalers to explore potential partnership models to provide telecom-specific AI capabilities. For hyperscalers, the ability to provide front-end and back-end AI infrastructures to support telecom-scale networks opens up a large new addressable market.
- Network Application Programming Interfaces (APIs): Many telcos are currently exploring how they can expose network APIs to enable third-party applications and developers to dynamically program the network. Public cloud offers an ideal environment for this type of experimentation, while giving telecoms immediate access to a global community of developers, wherever they may be located. Telecoms, hyperscalers, and developers can get accustomed to working together on back-end APIs, and lay a foundation for closer relationships in the future.
Looking Ahead
In all of these areas - private networks, AI, network cloudification, and more - it just makes sense for telecoms and hyperscalers to work together. Based on how our telecom, cloud, and network vendor customers are focusing their efforts behind the scenes, that’s exactly what we expect in 2024 and beyond.
In the next few years, look for telecoms and hyperscalers to collaborate more closely on bringing private network and edge solutions to market. Internally, more telecoms will pursue a hybrid cloud strategy that augments homegrown telco cloud infrastructure with one or more public cloud options. And hyperscalers will build up new AI and cloud development environments tuned to the uniquely demanding requirements of telecom. As both parties learn to work more effectively with each other, these collaborations will fuel significant growth for everyone.
