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Cloud Technology in Telecom Industry: New Revenue Streams and Opportunities

Learn about the role of cloud computing in the telecom industry and opportunities it unlocks

Updated: April 25, 2024 12 mins read Published: March 20, 2023

Since the rise of over-the-top streaming services, telecom operators have been battling industry disruption and decreasing revenue streams. Now that ubiquitous connectivity is a commodity, the telecommunication industry needs to provide distinctive service offerings beyond basic network connectivity. Cloud technology can help.

In this article, you’ll learn how telecommunications companies, or telcos, can leverage the power of the cloud to accelerate their transformation to digital service providers and meet the information communications technology (ICT) needs of modern enterprises. Keep reading to learn:

  • What a telco cloud is
  • Why telco cloud is important
  • What differentiates an enterprise cloud from a telco cloud
  • Key benefits of telco cloud
  • The impact of cloud computing on the telecom industry
  • New business opportunities and revenue streams for telcos
  • Levels of cloud technology adoption in the telecom industry
  • Cloud use cases for telecom operators
  • Telco cloud architecture considerations
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What is a telco cloud?

Telco cloud is a term used to describe the cloud-based services and infrastructure provided by telecommunications companies. It typically includes a range of services such as visualized network functions, software-defined networking, and network function visualization, all delivered over a cloud-based platform. The aim is to enable telcos to manage their networks, reduce costs, and deliver new services to their customers more effectively.

Cloud-based telecommunication services form a distributed computing network comprised of software-defined networking, network function virtualization, and cloud-native technology. The network itself and related computing resources are distributed across various websites and clouds, resulting in the need for efficient automation and orchestration processes.

Transforming traditional telecommunication infrastructure into telco cloud requires telcos to adopt virtualization technologies and migrate their services and infrastructure onto the cloud. This transformation also involves the deployment of software-defined networking and network function virtualization techniques to enable the telco cloud’s core functionalities. These technologies allow telcos to offer scalable, agile, and flexible services to their customers while reducing their capital and operational costs.

Telco cloud is mostly focused on creating a common virtualized infrastructure to enable the management of various network functions required to deliver communication services. With telco cloud, these functions get disaggregated from the hardware and are operated from a horizontal platform as cloud-native or virtual network functions. These functions usually execute a specific network operation, such as enabling a firewall or managing load balancing.

Why is telco cloud important?

Cloud-based solutions have revolutionized the IT field, and lots of businesses take a cloud-first approach when deploying new applications. According to Gartner, 85% of all organizations will become cloud-first by early 2025. Yet despite the optimistic forecasts, we still don’t see service providers rushing to adopt cloud services.

The reason is simple: It’s not that easy to shift telco’s infrastructure and its applications to the cloud. The infrastructure that modern telecommunications providers maintain and operate integrates a vast portfolio of services interconnected with communication networks worldwide. These networks are wired together in complex ways that might even be compared to a person’s nervous system and brain, with nerve endings reaching everywhere. A national mobile network operator in only one country can have up to 70,000 cell sites and hundreds or more connected to the central office locations. No wonder it takes an army of employees to support and maintain such infrastructure.

Surely, a lot of telecom operators see value in trying to upgrade and simplify their networks. But if we compare a telecom network to our nervous system, then reorganizing this system and transferring most of its functions to the cloud is a lot like brain surgery. Carrying it out successfully requires the utmost precision.

Yet the obstacles pale in comparison to the rapid advances in technology that require telcos to adopt cloud solutions for communication. Moving to the cloud removes a bunch of technology barriers preventing communications service providers (CSPs) from growing. Apart from that, a telecom cloud architecture allows for the agility, performance, and scalability needed to thrive in the digital era.

Benefits of telco cloud

The benefits of cloud computing in telecommunications are hard to underestimate. A properly executed telco cloud strategy can reduce operational and administrative costs, improve customer satisfaction, and allow for greater business agility.

Today, telcos use cloud technologies to:

Make a difference

Telecom cloud solutions help businesses create a variety of services and applications that can’t easily be replicated by competitors. Apart from that, application development methodologies such as Agile and DevOps, when used with a cloud-native architecture, allow telcos to shorten deployment times and improve time to revenue by quickly integrating cloud-based apps and features targeted at specific customers.

Deliver new B2B solutions

With full access to public cloud services – anytime, anywhere, and from any device – telcos are empowered to bring highly customized enterprise solutions to market quickly and efficiently. The telco cloud makes co-creation with enterprise service partners easy.

Build 5G revenue streams

This is a strategic necessity for most mobile operators. Yet efficiently monetizing 5G network capabilities is only possible with the new core and edge network capabilities provided by the telco cloud.

Protect customers

Telco cloud infrastructure brings improved service resilience and the ability to quickly respond to faults and fluctuations in demand. This, in turn, allows operators to maintain service levels and competitive pricing, which inevitably results in reduced customer churn.

Build strong digital relationships

Hybrid telco cloud deployments come with the advantage of access to advanced data analytics and artificial intelligence (AI) available in the public cloud domain. Smart use of these technologies allows telecom companies to predict customers’ preferences and requirements, centralize customer data in the cloud, create a 360-degree view of each customer, and deliver an engaging omni-channel experience to fulfil your customer’s every need.

Scale elastically

Telecom cloud extends logically across data centers, central offices, the public cloud, and edge locations, creating almost limitless capacity from a hybrid environment. Businesses are empowered to quickly move workloads to handle traffic spikes, work around faults, accommodate additional remote workers, onboard new customers, spin applications up and down when needed, and do much more.

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Impact of cloud computing on the telecom industry

Telecommunications cloud solutions unlock a variety of new opportunities and hence revenue streams for telecom operators. One way to benefit from this is to repackage existing hosting and networking capabilities and deliver cloud infrastructure and storage services, combining cloud and telecom transformation. Telcos can also team up with cloud software development companies to build industry-specific solutions for highly regulated sectors like healthcare and financial services.

Telecoms can become cloud brokers, aggregating public cloud services and ensuring service quality. Or they can choose to become service enablers and complement their core offerings with services such as data analytics and APIs. This enables them to further provide these enriched capabilities to third parties or use them to enhance their own telecom cloud services.

New business opportunities and revenue streams

Heralding a change in how Information and Communication Technology ICT resources are provided, cloud computing for telecom opens up new opportunities to create and deliver business value as well as increase profitability. Through its convenience and flexible pricing models, the cloud enables telecoms to become more agile and competitive in the new environment.

Researchers have identified six transformative cloud enablers that drive business innovation and help to either reduce costs or generate extra revenue.

Flexibility

One of the greatest advantages that cloud has to offer is the substantial IT cost savings. Cloud infrastructures are innately cost effective, thanks to their highly flexible, pay-as-you-go models. By using a network of remote servers, businesses are able to rent and pay for exactly the resources they need and significantly reduce overhead expenses for things like software and hardware updates, backup systems, and data storage.

More than 31 percent of executives surveyed cited cloud’s ability to reduce fixed IT costs and shift to a more variable ‘pay as you go’ cost structure as a top benefit.

IBM Global Business Services

Scalability

Cloud scalability means the ability to stay flexible and adapt to fluctuating storage and infrastructure needs by automatically provisioning and de-provisioning resources. Cloud computing for telecom enables businesses to strategically upscale and downscale their operations to maximize and capitalize on growth opportunities, while the elastic nature of the cloud allows for dynamic accommodation of things such as traffic spikes or heavy workloads.

Market adaptability

Driven by shifting customer demands, market conditions are constantly changing too. The ability to respond quickly to varying consumer needs becomes a key differentiator for businesses. The cloud also supports innovation and enables operators to easily revamp and update their telecommunications cloud services. The quick shift towards new market opportunities means a competitive advantage and results in higher profitability due to the influx of new customers.

Masked complexity

Masked complexity offers the advantage of hiding some operational intricacies from end users. For example, maintenance work and upgrades can be performed in the background. This helps a company increase the sophistication of its services and products without burdening customers with technical details. Even the shortest downtime leads to financial losses, illustrating the importance of masked complexity. Companies that ensure stable and flawless operations are always paid back with customer loyalty.

Variability

With its extended capacity and computing power, the cloud can help businesses better address fragmented user preferences. Cloud-enabled context variability refers to the ability of telecoms to leverage features like location, personal attributes, and analytics to customize products and services and deliver more user-centric experiences.

Ecosystem connectivity

By capitalizing on cloud-enabled agility and reach, forward-thinking carriers can build expansive ecosystems and seize more lucrative opportunities. Industry leaders across sectors and domains recognize the cloud’s potential as an innovation catalyst and use cloud-based telecom services and technologies to roll out new offerings.

Cloud business enablers can drive CSP industry imperatives

Cloud Technology in Telecom Industry: New Revenue Streams and Opportunities
Source: IBM

Learn how we helped a global VoIP communication services provider take full advantage of the cloud to scale their business.

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Cloud technology in the telecom industry: levels of adoption

Speaking of cloud adoption, it’s important to remember that this is not an all-or-nothing venture. Depending on their business strategy and technological maturity, the competitive landscape, and other factors, telcos can find themselves on different levels of the cloud and telecom transformation journey.

Generally, telecom operators fall into one of three categories based on how their cloud use impacts their value chain: optimizer, innovator, or disruptor.

The Cloud Enablement Framework identifies three organizational archetypes based on the extent to which a CSP enhances, extends or invents customer value propositions – and improves, transforms or creates its role in the industry value chain.

IBM Global Business Services

Cloud enablement framework

Cloud Technology in Telecom Industry: New Revenue Streams and Opportunities

Source: IBM

Optimizers

Optimizers leverage the cloud to improve their operational efficiency, expand the value of their services, and enhance customer experiences. Telecoms that embrace this level of cloud adoption can optimize their connectivity offerings in line with customers’ needs. By using caching, data acceleration, and other network-based methods, they can deliver connectivity in a smarter way.

Innovators

Innovators tap into the potential of IT services for the telecom industry to expand value propositions and open new revenue streams. To do that, they can transform their roles within value chains and enter adjacent markets and industries, gaining a competitive advantage. As CSPs already provide enterprises with bandwidth, they can extend their offerings with collaboration services, workflow management, and enterprise resource management through partnerships with third parties.

Disruptors

As the name suggests, disruptors invent radically different value propositions, create new services, and even generate new customer needs. To become a disruptor, CSPs can leverage their most valuable resource — unique customer information — and couple it with other distinctive assets to create new services and gain the first-mover advantage.

Discover how telcos can accelerate their digital transformation and evolve into customer-centric ecosystems.

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Cloud use cases for telecom

Given their control over mission-critical network assets, telecom cloud providers are well-positioned to become key players in the B2B cloud market. By leveraging telecom cloud computing capabilities, telecom operators can significantly enhance their telecom software and develop new customer-oriented services that will take them beyond being commodity providers and cement their competitive advantage.

Optimizer use case: Telefonica O2 Ireland

Telefonica O2 Ireland has rolled out its new hosted IP telephony service called O2 Unified Communications. Aimed at large businesses and public sector organizations, the platform seamlessly combines fixed and mobile telephone, voicemail, instant messaging, and videoconferencing into a single managed cloud-based service.

Thanks to O2 Unified Communications, users are able to communicate in real time from any location on their device of choice — landline, smartphone, desktop, laptop, or tablet. This capability is useful for integrating on-site workers and telecommuters without additional complexity.

Innovator use case: AT&T Healthcare Community Online

To help healthcare organizations improve operational efficiencies and streamline patient care, CSPs can leverage the cloud to provide flexible and highly secure storage for sensitive health data.

AT&T has launched a cloud-based health information exchange platform to drive collaboration across the entire healthcare continuum. By integrating patient data from various sources, the exchange platform provides a unified patient view as well as real-time access to patient information and relevant eHealth applications for faster and more accurate diagnosis at the point of care.

Disruptor use case: Verizon Digital Media Services

Always at the forefront of technological disruption, Verizon has taken a major step to unleashing the power of telecom cloud computing in enhancing cybersecurity and protecting web solutions. To that end, Verizon Digital Media Services launched a cloud-based web application firewall (WAF) that set a new standard for the reaction time to attacks.

When a new exploit is detected, WAF rule sets can be deployed worldwide within minutes. With its on-demand scalability and always-on capabilities, a cloud-based web application firewall offers stringent control and enhanced security to its customers.

Telco cloud architecture planning

While greenfield operators with a low-capacity network can build a custom cloud-native environment from scratch, established operators will need to build their telco cloud so it is interoperable with legacy network environments. The co-existence of legacy and cloud-native networks is needed for a period that would allow operators to migrate network functions, services, and apps in the most fitting way for their business.

Migrating to a cloud-native architecture requires a holistic approach. Migration might be implemented one network function at a time or one service at a time, yet the whole process should start with thorough assessment and planning. The readiness assessment should encompass infrastructure, app and service portfolios, organization, and processes.

Other considerations cover the crucial questions of acceptable levels of up-front investment, risks, KPIs, and process management. Decide whether your business is capable of performing the migration internally, you need to build a partner ecosystem, or you should work with an overarching systems integrator.

Performing a cloud readiness assessment guides your business through key decisions:

  • Virtual network function (VNF) migration strategy. Decide which network functions will need to stay in virtual machines (VMs) and which can be transferred to cloud-native microservices.
  • App migration strategy. Determine which applications can be transferred to cloud-native infrastructure and re-architected as microservices.
  • Management and automation strategy. Define priorities and plans for automating your internal processes. Find the tools that can be used to efficiently orchestrate and manage the environment.
  • Mix of private and public clouds. Plan your cloud infrastructure based on your ecosystem strategy, budget, operational capacity and capability, architecture, and time-to-market requirements. Remember that these parameters may change over time.
  • Creating an ecosystem. Define a pool of potential partners based on the quality of their products, services, and support. Evaluate potential partners’ ability to collaborate quickly, efficiently, and effectively.

Building a telco cloud on open-source software brings a wide range of benefits for your business. Working with open-source software makes it easy to mix and match industry-leading solutions from a wide variety of vendors, allowing development teams to innovate quickly and add new network functions, features, and technologies. Apart from that, open-source support of Agile, DevOps, and CI/CD dramatically reduces the time to market and lifecycle management intervals.

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Telecom cloud services have lots more to offer

The role of cloud computing in the telecom industry is becoming increasingly prominent. Since they own the networks on which cloud-based applications are delivered, telecommunications providers are uniquely positioned to play a strategic role in the new market and offer value-added services to reinvigorate revenue streams


Contact our experts to learn more about how to streamline your migration to a cloud-based network architecture and implement cloud-based telecom services to accelerate the development of new business models.

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