Carriers are fostering deeper partnerships with webscales to support growing enterprise demand for hybrid and multi-cloud environments

HAMPTON, N.H. (April 20, 2018) — Combined Cloud as a Service revenue for telecom operators in Technology Business Research Inc.’s (TBR) 4Q17 Carrier Cloud Benchmark rose 15.7% year-to-year in 4Q17 due to strategic acquisitions and alliances, investments in new data centers, and portfolio expansion in growth segments such as SaaS and hybrid cloud. Cloud revenue growth is being limited, however, due to pricing pressures and growing demand for solutions from webscale cloud providers such as Amazon Web Services (AWS). Carriers are cognizant of these trends and are becoming more focused on supporting hybrid and multi-cloud environments by launching new orchestration platforms.

“All benchmarked companies sustained year-to-year Cloud as a Service revenue growth in 4Q17 as significant opportunity remains for carriers to target businesses seeking greater cost savings, scalability and efficiency by migrating traditional infrastructure and applications to the cloud,” said Steve Vachon, an analyst in TBR’s Telecom Practice. “Though cloud revenue growth is being limited by pricing pressures from webscale providers, carriers are relying on the value proposition and convenience offered by the bundling of their cloud solutions with other network offerings, such as SD-WAN, security and mobility services, to attract customers.”

Operators are revamping their go-to-market strategies to counter disruption from webscale providers such as AWS, Google and Microsoft. Competition will intensify over the next several years as webscales seek to play a larger role within the European and Asian cloud markets by investing in additional data centers in those regions. Amid demand for solutions from webscales in the cloud market, most carriers are offering access to these companies to complement their existing cloud portfolios and to support hybrid and multi-cloud environments. Carriers are also integrating webscale cloud platforms to enhance adjacent portfolio segments such as Internet of Things and unified communications.

TBR’s Telecom Practice provides semiannual analysis of Cloud as a Service revenue in key segment splits and regions for the top global carrier cloud operators in its Carrier Cloud Benchmark. Operators covered include Bharti Airtel, BT, CenturyLink, China Telecom, Deutsche Telekom, Korea Telecom, NTT, Orange, Singtel, Telefonica and Vodafone.


Atos is executing strategy to scale digital transformation activities

TBR perspective

TBR expects Atos will sustain its growth momentum and achieve organic revenue growth at a CAGR of between 2% and 3% from 2017 through 2019. Over the past year, Atos has been shifting its portfolio mix to next-generation solutions, building digital skills and competencies through digital certifications of employees, and attracting digitally versed graduates from leading universities. Now the company is executing on its strategy to have 40% of its revenues in 2019 generated from its Digital Transformation Factory (DTF) solutions portfolio. Emphasizing the message around execution will resonate well with clients, especially Atos’ key accounts, as they move beyond the initial digital transformation hype to actually implementing and scaling their transformational initiatives.

Due to Atos’ less developed consulting expertise in North America compared to Europe, TBR believes the company has chosen not to follow the consulting-led digital transformation trend among peers in the region and is instead focusing on execution, something Atos does well. While leading with technology and vertical industry expertise will likely work as Atos builds relationships with key accounts and cross-sells solutions across its portfolio, TBR’s research shows that both business and IT consulting matter, especially for new clients and new solutions.

Overall, Atos is persistently keeping in line with its three-year growth ambitions for 2017 through 2019, and focusing on its strengths. This is exemplified by the company’s emphasis on the Internet of Things (IoT), as Atos combines its expertise and proven track record in IT services, security and industry solutions with the operations technology (OT) and industry expertise of its global strategic alliance partner Siemens to integrate IT and OT for clients and capture opportunities in IoT.

For the third consecutive year Atos held its annual Global Analyst Conference in Boston, underscoring its persistent emphasis on expanding in North America and diversifying its global revenue base, as well as highlighting its desire to be closer to the U.S.-based IT industry analyst community. The conference was hosted by Patrick Adiba, Atos’ new North America CEO, and featured plenary and breakout sessions as well as individual meetings with TBR analysts. During the event Atos presented its strategic direction through 2019; collaboration activities with global strategic alliance partners such as Dell EMC, Siemens and SAP (NYSE: SAP); and case studies that showed Atos in action delivering measurable business results for clients.

As the telecom industry drives open source for interoperability more operators benefit from NFV and SDN, but incumbent suppliers face significant disruption

HAMPTON, N.H. (April 12, 2018) — According to TBR’s 1Q18 NFV/SDN Telecom Market Landscape, open-source groups will spur NFV and SDN adoption by establishing industry standards that foster interoperability among a broader range of solution providers. Operators are also facilitating NFV and SDN adoption by targeting new hires with relevant skill sets, retraining existing employees and launching internal startups to quickly improve their resource pools. Cost savings is the primary driver for accelerated NFV and SDN adoption, but these benefits will be realized gradually.

“The ability to reduce capex will initially be the largest cost benefit realized by adopters of NFV and SDN as software-mediated technologies enable operators to significantly reduce spend on proprietary hardware,” said TBR Telecom Senior Analyst Michael Soper. “Reducing opex will be a longer process as most operators will maintain both legacy and virtualized environments until they are ready to migrate fully to virtualized infrastructure.”

As operators pursue cost reduction through NFV and SDN, incumbent vendors face numerus threats to their business models and disruption on multiple technology fronts. Industry trends are moving against the vendor community, with incumbent vendors, particularly hardware-centric vendors, poised to struggle the most. Operators globally are focused on significantly reducing the cost of network operations and capex, underscored by a desire to disaggregate the black box and commoditize the hardware layer. White-box-based universal customer premises equipment is the leading application of industry-standard hardware thus far, but operators are targeting additional domains, including the core and edge network.

The NFV/SDN Telecom Market Landscape includes key findings, market size, customer adoption, operator positioning and strategies, geographic adoption, vendor positioning and strategies, and acquisition and alliance strategies and opportunities.


The Business of One era requires new business planning and management practices

A new generation of incredibly powerful, flexible and responsive businesses is reshaping markets. Their ability to serve single customers at scale is what TBR terms the “Business of One.” The environmental forces triggering this shift are vast. Information velocity accelerates globally; digital information expands exponentially; competitive advantage windows compress rapidly; task work automates; acute labor shortages persist in new skill work; and new business risks pressure public policy. In the aggregate this confluence of technology-enabled business factors disrupts traditional business, education and public policy best practices. Technology vendor and enterprise business models must evolve, as evidenced by the market capitalizations of relatively new businesses such as Facebook, Amazon, Apple, Netflix and Google (FAANG) while more established firms have languished. In the Business of One era, success will rest upon rapid iterations rather than deliberate cadences, ecosystem participation for assembling complementary assets rather than amassing scale advantage, subscription monetization cycles rather than transactional product sales, and highly automated processes and customer access points rather than labor-intensive task work and repetitive, overlapping paper trails to establish commercial trust.