Operators are partnering more deeply with webscales to support multicloud and hybrid environments

Combined Cloud as a Service revenue for telecom operators in Technology Business Research, Inc.’s (TBR) 4Q18 Carrier Cloud Benchmark rose 13.2% year-to-year in 4Q18, primarily due to investments in new data centers and portfolio expansion in growth segments such as SaaS and hybrid cloud. All benchmarked companies sustained year-to-year Cloud as a Service revenue growth 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.

Combined IaaS revenue among benchmarked companies rose 11.2% year-to-year, driven by portfolio expansion and data center investments to reach customers in new markets. IaaS revenue growth will decelerate over the next several years, however, as operators increasingly emphasize supporting in-demand IaaS solutions from third-party providers such as Amazon Web Services (AWS) (Nasdaq: AMZN) and IBM (NYSE: IBM) over first-party IaaS platforms.

Other Cloud (which includes SaaS, PaaS and BPaaS) revenue rose 16.8% year-to-year, driven by the adoption of services including unified communications, CRM and office productivity solutions. Operators are capitalizing on the demand for SaaS and PaaS applications by cross-selling the solutions with IaaS platforms and other network services.

The bulk of revenue is being generated in APAC and EMEA as local operators benefit from data sovereignty laws that require cloud data be stored in local data centers, which is slowing the momentum of U.S.-based webscale providers. The Americas accounted for only 15% of Cloud as a Service revenue in 4Q18, as AT&T and Verizon are no longer competing in the IaaS market and Asia- and Europe-based operators are primarily targeting foreign-based multinational customers with operations in the Americas.

Graph showing 4Q18 total Cloud as a Service revenue

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, British Telecom, CenturyLink (NYSE: CTL), China Telecom, Deutsche Telekom, Korea Telecom, NTT, Orange, Singtel, Telefonica (NYSE: TEF) and Vodafone (Nasdaq: VOD).

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