There is perhaps no hotter topic in the industry today than cloud computing. While multiple definitions of the term exist, it is easiest to think of clouds as exemplifying the same business model used by electric utilities, hotel chains, and rental car services, applied to IT and network services. In this model, on-demand or pre-reserved resources are paid for on a usage-sensitive basis and accessed over a network. Web mail and video- and photo-sharing sites are cloud services, and so are storage and physical or virtual servers available for “rental.” The cloud model can also apply to databases, “platforms,” and middleware services that enable the rapid assembly of applications from pre-existing components and scripting languages as well as instantaneous “publishing” of those applications to a production run-time.
Telecommunications firms are at various stages of progress regarding the cloud. Some are exploring the strategic implications to their current network access and transport business or even beginning to deploy cloud services. Others, such as AT&T, are building on a decade and a half of evolution—from shared web hosting to managed hosting to utility computing—to provide a broad range of cloud offerings in addition to traditional telecom services.
Regardless of where a telco or integrated network and IT provider is on this spectrum, the accelerating transition to cloud computing has transformational ramifications for the industry.
Shifting network traffic
Traditionally, most enterprise network traffic flowed between and among two types of nodes: user devices and enterprise data centers. For example, traffic might flow between a PC or smartphone and an HR application, or between enterprise data centers for application networking or business continuity. The cloud impacts these patterns by adding a third type of node.
For pure-play transport providers, the most dramatic implications will be a reapportionment of customers’ metro- and wide-area traffic as applications shift from the enterprise data center to the cloud. For wireline and wireless access providers, more traffic will flow directly between end-users—consumers, teleworkers, and mobile workers—and the cloud, bypassing the enterprise data center entirely. As more full-service and niche cloud providers enter the industry, intercloud communications will become an increasing portion of the mix.
Thus, cloud service providers will continue to increase in importance as carrier customers and peers.
Not only are the types of on-net locations shifting, but the traffic mix is as well. Video is supplanting voice, text, and data. Consumer video cloud services are already being adopted by the enterprise, as firms use web video platforms for social media and marketing. Enterprise mobile, desktop, and immersive video is also accelerating, with applications that span field service, e-learning, videoconferencing, employee healthcare, video surveillance, digital signage, and merchandising optimization. Video traffic will continue to grow as standard definition video is replaced by high definition, and high definition is extended to 60 frames per second, 3D, and multiple screens. And, in only a few years time, Ultra-HD with 16 times the pixel count of 1080p will be introduced.
Not just the Internet
As all enterprise networking—including to the cloud— becomes increasingly video-oriented, the ability to provide end-to-end quality of service and multiple classes of service via MPLS VPNs will also increase. The capabilities of the public Internet relative to demanding, latency-sensitive applications such as voice and video will continue to drive the transition to IP/MPLS VPNs.
In addition, optical transport will play a critical role in hybrid enterprise-cloud architectures. One key scenario involving hybrid clouds is “cloudbursting,” where short-term peaks in workloads or temporary storage requirements are met by augmenting enterprise data centers with on-demand pay-per-use cloud resources. To effectively tie the enterprise to the cloud in these scenarios, optical transport is advantageous for data mirroring and synchronization, or for remote data access for transaction-intensive applications. In addition, MPLS VPNs and optical transport will play a key role in remote database access and virtual server migration.
Traditional over-the-top content delivery scenarios are no longer the only game in town, because integrated service providers such as AT&T can provide an optimal mix of VPN multicast, public, and private (behind-the-firewall) content delivery, in combination with co-lo, managed hosting, and cloud infrastructure and platform/middleware services, to deliver a full web experience in a cost-effective manner.
Some network providers can also enhance the security and availability of enterprise and cloud services by delivering network-based security such as anti-DDoS and email filtering; optimized routing; and fully managed end-to-end services.
Telco architectural transformation
Telcos, of course, are not just service providers, but enterprises as well. So called “private cloud” technologies such as virtualization and automation can be utilized by a telco just as much as by a bank, brokerage, or pharmaceutical company. By consolidating diverse workloads such as employee HR, message accounting, rating, and billing, network capacity planning, and fraud detection onto a common, virtualized platform with automated resource allocation, cost and CapEx can be reduced at the same time that agility is enhanced.
More than that, though, telcos can also consolidate their customer-facing IT onto such a platform. Functions as diverse as voice switching and conferencing, multipoint video conference bridging, PBXs, home IPTV, and even routing are transitioning from dedicated equipment, shelf, and appliance designs to just being software applications that will run on a geographically-dispersed hyperscale network-based information processing platform. For regional telcos, the purchase of cloud services from another carrier can offer a faster transition to the technology with minimal time and capital investment, while freeing up IT resources to work more strategic projects.
Industry structure and ecosystem shifts
This transition to a software-based architecture is enabling new firms such as consumer search and advertising companies and consumer PC software vendors to enter the business. New entrants will undoubtedly cause market discontinuities as they focus on linkages with their core businesses, while telecom firms will add value through network facilities and spectrum investments and by expanding their access, transport, and VPN portfolio with cloud computing options.
Between new technologies, net neutrality, disparities in international laws regarding data privacy, a shifting competitive arena, and the convergence of telecommunications and IT, there is much to consider. Telcos will continue to derive value from existing capabilities as bandwidth growth continues, seemingly without bound. To play a bigger role, however, telcos will need to clarify their strategy and role in the emerging cloud services market, and forge new relationships with IT firms, cloud providers, and other network providers. The rapid emergence of the cloud is presenting threats and challenges, but also opportunities for those with the agility and vision to transform.
Joe Weinman is Strategy and Business Development VP for AT&T Business Solutions.