Evaluating The Impact of Cloud Computing In The Telecommunications

World

Mobile Cloud Computing Asia

Singapore

July 14 – 15, 2010

1

Ahmad Nadeem Syed

ansyed56@gmail.com

The Discussion Points

2

A Brief overview of Cloud Computing

The Broadband Divide

Are the Telcos Natural Choice for Cloud Computing?

Conclusion

Cloud Computing – A Confusion or Reality?

3

There are diversified opinions about definition of cloud computing:

• Larry Ellision, Oracle’s CEO does’t understand “what we would do differently in the light of Cloud Computing other than change the wordings of some of our ads”

• Richard Stallman, of Free Software Foundation founder thinks “It’s a stupidity it’s a marketing hype campaign.”

• Andy Isherwood, HP’s Vice President of European Software says“ Two people say the same thing about it [cloud]. There are multiple definitions out there of “the cloud”

A Broad Definition

4

Cloud computing is a way of computing, via the

Internet, that broadly shares computer resources instead of using software or storage on a local PC

Main Categories of Cloud Computing

5

Infrastructure as a Service

PaaS

Platform as a ServiceSoftware as a Service

SaaS"Software as a Service (SaaS)" deliver software as service over the Internet,

eliminating the need to install and run the application on the customer's own computers and simplifying maintenance and support.

6

Googlee-mail servicecalendar, document editorSpreadsheet Etc.

Salesforce.comCRM software on-demand Sales cloud: containing accounts, contacts, leads, quotes, etc Service cloud. contains a customer portal,

knowledge base, analytics, etc.

Zohoe-mail service, document editor, spreadsheetpresentation toolInvoicingreporting, applicant tracking.

PaaS

"Platform as a Service (PaaS)" deliver a computing platform and/or solution stack as a service, often consuming cloud infrastructure and

sustaining cloud applications. It facilitates deployment of applications without the cost and complexity of buying and managing the underlying

hardware and software layers

7

Googlea framework to allow building software in Python or Java that is automatically distributed and scaled as necessary on the cloud.

MicrosoftAzure platform, provides Visual Studio programmers the ability to build software for the cloud

- the operating system as an online service- SQL Azure, a fully relational cloud database solution.

Force.comForce.com is a development platform that allows users to build business applications in the cloud.

IaaS

Infrastructure :Cloud infrastructure services or "Infrastructure as a Service (IaaS)" delivers computer infrastructure, typically a platform

virtualization environment, as a service. Rather than purchasing servers, software, data center space or network equipment, clients

instead buy those resources as a fully outsourced service.

8

Amazonwith its Elastic Compute Cloud (EC2). Renting this capacity to others through the internet

Rackspacerenting out space in their racks, providing managed hosting and dedicated servers through Inernet

GoGridvirtual machines to be rented by the hour, but they also offer dedicated servers for specific tasks that tend to be slow on virtual machines, such as databases.

Cloud Computing – Drivers and Enabling Factors

Customer needs● Capex savings - SMEs being the main target market● Any where any time - Individual’s requirement

Prerequisites● Readiness for use of IT applications● Availability of high speed Internet● Affordability from Individual’s perspective● Education

Role of Telcos● Service provider● Access provider

9

From Digital Divide to Broadband Divide

Cloud computing penetration is dependent upon level of Broadband penetration in a given market

Market Segmentation

● Developed markets

● Developing (Emerging) markets

● Under developed markets

Current Market Status

● Use of Internet based services is growing in developedmarkets at high rate

● There is very limited market for such services in developing /underdeveloped economies

10

From Digital Divide to Broadband DivideExcerpts from UNCTAD Report

● The digital divide between developed and developingeconomies is wide and growing in terms of Internetbroadband access

● There is a huge gap in terms of broadband speed within the two Developed and Underdeveloped market segments

● A person in developed country is on average at least 200times more likely to enjoy high-speed access to the internet than someone in a least developed country

● Broadband Price Divide: The cost of using fixed broadband is highest in low income countries. Average fixed broadband price at purchasing power parity in 2008 was:- Developed countries $ 28- Developing countries $ 289

11Source: UNCTAD Information Economy Report 2009

Underdeveloped Countries are Bandwidth Starved – UNCTAD Report Excerpts

● Despite positive Internet developments in many countries, its use is progressing slowly in certain regions.

● The developing countries are facing insufficient demand due to

- high prices

- inadequate infrastructure

● The lack of demand contributes to

- low levels of investment and

- high prices due to high cost of international connectivity

● Another barrier to greater Internet take-up is

- low levels of education

- Limited supply of web content in local languages

12Source: UNCTAD Information Economy Report 2009

There is Direct co-relationship Between Level of Purchasing Power, Education and Internet Usage

Purchasing Power

Internet Usage

Education

13

Purchasing Power & Education

Main Drivers of Internet Usage

14

-

20

40

60

80

100

93 99 99 99 99

71 61 50 48

36 29

%

Literacy

-

10.0

20.0

30.0

40.0

50.0

60.0 50.3 46.4

38.8 35.2 34.1

6.0 3.1 2.6 1.6 0.9 0.7

US

$(0

00

) /

Cap

ita

(PP

P)

GDP/Capita (PPP)

-

50,000

100,000

150,000

200,000

250,000

300,000

217,355 234,621

243,898 282,145 274,724

9,442 4,469 950 312 5 42 No

. of

Sub

s (0

00

)

Broadband Subs / 1 Billion Population

Countries with Higher Purchasing Power and Higher literacy have higher Internet usage

Source: ITU ICT Indicators and CIA fact sheet

Market Share of Economies

15

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

>25000 10001 -25000

5001 -10000

1001 -5000

<1000 NA

96.42%

2.56% 0.28% 0.75% 0.00% 0.00%

% D

SL s

ub

s

GDP $ Per Capita (PPP)

GDP $ per Capita/DSL Subs

26% 41% 4% .10%14%14%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

>25000 10001 -25000

5001 -10000

1001 -5000

<1000 NA

24.78%22.94%

24.18%

27.21%

0.86% 0.03%

% M

obile

Subs

GDP Per Capita (PPP)Sources: CIA Fact sheet & ITU CIT indicators

GDP per Capita /Mobile Phone Subs

Mobile Penetration

56% 14% 20%40%

● Countries Having GDP/Capita over $ 25 K have 25% of mobile Subs●mobile phone market there is saturated●Countries having GDP/Capita $ 5 – 10 K have 51% of mobile Subs●The mobile phone penetration there is around 50% there

● Countries Having GDP/Capita over $ 25 K have 96% of DSL subs ●Such countries have only 14% of the world population●Countries having GDP/Capita less than $25 K have only 4% of the DSL Subs● Such countries constitute about 86% of the world population

Telcos and Cloud Computing

16

Telco’s – Apparently Natural Choice?

● Infrastructure available for SMEs (e.g. they are experienced in managing massive amounts of data having own data centers)

● Own subscriber base

● Opportunity for additional revenue stream by

- Charging end users for a given level of service quality

- Charging cloud-based providers

17

Telco’s – Apparently Natural Choice?

● The Telco’s success in cloud computing as competitor to IT Service providers depends upon

- Right market conditions

- SME’s preparedness

● The pre-requisites for success of mobile cloud computing are

- High speed internet (3G) availability

- Affordability

- Time to cost relationship

18

Possible Suite of IT Services by Telcos

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0% 20% 40% 60% 80% 100%

Cloud Services IaaS , SaaS

Deploying and managing enterprise …

IT infrastructure solutions , virtulization

Client and desktop management support

Hosting, web, infrastructure and colobration …

Design, management and maintain …

Network and point security

Network services, consulting and integration

Connectivity (voice and data needs)

Telco’s Trump card

Traditional weakness in IT

Key datacenter battleground

Traditional strengths

Core Business

Source: IDC Telecom Perception Survey April 2010

Telco’s Preparedness - Varying Opinions

● Leading global and regional telcos have developed and

launched their own cloud computing services, including

infrastructure-as-a-service (IaaS) - (Ovum)

● Telco’s visibility in the market is very low . Only a very small

number of telcos have so far shown commitment in this

market according to some analysts.

● Sales uptake for IaaS is likely to be slow for at least the next

two or three years – (Ovum)

● It may take two or three years for telcos to establish credibility

in this market, so early market entry will have its benefits in

the longer term

20

Some Forecasts about Mobile Cloud Computing

● ABI Research forecasts that mobile cloud computing

subscribers be over 998 million in 2014

● Mark Beccue says : “By 2014, mobile cloud computing will

become the leading mobile application development and

deployment strategy, displacing today’s native and

downloadable mobile applications

● Mobile phones will overtake PCs as the most common Web

access device worldwide by 2013

● Ovum research indicates that cloud computing is currently

low on the agenda of most CIOs/IT managers, This means that

sales uptake for IaaS is likely to be slow for at least the next

two or three years”21

Issues for Telcos as Cloud Computing Service Provider

● Telcos will face all the following issues which other cloud computing

service providers could be facing:

- Security standards

- Reliability - Outage & Performance standards

- Portability

In Addition● Competition both from Mobile operators and cloud computing

service providers

● The cost for telcos to jump into cloud computing could be significant

as they need to upgrade their operational networks and data centres

● Telecom equipment is currently connectivity oriented and vendors

are lagging behind in the race to drive cloud-enabling technology for

telcos

● High cost of bandwidth - Presumable cost savings may be off-set by

high cost of bandwidth

22

Issues for Mobile Cloud Computing

● Outage - 3G coverage is non-existent and spotty even in

most developed markets

● The networks are generally loaded

● The bandwidth access could be insufficient

● Loss of control – (Multiple points of failures)

● Competition from peer telcos and IT service providers

(Such as email which remains the largest application)

23

Issues for Mobile Cloud Computing

● Issues in developing/underdeveloped economies

- Lack of speedy mobile Internet access

- Affordability – Access + Cost of smart phone

- Availability of cheap alternates

● Handset Impediments

- Smart phone high cost

- Battery life

- Keyboard limitation

- Small screen vs large screen

24

Some Facts About Two Markets

25

Description Developed Economies

Developing/Underdeveloped economies

Voice Market Saturated Lot to cover

Overall ARPU $ 40 - $ 50 As low as $ 2.5

Data ARPU $ 15 in US Negligible

Data Share 10% – 20% Less than 1%

Internet & Internet based Application Usage High Low

Major objective New Avenues Struggle for survival

Time lag for data services (say for 3G) Since early2000

8 – 10 years behind

(India, for example has only recently auctioned 3G licenses, Pakistan is yet to follow)

Source: Number from Cheetan Sharma Consulting

Conclusion

● Cloud computing by itself is in infancy stage

● Sustainability of success of Cloud Computing is yet to be proven even in developed economies

● Voice is and will remain the prime service both for developed and developing /underdeveloped markets for quite some time

● Developing /underdeveloped markets are not ready yet

● In terms of time for developing/underdeveloped economies

- Digital divide has taken about 10-15 years to narrow

- The broad band divide is already 8-10 years wide

● Level of Broadband penetration will determine fate of Cloud Computing in a given market 26

Ahmad Nadeem Syed

Research Analyst & Regulatory Economist

ansyed56@gmail.com27