ATT and Google have partnered in a cloud venture, but it’s just an indicator of a broader strategy by operators and cloud providers, and one that could impact cloud software players like IBM/Red Hat and VMware. The move is a further indication that network operators are not rushing out to deploy carrier cloud, and that alone has significant ramifications. This could be huge (as they say) or it could be another flash in a vastly over-flashed pan, and there are even related news items to consider while trying to build a broad strategic view of the venture.
Five years ago, carrier cloud presented the largest potential new data center opportunity in the world, with the potential to create over 100,000 new data centers by 2030. I said at the time that there were six driver applications for carrier cloud, ranging from the small-ish but early NFV possibility to the intersection of personalization and contextualization, and IoT that would have accounted for more than half the data center total. However, this was a forecast of potential and not of realization, because from the first it’s been clear that operators were struggling to make any headway in the space.
The prospect of a hundred thousand new data centers would be enough to make server vendors and software-platform suppliers salivate. I think that IBM/Red Hat and VMware are obviously targeting the network operators, and for them to win big, the operators have to deploy a large number of those data centers. While the demand drivers ebb and flow in importance over the coming decade, there’s been at least a chance that eventually deployment would happen. Now, that’s in question.
AT&T cut an earlier deal with Microsoft in the cloud space, and a number of international operators have also inked cloud pacts with some of the public cloud providers. These haven’t closed the door on carrier cloud (many, in fact, were really about resale of cloud services by the operators), but they’ve all demonstrated that operators overall are unwilling to build it and hope they come, so to speak. The AT&T deal is a reinforcement of this, because it’s about (according to Google) “monetizing 5G as a business services platform, engaging customers with data-driven experiences, and improving operational efficiency across telecom core systems.” This isn’t resale of cloud services, it’s darn-straight carrier cloud outsourced to a cloud provider.
One obvious truth here is that if carrier cloud could have generated a hundred thousand incremental data centers for operators, outsourced carrier cloud would likely result in a comparable number of data centers split among public cloud providers. What was at one time the biggest pie for server and software vendors to hope to slice in their favor, now becomes something cloud providers may well be fighting over. But the AT&T/Google deal takes us back to a business platform again, another example of the fact that 5G proponents are looking for anything they can claim will drive their technology. Business 5G isn’t going to drive a hundred thousand data centers. What’s needed is for it to jump-start something than can then be given further stimulus by other applications and missions.
There’s a lot to stake here. Any cloud provider with a carrier cloud win of significant magnitude could ride that win to market leadership no matter what else happened. None of the cloud providers are touting this at the moment, though, because it’s clear that the operators are very reluctant to rush out and admit that they can’t make carrier cloud work…but it’s sure looking like they can’t.
This deal could have enormous consequences for Google, and not just because it gives them an opportunity to go after their share of those one hundred thousand data centers’ worth of cloud demand. Google is in third place among cloud providers, and it’s struggled to create momentum even as things like hybrid cloud and Google’s own Kubernetes invention have triggered revolutions in cloud buying.
Also remember the deal is about edge computing, which in any form introduces a pretty significant requirement for segmenting resource pools by their characteristics, which in turn demands tools for policy-based Kubernetes federation of deployments across all those discontinuous resource pools. This is very similar to the needs of hybrid-multi-cloud deployments, and in fact among the top data center owners in the world, over three-quarters actually have a need for segmenting data centers (and sometimes within them) by characteristics. Google’s Anthos, a big part of this announcement, is one tool to provide this, and in my view, the best tool among those offered by cloud providers. It wins in the deal, as does Kubernetes, as does containerized software in general.
Obviously, other cloud providers aren’t going to lay down on this challenge. Microsoft has its own deal with AT&T, but Microsoft’s deal is more focused on resale of Azure by AT&T than on hosting AT&T network functions. Google’s deal could well end up doing the latter, which is why it’s a more fundamental threat to the carrier cloud as an independent operator deployment (rather than as a segment of the public cloud market). The question that comes to mind is “Why Google?” and I can offer some insight from my own years of experience with operators.
About a dozen years ago, I was asked by a committee of operators to approach Google on the subject of what would be called today a “cloud partnership”. I worked with some of my Google contacts, and they let me know quite bluntly that management would have zero interest in such a thing. The point is that the operators wanted to approach Google, not Amazon or Microsoft, which shows that Google had stuff the carriers already knew they might need. Since then, Google has built not only one of the top three public clouds, but the most important tools for cloudifying applications. They have the best example of an SDN-based IP network in the world, and they also run the largest cohesive but distributed data center. Those are a lot of good reasons why operators might like them.
But it gets better. Google isn’t Amazon, who operators feared even twelve years ago. Google sees “the cloud” in a clear technology light, free of any biases based on their own sales of services or the competitive dynamic in the market. In some ways, the fact that Google isn’t a hybrid cloud leader already is a good thing, because operators could undertake (as AT&T has) a partnership with Google aimed at business 5G service opportunities, without colliding with Google’s own service plans. Of course, 5G is a big focus of operator interest, but from an edge hosting perspective, any sort of business service could well be just as valuable. Leverage AT&T’s connectivity, add in a mix of Google Cloud, and you have something that could be compelling, both to operators and also to business customers.
Remember my four phases of worker empowerment? They were linked to mobile services, and even perhaps to 5G. They unlocked an enormous potential pool of new benefits to drive purchase of equipment, software, and services. It’s not difficult to see that applications that related to those four phases could easily involve edge hosting, and thus be a target of Google’s initiatives. Also note that the later phases of empowerment involve personalization, contextualization, and IoT. Those were the drivers that combined to create over half those hundred-thousand data centers.
This, IMHO, is the critical opportunity, and it also defines the critical risk for the venture. Too much focus on abstract business services invites the initiative to fall into one of those circular-justification pits—5G is essential for edge computing for businesses, which is the driver of 5G. Something has to be a driver without dependency on that which it drives, or it’s just eating power and HVAC. Or it’s going nowhere.
There are business services that could make this venture a success. Success here could lead to wider consumer applications of personalization, contextualization, and IoT. The reason the deal is important isn’t that it answers all the questions that need answered (it doesn’t answer any), but that it introduces a relationship that could lead to the answers, one that combines a desperate partner (AT&T, who is looking to cut costs massively, including laying off people) and one with great power (Google, who has probably more of the right answers than anyone else).
Telco/public-cloud cooperation in business services, dependent as they are on productivity gains, could create a back door through which the personalization and contextualization services bleed away from carrier cloud into public cloud. That’s not the only threat. We also need to consider the impact that SaaS might have on the telco cloud. Salesforce has acquired Vlocity, a kind of spun-out play for vertically focused CRM. Network operators are one of the specific targets, and this shows that cloud providers, via SaaS, could possibly host operations software for niche organizations within the operators, gradually syphoning off what might otherwise have turned into telco cloud applications, even within the OSS/BSS framework.
SaaS applications aimed at telcos’ own operations processes duplicate some early telco outsourcing of business activities to public cloud providers (AT&T announced this earlier). While these don’t seem to have the potential to evolve into generalized frameworks for personalization and contextualization, as the more recent Google/AT&T announcement does, they do have the potential to tap off early carrier cloud deployment incentives. If there is no near-term carrier cloud deployment driven by other factors, then there’s limited infrastructure in place to incubate emerging contextual service opportunities.
My model suggests that the creation of contextual services, leveraging both IoT information and customer information, would get underway around 2022, but that presumed some earlier deployment of carrier cloud justified by other drivers. If those drivers are lacking, there is not likely to be pre-existing carrier cloud capacity available for the early market trials of contextual services.
On the other hand, if operators truly reconcile to outsourcing carrier cloud to the public cloud providers, there’s no need for early telco-cloud opportunities to build up resource pools; they’re already there in the public cloud. Might that jump-start personalization and contextualization, not only for business services but for the consumer space? Perhaps.
What may be the best news is that cloud providers are in a better position than network operators to come up with the software framework needed to support all six of the “carrier cloud” drivers. The partnerships between operators and cloud providers may be the way the former group is expressing its admission of failure. Since all the carrier cloud drivers relate to services above traditional connection services, cloud providers probably have a better handle on what’s needed. The partnership may close some doors for vendors who hoped to grab some of those hundred-thousand data centers, but in the long run it may deliver more value for everyone.