The telco cloud invasion

Australian telcos have begun ramping up their cloud service offerings in earnest, as part of a larger war effort to sequester a piece of the cloud services pie for themselves. So what does this mean for IT departments looking at adopting cloud solutions? Andrew Collins finds out.

In recent times, some of Australia’s biggest telecommunications companies have begun spruiking cloud-based services.

Optus and Telstra, perhaps the most visible examples, have each invested heavily in both software-as-a-service (SaaS - the remote delivery of software applications, like business applications) and infrastructure-as-a-service (IaaS - the leasing of remote compute resources, like storage and server time).

While more choice does wonders for competition - driving down prices - it has left some IT managers scratching their heads, wondering why they should provision cloud services from a telco, instead of from a dedicated cloud provider.

Previously, a move to the cloud meant asking a bunch of hard questions to decide if such a move was appropriate - questions about things like security, liability, regulations, geography, service level agreements, and so on - then, if there were ticks in all those boxes, picking a cloud provider.

Nowadays, the market is divided into qualitative tiers. Not only must you ask those hard questions, you must also consider what kind of cloud provider you want, before you can start comparing prices.

Should you go with a traditional service provider that deals solely in cloud services, trusting in their specialised experience? Or should you go with a telco that has only recently added these cloud services to their portfolios, and expect some sort of discount from service bundling?

With telcos now throwing their collective hat in the ring, there are three main categories of cloud service provider, each with their own advantages, disadvantages, and ideal-use scenarios.

Low-cost service providers

The first category of cloud service provider goes by several names: low-cost providers, commodity cloud providers, mass market cloud providers.

Typically, service providers in this tier actually specialise in some business outside of the cloud.

Clive Gold, Marketing CTO, EMC Australia and New Zealand, explains: “These providers use their investments in their primary business to offer cloud services and look at ways to subsidise their offerings with other revenue sources.”

Take Google, for example, the primary business of which is web search.

The company provides its cloud-based email service, Gmail, for free to individuals. In order to generate revenue from Gmail, the company has applied its experience with context-sensitive text ads in web search to Gmail, inserting ads into the web app that are related to the contents of any given email. Users click ads, advertisers pony up their fees to Google, and Google makes money from Gmail without actually charging its users for it.

But while applications in this tier tend to be low cost or even free to use, they usually come with some pretty hefty restrictions. Depending on your business, these restrictions can potentially put a large dampener on your plans.

“There is no control or visibility into these services. The data may be kept anywhere in the world, [and] there are no claims as to who can and can’t access and view your data,” Gold says.

Furthermore, since these services tend to be static and offer little in the way of deep customisability, they can carry hidden extra costs, in the form of internal development or restructuring of processes.

“A lot of these services need the organisation to rewrite or re-engineer the way they do things or there is no way to extract the data. This means these services should be viewed as proprietary with all the issues that come with that,” Gold says.

On the plus side, some of these providers have multiple data centres dotted around the globe, and can therefore meet the regulatory requirements demanded by some multinationals.

“The location of the provider’s data centre can be important for some industries, such as finance where there are compliance regulations over where customer data is held,” says Peter Hall, Principal Analyst at Ovum.

Aside from Gmail, Gold nominates Amazon and Facebook as well-known examples of this low-cost tier of cloud service providers.

Virtual private cloud providers

Providers in this second tier are the classic enterprise cloud providers, offering higher-end services than those in the low-cost tier. Local examples include MelbourneIT and Bluefly IT Solutions.

“Dedicated providers typically come from a managed hosting background so they have more experience in delivering business-grade services than commodity providers,” says Ovum’s Hall.

They tend to have more specific target markets than the low-cost providers and mould the services they offer to suit their targets’ needs.

“For example, they might target large organisations looking for a backup service,” says Gold. “As such, they would provide the service attributes and a service level guarantee appropriate to this need.”

These solutions are not only more targeted than the low-cost alternatives, but can be customised to suit different customers.

“Dedicated providers are also more able to provide a customised solution rather than just an off-the-shelf solution,” says Ovum’s Hall. “For example, a hybrid solution combining public cloud and private cloud.”

One enterprise cloud service provider is IPscape, which provides cloud-based contact centre solutions.

According to Simon Burke, CEO at IPscape, the experience that dedicated cloud providers bring to the table is a virtue.

“You’re dealing with a real domain expert with proven operational expertise and knowledge in that field. Treading a path with a cloud provider [that] others have followed also reduces the risks surrounding changes to IT delivery,” Burke says.

“They may also be better equipped to provide related services such as consulting; for example, assisting a customer to identify applications suited to the cloud,” Ovum’s Hall says.

And while the services might be more targeted than the low-cost services, and carry better guarantees of what they can actually do, they come at a higher cost.

“There is no magic,” Gold says. “To provide a certain level of service, you have to build a certain standard of infrastructure and operate it accordingly.”

Service providers in this tier may also be of limited use to multinationals.

According to Ovum’s Hall, these providers typically have a single data centre, meaning customers with offices in multiple countries may run into problems with laws that dictate where data is stored.

Also, these providers tend to have limited options when it comes to connectivity.

“Dedicated providers will have limited connectivity options, typically only public internet, although they may also offer an IPsec-based VPN solution,” says Hall.

Companies with heavy networking or security requirements may need to look elsewhere.

The telco

Cloud services from telcos tend to sit somewhere in between those from low-cost providers and those from enterprise providers.

Telco cloud services tend to offer more control than the low-cost providers, but they are standardised - ‘one-size-fits-all’, so every customer gets the same service - with little customisation to meet different target markets.

“So it caters for the average consumption use-case, and it has a cost which is appropriate,” says Gold.

Bundling services together is a time-honoured telco tradition, and it’s no different with cloud services.

“The big advantage of the telco is that they can bundle services, so your cloud traffic may be free, or at a very low cost,” says Gold.

He also says that telcos are used to providing very robust services.

“When last did you not get dial tone?” he asks.

One of the big benefits a telco brings to the table that other cloud providers might not is their existing telecoms infrastructure; specifically, their networks.

Telcos tend to offer “multiple connectivity options including MPLS VPN and carrier ethernet – typically, the trusted WAN services used by enterprises,” says Hall.

Telstra and Optus both claim that telcos’ networks can be a boon to cloud computing.

Liam Fraser, General Manager, Cloud Services - Optus Business, says: “Delivering cloud services via a dedicated, secure network can provide significant advantages over internet cloud-based solutions.”

Mark Pratley, General Manager, Telstra Cloud Computing, says: “Cloud services are only as good as the network that delivers them. This makes security, reliability, performance and maximum reach essential pre-conditions for successful cloud services.”

This sentiment is mirrored by Macquarie Telecom, another telco offering cloud services. Aidan Tudehope, Managing Director, Hosting at Macquarie Telecom, says telcos have “resilient internet or secure WAN connectivity” that can help in delivering enterprise cloud services.

IPscape’s Burke agrees that telcos’ network infrastructure can be advantageous in some situations.

“Where organisations are handling complex network traffic around or running mission-critical services, then choosing a telco to manage the overall cloud service can be a sensible option,” he says.

According to Burke, telcos have the infrastructure to support global operations and the experience to support complex voice and data networks across multiple countries.

But, he says, “That doesn’t mean to say all telcos are naturally good providers of cloud simply because they manage a network - the skills involved are very different. When selecting a telco for cloud services, it’s important to see evidence of a well-defined cloud strategy with real examples of services being delivered successfully to global companies to agreed SLAs.”

When assessing a telco for cloud computing services, Burke recommends taking a look at the telco’s long-term cloud plan, and its partners.

“Telcos that have a clear road map as to how they will roll out cloud services and who partner with best-of-breed cloud software providers will obviously be better placed to meet the needs of customers than those that don’t,” Burke says.

There is something to be wary of with telco cloud offerings, however: the reliance of these offerings on external services.

“The caution with the telco offerings is they are also leveraging their ‘links’ to aggregate services from outside of the country to ‘round out’ their offerings - for example, Telstra and Microsoft,” Gold says.

“So the user must still understand how the cloud service is actually delivered and the flow-on contractual and risk issues that might arise,” says Gold.

In other words, it’s easy to understand risk when the service you rely on comes in one chunk, from one provider. All your contact is with them, and things are simple.

But when you rely on a service that itself relies on multiple other services, things can get complicated. You may be required to engage in contracts with not only the telco providing you with the cloud bundle, but also the companies that provide your telco with services.

Plus, your data may pass through several companies, bringing increased security risks with each jump.

That’s not to say telcos are inherently riskier than traditional cloud providers. It just means that you must be mindful of these complications when you engage these services, and that the due diligence you undertake before provisioning a cloud service from a telco may end up being more involved than if you went with a traditional cloud provider.