Telstra’s Big Shift on Cloud

18 December 2014 | By John Merryman

Telstra’s Big Shift on Cloud

Telstra’s recent shift in cloud strategy sets a new path for the Australian telecommunications giant in the cloud marketplace. After several years of ambitious yet lacklustre cloud build initiatives, Telstra’s formation of a multi-vendor cloud brokerage ecosystem marks a definitive change in strategy. Notably, VMware, Cisco, & Microsoft are cited in this series of changes, with more likely to come.

Global Market Change

Even a year ago, the global view of cloud services was different, as summarised in the following chart.

Move forward to late 2014, and the picture is changing. Dell, HP, & IBM have exercised notable restructuring and strategy changes in an effort to catch-up on the Cloud Service Provider (CSP) market. Instead of continuing to market custom cloud build/orchestration projects, pre-packaged public cloud offerings from Cisco & VMware are being brought to market.Amazon & Microsoft continue to levy technically dominant offerings, and Google has quietly entered the enterprise cloud compute marketplace. The question soon will be not how many years ahead is Amazon Web Services (AWS), but how difficult the game of catch-up will be.

Regional Market Change

During the last two years, the cloud marketplace has localised for Australian customers. First Amazon’s 2012 entry into Sydney, followed by IBM Softlayer, and now Microsoft have changed the stakes for incumbent hosting and managed services providers, where data sovereignty and institutional trust were the de facto local market levers.

Today, the options are arguably fewer but better. The days of massive capital investments in hardware/software/automation are waning, as the vast majority of these projects are written off by customers and written down on the balance sheets. At this moment in time, Telco service providers have one of two choices:

1) Change to a Cloud Brokerage Model.

2) Bet on OpenStack being better than the last two generations of cloud orchestration.

Otherwise, the global Cloud Service Providers will etch into the market and drive the traditional Telco Cloud offering into obscurity.

New Challenges

Our favourite part of the Telstra change, is the potential increase in consumer choice, and a chance for Telstra to innovate around traditional core business and technology strengths. With any brokerage of scale, there are massive challenges across the business systems integration, governance, security, and provisioning – all traditional strengths in the Telco industry. Below the core service layer, the network orchestration and automation challenge could not be better timed with the onset of carrier grade Software Defined Networking (SDN) and Network Functions Virtualisation (NFV) technologies. With this in mind, there is value to be provided and margin to be earned, and this is unlikely to be matched by regional Telco providers.

The Path Ahead

There’s never been a better time for customers of all sizes to exercise choice in the Australian market. From small to medium, right through to large enterprise, there are refined cloud service offerings on market available for consumption. Telstra has reframed a corner position in market, with alliances with leading software and cloud service providers and a legacy of network service innovation and dominance. Independent advisory services and boutiques now have a meaningful role to play in the market, as the dominant forces of outsourcers and solutions integrators are now in transition.

We advise a close watch on Telstra’s momentum as we expect it to build on the back of this adjusted market strategy.

For more information or to discuss this further, feel free to contact the GlassHouse Technologies team.