IBM expects unprecedented 5G hypergrowth to begin around mid-decade, and the decisions made by CSPs today are critical
The cloud hyperscaler dominance over legacy media companies has been making headlines lately, heightening the pressure on Communications Service Providers (CSPs) to avoid the same fate. The race for CSPs to restructure their business models in a way that will allow them to monetize 5G and edge is heating up, as is evident in a recent IBM survey, which highlighted how telco CEOs view their relationship with hyperscalers. According to IBM’s Craig Wilson, VP for global telecom industry, telcos are embracing open hybrid cloud platforms, but are doing so with caution.
“Three quarters of those surveyed feel that they need to work with hyperscalers,” he told RCR Wireless News, “but also feel they are at a critical decision point because, right now, the hyperscalers are the ones capturing a lot of the value from these partnerships.”
Specifically, 71% of telco CEOs surveyed said cloud computing is a core technology to help deliver results over the next two to three years, while 61% feel similarly about 5G. However, 74% of the highest performing CSPs agreed that partnering with webscale companies, including hyperscalers, for 5G-enabled edge computing would mostly benefit the strategic interests of webscalers.
In fact, cloud companies like Amazon and Microsoft have been burdening and benefiting from the networks that operators have spent billions to build out and upgrade. As the IBM report put it, “CSPs shoulder most of the burden of investing in infrastructure, but most money is being made by using that infrastructure — not building it.”
5G is, of course, no different. CSPs have incurred tremendous costs preparing for 5G-enabled Edge computing, and so the top performers are focusing on finding new revenue streams to drive profit.
“There was a clear and consistent approach from top performers,” commented Wilson, explaining that of the 500 executives interviewed, about 14% have been outperforming the rest for several years.
“Ninety-one percent of those top performers expect to continue to outperform in the industry for the next five years,” he said, “and they expect to do that as a result of building hybrid cloud business platforms built to optimize edge computing and 5G.”
Because CSPs are moving at different rates when it comes to developing a hybrid cloud, cloud-native platform business approach, IBM has detected a separation between the subset of those that are moving more “aggressively and consciously” towards this goal and those that seem to be dragging their feet.
The latter, he warned, are leaving themselves vulnerable in the race to capture the value of 5G edge, and therefore, to growing their revenue.
Fifty percent of the high performing CSPs, however, believe it’s important to “become strategic cloud platforms blending a diverse partner ecosystem,” and 59% agree they must become secure clouds infused with AI and automation.
Telcos are at a crossroads of sorts, forcing them to either simply and incrementally improve connectivity, or to do something disruptive and create a fundamentally different business model that places them in control of their own destiny. IBM expects unprecedented 5G hypergrowth to begin around mid-decade, and the decisions made by CSPs today are critical to their ability to compete long-term against cloud native competitors.