This white paper, produced in April 2012, is derived from the Informa Telecom Cloud Monitor, an analytical tool tracking the cloud-related activities of more than 130 operators worldwide.

1. Navigating The Telecom Cloud
Growth Perspectives
www.informatandm.com

2. Fig. 1 – CSPs selling cloud services multiply
Introduction 160
140
Communication service providers should remember that 120
CSPs selling cloud services
cloud computing can – and must – defend the core. The core is
100
broadband, whatever their aspirations to become digital media
outlets or ICT service providers. 80
Using cloud services, CSPs have a multi-billion dollar opportunity to 60
change the dynamics of ICT wallet share. Nevertheless, CSPs’ cloud
services must fulfil a primary function of securing revenues on the 40
network assets that make CSPs positively different from pure-play cloud
20
service providers.
0
Informa has examined the cloud strategy of more than 130 CSPs across 2006 2007 2008 2009 2010 2011 1Q12
the world (see fig. 1). This underscores that CSP cloud activities and
 Eastern Europe & CIS
investments are accelerating (see fig. 2).  Western Europe
 Asia Pacific
CSPs – particularly those in North America and Asia - spent almost  North America
 Middle East & Africa
$14 billion on cloud pursuits in 2011 (see fig. 3), according to Informa’s  Latin America
Telecom Cloud Monitor. Revenue growth rates comfortably exceeding
100% per annum are common. However, only a handful of CSPs currently
generates more than 5% of overall revenues from cloud services. SOURCE: Informa Telecoms & Media
CSPs must act now to secure long-term profits from cloud services.
As demand for cloud services shifts to emerging markets and across
customer segments, CSPs’ cost bases are under increasing pressure – and
Fig. 2 – CSP cloud activity accelerates
their competitors are increasingly diverse and sophisticated.
We hope that the following perspectives provide guidance, and we look
forward to working with you on your cloud journey.
66
1Q12
Camille Mendler
39
Principal Analyst – Informa Telecoms & Media
camille.mendler@informa.com
@cmendler
27
1Q11
22
4
1Q10
4
 Services launched
 CSPs active in quarter
SOURCE: Informa Telecoms & Media
© 2012 INFORMA UK LTD. ALL RIGHTS RESERVED. WWW.INFORMATANDM.COM

3. Fig. 3 – CSP spent $13.5 billion on cloud in 2011
The status quo Investment by region Top telecom cloud investors
CSPs are muscling into the global cloud market with bulk – big-
name acquisitions and big-ticket investment programs. In 2011
alone, CSPs spent $13.5 billion on cloud-related pursuits.
So far, CSPs in developed markets have called the shots. Notably, ATT,
NTT and Verizon are executing well-established plans to sell cloud
services – and they have the appetite to invest globally. North American
and Asian CSPs accounted for 90% of telecom cloud investments in 2011.
European operators accounted for only 7%. CSPs in other regions made
up the remainder (see fig. 3).
 Russia and CIS (2.7%)  Centurylink (18.7%)
 Europe (7.1%)  Windstream (18.6%)
Europe’s economic weakness and uncertainties about security and  Latin America (0.8%)  NTT (16.1%)
privacy laws have meant more muted investment activity. Yet European  Asia Pacific (30.8%)  Verizon (10.4%)
 Middle East and Africa (0.4%)  ATT (7.4%)
CSPs continue to launch the largest number of new cloud services – and  North America (58.2%)  Telstra (6.3%)
half of their cloud enablement partners are European firms. Prominent  China Unicorn (4.7%)
 Others (17.8%)
European CSPs include Deutsche Telekom, Orange, Portugal Telecom
and Telefonica.
NOTE: Totals may not add up to 100% due to rounding. Totals include estimated value of
acquisitions and investment plans announced in 2011.
From 2012 onward, Informa believes that CSPs in other regions will
become prominent in cloud services, particularly in emerging markets SOURCE: Informa Telecoms Media
(see fig. 4). In Africa for example, lack of legacy ICT infrastructure may
prove a positive advantage for cloud service takeup. Besides data center
investments, African CSPs including MTN, Safaricom and Vodacom are
now linking cloud services to m-commerce payment models, cleverly
Fig. 4 – Cloud activity shifts to emerging markets
adapting to the limitations of Africa’s formal banking infrastructure.
Number of CSP cloud service launches by country type
In the Middle East, CSPs are ramping up activity and bolstering cloud
1Q11 1Q12
skills through ICT partnerships. STC works through its ICT subsidiary
Awal and with India’s Sify. Etisalat works with HCL Technologies. Mobily High income Eg: Germany, Japan,
and Qtel work with regional ICT integrators, Smartworld and iHorizons, countries UAE, United States
77% 59%
respectively. du is targeting SMEs through a government-supported
cloud initiative in partnership with Microsoft. Upper-middle income Eg: Brazil, China, Russia,
countries Turkey
9% 33%
In Latin America and the Caribbean, data center construction is well
underway, involving CSPs such as Digicel, Entel, Telconet and Telmex. Lower-middle income Eg: Egypt, India Ikraine,
Service launches are accelerating: America Movil and Lime are rolling countries Vietnam
9% 8%
out cloud services across their subsidiaries. SMEs are a principal
customer target for CSPs like Telefonica. But equally, CSPs like Alestra, Low income Eg: Kenya, Pakistan,
Oi and Telmex are also targeting public sector organizations in general countries Tanzania, Uganda
administration, health and education.
5%
In each region of the world, there is much to play for, and rising pressure
on CSPs to make a return on their considerable cloud investments. SOURCE: Informa Telecoms Media
© 2012 INFORMA UK LTD. ALL RIGHTS RESERVED. WWW.INFORMATANDM.COM

4. Fig. 5 – Cloud services benefit everyone, and everything
Secure the core Customers
People Objects
Segments
CSPs’ cloud services are not interchangeable with those of
Horizontal Vertical
other cloud service providers. The services may bear the same
Consumers SoHos SMEs Enterprises Government Health Finance Energy etc…
name and functionality – IaaS, PaaS and SaaS – but they have a
specific duty to perform.
Services
UCaaS IaaS PaaS SaaS Carrier Ethernet DSL WiFi M2M 2G/3G/4G IP VPN
Broadband, and increasingly mobile broadband, is the anchor
service that CSPs must support and integrate into their cloud service
Assets
propositions. CSPs must not seek to simply copy pure-play cloud service
Spectrum Fiber Datacenters OSS / BSS Stores Channels Security Certified Skills
providers; they must emphasize how they positively differ.
CSPs must also suppress the urge to silo cloud services into the SOURCE: Informa Telecoms Media
‘ownership’ of a particular division: Cloud is a consumption model for
digital goods which touches all customer segments – as well as CSPs’
internal processes (see fig. 5).
Fig. 6 – CSPs prioritize IaaS
CSPs can act as a distribution channel for third-party cloud services. But a
central role in the cloud value chain – and a bigger share of the revenue
World: CSP cloud services launched by type, 2011
pie – is sought. Reflecting this desire is the growing focus on IaaS (see
fig. 6) and data center assets. In 2011, eight out of 10 CSPs’ cloud-related
investments and acquisitions involved data centers to establish positions
in IaaS. CSPs are now constructing a quarter of a million square meters of
data center space.
But making a land grab for physical assets in order to sell virtual goods
carries risks. Once the cloud’s digital assets are fungible – standardized
and completely interchangeable, irrespective of vendor – the only real
differentiator becomes price.
CSPs must not re-architect the boom and bust cycle of the Enron Era. Two
duties are clear: To assert service differentiation and to lower costs. In a
post-PC world, CSPs must remember that their ability to secure, mobilize
 IaaS (18%)
and democratize access to cloud services is increasingly valuable.  Storage, back up and restore (16%)
 nified communications and collaboration (15%)
U
Recommendations  Business apps suite (14%)
 Security (9%)
• ecure core income: Cloud services must drive usage of CSPs’
S  Other (28%)
broadband networks and secure customer loyalty.
• ifferentiate, don’t copy: CSPs must emphasize their multi-device
D
NOTE: n=170 new services launched in 2011
and multi-platform cloud service delivery and support capabilities.
• emove silos: CSPs must develop a holistic cloud strategy that
R SOURCE: Informa Telecoms Media
delivers both go-to-market and operational benefits across their
customer bases and business processes.
© 2012 INFORMA UK LTD. ALL RIGHTS RESERVED. WWW.INFORMATANDM.COM

5. Fig. 7 – Triaging services to secure differentiation
Promote differentiators Cloud Service What do they promote in the Telecom Cloud?
Quality Ubiquity Security Interstitial Collaboration
consumption
Many CSPs want to establish a high-volume hypermarket for Multimedia content
cloud services. But CSP success is highly dependent on whether
management     
their service delivery and management costs are pared down Console-quality
and their competition is weak.
gaming
   
Open-source cloud stacks promise more competitive cloud economics for
Medical imaging
  
CSPs moving into commodity, public cloud services. But to play for keeps, Cross-platform
CSPs must also prioritize differentiating services that underscore the
video conferencing
    
importance of broadband and alter patterns of user behavior in leisure or
work contexts. Differentiating services (see fig. 7) are those which:
Cloud telephony
  
• epend on quality of interaction: Services which rely on high-
D
speed connectivity, where latency impairs the quality of user
Virtual desktop
  
experience and application functionality.
• llow ubiquity of interaction: Services which are accessible and
A SOURCE: Informa Telecoms Media
easily switchable between connected devices without impairment
of experience, irrespective of location.
• ecure digital interaction: Services which safeguard content,
S
the physical housing and transmission of content according to
Fig. 8 – Linkages between consumer and enterprise cloud services
individual, corporate and governmental requirements.
• timulate “interstitial” consumption: Services which enable digital
S
interaction during downtimes, typically when an individual is
moving from one task or location to another. Examples may include CONSUMER CLOUD ENTERPRISE CLOUD
queuing, taking a taxi or being on hold. Multimedia content Storage-as-a-service
• romote collaboration: Services which support multi-user
P management Backup disaster recovery
interaction, content sharing and problem solving across diverse Gaming Collaboration, enterprise video
connected devices and physical locations. Cloud telephony second-line Dual-persona / managed BYOD
Unified communications
Device security
In particular, CSPs need to mirror consumer and enterprise cloud services Managed security
device management
in order to create operational and behavioral synergies (see fig. 8). Only
5% of CSPs’ new cloud services targeted consumers in 2011. Consumer
cloud services may not be highly profitable in their own right, but they
can help build cloud experience and grassroots demand. The consumer SOURCE: Informa Telecoms Media
cloud is a Trojan horse into the enterprise.
Recommendations
• pply the power of consumerization: Consumerization of the
A
enterprise is a weapon to use proactively to drive cloud service
demand.
• eware cloud hypermarkets: Brokering apps, storage and compute
B
services mustn’t downgrade a CSP’s differentiators in the cloud
ecosystem.
• ursue open source: Open source cloud stacks are still maturing,
P
but could improve CSP costs and competitiveness.
© 2012 INFORMA UK LTD. ALL RIGHTS RESERVED. WWW.INFORMATANDM.COM

6. Fig. 9 – CSPs focus on SMEs
Sell trust to SMEs World: Segments targeted in CSP services, 2011
Small and medium-sized enterprises are the number-one
target for CSPs’ cloud services (see fig. 9). But SMEs are not
a single ‘mass’ market. CSPs must execute a two-pronged
strategy: They must support both general and selected
industry-specific business processes.
Generic functions addressing nearly all SMEs include unified
communications and collaboration, security, data storage and backup,
point of sale, invoicing and billing, sales force automation, inventory
management, customer care, and marketing. Addressing industry-
specific processes is also relevant where demographics are favourable
 SMEs (44%)
(see fig. 10).  Enterprises (41%)
 Vertical industries (10%)
Many CSPs believe that price is the only issue that really matters to SMEs.  Consumers (5%)
This is only partly true. An effective SME portfolio should demonstrate a
NOTE: n=170 new services launched in 2011
balance of capabilities:
• ocalization: Serve local conditions and business processes. For
L
example, Koç.net is partnering with SaaS vendor Surado Solutions SOURCE: Informa Telecoms Media
to sell a Turkish-language version of its CRM package to Turkish-
speaking SMEs in Turkey and beyond.
• emocratization: Extend enterprise-class capabilities cheaply into
D
SMEs. For example, Telecom Italia’s Fast-Start per SAP Business All-
Fig. 10 – SME verticals are worth targeting
in-One service includes an online configurator where SMEs select
and pay only for required processes.
1000+
• pecialization: Target sizeable SME sub-segments. For example,
S
NTT Data’s Recec service for the Japan Dental Association is a
SaaS service for dentists which manages their medical insurance
reimbursement claims, bundled with a secure VPN connection.
• Mobilization: Deliver mobility that positively boosts an SME’s
500
business efficiency. For example, Vodafone Germany’s Vodafone
Locate service helps SMEs working in logistics to track their drivers
without the need to invest in specialist hardware or software.
• rust: Stress competence to reduce business risk and boost
T
profitability on a strategic and operational level. For example,
Employees per Company
Orange’s Le Cloud Pro is a dedicated small business portal which 100
sells cloud services, but also integrates curated business strategy
and trading advice.
Recommendations
• romote trust over cost: CSPs must find new ways to help SMEs
P 20
to do business using the cloud, not just cheaper ways. Trust is a SME VERTICALS
differentiator. Shop owners
• erticalize the SME universe: CSPs should market to large sub-
V Hotel / restaurant / bar owners
5
segments within their SME universe. Sizeable groups exist where Accountants
discrete targeting is justified. Doctors, dentists
• on’t downplay broadband: CSPs should promote services that
D
Small manufacturers
offer fundamentally new ways for SMEs to do business using assets
that CSPs control.
1 Lawyers
Plumbers / electricians
0
SOURCE: Informa Telecoms Media
© 2012 INFORMA UK LTD. ALL RIGHTS RESERVED. WWW.INFORMATANDM.COM

7. Fig. 11 – Money flows are complex
Triage cloud enablers
SaaS vendor
The average CSP works with 16 cloud enablement partners,
according to Informa’s Telecom Cloud Monitor. Many
relationships simply involve SaaS resale (see fig. 11), but more
complex relationships are also common.
Informa defines cloud enablement as a sub-set of telecom managed and
professional services, divided into two inter-related types. Go-to-market Cloud Indirect
CSP
aggregator channel
services involve helping CSPs to sell cloud services to end customers.
Operational services, meanwhile, may include the construction and
operation of cloud service infrastructure, but also the migration of CSPs’
existing processes to the cloud’s operational model, such as provisioning,
billing and service orchestration.
CSPs’s leading partners in 2011 illustrate the diverse, multi-faceted nature Indirect Indirect
of cloud enablement. They included: CSP
channel channel
• icrosoft: Twenty eight CSPs developed and launched services
M
(largely Office365) with Microsoft in 2011.
• isco Systems: A leading unified communications and
C
collaboration (UCC) provider, Cisco was also a global IaaS enabler
with EMC and VMWare.
• E On-Demand: The Hungarian Office365 syndication partner
C
helped CSPs in Austria, Bulgaria, Hungary, Poland and Slovenia.
• oogle: GoogleApps won support as far afield as the Maldives with
G
SME / Enterprise
Dhiraagu, but also major CSPs like Vodafone Germany.
• imension Data: The NTT Group subsidiary provided its onecloud
D
Payment types may include:
IaaS platform to CSPs including BSNL, Hutchison Global, Indosat
and PLDT. Retail payment Referral commission, Pass-through
• arallels: The vendor’s cloud-service automation tools helped
P revenue-share payment
payment
Charter Communications, KDDI and KT in 2011.
• EC: Most prominent in Telefonica Espana, NEC’s SaaS enablement
N
services extended to Latin America, and CSPs like MTS Belarus. SOURCE: Informa Telecoms Media
Historically, go-to-market partnerships dominated enablement activity,
but needs are evolving.
Fig. 12 – Cloud enablement is multi-sided
Today, the transition to cloud-based operations ranks among CSPs’ top
three operational investments for 2012, according to a recent Informa
survey. Ultimately, telecom cloud market dynamics (see fig. 12) will favor PROPOSITION ENGAGEMENT COMPENSATION
enablers that can provide a lifecycle of services – and shared reward.
Recommendations One-off
• emand gain sharing: Favor partners willing to share risk and
D
CLOUD ENABLER
Sell to Consult, design, plan, build,
deploy, integrate, migrate
reward. Go-to-market services
• valuate wider partnership benefits: If a partner’s proposed
E Help sell the cloud
financial terms are unfavorable, consider if the cloud service can
CSP
Annuity
act as a loss leader to secure broadband subscriptions before Manage, operate,
Sell with optimize, licence, white
walking away. label
• treamline partnerships: Look to lifecycle partners that can
S FIXED PRICE
simplify partner onboarding and management burden. Units, over term, license
Operational services fee
Help deploy the cloud VARIABLE
Sell Performance, deferred
through CAPEX, pay-as-you-grow,
shared risk/reward
SOURCE: Informa Telecoms Media
© 2012 INFORMA UK LTD. ALL RIGHTS RESERVED. WWW.INFORMATANDM.COM

8. The Informa Telecom Cloud
Monitor
This analysis is derived from the Informa Telecom Cloud
Monitor, an analytical tool tracking the cloud-related activities
of more than 130 operators worldwide. Content sources
include Informa operator, vendor and enterprise interviews,
company financial statements, press releases and other
publicly-available data. Activities tracked include acquisitions,
investments, customer wins, service launches, trials and
partnerships with more than 250 cloud-related equipment,
software and services vendors, with a historical archive
beginning in 2005.
Related research
Sell the cloud to protect the core: Action plan for 2012
Cloud TV: A future necessity for operators
The SME cloud opportunity: A market overview
Is SaaS a loss leader in the telecom cloud?
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© 2012 INFORMA UK LTD. ALL RIGHTS RESERVED. WWW.INFORMATANDM.COM