Do Service Providers Still Matter?

G. Barton
G. Barton

Summary Bullets:

  • The range and strength of alternative options to traditional telecoms service providers (SPs) are increasing.
  • SPs still offer clear differentiators that make them relevant to modern enterprises.

The launch of Amazon Web Services’ (AWS) Cloud WAN proposition is another move by the public cloud giants into what has traditionally been the domain of telecoms service providers (SPs).  AWS Cloud WAN is in the same category as Microsoft’s Azure WAN suite of services (particularly Azure Virtual WAN) and builds on AWS’ existing Direct Connect and Transit Connect Gateway products – but this time with a proposition that is specifically designed as a WAN solution (rather than purely cloud access), therefore making it more coherent and easier to manage.

The advance of cloud provider service offerings has not been restricted to network services.  Cloud-native collaboration solutions such as Microsoft Teams, Cisco Webex, and Ring Central have moved the location of the collaboration platforms away from service providers and put them into the hands of the vendors.

The questions, then, are: what is the future for service providers and are they still relevant in the enterprise market?  In three important aspects, the answer is ‘yes.’  The first is a relatively simple fact of physics.  Solutions such as AWS Cloud WAN and Microsoft Azure WAN can provide the ‘middle’ bit of the WAN, the sections between data centers, but they do not offer connectivity.  In order to connect a site (be that a corporate office or homeworker) to the hyperscaler’s middle WAN, a connectivity service (e.g., broadband or a fiber-based dedicated internet service) from a service provider is required.  This need for connectivity is driving investment in 5G and next-generation broadband services and is potentially very lucrative.  However, on its own, it is not enough to keep SPs in the enterprise game as these access services can be bought by enterprises separately and can be managed by a third party, such as a systems integrator.

It is this managed service aspect that offers the second in-route for service providers.  GlobalData’s research highlights that the complexity of new technologies, security concerns, uncertainties over the future of network requirements, and a desire to focus resources on core business activities are pushing more and more enterprises towards a managed or co-managed service and away from a DIY strategy.  Systems integrators remain the dominant force for managed services, and service providers such as Vodafone, Colt, and BT are moving closer to SIs and thereby take on the role of a B-end network partner.  However, as cloud connectivity focuses enterprises’ minds on the importance of the network, the network operator then offers a unique perspective when it comes to managing both the network and many of the services that run over it – including security and collaboration.  Service providers also have the partnerships with cloud providers and other global network operators that mean they can offer genuine differentiation when it comes to cloud access and supporting hybrid working.

The final piece is easy to overlook, but may be the most important in certain circumstances.  While hyperscalers have huge, global WAN backbones, their presence in any given geography tends to be limited to a few or only a single data center.  In some countries, the hyperscaler may have no presence at all.  When it comes to services that require a low-latency environment (e.g., moving legacy apps to the cloud), the edge networking facilities of service provider networks will be hard to beat.

The future is challenging for service providers, but don’t count them out just yet.

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