Google remains firmly in third place in the cloud market, and that is true in the telecoms space, but it is making significant gains on Amazon AWS and Microsoft Azure. In the past week, it has announced strategic partnerships with Orange and Verizon, and other major cloud partners include AT&T, Telefónica and Telecom Italia. It seems to be leveraging three main advantages in the operators’ eyes.
These are:
- Their fear of being locked into a single powerful webscaler as surely as they were previously locked into their network vendors. Verizon and AT&T, for instance, are sharing their cloud partnerships around. Verizon has agreements with AWS and Google, while AT&T has Azure, IBM and AWS as key partners in different areas of its telco cloud strategy.
- Google’s strong progress in building a highly telco-specific set of services and tools, which focuses heavily on the edge – the aspect of the cloud where many operators see some remaining chances to retain their power, and where AWS and Azure, with their models built on huge centralized scale, have weaknesses.
- The opportunity to bring the huge Android mobile developer base deeper into the 5G cloud environment. Access to developer bases are an important part of all 5G operator/webscaler relationships, even if some leading GSMA MNO members still dream of creating a telco developer platform to rival those of the cloud majors.
Google Cloud’s new relationship with Orange has elements of all three of these factors. It aims to transform the French-based telco’s IT infrastructure and co-develop future cloud services, mainly focused on edge computing, with compute/connectivity/storage nodes implemented in some of Orange’s central office, micro-data center or cell site locations. Edge, cloud and cybersecurity services will be jointly developed, sold and fulfilled across both companies’ infrastructure and the Orange networks.
The agreement is part of Orange’s Engage 2025 plan, announced last year as a five-year program to drive internal transformation, with a heavy focus on AI and big data to improve operational efficiency and the customer experience.
Orange CEO Stéphane Richard said in a statement that the deal would “accelerate our data and AI transformation and continue towards a better service for customers”. He added: “Google has been a long term partner of Orange and, as Google is eager to invest in Europe – and especially in France – to develop new data centers, this is the perfect time to work on new services and opportunities in French and European markets.”
Google will bring its expertise in cloud technologies, analytics and AI tools to the party, along with an established digital transformation methodology. Orange will bring its expertise in ICT services and its multinational network infrastructure. It will build a next generation analytics platform with Google technologies and use it to transform its own processes and decision making, and to provide services at the edge, including B2B2C applications in sectors such as gaming or retail.
Orange Business Services will use the platform to offer value-added analytics, cybersecurity and other cloud services based on Google Cloud solutions.
Specifically, Orange and Google Cloud will jointly create an Innovation Lab and a Center of Excellence which will work on the 5G/edge/AI solutions and provide support and training for Orange.
This is an example of the increasingly common pattern of webscaler/telco engagements, where each side backs away from too much confrontation, and seeks to play to its own strengths in order to win more business than rival cloud/telco combinations. So Orange’s rapidly expanding 5G network (and fiber in some markets) will help Google Cloud boost its reach and the services it can offer in western Europe, without having to build out a great deal of connectivity or edge infrastructure. Meanwhile, it gains direct revenue from Orange as a customer for its cloud solutions, as well as jointly pursuing enterprise opportunities which might have been out of reach for Google without a 5G partner.
Orange gains access to digital skills and to developer resources, which could enable it to drive the kind of applications that will stimulate adoption of 5G and edge – doing that inhouse, or with traditional telco developer ecosystems, has repeatedly proved inadequate to match the impact of the Internet giants.
But operators will be keenly aware of the danger that they will help the cloud giants to expand their business in services that are enhanced by 5G and edge, only to be squeezed into the dreaded bit-pipe role as their webscale ‘friends’ become entrenched in the new customer bases. Webscalers may need telcos, especially in markets where there is no significant chance for non-MNOs to build out 5G – which is still true of most European markets, including France. But they have the scale to be the dominant partners, and if telcos prove too difficult, they have the option to make direct investments in connectivity and edge – an expensive and risky route, as Google found with its fiber roll-outs in some US cities, but not beyond their resources.
Last year, for instance, Google Cloud’s sales rose by 53% year-on-year to $8.9bn, dwarfing Orange’s cloud revenues which rose by 19%, and total revenues from its IT unit (which includes cloud) €2.9bn ($3.4bn). And Orange is one of the more aggressive European operators in developing cloud services.
The market has been valuing infrastructure and cloud stocks more highly than telecoms shares for some years, and that trend will be intensified by the Covid-19 pandemic, as major recessions generally drive investors towards the relative safety of scale and physical infrastructure. Alphabet, Google’s parent, is worth more than $1 trillion and its stock has risen in value by 140% over the past five years, while Orange is valued at about €27.5bn ($32.2bn) and its stock has fallen by about 37% over the past five years.
One of the important benefits Orange will target is to gain skills in AI and automation from a company which has helped to invent the modern AI platforms. While Orange, like most operators, frames its public statements about AI and machine learning in terms of improved customer experience and business agility, one of the key objectives of a program like Engage2025 is to slash staffing levels in order to reduce cost. This will be, in the short term, the most important return on investment in AI, if Orange can successfully automate many of its network, IT and customer operations processes, using AI to ensure automation remains intelligent, and moving many of the tasks to the public cloud.
It is targeting €1bn ($1.2bn) in annual cost savings by 2023, compared with 2019, as part of Engage2025, having already reduced its staff levels by 6% compared to 2015 – though that is less than many of its peers, with Vodafone, Telecom Italia and Telefónica all having reduced their workforces by at least 15%.
Similar motivations, though on a smaller scale for now, are seen in Verizon’s deal with Google Cloud. The two will work together on an AI-enabled “natural and streamlined digital experience” for customers, with the system designed to replace customer care agents in some scenarios, and provide them with better tools to answer queries in others. Verizon will use the Google Cloud Contact Center AI solution, which boasts of combining natural language recognition technologies,with high speed processing and real time access to customer insights and product information.
One of the ways in which Google has stolen a march on its larger rivals in the 5G world is in the edge cloud. At Google Cloud’s recent Next 2020 virtual event, the division’s CEO, Thomas Kurian, said that 5G, edge, automated customer service and hosted core networks were cornerstones of the company’s bid for more MNO business.
“What we’re offering with mobile edge cloud is the ability for a telecommunications company to build a set of virtualized network functions and cloud-native functions for the packet core and the RAN, on top of Google’s cloud,” he said. This could be combined with Google’s pre-packaged catalog of services for specific industries such as manufacturing or retail. The aim, clearly, is to save a great deal of upfront cost for operators, both in building their own networks and in developing their own vertical market solutions and channels.
The danger for operators is that this telco-in-a-box approach enables new challengers with greater industry expertise and agility. Some smaller MNOs may respond to that threat by taking the same approach. Large MNOs will still retain control of their networks – and some are starting to build significant inhouse R&D resources to wrest back control of the network technology agenda from equipment vendors and webscalers. But they may increasingly use the public cloud to support network elements as well as IT processes and customer applications. And they will certainly be interested in tapping into the webscalers’ knowledge, solutions and established position in enterprise sectors where the MNOs may have little relationship except as a provider of SIM cards and data bundles.
The most interesting differentiator from the other cloud giants is the highly telco-focused approach to edge computing. Google is positioning its cloud platform and tools far more specifically for 5G networking than its rivals, and earlier this year, it unveiled the Global Mobile Edge Cloud, an open platform on which operators and Google can jointly develop applications and a distributed edge.
When Telefónica announced a partnership with Google Cloud in June, it said the cornerstones of the deal were the edge platform and services, plus its development of a multicloud strategy. Google will extend its cloud services using Telefónica’s infrastructure in the Madrid region, initially, and the telco will develop enterprise services on the Google Cloud, boosting its digital capabilities in areas like AI/ML and big data analytics, to enhance its services for its global customer base, especially in 5G.
Telefónica’s Tech Cloud business, which was set up late last year, will use the platform alongside other public clouds. The unit is centralizing Telefónica’s cloud, security, IoT and big data activities and aims to generate over $2.2bn in revenues from 2022, and its relationship with Google looks similar to the Orange/Google deal, exchanging cloud and AI expertise and capabilities for the operator, for an extension of Google’s edge cloud and connectivity reach in a key European market.
The Global Mobile Edge Cloud platform aims to provide a more open and collaborative approach to the telco edge than rival offerings like AWS Wavelengths and Azure Edge Zones (though Telefónica has also signed up for Azure Edge Zones).
AT&T was Google’s launch partner for its edge platform, and while Google Cloud lacks AWS’s ubiquity or Microsoft’s huge enterprise incumbency, it does look attractive at the 5G edge. Its model and infrastructure are less centralized and more network-centric than those of its rivals and that may enable it to form more multi-faceted collaborations with operators.
Under its edge banner, Google says it aims to deliver:
- a portfolio and marketplace of 5G solutions built jointly with telcos
- an open cloud platform for developing these network-centric applications
- a global distributed edge for optimally deploying these solutions, which will be developed rapidly by “lighting up thousands of edge locations that are already deployed in these telecom networks” rather than building all the sites itself
To help achieve the second objective, Google offers Anthos for Telecom, which brings its Kubernetes-based Anthos cloud platform to the network edge and optimizes it to support telecoms-centric applications such as AI-enabled customer service or personalization systems.
“We’re basically giving you compute power on our edge, where previously it was only for Google use, through the Anthos platform,” said Eyal Manor, VP of engineering for Anthos, earlier this year. “The edge is very powerful, and I think we will now see substantially more innovation happening for applications that are latency-sensitive. We’ve been investing in edge compute and edge networking for a long time in Google over the years for the internal services. And we think it’s a fairly unique capability now to open it up for third party customers.”