Telefónica’s acquisition of Austrian cloud software provider and integrator BE-terna, for up to €350m, depending on future earnings, gives a clear indication of the telco’s enterprise strategy, as well as indirectly highlighting the relative positions of the three big hyperscalers, Microsoft Azure, Amazon Web Services and Google Cloud.
The acquisition, made by Telefónica Tech, the telco’s enterprise division, also dovetails with the partnership unveiled in March 2022 with Israel’s Pente Networks. This revolves around the latter’s enterprise LTE/5G platform and aims to develop a managed 5G Cloud service to facilitate emerging applications for enterprises, that the operator likes to describe as “transformational use cases”.
These two companies had already developed joint products that combine 5G connectivity with on-premise and edge platforms as a turnkey system. That is a slight misnomer because in practice such platforms require some customization and cannot literally be turned on by the customer, but nonetheless comprises substantially pre-built components.
In this case, the idea was that enterprise customers could access a full range of cloud-based hyperscale services to build, manage, and scale local applications, working with the Pente connectivity platform. Telefónica argued this meant it could bring up private networks in hours or days, depending on the amount of customization required, as opposed to weeks, months or even a year or two for a completely bespoke system. This ‘turning on’ was to be performed by a new team drawn from the operator’s own IoT division and also the big data group of Telefónica Tech.
Telefónica presented this as the fruit of convergence between IoT, big data, AI and 5G to provide tight control over where data is stored and executed by using edge compute combined with high performance and secure wireless connectivity, with millisecond latency as required. This convergence also helped make deployments more replicable, with a greater degree of reusability.
The BE-terna acquisition picks up the baton – for now just in the European countries where Telefónica has wholly or partially owned operations, that is Spain, Germany, Austria, Slovakia, Czech Republic, the UK and France.
The move will help Telefónica to develop and deploy enterprise applications that exploit the underlying hyperscale platform, especially for the software markets where BE-terna is already established, namely enterprise resource planning (ERP) and customer relationship management (CRM) software.
While CRM is concerned with customer-facing processes, often involving analytics to improve retention and boost sales, ERP embraces internal processes in production, finance, distribution, and human resources, fostering their interaction and integration. Together then, ERP and CRM cover the bulk of an enterprise’s application software arsenal, which until recently has run largely on internal systems in data centers. The relocation to the cloud and edge systems allows greater scale economies, flexibility and performance by being able to exploit hyperscale infrastructures.
Telefónica, with this latest action, has tilted very much towards Microsoft in its enterprise cloud strategy. BE-terna is a Cloud Microsoft Dynamics partner and edged closer still early in 2021 with the acquisition of Solution House, a Danish Microsoft Partner specializing in Dynamics 365 Finance and Supply Chain Management. “As a next-gen IT services integrator our priority is to build and become a leader and continue to deliver differential growth both organically and inorganically,” said José Cerdán, CEO of Telefónica Tech. “BE-terna will reinforce our cloud capabilities in Germany and enable us to enter into other Central European and Nordic markets.”
That comment is notable both for highlighting Telefónica’s close relationship with Microsoft in those countries, while emphasizing that the telco is open to similarly intimate partnerships with other hyperscalers elsewhere. It does maintain Microsoft’s momentum in enterprise private networks, as the only one of the big three hyperscalers to have acquired substantial mobile technology, rather than relying on partnerships and organic development, as AWS and Google Cloud have done. The two acquisitions, both in 2020, were of Affirmed Networks for 5G core, network slicing and automation technology, pitched largely at operator partners; and of Metaswitch, for similar components at the enterprise scale. The former was the bigger purchase at $1.35bn, while Metaswitch cost $270m.
These, combined with Microsoft’s cloud and the enterprise application software from BE-terna, offered Telefónica the bones of what it needs to fulfil that ambition of becoming a major all-round provider of enterprise technical and software services in Europe. It is likely that these capabilities will be extended elsewhere, although Telefónica will be wary of becoming too dependent on Microsoft.
Indeed, operators are in a rather equivocal position as partners and competitors of the hyperscalers. They also compete locally with other carriers, as Telefónica does with Deutsche Telekom in Germany. DT itself has grand enterprise ambitions and like Telefónica, channels these efforts in large part through a dedicated subsidiary, in this case T Systems.
But DT has taken a rather different approach, focused on internal development to accumulate a strong portfolio of enterprise private network products, with Ericsson as a major partner. These two, in January 2022, announced they would jointly develop a 5G Standalone (SA) private campus network platform, based on local 5G infrastructure dedicated to customer applications. This then operates without LTE anchors and is designed to offer all the advantages currently enabled by 5G, including high bit-rates and capacity, plus high reliability and low latency as required.
DT aims to keep the hyperscalers more at arm’s length and partner with them more tactically than some operators, working with them for specific applications or capabilities. In March 2022, DT announced that it was able to secure client data in the AWS cloud, enforced by encryption and transparency controls. This was Europe-centric, designed for adherence to the EU’s GDPR rules, under the banner of Data Protection as a Managed Service in the AWS Cloud. GDPR imposes various rules on locality and security for organizations that process personal data of EU data subjects. With Data Protection as a Managed Service, T Systems enables clients to adhere to GDPR requirements almost automatically, while enjoying the scalability and scope of AWS cloud services.
Other top tier telcos have adopted a range of approaches, with Vodafone sitting somewhere between DT and Telefónica (see separate item). Meanwhile, from the hyperscaler perspective, MNOs are cogs in the wheels of their global ambitions. This is evident for example in the details of the AWS 5G offering unveiled in December 2021, based on relationships with multiple MNOs around the world to ensure that components of the cloud services were compatible with the licensed spectrum available in the respective areas.
Amazon described its AWS Private 5G as “spectrum agnostic”, able to work with licensed, unlicensed and, if relevant, ‘bring-your-own’ spectrum, but in practice requiring collaboration with carriers to make private 5G available in partners’ licensed spectrum to provide network connectivity.
The core, whether centralized or remotely located, is hosted by AWS in its points of presence, with other edge functions under the Outposts banner. So, although AWS can claim to be partnering with MNOs rather than competing with them, it is confining their role to providers of radio services, not so much more than the dumb pipe. At the same time, less like Microsoft but more like Google, AWS has brought a plethora of 5G partners into its ecosystem.