Telcos uncertain when cloud spend will pay off

Jessica Scarpati
Amazon and Rackspace own today's cloud computing market, but telecom operators aren't going down without a fight—even if they haven't quite figured out how to make telecom cloud services profitable. Service providers at the TIA 2011: Inside the Network trade show acknowledged that enterprise adoption of their cloud services remains relatively low despite the billions of dollars carriers are investing in it, but say they also cannot afford to be left behind.
"We're in that early adopter phase where you're almost not sure if you're going to make money in the end or not," said John Breen, assistant vice president of equipment solutions engineering at AT&T, speaking on a panel at the show. "But if you don't stay in [the market], you'll never know."
The path to building out telecom cloud services is reminiscent of the early and uncertain days of mobility, Breen said during a panel discussion.
"Mobile phones were developed back in the ‘50s, but the technology probably didn't sell, because who would want a lousy voice connection?" Breen said. "Well, mobility turned out to be a huge thing and now mobile ... revenues [have gone] up and paid the cost of your mobile [infrastructure]. So, [we've] found ways to make money."
A Verizon engineer in the audience, who said he was working on Verizon's cloud strategy and architecture, expressed his unease with the hazy prospects for a return on investment (ROI) in telecom cloud services.
Unlike traditional business services—which supply carriers with relatively consistent, recurring revenue streams under strict, long-term contracts—cloud computing services are billed in a pay-per-use model and enable dynamic provisioning. A customer could spin up and pay for dozens of virtual servers one month, only to take most or all of them down by the next billing cycle.