Telstra and Cisco have announced a first-of-its-kind alliance that signals an inflexion point in the evolution of the global infrastructure-as-a-service (IaaS) market. Even as Australia’s largest telco, Telstra has decided that the economies of scale required for sustainable success as an IaaS provider are beyond its means.
It has determined that it is better to cease investing in potentially sub-scale home-tailored cloud computing infrastructure and instead partner with a global provider of ready-to-use cloud platforms.
The alliance is a win-win arrangement: Telstra has found a way to play a stronger local game in Australia by leveraging Cisco’s global cloud muscle, while Cisco has found a way to sell its global offerings into the Australian market without needing to invest in local services capabilities on the ground.
Cloud services winners will deploy global scale locally
One of the most significant impacts of cloud services on the ICT market is the reinforcement of the dynamics of economies of scale. Cloud services that work well can grow fast, and faster, because all customers are consuming a standardized service offering. The largest service providers can aggregate the largest revenue and invest the most in infrastructure, software, and people. Economies of scale enable lower unit costs and therefore more competitive pricing, which fuels further investments in service innovation and trustworthiness.
Companies such as Amazon Web Services and Salesforce have defined this model, and proven that it works. The largest scale accrues from pure global public cloud services, but not all customers are happy to consume a global service. Both real and imagined needs exist for data to remain more privately in the country where it is created and for cloud service providers to be locally based – particularly in government and other regulated sectors.