According to a report by ABI Research, global telco cloud revenue will reach $29.3 billion by 2025, which is a marked increase from this year's $8.7 billion. The five-year CARGR for global telco cloud revenue is 27%.
ABI said telco cloud revenue growth will be primarily fueled by cloud infrastructure related investments across areas such as virtual network functions (VNFs), Management and Network Orchestration (MANO) and cloud-native functions.
There are various efforts underway to simplify the onboarding of VNFs as part of implementing network function virtualization (NFV), including MEF's decision last summer to support Lean NFV and the formation of the Common NFVi Telco Taskforce (CNTT). Other service providers, such as BT have abandoned their NFV efforts to focus on cloud-native, containers and cloud.
There's a move underway to replace virtual machines with containers, which has led to cloud-native functions, or container network functions, but the industry will be in a hybrid mode of using both for the immediate future.
By 2025, the telco cloud market will be worth $10 billion in North America, $9 billion in Asia-Pacific (APAC) and $8.2 billion in Europe, according to ABI's white paper.
The new "cloudified" environments have also led to a shift in the telecoms business value chain, according to ABI. For example, telcos are now being presented a second option of telco cloud deployment—the multi-vendor approach, in which different network equipment vendors are responsible for different components of the telco. Creating an ecosystem allows service providers to break the chain of vendor lock-in.
Telcos, such as AT&T and Telefónica, are partnering with multiple cloud providers, such as Amazon Web Services, Microsoft Azure and Google Cloud, to offer different types of services to their enterprise customers, but that requires more coordination across hybrid clouds.
“While this approach seems to provide some benefits, such as avoiding single-vendor lock in, it also requires substantial coordination of effort, not only through robust MANO, but also between stakeholders during certain key phases of the telco cloud deployment, such as the design and planning phase,” said ABI Research's Kangrui Ling, 5G core and edge networks research analyst, in a statement.
According to the white paper, 5G network slicing stands to create approximately $8.9 billion in revenue by 2026 at a CAGR of 76%. 5G network slicing allows telcos to offer enterprises their own network slice from their 5G cores, or enable a service provider in one area to offer a network slice on another carrier's network in another area.
"Arguably that is a drop in the bucket for communication service provider (CSP) service revenue. CSPs continue to possess strong network assets, namely low-latency, last-mile access and core network capabilities,” said ABI Research Senior Analyst Don Alusha, in a statement.
Microsoft Azure, Google Cloud Project and Amazon Web Services are targeting their efforts at telcos mainly due to the service providers' last mile and data center connections, although in some cases telcos, such as AT&T, are selling cloud providers' services downstream to end customers.
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Edge compute deployments, such as AWS Wavelength and Microsoft Azure Edge Zones, are of particular interest to telcos because they enable low-latency services at the edge.
“Though moderate in the next five years, new value creation abounds, but the jury is still out who captures what parts of the bigger emerging 5G edge and network slicing ecosystem,” Alusha said.