Where do telcos see opportunity for hyperscaler product partnerships?

Vodafone again demonstrated its commitment to working with hyperscalers on developing and delivering new services with the announcement this week of a new 10-year ‘billion-plus’ deal with Google. This follows a six-year partnership signed by the two companies in 2021 to develop a global data platform. It is not the only large hyperscaler deal the communications service provider (CSP) has struck to serve its European and African market footprint. In January this year it announced a ten-year deal with Microsoft, which will see it investing $1.5 billion in cloud and customer-focused AI services developed in conjunction with Microsoft.

Vodafone stands out from most other telcos for the scale of its publicly stated commitment to working with hyperscalers, but many other telcos are tapping into their cloud and AI capabilities. BT, for example, has been migrating its data to the public cloud and developing a group-wide data and AI fabric as part of its cloud-first and AI-first strategy. And last year BT announced it will collaborate with AWS on IoT industry solutions, new cloud networking propositions, and new 5G edge computing services for its UK business customers.

BT reflects a wider trend among telcos of partnering with hyperscalers to develop and deliver IoT and edge computing services. A TM Forum survey of more than 50 procurement leaders and experts working for communications service providers (CSPs) worldwide, found that the majority are open to addressing the enterprise market with hyperscalers in these and other areas, as the table below demonstrates.

Indeed, IoT is one of the top areas where telcos see their products and solutions benefiting from a partnership, just behind the hyperscalers’ bread and butter offering of managed cloud services. Both AWS and Microsoft provide tools and services for IoT,. However, Google last year dialed down its IoT position, when it discontinued Google IoT Core, which interfaced between the Google Cloud Platform and IoT machines and devices.

A special relationship?

Despite moves by CSPs to work with different hyperscalers, depending on their expertise, over half of those surveyed have a preferred relationship with one provider.

Interestingly, although cost management is an important factor, it is not seen as the primary benefit of partnering with a preferred supplier. Instead, CSPs are looking to gain from closer collaboration on innovation and product development, and bringing their services to market, as the chart below illustrates.

But that doesn't mean that CSPs are not keeping a close tab on spend, or service and product autonomy. Those surveyed express a variety of concerns about vendor lock in, notably when it comes to cost control, lack of strategic flexibility, and being tied to vendor software release cycles and roadmaps.