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Cloud-based services gain relevance

Posted: 02 Nov 2011     Print Version  Bookmark and Share

Keywords:wireless operators  broadband usage  cloud-based services 

Cloud-based services for tablets and other mobile devices will be the key to enhanced profits and operating margins for wireless service providers who have been slow to react to the paradigm shift wrought by the explosive rise of broadband usage on smartphones and tablets, according to the IHS iSuppli.

"Mobile communications service providers have lagged behind in the race to unlock the value in the mobile communications industry, which is estimated to grow to a trillion dollars during the next two years," said Jagdish Rebello, Ph.D., senior director and principal analyst for communications and consumer electronics at IHS.

"Because of this, the average operating profit for wireless service providers around the world declined in 2010, even as semiconductor suppliers and device manufacturers improved their margins. With the transformative impact of tablets and consumer-centric smartphones, the pace of change is accelerating in the wireless market. And to reclaim their share of profits, wireless carriers must be willing to take risks, move fast and be innovative in their offerings. A key offering will be cloud-based services for tablets and other mobile devices that represent a new revenue stream for these companies."

Sunny days ahead for the cloud
Consumer and enterprise spending on the public segment of the cloud is projected to rise to Rs.4.93 lakh crore ($110 billion) in 2015, up from Rs.1.03 lakh crore ($23 billion) in 2010, as presented in the figure below.

Consumer spending graph

The public cloud represents a concept of cloud computing wherein services, software and storage are configured and delivered, over the shared, public Internet infrastructure in a framework that is rapidly scalable, dynamically provisionable, on-demand and with minimal management requirements.

IHS believes that mobile network operators (MNO) can capture about 7 per cent of the total spend on public cloud services in 2015, up from less than 1 per cent in 2011.

Data on data revenue
Global wireless data revenue grew by almost 18.5 per cent in 2010 to Rs.9.78 lakh crore ($218 billion), and is expected to rise to approximately Rs.15.11 lakh crore ($337 billion) by 2015.

Despite the strong increase in data revenue, the average operating profit margin of wireless service providers declined to 19 per cent in 2010, down from 20 per cent in 2009.

Tablet revolution bypassing wireless operators
Meanwhile, media tablet sales are booming—with the market dominated by Apple's iPad.

Global media tablet shipments are expected to rise to 6 crore units in 2011, up 245.9 per cent from 1.74 crore in 2010. Shipments then will rise to 27.53 crore units in 2015.

Because of their dependency on Internet-based resources and enhanced user interfaces, media tablets are driving up wireless data traffic.

However, many media tablets are being offered without cellular connectivity, and in many cases are being sold with no subsidies. In contrast to smartphones, tablets are not reliant on wireless carrier marketing and advertising.

As a result, wireless carriers often are being bypassed in the key area where they derive revenue for data services: fees related to mobile broadband access for data plans on tablets.

To compensate for the lack, wireless operators must concentrate on other segments of the data market, particularly value-added services including the cloud.

Cloud opportunities and challenges
The transition to could-based services will require new levels of data security, backup and disaster recovery. This is especially important in the enterprise information technology (IT) environment to ensure that critical elements of the corporate knowledge base are protected and safeguarded. It is in this new paradigm that IHS sees a tremendous opportunity for service providers to offer differentiated services and gain relevance.

However, the cloud market will present major competitive challenges for wireless operators. The market already is occupied by traditional IT providers, including IBM, EMC, Microsoft and NetApp, as well as newer players like Apple, Google and Amazon.

- Jean-Pierre Joosting
  EE Times

For more statistics and forecasts, click here.

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