Cloud business models struggle to coexist with the public Internet

MELBOURNE, AUSTRALIA: Resiliency, latency, and security on the core Internet are problem areas for mission-critical cloud-based business applications, as are the irregular last-mile access networks that exist in many countries, according to Ovum’s network infrastructure analysts.

“Public IP will not be sufficient for business-grade cloud computing and carrier Ethernet and IP/MPLS VPNs will play increasingly important roles. More efficient data centers, and more of them, distributed globally, will also help”, said Matt Walker, Ovum principal analyst.

Although cloud computing is a well-defined concept, it will require a strong physical network infrastructure to live up to its promise. These will need improved interconnectivity for resiliency, load balancing, new transmission capacity; and added intelligence from new optical and IP hardware.

Ovum's recent discussions with operators and vendors indicates that hope runs high, that IaaS (infrastructure-as-a-service) applications will generate more and higher-margin revenue - not just traffic growth - to support building multi-terabit networks.

Expanding on this theme, Dana Cooperson, Ovum’s Practice Leader, Network Infrastructure, commented: “Public cloud IaaS business models are "pay-for-use" or at least tiered, which, unlike "all you can eat" consumer broadband models, tie resources used more directly to revenues generated. Public and private cloud business and pricing models are new and in flux, so there's still ample time to get it right...or wrong.”

Cooperson added “The network is an essential part of telcos' value propositions as cloud computing applications move from public IP, with no QoS or SLA guarantees, to trusted networks.

“We expect cloud applications to only incrementally add to infrastructure vendors' equipment sales. But product capabilities that help telcos move away from simple access/connectivity services and advanced optical and packet gear that can create large, intelligent network cores to facilitate, for example, resource and application transfers between data centers, will be in demand to support new revenues, not just traffic growth.”

Relating this to carrier revenues, Walker added: “The last mile crisis is, not surprisingly, seen as an opportunity by some. For consumer-oriented services and apps residing in the cloud, FTTH may be the delivery pipe, supplemented by mobile broadband. For mission-critical business applications, though, we imagine cloud will provide a healthy kick to the market for carrier Ethernet and IP VPNs.

“Given how tough it is for operators - especially wireline players - to find revenue growth nowadays, this may be a welcome reality”, concluded Walker.