Network operators are transitioning towards the next stage of cloud-based networks as they work to meet customer demand for high-bandwidth services. To maintain service delivery effectively, operators require a cost-effective, low-maintenance solution that enables them to allocate resources as network demand waxes and wanes.

Proactive operators will meet those needs by pursuing a cloud-connected future, one where cloud-hosted networks can accelerate network transformation without compromising on latency or innovation. And according to recent research from analyst firm IDC, mass telco cloud adoption momentum is just beginning, and it’s predicted that market spending will grow to $27 billion by 2027. What are some of the factors spurring this growth, and how will it impact the industry?

The evolution of network functions

Cloud-native network models appeal to operators from both a performance and business point of view. Many operators have already implemented software-only virtual network functions (VNF) hosted on the public or private cloud. Although these functions offer tremendous benefits, cloud-native network functions (CNF) can offer even more support for high-demand services by utilizing container-based architectures. These CNFs employ cloud-native conventions to deliver services, conduct tests, provision network resources, and more, all within the confines of containers. CNFs can also reduce widescale network outages by relegating software updates to these specific containers, reducing the scope of changes across the entire network.

Additionally, the growing industry preference for term licenses (a cloud-hosted subscription-model) over perpetual licenses (a practice where a customer buys and owns the software) is driving telco cloud adoption for operators who require flexibility without vendor lock-in or high upfront onboarding costs.

Hyperscalers’ role in transforming telecommunications

Another important factor reshaping telco environments is the presence of hyperscalers, large cloud providers that deliver enterprise-scale computing and storage with the ability to scale to meet demand. 

Traditional data centers are often hampered by widely inefficient over-heating, limiting their ability to efficiently run without expensive costs and a significant strain on the environment. However, hyperscalers are implementing innovative front to back cooling which allows for more efficient cooling patterns, providing better power utilization and support for long-haul and high metro traffic use cases – something that is critical for a booming consumer population.

Major providers like Google, AWS, and Microsoft have already adopted such approaches to data center-to-data center connectivity by deploying telecom equipment at a higher density, with more optimal utilization than telcos can typically access. In 2023 alone, Microsoft’s cloud hyperscaler revenue amounted to nearly $24 billion dollars, proving operators should take a page out of their book.

Supporting diverse cloud environments

Perhaps one of the cloud’s biggest advantages, and one that’s inspiring rapid adoption, is its robust support for personalization. Depending on customer needs, the telco cloud offers three cloud environments, each with their own advantages and challenges.

Historically, the public cloud has provided access to a full range of networking choices delivered as a managed service, while a private cloud allows for more control of the underlying infrastructure and the data that it will store and process. Although both environments share common features such as virtualizing hardware, delivering services via API, providing automated scaling, and supporting full backup capabilities, operators should remain aware of certain differences.

Public clouds can be attractive to customers looking to move to the cloud for its enhanced ability to support high-bandwidth services. In turn, this flexibility can open new opportunities and use cases to drive higher revenue. Additionally, public clouds provide an easy transition without the upfront costs and ongoing maintenance often associated with building their own network. This approach can be particularly effective for certain services, such as contact centers, which benefit both technically and commercially from those services.

Furthermore, public cloud offers meaningful advantages in size, speed, reliability, and scalability. With robust global support for public cloud infrastructure and the ability to concentrate in specific geographic areas, deployment can be seamless and straightforward. Additionally, the pay-as-you-go model offers organizations the flexibility to scale their technology as needed.

Some organizations, however, need to maintain control over their infrastructure and data, leading them to the private cloud as an alternative. While large organizations may find their extensive infrastructure of data centers and management systems can be better served by pooling and sharing their internal resources via a private cloud approach, those advantages can be offset by the oftentimes exorbitant costs of implementing and maintaining the infrastructure long-term.

In other cases, organizations may instead opt for hybrid or multi-cloud environments, in which separate services can be run by utilizing both private and public clouds. Such environments can’t survive on traditional infrastructure approaches alone, however.

Multi-cloud environments require a strategy that consists of customers running part of their workload in a private data center, and another piece of their workload hosted via a public cloud to support the building, testing, and deployment of applications. But this method lacks long-term sustainability in a growing cloud environment. Instead, some companies can use single code stream environments that leverage containers to provide the flexibility to move from one public or private environment to another, even on special-purpose hardware.

The future of the telco cloud is quickly evolving as operators look for the most efficient, cost-effective ways to provide the full range of wireless services that consumers demand. As the landscape continues to change, operators who adopt innovative approaches have the potential to revolutionize their telco cloud journey and position themselves as industry leaders.