Story of Cloud Overprovisioning in Telecom
As telecom operators shift infrastructure to the cloud, a recent report reveals a surprising gap in utilization. Telecom companies are only using about 48% of their purchased cloud capacity, according to Infosys. This statistic comes at a time when cloud spending is accelerating, driven by the rise of AI and digital transformation across the industry. Why is so much capacity left untapped, and how can telecom providers maximize their cloud investments?
This trend highlights the complexities telecoms face as they adopt cloud infrastructure, balancing the need for scalability with effective use of resources. Here, we explore the drivers behind this discrepancy and strategies that telecom operators can use to maximize their cloud capacity.
Cloud Investment Surges in Telecom, But Usage Lags
Spending on cloud infrastructure is at an all-time high, with projections indicating sustained growth. New data from Synergy Research Group shows that global cloud service and infrastructure revenues reached $427 billion in the first half of 2024, a 23% year-over-year increase. Yet, despite these numbers, telecoms are underutilizing their cloud resources(blog 5 sources).
Infosys estimates that telecom companies spend an average of $32 million annually on cloud services but consume less than half of that capacity. This underutilization can be attributed to the complexity of migrating from legacy systems to cloud-based operations, where interdependencies and the sheer scope of the move introduce delays and inefficiencies(blog 5 sources)(blog 5 sources 2).
The Role of AI in Cloud Spending and Underutilization
The drive toward AI-powered applications has fueled a wave of cloud investment across telecom. AI requires significant compute power and storage, which is typically hosted in hyperscale data centers. With AI capabilities expanding, telecoms have purchased additional cloud capacity to support future growth. However, many operators have yet to fully implement these AI-driven solutions, resulting in unused cloud resources.
Best Practice Tip: To leverage cloud investments effectively, telecom companies should start small with AI implementations, using phased deployments that progressively tap into cloud capacity as applications scale. This approach can prevent overprovisioning and improve operational efficiency.
Addressing Challenges in Cloud Migration
One of the biggest challenges telecom companies face in cloud migration is the coexistence of cloud-based infrastructure with legacy systems. Telco cloud adoption allows for rapid scaling and efficient resource allocation, but telecom companies still rely on traditional physical infrastructure to manage core network functions. This hybrid approach requires seamless orchestration and often necessitates tools like Cell-Stack, which automates resource management across both cloud and physical systems.
Integrating these systems is no small feat, especially when telecom providers use Virtualized Network Functions (VNFs) and Physical Network Functions (PNFs) that may not be fully compatible with cloud services. Customizations required for these VNFs and PNFs to operate in the cloud add complexity and delay the full transition.
Strategies for Improving Cloud Utilization
Given the current usage gap, telecom operators can adopt several strategies to ensure their cloud resources are effectively leveraged:
- Optimize Resource Allocation with AI-Driven Insights: AI can help telecoms monitor cloud usage patterns and identify underused resources. AI-based tools integrated with Operational Support Systems (OSS) and Business Support Systems (BSS) can streamline resource allocation and predict capacity needs, adjusting allocations in real time.
- Embrace APIs for Flexible Orchestration: Telecom operators with in-house development capabilities can leverage APIs to bridge OSS/BSS systems with cloud resources, making it easier to adapt cloud infrastructure to changing demands. APIs offer flexibility, allowing telecoms to manage resources dynamically and automate repetitive tasks that previously required manual intervention.
- Gradual Transition and Hybrid Deployment: As noted, a full transition to the cloud can be complex. A phased approach that maintains critical processes on physical infrastructure while gradually migrating other services to the cloud can help telecoms avoid overprovisioning. Cell-Stack solutions are especially useful for automating hybrid infrastructures, reducing the burden on internal teams and ensuring that all assets are used efficiently.
- Virtualization for Scalability and Flexibility: Telco cloud infrastructure supports virtualization, allowing telecom operators to leverage virtual machines, containers, and microservices to scale operations without additional physical hardware. This setup makes it easy to deploy new services, respond to peak demand, and improve overall efficiency, utilizing cloud investments to their full potential.
Balancing Customer Experience (CX) with Regulatory Compliance
For telecom operators, regulatory compliance is essential, particularly when managing customer data in the cloud. This is especially important as hyperscalers, such as AWS and Microsoft, are offering telecom services that place them in competition with traditional telecom providers. Telecom companies must ensure that data handling and storage comply with local laws, which adds to the complexity of cloud migration.
Key Steps for Compliance:
- Enhanced Data Security Protocols: By implementing stringent security standards, telecoms can better protect customer data and stay compliant with regulations. Robust security protocols reduce the risk of breaches and improve customer trust.
- Comprehensive Audit Trails: Documenting data usage and access across cloud infrastructure helps telecom operators maintain compliance with regulatory bodies. This transparency is crucial as cloud resources expand, especially when handling sensitive customer information.
Looking Ahead: What’s Next in Telecom Cloud Utilization?
The future of telecom cloud utilization lies in strategic investment and intelligent scaling. AI will continue to play a pivotal role in helping telecoms monitor and adjust their cloud capacity, responding dynamically to changing demands. Advanced orchestration tools and APIs will enable telecom providers to create highly efficient, hybrid infrastructures that combine cloud capabilities with traditional networks.
The telecom industry’s shift to cloud infrastructure will ultimately lead to faster service delivery, enhanced customer experience, and improved operational efficiency. However, without careful planning, telecom operators risk investing in capacity that remains idle. Leveraging hybrid cloud strategies and AI for predictive insights can help operators bridge the gap, ensuring their cloud investments deliver optimal value.
As telecom companies navigate these complexities, a phased and data-driven approach to cloud usage can ensure that they capitalize on their investments, adapt to market demands, and meet regulatory standards.
Sources:
https://www.lightreading.com/cloud/spending-on-cloud-is-booming-but-is-telco-using-
jai.front-sci.com/index.php/jai/article/view/1099
er.chdtu.edu.ua/handle/ChSTU/4979
ieeexplore.ieee.org/document/10631212
