Contemplating the New Telefonica and Huawei Partnership

Side-Stepping AWS with Localized Public Cloud Capability


AWS’ dominance in public cloud infrastructure has been rapid and hard to oppose. Dwarfing its closest rivals in revenue terms with its IaaS revenues likely to be larger than Microsoft, Google, and IBM combined. Given its recent (Q3 2015) growth of 78%, it seems unlikely that this position will change much in the short term, without a new approach from its challengers. Particularly as AWS continued strengths has made likely competitors gun shy of the pure public cloud IaaS market. However, we are starting to see competition emerge.


To avoid going directly head to head with AWS, Telefonica and Huawei are approaching the cloud IaaS market with a partnership that provides cloud services in some key Latin American locations. Given that Huawei has already launched a successful cloud service for its customers in China and is looking to broaden its reach across the globe, tapping into Telefonicas local knowledge in Latin America makes sense. Also approaching the market country by country helps differentiate it from AWS and the other global players. Additionally, the use of an Open Stack platform should make the offering more attractive to large enterprise customers, looking for hybrid approach to cloud.


It is also important to note that although many organizations have started to use public cloud services, much of this is use is still low level, with the more mission critical applications and data remaining on either legacy platforms or private clouds. One of the barriers to the additional and more critical use of the public cloud by some enterprise clients is the lack of suitable (secure / fast) network connections. So Telefonica can play an important role in not just bringing these cloud services, but also make them work effectively as part of an enterprise infrastructure with the requisite cloud interconnect.


The Telefonica and Huawei agreement commits the service providers to work together deploying compute, storage and backup public cloud services, from eight data center locations. Initially the services will be offered in Brazil, Mexico and Chile in Q1 2016, with five additional locations going live over the course of 2016. Huawei will deploy the services, running on Telefonica’s Open Cloud system based on OpenStack in eight Telefonica data centers. This is part of a number of recent announcements by Huawei to build out its cloud ecosystem including its recent partnerships with Vodaphone and T-Systems.


In our recent research on the Dell purchase of EMC we mentioned three likely scenarios for Enterprise cloud IaaS adoption. A rapid rise of public IaaS, the slower rise leaving room for hybrid and a scenario where hybrid cloud is the dominate enterprise infrastructure platform; concluding that although public cloud may end up as the dominant platform, hybrid is likely to play a significant role, certainly for the foreseeable future. So a public cloud that uses Open Stack provides a clear roadmap of cloud adoption and may give reluctant enterprises confidence that they can move in and out of public cloud if need be.


HfS recently wrote about AWS enterprise approach, so we understand that going head to head with AWS would be an almost impossible task. By providing a more local service, Telefonica and Huawei are side-stepping AWS’ primary target customers. Their geographic edge, combined with strong network capabilities and a hybrid adoption path, may give these services real advantages other competitors couldn’t manage.


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