#1 – Mobile Edge Computing will go on hyper scale dating
Edge computing in the telecom world has been maturing in recent years but no major deployments have yet taken place. The B2B demand is now here as enterprises are showcasing edge computing use cases. The enterprise customers are now asking for private network solutions where edge cloud is a necessity. As many enterprises have started to transfer their systems to be run on public clouds, they turn to the hyperscalers for the solutions. This will in turn put the hyperscalers in a position where they need to drive for the necessary business discussions and investments whilst lacking the connectivity for solutions. Operators have been willing to approach edge computing too, but it has shown limited potential as a stand-alone connectivity offering.
The hyperscalers also realize they cannot create solutions entirely on their own, even though some have shown interest in moving closer to the mobile networks (e.g. Microsoft’s acquisition of Affirmed Networks in early 2020). The increased demand and maturing technology thus emphasize a collaborative model for success, where Operators and hyperscalers together offer the edge solution to enterprise customers. Such collaboration should not be confused with the strategic partnership announcements in the last few years between a few large operators and some hyperscalers in the Telco cloud and Core Network domains; announcements that so far have not materialized in any major deployments. Therefore, driven by the emerging B2B use-cases from enterprise and the lack of solution comprehensiveness from Operators or Hyperscalers, we foresee that 2021 will be the year of collaboration and the edge deployment actually takes off.
What we have been witnessing in 2020 is a significant increase in market demand for Edge1 computing by enterprises. Executives are building strategies to digitalize their operations, personalize customer experiences, generate faster actions based on insights, and maintain continuous operations. As the data volumes increase, so does the beneficial operational implication of edge computing. Besides reduced IT expenditure on cloud and bandwidth costs, the ability to process high-volume data locally provides faster analytics to manage the local devices. Hence, high-quality business services can be maintained – even when a few seconds are crucial – making edge computing an attractive technology. However, network operators in most of the developed world are today mainly focused on building out their 5G networks to provide 5G connectivity and solutions to the market, and as much as edge computing has been pointed to as a key feature of the 5G networks, there has, of yet, been limited signs of operators investing in, and deploying, this technology.
As an illustration of the increasing market demand in the B2B segment, three quarters of enterprise-generated data are predicted by Gartner to be created and processed at the Edge in 2025, and the enterprises are projected to spend 30% of their IT-budgets on Edge or Cloud (between 2018 and 2021).
Operators have been willing to approach edge computing, but it has been considered a risky investment as it has up until now shown limited potential, especially as a stand-alone connectivity offering. Hyperscalers have been viewed as a threat to the operators’ business in this area and operators have been generally cautious about them. For most operators, attempting to move up the value chain in this vertical and directly compete with these players will, however, prove difficult. The edge computing deployment is also most likely to be driven by use-cases enabled by cloud platforms, such as smart factories or other private network solutions. This means that edge computing will initially be an enabling technology as part of bigger platforms, and not a pure telco service. Additionally, Edge computing in itself will have limited potential without good integration with distributed cloud solutions that form a seamless platform for applications.
Hyperscalers have also realized they do not have the capabilities to build edge computing solutions on their own as they do not own the networks where it would be deployed. It is highly likely however, that the hyperscalers will take the lead, together with their enterprise customers, and drive the edge computing deployments at the operators – extra tempting for the hyperscalers as it helps to put them closer to the end-users. Worth noting is that this time around the collaboration model between operators and hyperscalers is not a plug and play solution. It is rather a set of customized solutions that require integration and setting requirement for the services business, where both operators and hyperscalers are missing resources.
This all speaks for the collaboration model where the operators and cloud players seek each other out to create the best circumstances for services based on edge computing and meet customer demands. The operators who do not opt for a collaboration-based model will instead risk completely missing out on the edge computing opportunities and will lag in the years to come. This also helps the operators in making sense of the investment costs of edge computing, as the investments in Edge computing infrastructure by CSPs are expected to grow with 47% CAGR in 2020-2023, exceeding $67B in 2023 (TBR). In recent years, several major operators and hyperscalers have indeed announced strategic partnerships, but the large-scale, major deployments have yet to be seen. The B2B demand we are seeing emerge will change that.
All in all, this means that in 2021 we will see multiple factors in the market calling for edge computing capabilities in the operator networks, leading to not only more strategic partnerships forming between the cloud giants and the network operators, but more importantly, that major deployments will finally take place in the form of B2B solutions. There are already initial signs of telco incumbents investing in edge computing software and partnering up with cloud players, but 2021 is the year it really takes off.