For many years, the telecoms industry has had a complicated relationship with the hyperscalers – in particular AWS, Google and Microsoft. Industry watchers, both analysts and journalists, have been quick to point out the seemingly conflicting risks of deep collaboration – dependency and disintermediation. These concerns are not without some historical foundation, but things are changing. In the last three years, the potential value of long-term, meaningful partnerships is driving ever-deeper engagement and the arguments for caution are weakening.
Of course, telcos are already working with hyperscalers. Telco/hyperscaler partnerships have rapidly moved to become ‘business as usual’. But there’s an even more exciting future for these relationships. A future that leverages the hyperscalers’ technology and AI expertise to help telcos increase operational efficiency and agility, reduce costs and reignite growth. And the AI opportunity for telcos is considerable. McKinsey estimates that nearly $100 billion in incremental value, and up to $180 billion in productivity gains, can be realised through GenAI alone.
The major hyperscalers have become deeply engaged in the telecoms industry, including the work of TM Forum. We’ve identified four major joint opportunities in telco/hyperscaler partnerships for today and into the future:
- Reselling Software-as-a-Service
The first opportunity is the traditional reselling model, where telcos package and resell software-as-a-service (SaaS) offerings to their SMB and enterprise customers. Likely the most common example is the re-selling of Microsoft 365 and, more recently, generative AI services like Copilot.
This kind of collaboration is mutually beneficial, leveraging the strengths of each party: the infrastructure, customer base, and expertise of operators, combined with the scalability and innovation of hyperscalers.
This reseller model not only enhances the SaaS ecosystem but also accelerates cloud adoption across industries, creating a win-win-win scenario for operators, hyperscalers and end customers.
2. Moving telco IT workloads into the public cloud
Moving telco IT workloads onto public cloud platforms from telco-owned and managed data centres was originally driven by total cost of ownership arguments. It should be cheaper to run them on the public cloud, and telcos have the expertise to manage them and deploy FinOps to optimize costs.
But operators have quickly realised the potential advantages go beyond cost-savings as they evolve to cloud-native componentized software architectures. TM Forum’s vision here is to deliver a step-change in business simplicity, velocity, partner-ability and operating costs to enable telcos to run on AI-ready composable software. Becoming cloud-native is critical to this vision. However, neither telcos nor hyperscalers want this move to be platform-specific and subject to ‘lock-in’. As a result, we’ve seen strong support for TM Forum’s ODA Canvas from both telcos and hyperscalers.
Rather than a ‘lift and shift’ approach, the Canvas supports operators’ ambitions to go cloud-native in a multi-cloud environment. The ODA Canvas’ standardised deployment environment makes it easier for telcos to manage software estates in a multi-cloud setup, simplifying management and operations and guarding against future dependence on a single hyperscaler platform.
Among numerous examples, Vodafone Greece is working with hyperscalers to reimagine its IT infrastructure on an ODA Canvas, and AWS has deployed an ODA canvas for Bell Canada. Microsoft recently contributed its ODA Canvas modules for Azure to TM Forum’s opensource project, and we expect more announcements in this space from Google and AWS in the coming months.
To compete, hyperscalers recognize they need to give their telco customers what they want and then differentiate on top – AI being a key ‘battleground’. And we’ve already started to see this in action.
3. Moving telco network workloads onto the public cloud
The third opportunity is similar but focused on moving network workloads onto the public cloud. Cloud-native telco networks are essentially software which runs on servers.
Hyperscalers have made various attempts at offering more than a platform for operators to run their network on, by providing the actual network software. Microsoft’s acquisition of AT&T’s cloud network is an example of this shift, aimed at leveraging the potential of moving network workloads to the cloud for gaining economies of scale, more efficient use of shared resources and a reduction in total cost of ownership.
While this market has been somewhat slow to take off, in the medium-term it’s possible that operators will more fully embrace this strategy with their hyperscaler partners. Indeed, it could help to bring the IT and network sectors of the telecoms ecosystem closer together – something our industry has anticipated for years.
4. AI services and partnerships
The final opportunity, and another that is attracting a lot of interest, focus and excitement, is jointly developing entirely new products and services based on AI. Telcos need the AI technology and skills that the hyperscalers can bring to create and deliver them. Working together on joint go-to-market strategies is appealing to both parties.
According to TM Forum research, more than half of CSP procurement leaders say that these relationships are important for new offerings in managed cloud services, IoT, edge and mobile private networks, managed infrastructure and digital transformation services for B2B customers. And more than 50% report having preferred relationships with specific hyperscalers, believing that they help them jointly develop products, support go-to-market initiatives and drive volume discounts.
A bright future
The potential value of long-term, meaningful partnerships is resulting in ever-deeper engagement between operators and hyperscalers. Telcos are working with hyperscalers to develop and deliver new products and solutions at scale, leveraging the hyperscalers’ technology and AI expertise to provide new and competitive customer experiences.
Furthermore, these growing partnerships are driving our industry towards composable IT and ecosystems and autonomous network operations underpinned by AI, helping telcos increase operational efficiency and agility, reduce their costs and reignite growth.
AI is a two-sided equation for telcos, as identified by McKinsey: $180 billion in productivity gains, and approaching $100 billion in incremental value. An operator CxO recently told TM Forum: “One of our team’s goals is looking at applications of AI to achieve a 30% increase in EBITDA.” But telcos can’t do it alone – and they ‘get it’. As another CSP leader proclaimed: “This decade is all about collaboration and partnership.” And that’s a future we can all – telcos and hyperscalers – be excited by.
Andy Tiller, EVP of member products and services at TMForum
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