Global telco cloud revenue will grow to $29.3 billion by 2025, up from S$8.7 billion in 2020, at a 5-year Compound Annual Growth Rate (CAGR) of 27%, according to the recent white paper of the tech market advisory firm ABI Research titled “The 36 Transformative Technology Stats You Need to Know for 2021.”
The telco cloud growth will be driven primarily by cloud infrastructure-related investments, such as Virtual Network Functions (VNFs), Management and Network Orchestration (Mano), and Cloud Native Functions (CNFs). By 2025, the telco cloud market will be worth $10 billion in North America, $9 billion in the Asia Pacific (APAC), and $8.2 billion in Europe.
This introduction of cloudified environments in the telco business landscape also presents some shifts in the value chain. For example, telcos are now being presented a second option of telco cloud deployment — the multi-vendor approach, in which different network equipment vendors are responsible for different components of the telco.
“While this approach seems to provide some benefits, such as avoiding single-vendor lock-in, it also requires substantial coordination of effort, not only through robust Mano but also among stakeholders during certain key phases of the telco cloud deployment, such as the design and planning phase,” said Kangrui Ling, 5G Core and Edge Networks research analyst at ABI Research.
Another 5G Core and Edge Networks trend highlighted in the whitepaper: 5G network slicing stands to create approximately $8.9 billion by 2026 at a CAGR of 76%.
“Arguably, that is a drop in the bucket for Communication Service Provider (CSP) service revenue. CSPs continue to possess strong network assets, namely low-latency, last-mile access, and core network capabilities,” said Don Alusha, senior analyst at ABI Research. “But for the broader industry, capturing significant new growth opportunity will vary in line with their corresponding digitization initiatives and readiness to adopt new technologies like 5G core networks and cloud-native principles.
At the same time, hyperscalers like Microsoft and Amazon are cognizant of these dynamics and are positioning themselves accordingly with telco-specific solutions like Amazon Web Services (AWS) Wavelength and Microsoft Azure Edge Zones, particularly on edge computing deployments.
“Though moderate in the next 5 years, new value creation abounds, but the jury is still out who captures what parts of the bigger emerging 5G edge and network slicing ecosystem,” Alusha said.