Sovereign cloud demand spurs B2B opportunity for telcos

Mounting concerns by governments and enterprises about their ability to control where and how data is stored and processed could translate into new B2B revenues for communications service providers.

BT Business CTO Colin Bannon, speaking during the recent Mobile Europe Telco to Techco virtual event, said that every customer he talks to now asks about sovereignty, given the current geopolitical situation, and that telcos can address these concerns from the vantge point of long-standing trusted relationships.

“Countries still trust the telcos. There in an inviolate honor relationship with the country that they serve…There is no Plan B without communications and that trust has value…For those telcos that are ready to pivot and take advantage of that, there's a great opportunity,” said Bannon.Mohamed Talaye, Chief Technology Officer at Orange Business, described sovereignty as an opportunity that is not yet “fully leveraged”, speaking on the same.

“Telcos are critical infrastructure for the countries where we provide communications, and there is an opportunity for us to provide sovereignty in Europe and inside the countries where we are,” he said.

While some telcos see potential in sovereignty, Deutsche Telekom boasts it is already doing it.

In an address to shareholders earlier this month, DT CEO Tim Höttges said, “We’ve been offering for 20 years what others merely talk about – the sovereign cloud. The data remains in Europe. Operation of the technical solutions remains in Europe. And we offer solutions from a wide range of providers, meaning our customers are not dependent on single companies. This is also sovereignty.”

Geopolitics heightens awareness

The main demand driver for sovereign cloud solutions is regulatory compliance as European organizations expand cloud usage, but recent geopolitical change is leading more enterprises to consider sovereignty as part of risk management strategies, according to Rahiel Nasir, Research Director for European Cloud and Lead Analyst for Worldwide Digital Sovereignty at IDC.

While “geopolitical uncertainty” ranked low among demand drivers in IDC’s Worldwide Digital Sovereignty Survey 2024, Nasir said that “anecdotal evidence is now suggesting that it is rising up the agenda.”Telcos’ role in cloud sovereignty

IDC defines the sovereign cloud market as comprising three elements: data, operational, and technical sovereignty. The opportunity for telcos is in the latter category, which provides sovereign control of infrastructure and platforms, including the data centers, services and networks.

“Sovereign control should be applied to data at rest as well as data in transit, and that’s super complicated,” said Nasir. That is, as data traverses cross-border networks comprising various fibre and wireless infrastructure with geographically dispersed points of presence, it needs to have sovereign control along the route and in each jurisdiction.

There are signs of demand for what telcos can offer here. According to IDC’s survey last year, 52% of European organizations said the top requirement for technical sovereignty is “sovereign controls of their network infrastructure and the software that manages that network infrastructure.”

Nasir said he was surprised by this survey result, “because there aren’t many telcos that offer sovereign control. But it shows there is an opportunity for telcos to do that.”

This has changed in the last twelve months, as “telcos have started to bristle with interest in sovereignty,” he said.

He pointed to BT, Orange Business, T-Systems, and Vodafone Business as examples of telcos showing interest in sovereign solutions.

“It’s going to be interesting to see how they grab that and move forward. It’s more important than ever before because of those geopolitical uncertainties that Europe is facing”, he added.

Vying for network of choice for sovereign clouds

Partnering with cloud providers will be key for telcos’ sovereign plays. Indeed, Nasir said the “golden opportunity” for telcos is to partner with sovereign cloud providers to be the “network provider of choice.”

Several cloud providers have launched or announced plans for sovereign offerings in Europe, including Amazon Web Services, Google Cloud, Microsoft, and Oracle, along with solutions from a host of local cloud providers.

And there are some early examples of telco-cloud partnerships for sovereignty. For example, T-Systems offers a sovereign cloud “powered by Google Cloud” as well as an Open Sovereign Cloud, based on open source technology.

In the UK, RackSpace has launched sovereign cloud services for the public sector and partnered with BT to provide the secure, sovereign communications services to its data centers.

HPE has teamed with Orange as its network partner for its sovereign cloud offerings.

Orange has also created a sovereign cloud services joint venture with Capgemini, called Bleu, in partnership with and based on Microsoft Azure technology.

But it is still early days for sovereign telco offerings as they seek to grow B2B services.

“Telcos are still moving their own internal IT to cloud, while at the same time trying to present themselves as enterprise service providers for cloud provision … and beginning to have conversations about offering the sovereign network,” said Nasir.