Google makes more progress in telco cloud with Telefonica tie-up

Telco cloud services might still be in their embryonic days, but there is plenty of attention from the Silicon Valley internet giants as Google inks a deal with Telefonica.

As part of the new agreement, Google Cloud will open a new cloud region in Spain that will make use of Telefonica’s Madrid region infrastructure, while jointly creating 5G mobile edge computing services and products with the telco.

“The unusual situation that we have had to live in, marked by the confinement of the world’s population and the exponential increase in remote work and online education and entertainment, has highlighted the key role that connectivity and digitalization play in society to create a more inclusive and sustainable future,” said José María Álvarez-Pallete, CEO of Telefónica.

“Through our alliance with Google Cloud,  we want to fulfil our social commitment and foster the recovery of the economy by helping companies, the public administration and all types of organizations not only to recover the ground lost by the crisis as well as  accelerate their digital transformation and strengthen themselves for the future.”

How many of companies will maintain today’s working dynamics once the COVID-19 pandemic abates remains to be seen, however, Google clearly sees value in partnering with telcos to enhance its cloud computing footprint.

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Aside from this partnership with Telefonica, Google Cloud is also working with Telecom Italia in Italy, where it plans to open another cloud region, T-Systems in Germany and it is also developing edge compute services with AT&T in the US.

Google is of course not alone in targeting the telco cloud world for additional revenues. Microsoft has acquired NFV-specialists Affirmed Networks and Metaswitch, while Amazon Web Services (AWS) have also been making the right noises. You get the impression Google Cloud and Microsoft has gotten a jump on AWS in this space for the moment, but the Amazon business unit is the cloud market leader and could turn momentum around quickly.

Google looks like the most aggressive of the internet giants in this space currently, and considering success, we would expect the team to up the ante soon enough.

Although the Google business has largely been steady through the coronavirus pandemic, there have been dents. Hiring has been frozen, while the latest financial results demonstrated some weakness in the advertising market. Most importantly, however, its diversification efforts have allowed it to continue growth and expansion.

Top of the list of diversification successes has to be the Cloud business unit. The latest quarterly results saw revenues increase to $2.777 billion, a 52% year-on-year increase, and while it does not command the same market share as its rivals, it is a worthy inclusion on the podium.

The telco cloud segment presents an opportunity for all the internet giants to expand cloud revenues, but as it is still early days, Google could create a leadership position with the right partnerships. This could erode the gap between itself and the top two cloud players.

It does seem to be following a strategy of exclusive partnerships in each market, and it will be interesting to see who discussions are taking place within regions such as the UK, France and the Netherlands.

The risk for the telcos is somewhat of double-edged sword. Yes, the assistance of the internet giants could lead to greater revenues, but telcos could be relegated to the role of connectivity partner. Some telcos might be happy with a commoditised role in the partnership, but others would not see the value.