How Utilities and Telcos Are Rationalizing Their Clouds

For a few years, I've been tracking the impact of cloud in these industries with my dedicated utilities and telecommunications-focused colleagues, including Octavio Garcia Granados and Andre Kindness. Our latest report, The State Of Cloud In Utilities And Telecommunications, 2024, highlights how these linear asset-intensive industries, although relatively late to public cloud, are now eagerly pursuing its potential.

A Market Full of Cloud Tension and Juxtaposition

Today, many utilities firms exist as exclusive service providers, often due to comprehensive or partial deregulation. Similarly, telco organizations typically function within a confined market space or with almost 100% customer penetration, making growth opportunities limited and customer centricity nonnegotiable. These distinctive situations compel both to reduce expenses and seek revenue through unconventional methods.

For utilities, the ability to cut costs and create new revenue streams with cloud solutions is far more engaging to these firms than those aimed at typical business growth. For telcos, their desire to foster ways to switch customers from their competitors encourages bold companies to sell cloud services, whether on their own (e.g., Deutsche Telekom's T-Systems) or as a reseller (e.g., the Australian Macquarie Group sells managed Azure cloud services).

Related:What Is a Sovereign Cloud and Who Truly Benefits From It?

At the same time, utilities and telcos continue to face change and challenge from sustainability goals, natural disasters, and their increasing role as critical national infrastructures, forcing both to prioritize capital expenditure over operational expenditure, a pursuit that cloud technologies can greatly assist if used in the right way. In the end, the benefits of public cloud generally, and hyperscaler services in particular, cannot be denied even for these uniquely positioned industries, making this market one that is rich with contradiction.

Cloud Rationalization Is Changing the Landscape

While utilities and telcos are increasingly heading towards heavy cloud adoption, many are also rationalizing their clouds, as technical debt, security, regulatory, and for some, customer experience concerns plague their industries. In organizations that use at least two cloud deployment models (public, private, and/or hosted private cloud), there has been a drop from 88% in 2022 to 80% in 2023. Similarly, those that use at least two different public clouds have also seen a significant change, from 89% down to 71%. In fact, more organizations used the internal private cloud as their primary cloud computing platform in 2023 (52%) than they did in 2022 (33%). The consolidation of these technologies is demonstrative of the challenge that both industries face in providing reliable and consistent services that are expected from customers, regulators, and policymakers.

Related:On-Prem vs. Private Cloud: What's the Difference?

Want to learn more? Forrester clients can access the full report for additional insights:

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— Sam Higgins, Principal Analyst