Cloud services: why the growth is far from over for telecoms firms

17 October 2019

Cloud services: why the growth is far from over for telecoms firms

When Jamie Hughes, CEO of Pace Telecom, decided to invest in the cloud he was ahead of the curve. It was 2008 and at the time if anyone mentioned the cloud, they were likely to be referring to the white fluffy things up in the sky, not a concept that has since revolutionised the IT sector.

Today, businesses can no longer live up to their full potential without the cloud. And there is certainly more cloud-based growth in the pipeline.

According to research company Gartner, the worldwide public cloud services market is projected to grow 17.5% in 2019 to a total of $214.3 billion, up from $182.4 billion in 2018.

Clouds
Photo: Pero Kalimero

The fastest-growing market segment will be cloud system infrastructure services, or infrastructure as a service (IaaS), followed by cloud application infrastructure services, or platform as a service (PaaS).

“Cloud services are definitely shaking up the industry,” said Sid Nag, research vice president at Gartner. “At Gartner, we know of no vendor or service provider today whose business model offerings and revenue growth are not influenced by the increasing adoption of cloud-first strategies in organisations. What we see now is only the beginning, though.”

Indeed, Gartner predicts that by 2022, the global market for cloud services will have increased by staggering 54.4% to $331.2bn.

At Pace Telecom, the original investment has clearly paid off. The company, which specialises in telephone systems, fixed line, mobile and broadband for small to medium-sized businesses, was one of the first to create its own hosted system, dubbed Pace Cloud and launched in 2012.

Creating its own cloud network not only enabled Pace Telecom to offer faster connection times, it was also able to tailor its offering to each client, down to the smallest detail and often within tight budgets.

“We made a huge investment in technology in a bid to become the go-to place for knowledge and experience,” explains Hughes. “We saw that VoIP (voice over internet protocol) was going to be the future but the broadband network wasn’t good enough to host it. So we created our own cloud-based system.”

The move has led to a boost in customers. Pace Telecom has almost doubled the number of its end users and there are plans to grow the business to 20,000 end users over the next 12 months.

Pace Telecom logo

With the 2025 ISDN switch-off looming, Hughes sees potential for expansion and is on the hunt for acquisitions – namely small, traditional telecoms businesses that have yet to migrate their clients to SIP.

This powerful and efficient communications protocol, which operates on a VoIP network, can be used to carry voice, data and video and is the future of business telephony. Additional features such as call recording, receiving voicemails via email, call queuing and unified communications, or being able to access the system on multiple devices such as a mobile and desktop, are all typically part of a SIP package.

Some 40% of UK businesses are currently on SIP, meaning 60% of businesses still have to migrate within the next few years.

“Not many people seem fully aware that by 2025 all ISDN lines will be switched off and in 2020 businesses will no longer be able to buy any systems that use PSTN and ISDN networks,” says Hughes.

Unlike the noise that surrounded the analogue TV switch-off, Hughes says there has been little marketing of the deactivation of the ISDN network. He advises companies not to leave it to the last minute.

While the infrastructure that underpins ISDN has been significantly overhauled since it was first launched by BT in 1986, the network has remained pretty much unchanged. BT has invested heavily in VoIP so it doesn’t have to invest any further in this legacy network.

Which is why cloud-based systems such as the one provided by Pace Telecom are so attractive. So-called SIP Trunks can be installed in a business of any size and can offer a wide variety of services from video conferencing to instant messaging to cheaper voice calls.

Duncan Gregory, transaction services director at Evolution Capital, believes there is plenty of growth yet to come from cloud-based services, especially in the telecoms sector.

“The market is only going in one direction. The attractiveness of migrating to cloud-based telephony is clear for any business. Traditionally, installing at PBX-based phone system was very costly and would significantly impact on a company’s capital expenditure. A cloud-based system is charged monthly and is considerably cheaper in the long-run. It is also a more complete offering as it includes so much more than voice calls. Customers are essentially getting more for less,” explains Gregory.

However he warns that competition will become fiercer as more telecoms businesses offering cloud-based services join the fray. He adds: “Eventually, it will come down to price. Telecoms firms will have to show they can offer customers something different in a bid to stand out from the crowd.”

It seems 2020 has plenty in store for players operating in cloud-based telephony.

Telephone boxes
Photo: Nick Fewings

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