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“Breakthrough Global Cloud Service” from IBM and AT&T: much ado about nothing ?

 “Breakthrough Global Cloud Service” from IBM and AT&T: much ado about nothing ?
Since the inception of cloud computing, security concerns have been a major factor preventing its broader adoption, notably by very large enterprises, resulting in slower than expected market development.

Despite a growing and now dominant consensus that the cloud model is the future of IT infrastructures, repeated surveys of CIOs worldwide continue to point to security issues as a key inhibitor, especially for deploying the mission-critical applications of large organisations.

So, when legitimate key suppliers such as AT&T and IBM partner to propose relevant answers to large scale cloud deployment requirements and security issues, this should only spell good news for customers and help accelerate cloud adoption.


On October 9th, 2012, AT&T and IBM announced an agreement to launch (1Q 2013) what they describe as a “highly secure, first-of-its-kind network-enabled cloud service that uses private networks rather than the public Internet.” Citing security concerns as the key inhibitor for cloud implementation among very large (Fortune 1000) businesses, the new service will combine IBM’s SmartCloud Enterprise+ with AT&T’s virtual private networking, thereby avoiding potentially unsafe internet links. The two firms claim that “breakthrough technology” from AT&T Labs will integrate the security protections of both and also enable flexible and automated network and computing resources allocation.

The announcement did not include details on the specific nature of the new technology from AT&T Labs, nor did it provide any indications on how the product will be marketed, packaged or priced, or on the form of collaboration and business model between IBM and AT&T.


Despite the size, capabilities and credibility of both firms in this market, there appears to be little substance and demonstrated innovation behind this agreement. The announcement is ambiguous, pitching well-known and widely used solutions such as Virtual Private Networks (VPNs) as innovative, and referring to undocumented “breakthrough technologies”.

Even so, in geographies where AT&T has significant network assets, the new service is likely to appeal to IBM’s most loyal and conservative customers, who will appreciate a secure and completely “blue” solution.

More broadly, the move illustrates the key role of network and telco operators in the cloud market, but falls short of demonstrating any significant advance over the competition. Ironically, the deal confirms an inherent advantage of large operators in this market, namely that controlling and managing the network is critical to the provision of secure and effective end-to-end cloud services.

Using VPN for cloud services is nothing new

With the limited information provided by AT&T and IBM, it is not clear how the projected offering will differentiate from services already provided by several large telecom operators, such as Orange and Deutsche Telekom (T-Systems). Both of these operators offer “virtual private clouds”, accessed primarily over enterprise VPN networks.

Using managed VPN services for corporate networks, but also for client and partner access is nothing new, and cloud VPN connectivity is by no means different, nor is it revolutionary.

Gateways of all kinds between the “safe” VPN-based universe and the “rest of the world” (read the internet, the mobile networks, etc.) continue to be a necessity anyway, and managing and securing this type of traffic is equally mastered by operators and large IT shops. There is no substantial indication in the announcement that AT&T and IBM will revolutionize this type of problem.

Agreed, AT&T operates secure VPN infrastructures and has tremendous experience in this field. It is not, however, light-years ahead of its major telco competitors. Most of these large operators are more or less on a par regarding security, and all continue to improve on the front of flexible bandwidth and network resources provisioning to cope with the growing volume and unpredictability of data traffic.

A “blue” cloud solution for the “bluest” customers

What the announcement reveals, actually, is the central role of networking in cloud services. Mastering the network is an absolute prerequisite to deliver end-to-end secure cloud services, the basic expectation from large enterprises, and many smaller ones as well.

Despite its mastery of cloud technologies, IBM by itself lacks network control. Its alliance with AT&T is a clever move to deal with this issue.

IBM has a huge and very loyal customer base, with a significant part of it likely to be open to sourcing many cloud services from IBM. But IBM alone cannot resolve all security issues, primarily those related to network infrastructures. The alliance can definitely help address customer security concerns, helping speed up cloud adoption.

Hence, the alliance is likely to meet with significant customer interest in geographies where AT&T has network assets, but success will not depend that much on technology breakthroughs: rather, delivery execution and service quality will be key. Pricing is unlikely to be overaggressive as both partners will need to gain from the deal and neither of them has a low-cost strategy. Which partner benefits most from the deal remains to be seen.

The rise of telcos in cloud services

Large telco operators have a structural advantage in the race for the cloud computing market: control of the network is needed from the start. IT expertise and services capabilities are also essential, and most large telcos have understood this, expanding these capabilities.

While there is still a long way for telcos to go before they can compete across the whole services spectrum with traditional IT service providers, the cloud paradigm shift opens a major window of opportunity for them. Network-related issues in IT have become more critical than ever before, and this will only be compounded, moving forward, by the rapidly increasing demand for mobility support and the continued opening of corporate information systems to the “outside world”.

As a result, telecom operators will continue to have an edge over the next five years when competing for cloud value, provided they acquire enough IT expertise and credibility – a path on which players such as Deutsche Telekom (T-Systems) and Orange have already made very substantial progress. In addition, “barriers to entry” on the network side are higher than on the IT services side.


Many cloud players, notably, but not exclusively, in Europe, have deplored, over the last 18 months, that “the cloud” was taking off at a slower rhythm than expected. Many blamed the security concerns. The AT&T/IBM alliance has some merits in the way it proposes to address this issue. Irrespective of claims about “technology breakthroughs”, it is a clever tactical move aimed at speeding cloud adoption among large and loyal IBM customers.

Seen from this angle, however, it arrives a bit late. Several other players can, and do, offer similar solutions, notably large telco operators. Even so, comparable tactical alliances between IT service players and telco operators may well emerge in the coming months.

Wednesday, October 10th 2012
Duquesne Advisory
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Duquesne Advisory

Duquesne Advisory is a European firm, dedicated to researching, understanding and advising clients worldwide on opportunities and trends in Information and Communications technology.


Duquesne Advisory delivers in-depth analyses of Information and Communications Technologies, their implementations and their markets. Research is based on critical observation of the market by the analysts and their on-going contacts with the vendor community, together with hands-on, practical experience in consulting engagements.


The analysts of Duquesne Advisory leverage the Firm’s ongoing market and technology research to undertake high added value consulting engagements for both ICT users and ICT providers. Focused on client service, their approach is rigorous and methodical, and at the same time pragmatic and operational.