Edge Computing is a Market Transition, Pensando Believes

Edge computing is a market transition, John Chambers believes. And, for that reason, edge computing also represents opportunities for new leaders to develop. "When you go to a market transition, almost never does the leader in the prior transition lead in the next," Chambers--chairman of Pensando, said. 

Compute is migrating to where the data is, says Pensando, an edge computing firm whose mission in life is to create a platform and ecosystem supplying computing as a service without lock-in to Amazon Web Services or any other major cloud computing supplier. And Pensando believes edge computing will allow many new contestants a chance to enter the computing as a service business at the edge.

Pensando aims to focus on an ecosystem of software supporting edge computing, featuring highly-programmable software-defined cloud, compute, networking, storage, and security services wherever data is located, the company says. “This unique capability means that cloud providers can now gain a technological advantage over the current market leader, Amazon Web Services Nitro, delivering five times to nine times improvements in productivity, performance, and scale when compared to current architectures with no risk of lock-in.”

Coming out of stealth mode, Pensando had gotten partnerships with HPE, Goldman Sachs, NetApp, and Equinix. In at least some instances, the Pensando platform appears likely to be used to support server-to-server (east-west traffic) rather than client sensor to server operations. 

“The foundation of the Pensando platform is a custom programmable processor optimized to execute a software stack delivering cloud, compute, networking, storage and security services wherever data is located, all managed via the Venice Centralized Policy and Services Controller,” Pensando says.

Walmart to Get Into Edge Computing as a Service

Walmart plans to build its own edge computing centers. Furthermore, Walmart expects to make that capability available to third parties. Also, Walmart expects to make its  warehouse and shipping capabilities available to third-party sellers, using a model perhaps similar to the way Amazon supports third-party retailers. 

Walmart further says it will use its large supercenter store locations to fulfill online orders for Walmart’s groceries and other items.

The point is that the market opportunity for multi-access edge computing now is being challenged by retailers, Amazon and eventually others who plan to deliver edge computing as a service themselves, perhaps foreclosing much of the potential role for connectivity service providers to become suppliers of edge computing as a service.

Wholesale is No Answer for Mobile Voice Declines

Some recommend that mobile service providers turn to wholesale operations or support for third party calling functions as a way of slowing voice revenue declines. That is a very tall order, given the huge declines in voice revenue between now and 2024, the slim profit margins from wholesale and lack of demand from third parties for such wholesale access.

Mobile operator revenue from voice services will fall from $380 billion in 2019 to $210 billion in 2024, at least in part because of  increasing usage of over-the-top apps, including WhatsApp and Viber, says Juniper Research. 

Precisely what can be done about that remains a big question. 

source: Juniper Research

Juniper Research recommends that operators sign partnerships with hosted services providers, notably through Communications-Platform-as-a-Service. Some might simply call CPaaS “wholesale” access, allowing third party customers or partners access to mobile subscribers for voice and messaging services. 

source: Juniper Research

That advice, commonly offered, seems questionable as a way of arresting the decline of mobile voice revenues. Telcos--both fixed and mobile--have been encouraged by some to partner with third party VoIP suppliers since the early days of IP telephony. 

The problem is that partnering with OTT voice and messaging providers is problematic, for a number of reasons. For starters, profit margins are low. Also, there is no reason WhatsApp or other OTT messaging providers “need” to partner with connectivity providers. They can go direct to end users, and do, routinely.

That, in fact, is the meaning of the phrase “over the top.” App providers do not need permission from connectivity providers to deliver their services to end users. Also, consumers continue to abandon fixed line telephony. It is hard to see how allowing third parties to use wholesale telco services can reverse that trend. 

Mobile operators might lose $157 billion in voice revenue between 2018 and 2023, Juniper Research forecast in 2018.  The latest forecast is that operator revenue from voice services will fall from $380 billion in 2019 to $210 billion in 2024. 

source: Ovum

It remains to be seen whether wholesale markets will present greater opportunities as smart speakers become ubiquitous, and if some suppliers seek to add public network calling to their devices and services. 

Still, it seems a stretch to think that demand for this type of support (calling to public network customers using smart speakers) will generate significant profit for telcos, even if some amount of gross revenue might be earned by supporting third party customers who want to support public network calling that originates and terminates on smart speakers. 

So far, it seems unclear whether public network calling using smart speakers will become a feature smart speaker suppliers will wish to add. 

"5G" Often Means Other Things, Such as Edge Computing

If 5G connections wind up representing 33 percent of all internet of things connections by 2025, reaching 2.3 billion active connections by 2025, as Strategy Analytics now estimates, it is likely that edge computing and virtualized networks with performance guarantees are the reason.

Most IoT sensor apps do not require 5G bandwidth, and may not require ultra-low latency, either. Arguments can be made that 4G or other networks will work just fine to support most IoT use cases.

On the other hand, as so often is the case these days, it is the way 5G enables edge computing and is enabled with network slicing that might explain the adoption. It might not so much be 5G access networks which drive the value, but the edge computing and network slicing. 

To be sure, network slicing is a necessary attribute of the 5G core network. But edge computing arguably is the key to realizing end-to-end ultra-low-latency application performance. 5G, in many ways, is simply the access network that allows those attributes to be commercialized. 

source: Strategy Analytics

IoT and Automation Top Lists of Key 2020 IT Trends

Three different forecasts of important 2020 information technology trends shows automation and internet of things as common picks. 

source: Forbes

McKinsey’s list of the most-important information technology trends for 2020 includes:

1. “As-a-Service” Consumption for Everything from Software to Hardware. 
2. Mainstream Public Cloud 
3. Increased Use of Open-Source Offerings, Up & Down the Stack 
4. Cybersecurity
5. Mainstream Comfort with “White Box” Hardware 
6. Internet of Things 
7. Shift of the Hardware Infrastructure Market to Asia 
8. DevOps for Software & Hardware 
9. Container-First Architectures 
10. Artificial intelligence & Machine-Learning

The Gartner top 10 trends affecting information technology infrastructure in 2020 include:

1. Automation Strategy Rethink
2. Hybrid IT Versus Disaster Recovery (DR) Confidence
3. Scaling DevOps Agility
4. Infrastructure Is Everywhere — So Is Your Data
5. Overwhelming Impact of IoT
6. Distributed Cloud
7. Immersive Experience
8. Democratization of IT
9. Networking — What’s Next?
10. Hybrid Digital Infrastructure Management (HDIM)

Splunk’s list includes:

1. AI/ML/NLP
2. Blockchain 
3. IoT/5G 
4. Dark Data 
5. IT Security 
6. Social Engineering 
7. Critical Infrastructure 
8. Cloud Security 
9. Threat Intelligence 
10. IT Operations 
11. Automation 
12. UX/Consumerization

Hyperscale Data Centers Driving IT Spending

As computing workloads shift from enterprise to public cloud, it is logical that spending on information technology also should shift. Data from Synergy Research Group shows that is happening.

Hyperscale operators accounted for 33 percent of all spending on data center hardware and software in the first three quarters of 2019, up from 26 percent from 2017 and up from 30 percent in 2018.

The total market has increased in size by over 34 percent, so that spending by enterprises and service providers has risen by six percent since 2014.

Still, enterprise spending has “remained under pressure primarily due to the ongoing shift in workloads from private networks to the public cloud,” says Synergy Research. 

source: Synergy Research

Edge Will Support Telco Virtualization

One way or the other, connectivity service providers will be significant users of edge computing to support operations of their own virtualized networks.

Less clear are roles in supporting edge computing as a service.

Telecom edge computing refers to computing performed by small data centers located as close to the customer as possible, owned and operated by a telco, and on telco-owned property. One definition might be computing no further than 30 miles from any end user location. 

Metro edge computing might occur more than 30 and up to 100 miles from any end user location. Both those sorts of edge computing, and including computing happening on a user device or on an enterprise campus or inside a building are the other types of edge computing. 

Some have estimated edge computing revenues of perhaps US$21 billion in 2020. This is up more than 100 percent from 2019, and the market is poised to grow more than 50 percent in 2021 as well, some estimate and Deloitte reports. 

source: Deloitte

source: Deloitte

Irrespective of any efforts to host or otherwise supply edge computing as a service, telcos and mobile operators are among the biggest current users of edge computing to support their own internal operations. 

“The largest demand for edge computing currently comes from communication network operators as they virtualize their wireline and wireless network infrastructure and accelerate their network upgrades, including 5G,” say the authors of the State of the Edge report. 

“Most edge investments today are for virtualizing wireline infrastructure, including SD-WAN equipment, core network routing and switching equipment and data gateways,” the report states. 

“Network function virtualization (NFV) and software defined networking (SDN) solutions that underpin next generation technologies like 5G and are being implemented on edge platforms that CNOs are deploying across their networks,” the report says. 

In other words, 5G and similar upgrades to the wireline networks will require edge computing for network virtualization and automation, as well as to enable new services. 

This will drive investment in edge data centers to support their own operations. 

The global power footprint of the edge computing equipment for CNOs is forecast to increase from 231 to 7383 megaWatts between 2019 and 2028. 

In 2019, communications service provider deployments will represent 22 percent of the global edge footprint, declining to perhaps 10 percent of total investment as other third party uses proliferate. 

In 2019, 94 percent of the footprint wil be in central office sites, with the remaining six percent in access and aggregation sites. Between 2019 and 2028 the aggregation edge footprint for CNOs is forecast to increase from five to 38 percent of the total footprint. 

source: State of the Edge report

Telcos Will Deploy Edge Computing to Support Their Own Networks

Irrespective of any efforts to host or otherwise supply edge computing as a service, telcos and mobile operators are among the biggest current users of edge computing to support their own internal operations. 

“The largest demand for edge computing currently comes from communication network operators as they virtualize their wireline and wireless network infrastructure and accelerate their network upgrades, including 5G,” say the authors of the State of the Edge report. 

“Most edge investments today are for virtualizing wireline infrastructure, including SD-WAN equipment, core network routing and switching equipment and data gateways,” the report states. 

“Network function virtualization (NFV) and software defined networking (SDN) solutions that underpin next generation technologies like 5G and are being implemented on edge platforms that CNOs are deploying across their networks,” the report says. 

In other words, 5G and similar upgrades to the wireline networks will require edge computing for network virtualization and automation, as well as to enable new services. 

This will drive investment in edge data centers to support their own operations. 

The global power footprint of the edge computing equipment for CNOs is forecast to increase from 231 to 7383 megaWatts between 2019 and 2028. 

In 2019, communications service provider deployments will represent 22 percent of the global edge footprint, declining to perhaps 10 percent of total investment as other third party uses proliferate. 

In 2019, 94 percent of the footprint wil be in central office sites, with the remaining six percent in access and aggregation sites. Between 2019 and 2028 the aggregation edge footprint for CNOs is forecast to increase from five to 38 percent of the total footprint. 

source: State of the Edge report

Edge Infrastructure Spending to Reach $146 Billion in 2028

The deployed global power footprint of the edge IT and data center facilities is forecast to reach 102 thousand megaWatts by 2028, with 68 percent of the deployments the State of the Edge report. 

The global annual capital investment for edge IT and data center facilities is forecast to reach $146 billion in 2028 with a 35 percent compound annual growth rate. 

The annual capex for infrastructure edge equipment is expected to have  a CAGR of 42 percent, compared with a CAGR of 25 percent for the device edge. 

After 2025, the global annual capex for device edge infrastructure is forecast to stabilize and in 2028, to decline moderately, as capex for infrastructure edge capabilities continues to increase.

source: State of the Edge report

Vodafone Launching Wavelengths with AWS

Vodafone is among the first telcos globally to partner with Amazon Web Services for Wavelengths, an AWS edge computing service that puts an AWS node in a telco edge facility.

AWS Wavelength will be available first in the UK and Germany on the Vodafone 5G network, expanding to other Vodafone markets across Europe, Vodafone says. Though there is no particular reason why Wavelengths must be the only Vodafone initiative in edge computing, Wavelengths is described as “multi-access edge computing” by Vodafone. 

Multi-access edge computing has been viewed as a way for mobile operators and possibly others to participate in the edge computing market. Originally known as mobile edge computing, the concept now includes Wi-Fi or fixed network edge, not just mobile edge. 

source: Computer.org

Multi-access edge is meant to delineate edge computing owned and operated by enterprises or consumers, on devices or on the premises, from service provider facilities and services, from offerings by other third parties, including content delivery networks, data centers or others operating at the metro edge. 

Wavelengths essentially is a low-risk, lower investment, but also lower upside way of participaing in edge computing, as it is AWS that actually provides the edge computing. Vodafone and other telco partners really only supply racks and hosting. 

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AWS Builds on Familiarity with Leased Facilities

One might argue that the trio of edge computing approaches announced by Amazon Web Services grows directly from the way it has in the past sourced computing infrastructure, including a mix of owned and leased facilities. Along the way, AWS has had to create and get comfortable with the idea of its servers operating in somebody else’s facilities.

Up to this point, the “somebody else” has been third party data centers. But edge computing requires even more decentralized facilities. Hence, Outposts, a rack of servers managed by AWS but physically on-premises. 

The customer provides the power and network connection, but everything else is done for them. If there is a fault, such as a server failure, AWS will supply a replacement that is configured automatically. Outposts runs a subset of AWS services, including EC2 (VMs), EBS (block storage), container services, relational databases and analytics. S3 storage is promised for some time in 2020. 

Local Zone, currently only available in Los Angeles, is an extension of an AWS Region, running in close proximity to the customers that require it for low latency. Unlike Outposts, Local Zone is multi-tenant. AWS deploys only when there is a critical mass of customers unable to take advantage of an established AWS region. 

Wavelength is a physical deployment of AWS services in data centers operated by telecommunication providers to provide low-latency services over 5G networks. Operators signed up so far include Verizon, Vodafone Business, KDDI and SK Telecom.

All three services essentially are built on Outposts and local server facilities using third party sites. As AWS had to get comfortable with third party data centers hosting its servers, so Outposts extends that hosting to enterprises. 

A Local Zone is effectively a large group of outposts. Wavelength involves Outposts located inside a telco facility of some kind, likely often a central office. AWS is early to move, but the other hyperscale computing-as-a-service providers also are expected to make big moves toward edge computing facilities as well. 

By 2023, by some accounts, the hyperscale cloud computing firms will be spending $23 billion in a single year to create edge computing facilities, about half of total capex in that year.

Will Telco Role in Edge Computing be Connections and Real Estate?

It has to be said: in choosing to supply AWS with edge hosting facilities, a few tier-one telcos, likely to be followed by others, are making a considered bet that edge computing as a service is likely to be lead by, if not dominated, by the same providers in the ecosystem that dominate computing as a service. 

There are other rational considerations. It likely is too late for telcos to replicate the hyperscaler role in “as a service” computing. 

In seeking a role in edge computing, the telco partners avoid the heavy capex required to emulate what the hyperscalers can provide their customers, instead choosing the hosting role (rack space, security, cooling and power). 

What they may be hoping is that the AWS moves lead to similar deals with many of the other hyperscale computing as a service providers, creating a data center hosting role some telcos tried and abandoned earlier. 

While other roles are not foreclosed, the AWS partnerships suggest that executives do not believe they are in position to invest in--or win--the battle for computing as a service. As many discovered earlier, the data center business has generally not been an area where telcos brought  significant advantages. 

On the other hand, perhaps many are betting that an early lead can be gained in the “edge facilities” part of the data center business, before potential rivals can scale their efforts. Of course, the hyperscale computing as a service suppliers are at the top of the list of potential leaders of the coming edge computing business. 

So the optimistic view might be that although not in position to lead edge-based computing as a service, telcos might secure a meaningful role in the edge data center hosting business, which requires distributed smallish data center locations.

Telcos of course have long considered former central offices or switching centers to be ideal real estate, in that regard. In metro areas where most of the edge computing demand will develop, central offices sit at the center of access networks running a few miles or so from end user locations. 

At least some mobile switching offices also are viable candidates for edge facilities as well.

Other roles are not foreclosed by the telco deals with AWS. It is conceivable that some vertical market services might develop where a few telcos are significant providers of the applications or capabilities. Vehicle communications and computing are logical candidates, for example. 

Still, the AWS deals are stark reminders that the edge computing ecosystem is, at the moment, most favorable for telcos as suppliers of rack space and communications. Most observers would probably agree with that assessment. 

That role also is arguably a capital-efficient and low-risk way  to enter the market. Other roles are not foreclosed. But perhaps few observers really believe the long-term telco opportunity is greatest anywhere but in the “pipeline” and “real estate” areas.