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Will telecom operators shake up competition in cloud computing?

AT&T’s announcement last week that it has entered cloud computing is a sign that software as a service (SaaS) players will see heavy competition from a powerful source — telecom network operators.

In June, Verizon also announced a so-called on-demand computing program, and analysts say other network operators are soon to follow.

For systems integrators trying to find their place in the already precarious SaaS market, it means going to bat against telecom operators that already have deep relationships with enterprises.

“There are companies out there that want hosted solutions, and they are going to say [to network operators] ‘you’ve got my circuits already, so you can host too,’” Chris Thompson, Cisco senior director of solutions marketing, said.

And now that telecom network operators have moved beyond broadband voice and data into network-dependent applications like videoconferencing and telepresence, those enterprise relationships are even deeper, he said.

For network operators that are always trying to broaden their presence in the enterprise, getting into hosted services is a no-brainer.

“They are moving beyond being dump pipe providers,” Current Analysis analyst Counse Broders said.

AT&T is particularly well positioned to launch this SaaS play, which it has dubbed Synaptic Hosting. The telecom giant acquired hosting and managed applications company USinternetworking in 2006. Now it has combined that technology with five “super Internet data centers” in the U.S., Europe and Asia and 38 data centers in its global IP network.

AT&T will offer managed networking, security, storage and computing. Customers will be able to order on-demand Windows and Linux environments, as well as most common software applications, including Oracle and SAP.

Still, despite AT&T’s strong position, it could run into problems. Synaptic is not its first foray into hosting computing and applications. In the late ‘90s AT&T and many other network operators became applications service providers (ASPs), offering managed computing and applications, but these business models mostly didn’t work out.

Thompson noted that network operators have a drawback in this arena. While they do have the advantage of being inside the enterprise, they have the disadvantage of not being IT integrators. Often companies are looking for providers that have complex IT skills and can integrate multiple systems. That being said, since the ‘90s AT&T has built its business services arm into a strong IT consulting unit.

AT&T executives refused to comment on their channel strategy for Synaptic, but they said services would be sold through their channel as well as directly. Like most companies, except for Microsoft, AT&T hasn’t released a description of how it will compensate partners for selling hosted services. In addition, analysts have said they believe AT&T will take this service mostly through its extensive direct sales force.

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