Why 5G is a huge enterprise opportunity the cloud giants have already moved in on

Why 5G is a huge enterprise opportunity the cloud giants have already moved in on
Insider

Why 5G is a huge enterprise opportunity the cloud giants have already moved in on
Analysts predict the market for 5G enterprise networks, enabled by cell towers like this, is multi-billion dollars - and cloud giants are partnering with telcos to capitalize on it.Alessandro Bremec/NurPhoto via Getty Images
  • 5G is the next-generation telecommunications network, which could power the IoT and smart cities.
  • Cloud giants Amazon, Microsoft, and Google have already made headway by partnering with telcos.
  • Enterprise 5G networks are a big opportunity that analysts say could reach $5.7 billion by 2024.
The next generation of wireless networks, dubbed 5G, will have more capacity, faster speeds, and lower latency than its predecessor 4G. As a result, it's expected to bring technologies like augmented reality, self-driving cars, data-crunching Internet of Things devices, and even smart cities closer to the mainstream than ever before.
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Deeply entwined with cloud computing, 5G is expected to be the backbone of so many future products and services that it has the potential to power economic growth for decades to come, analysts predict.
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At the moment, 5G networks are still being rolled out by wireless carriers, and the public has yet to fully realize its benefits. But there are plenty of opportunities for startups and major companies alike, including in partnering with wireless carriers, deploying private and enterprise 5G networks, and developing 5G-enabled applications.

To the edge: How Amazon, Microsoft, and Google are already making headway

Though it's still early stages, analysts predict that 5G will be the impetus for the next wave of multi-billion dollar infrastructure spending.

Part of that is because of the rise of edge computing, the industry term for putting data processing power closer to customers' devices or locations for better performance. 5G networks, which support edge computing, are suddenly attractive partners for cloud providers like Amazon, Microsoft, and Google.
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"What we're seeing right now is a proliferation of new industry, for lack of a better term, where we've seen a lot of partnerships that are being announced between the cloud providers and the telco providers," said Sid Nag, a vice president focused on cloud services at Gartner.

Cloud providers don't own the millimeter spectrum required to build 5G networks but have customers who want to utilize them. Telcos, meanwhile, have built the 5G "superhighways" but don't have the traffic - creating a natural fit between the two, Nag told Insider. And cloud giants have already moved quickly on the opportunity, said Patrick Filkins, a 5G-focused analyst at IDC.
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In 2019, Amazon partnered with Verizon and other major network operators to launch AWS Wavelength, its 5G edge computing service, which enables developers to build applications that work over 5G networks. Microsoft has done the same with Azure, its cloud service. Google Cloud, which partnered with AT&T, has also launched extended edge computing offerings, and Hewlett Packard Enterprise, VMware, and Cisco have likewise rolled out cloud-based tools for wireless carriers.

Where there were about a dozen partnerships last year, there could be four or five times that number in 2021, Filkins told Insider, especially as telecos want to work with multiple cloud partners. "You'll see that everyone's partnering with everybody - an ecosystem starts to grow out of it," he said.

He also predicts that opportunities will arise for startups with specialized edge platform capabilities.
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"You are absolutely seeing some startups come in and say, 'Hey, we'll solve what doesn't exist,'" Filkins said.

Private or enterprise networks are an opportunity too

Analysts also say there's strong demand for companies to deploy their own 5G networks, which provide greater control, security, and capacity. Carriers can use virtualization to "slice" their wireless networks into multiple virtual sections from the same physical infrastructure, enabling them to dedicate a certain amount of wireless bandwidth to enterprises. That bandwidth can be used to address operational and process automation challenges, especially for industries like manufacturing and oil and gas.

IDC forecasts that revenue from private 5G infrastructure alone will grow to about $5.7 billion in 2024.
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"The amount of contracts we're seeing pop up around private cellular, private LTE, private 5G is pretty quick," Filkins said. "I think the enterprise market as a whole globally is now realizing the value in it."

Microsoft, for example, partnered with Verizon last October to offer solutions for private 5G networks to the manufacturing and healthcare industries, and Samsung is working to bundle edge computing and private 5G networking. Google Cloud also announced a 5G partnership with Nokia.

Challenges facing 5G rollout and enablement

Spectrum availability is a critical constraint to full 5G deployment. Wireless bands in the US are managed by the Federal Communications Commission, and a recent auction of mid-band spectrum (considered the "sweet spot" for wireless spectrum) netted over $80.9 billion for the government.
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More spectrum availability will fuel private cellular investment, Filkins said. "You see governments around the world start to realize, 'Oh wait a minute. If we give some spectrum or if we devise a way to provide spectrum to enterprises, then they can build this. They can take advantage of this much quicker."

Part of the challenge for cloud providers, carriers, and enterprises is that 5G is still an emerging technology - "there's no universal model around how you consume edge services," as Filkins put it. "It's a very complex task for an enterprise to try to solve, and best practices are still being fleshed out," he said. Recent years have seen the launch of projects like the O-RAN Alliance, sponsored by companies like Dish Network and AT&T, as well as Chinese firms like ZTE and China Mobile, that aim to consolidate much of the 5G industry on open standards for virtualized networks. Tech giants like Cisco, Facebook, VMware, and Intel have also led their own consortiums or projects aimed at the same purpose, which aims to open up custom networking hardware to a software-based environment - and could disrupt the hold of established telecom hardware manufacturers.
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But when looking to this year, analysts like Filkins are most excited about the enterprise opportunities ahead. "The real impetus around 5G is going to be what it can do in the enterprise space," he said. "2021 is when I think people really realized the story of 5G that will be written, will be how it impacts enterprise customers."

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