LATAM Region a Leader in Virtualized Cloud

Canada and the United States -- developed North-American world powers that they are -- may have a lot of wealth and hard-coded infrastructure, but Latin America (LATAM) is breaking the global curve on cloud adoption.

Digital transformation isn't a first-world problem. If anything, the globalization that digital-transformation tools enable is helping still-developing nations get a leg up over their more developed counterparts when it comes to these cutting-edge technologies.

Cloud computing, SDN, NFV, VNFs, The Internet of Things, social and mobile platforms: All of these digital-transformation technologies are -- well -- transforming the way telecommunications companies, carriers and service providers operate and their workers interact. They present advantages in efficiency, cost-effectiveness and innovation.

And, perhaps counterintuitively, they are enjoying easier penetration in developing markets – because of their very nature. An IDC study last year reported that LATAM leads the world in both public- and private-cloud adoption, with its wealthier, more developed continental cousin to the north taking second place. IDC has further predicted that no less than 40% of all enterprise IT expenditures in LATAM will be spent on the cloud by 2018 -- with this number rising to more than half of all "IT infrastructure, software, services and technology" spending by 2020.

In an interview on cloud, SDN and NFV deployment in developing LATAM nations, Daniel Pineda, a consultant coordinator at Teléfonos de México (Telmex) (OTCMKTS: TMXLF), told Telco Transformation that Telmex has been actively exploring the market and evaluating analytics as the telco prepares to enter the virtualized cloud market with a portfolio of products -- starting with infrastructure-as-a-service (IaaS).

"It's growing fast," said Pineda, referring to demand for IaaS in Mexico and throughout the LATAM region. "There are fantastic opportunities. Five-to-6% of servers today are virtual." "In LATAM, infrastructure-as-a-service is growing fast, with strong local players as well as international players coming to the region," concurred Gabriel del Campo, LATAM regional data center vice president for Level 3 Communications Inc. (NYSE: LVLT), in an email interview with Telco Transformation. "There are some import and local taxes that are pushing cloud prices up. However, they are compensated by lower connectivity and human-resource costs. With local, in-language support, the customer experience is usually better."

Pineda was even more enthusiastic about the cost benefits, observing that virtualization and cloud technologies are available in developing LATAM countries for pennies on the dollar compared to more developed nations -- especially where these technologies are driven by open source. Accordingly, Pineda pointed out, Telmex's LATAM network investments are much lower and more cost-efficient—necessary edges, Pineda further pointed out, in countries lacking broad and abundant access to capital resources—than those of the telco's counterparts in the US, Canada and more developed European nations.

"So our investments in [LATAM] are much lower than American or developed European companies' own local investments," concluded Pineda.

To be sure, IDC has predicted that throughout 2016, "more than two thirds of IT project initiatives [in LATAM] will require demonstration of cost savings, forcing open-sourced [solutions] into the spotlight" for cloud, mobile, big-data analytics and social networking platforms. Others, however, are more dubious about any economic implications that may be play here.

"I don't want to go so far as to say there's a cause and effect there," said Rick Hubbard, senior vice president of Networking Product Management at AT&T Inc. (NYSE: T). "I think it's just a newer type of technology -- and if you need that sort of access as you're entering a new market, you would consider it now versus before."

Certainly, to be fair to Hubbard's point, IDC expressly acknowledged that its bold predictions for LATAM's digital-transformation evolution have been knowingly made in spite of what the analyst firm concedes is a currently dismal economic outlook in LATAM because of the Brazilian recession.

On the other hand, these economic woes may ultimately help drive LATAM's digital transformation. Indeed, recession or no recession, the gA Center for Digital Business Transformation in Latin America (CdBT) recently identified Brazil's telecom industry as leading all other industries in all LATAM countries in terms of digitization.

"To overcome constraint on future economic growth, Latin America needs to tackle the industrial competitiveness and productivity challenge, through intense assimilation of digital technologies," averred the gA Center for Digital Business Transformation in Latin America (CdBT) in its recent report, "Latin America 4.0: The Digital Transformation in the Value Chain." "In other words, to yield productivity improvements in Latin America, the adoption of digital technologies needs to be combined with the hard work of process retooling, organization restructuring, and human resource retraining."

According to del Campo, Level 3 has been directly tackling these specific challenges identified by CdBT by hosting a variety of technology and business forums in the LATAM networking space this fall.

— Joe Stanganelli, Contributing Writer, Telco Transformation