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Analysts were treated to a bizarre spectacle last week. Not one, not two, but – count them – six vendors in the customer interaction space (Genesys, Mitel, Twilio, Cisco, Five9, and Vonage) simultaneously released the news that their platforms are now integrated with Google Cloud Contact Center AI. This sparked a debate in the Ovum customer engagement and enterprise services teams: Is this indicative of a "Trojan horse" strategy by web-scale cloud IT providers, which will eventually see customers move to their platforms for core routing? How are vendors differentiating their products when they are all integrating in the same way with the same partner, all announced on the same day?

We may not find out the answers to these questions soon, but the episode illustrates the diminishing power of the vendors versus the web-scale players. This is not necessarily a good thing for customers, who may have less choice in a consolidating supplier landscape, or the established industry, because innovation may be concentrated in an oligopoly of mega-providers.

As with vendors, so with service providers, who have been struggling for nearly a decade to launch differentiated, compelling cloud services. Vodafone briefed the Ovum team this past week on its partnership with Alibaba for cloud services in Germany, which illustrates some of the possibilities for more fruitful partnerships. While Vodafone provides a direct MPLS link into AliCloud's data centers, and AliCloud enables it to offer a secure connection to a non-US-based public cloud service, Vodafone claims it differentiates in three ways. First, it offers local, German invoicing. Second, it is the master contractor for the combined service, with the contract governed by German law. Third, it offers an "integrated customer experience," which in Vodafone's terms means premium, German-speaking customer support and a portal for service monitoring and management.

Will this be enough? In the short term, maybe. But the answer depends on the goal. Service providers with managed cloud services capabilities point to reduced customer churn and the chance to cross-sell other network services. In contrast, for vendors whose platforms provide specific functions, there is a danger that the cloud giants may simply consume the core of those functions, providing that functionality in their own services. The opportunity for cross-selling, or service management around this core, is then reduced. Customer demand means that vendor partnerships with the cloud providers may not be optional, but they serve to increase the imperative to defend the core. This is a dance familiar to the telco industry, and one that vendors will also have to learn.

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