NSR Bottom Line Cloud computing: Ratcheting the satellite industry forward

Cloud computing represents an important technological shift that has been underway across industries since the turn of the century, impacting the bottom lines and business models of various players in the ICT sectors. Over the past decade alone, adoption of “the cloud” has surged forward with major legacy software vendors orchestrating efforts towards the emergence of on-demand self-service, rapidly elastic solutions on the so-called cloud. Digitization strategies today are less about the blanket “adoption of cloud-based services” and more about understanding exactly which services need to move on from on-premise, and their associated costs and value-add.

The satellite industry in comparison to the wider ICT sectors has lagged significantly in its true cloud adoption. The three cloud service models as defined by the NIST – SaaS, PaaS and IaaS, each come with their own pros and cons. On the other hand, the advantages of incorporating the cloud into satellite businesses, whether earth observation or communications related are clear: a reduction of upfront capital expenditures and operational costs, ease of development and ubiquitous accessibility. In other words, less CAPEX and more predictable OPEX. The use of cloud-based applications ensures that existing business processes are further streamlined. While these are tactical advantages, shifting to the cloud is more a strategic imperative, with business agility, i.e., the ability of a business to respond quickly to opportunities and risks, and IT flexibility being key drivers. Where then, does cloud computing most impact the satellite industry?

NSR’s Cloud Computing via Satellite report forecasts is an industry that forecast a $16B cumulative revenue opportunity for cloud-based services in the satellite/space industry through the coming decade. . Of the market segments studied NSR describes how the delivery of cloud services via satcom represents by far the largest revenue potential throughout the forecast period, from nearly $200M in 2019 to more than $1.8B in 2029. Earth Observation data downlink forms the next largest segment as an opportunity for ground segment players, while Geospatial Analytics and Orbital Infrastructure are smaller segments with revenues driven by business model and technology evolution trends respectively.

Satellite Communications Is Where It Rains

Cloud Service Providers (CSPs) have made a flurry of announcements in the last few years alone, expanding their direct connectivity partner programs to include satellite operators and service providers: from Microsoft Azure ExpressRoute (SES, Intelsat, Viasat) to IBM DirectLink (SES) . Such partnerships ensure high performance cloud-access to satcom customers, whether in the maritime, aero, energy or govmil sectors. RigNet, for instance, leverages cloud capabilities to provide video intelligence and cybersecurity solutions in the energy sector. IIoT-based analytics are another key factor in the mobility satcom segments, as with the Inmarsat/Microsoft or AWS/Iridium partnership. The cloud trend in satcom is expected to impact business models of all actors in the value chain. Such solutions are expected to drive revenues in the long run, sustaining bandwidth demand from traditional satcom customers. On the other hand, the development of applications in the cloud is also expected to bring in bandwidth savings as applications move closer to being “high value low volume” with greater margins, leading to increased revenue opportunities as well.

Data Downlink: EO Building Steam

Meanwhile, ground station service providers are accelerating efforts in revamping/augmenting existing infrastructure, with the use of cloud-enabled services or virtual ground stations built on shared infrastructure. Cumulatively, nearly 500 PB of raw EO data is expected to be downlinked over the next ten years onto cloud servers. There are a few main factors driving this market: the emergence of Newspace players with solid investor backing (Infostellar), the entry of a major CSP with deep pockets and resources into the space industry (AWS GSaaS) and the virtualization of ground station services. Commercial EO players are open to a fully/partially outsourced ground service model, thereby generating cloud-related data traffic in this segment. SAR imagery players such as Capella Space and Umbra Labs, for instance, have leveraged AWS services to simplify and automate their data flows. Improvements in the resolution and quality of EO data (optical, SAR, hyperspectral etc.) will only increase the volumes of data being downlinked.

Satellite Big Data Analytics: By the Buckets

Downstream business model innovations are also underway, as analytics providers compete to provide better insights by developing newer products and services, thereby increasing the consumption of cloud services, whether for compute/storage/network capabilities. In mid-2019, Descartes Labs built the first system on the TOP500 fastest supercomputers list to run completely on public cloud resources. Soon after, the company launched a real-time geospatial data platform, providing geospatial tools that use satellite big data over the cloud. UrtheCast’s UrthePipeline is proposed as a fully managed solution to provide what is called ‘scientific-grade Analytics Ready Data’ to customers at scale, a solution that is tunable to the customers’ scale and latency requirements. Satellite big data solutions have taken center stage in the wake of the COVID-19 pandemic as well, and related cloud service opportunities are forecast to increase, reaching upwards of $200M by 2029. NSR expects service providers in this segment to further optimize their cloud usage to improve their margins, while presenting a low hanging revenue opportunity to CSPs.

The Bottom Line

Enterprise digitization across industries and cybersecurity considerations have driven the cloud-based satcom service market significantly. As satellite players vie to keep up with the expected demand for connectivity, cloud computing will form a crucial part of digitization strategy. With the growing supply of EO satellites, the traditional EO industry has evolved to include data analytics, and the cloud is essential in accelerating the adoption of such solutions.

Cloud computing brings multiple benefits to an organization, acting as an enabler by reducing the barrier of entry to a market for small companies and new startups in the space industry. By cutting out the need for ownership of hardware/software, it allows satellite players to cooperate with CSPs and serve their customers much more efficiently. The cost of a cloud service, the potential upside / expected savings for the business, and turnaround time – these are important questions that drive cloud-related conversations today.

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