Satcom Apps Move to the Cloud

Satellite communications is by far the largest segment in terms of data traffic via satellite. Despite major developments in the Earth Observation industry in recent years, data traffic for point-to-point communications via the satellite bent pipe continues to grow rapidly.

The cloud is expected to play an increasingly important role across several segments in the satcom industry, key amongst them being mobility markets such as Maritime and Aero. Onshore Energy, Gov/Mil and Retail segments follow closely behind. By allowing for the integration of data across various platforms and tools within a corporation, the cloud smoothens digital operations for an end user dealing with numerous applications delivered via satellite.

Space-Cloud Convergence

NSR’s Cloud Computing via Satellite, 2^nd Edition report presents cloud-based satcom service revenue opportunity to be over $8.6 billion during 2020-2030. This opportunity is made up of revenue generated by service providers and satcom operators from the access to/delivery of cloud-based applications to end users. Meanwhile, cloud-based data traffic volume in the satcom domain is expected to grow at a staggering 48.9% CAGR through the decade, reaching close to 227 Exabytes cumulatively.

The space-cloud ecosystem is converging, as satcom service providers partner with cloud providers to make applications available on-demand. Incumbent cloud providers continue to dominate the market as they enter the space industry, each with their unique selling points. Microsoft, for instance, has a long-term strategic partnership in place with SES for mPOWER. Amazon is another, with one of the largest portfolios spanning across space applications.

Direct connectivity partnerships are a key part of the satcom cloud strategy, as satellite operators vie for a larger share of the blue ocean satcom revenue pie. Most major CSPs as of today have a satcom network partner, for instance, Microsoft with SES/Intelsat/ViaSat, IBM with SES or SpaceX with Google. Such a strategy will play a vital role as next-generation satellites that are cloud-ready launch into orbit. Satcom operators are betting on driving long-term growth by attracting larger data pipeline usage from various end customers.

Despite being heavily impacted by the COVID-19 pandemic, Maritime and Aero segments are expected to bounce back in the near term, as existing in-service units from the last year drive revenues in the near term.



Most satcom segments, as pictured in the above graph, remain flat well into 2021, and a growth phase is expected only in the mid-term, as pandemic-related supply chain issues and delays bounce back. Data traffic is forecast to rise significantly from 2022 onwards, as HTS satellites come online, alongside the introduction of free service models in the Aero segment. Even traditionally conservative Government and Military institutions are expected to double down into cloud-heavy investments by the end of the forecast decade, taking up 23% of the market share by then. Overall, satcom will continue to grow as a key driver of the satellite cloud ecosystem, making up approximately 40% of the total cloud revenue opportunity in the space industry through the next ten years.

Digitization and Cloud-Native Applications

Maritime and Aero satcom are the main revenue drivers, generating $4.6B and $1.2B cumulatively over the 10-year forecast period. In terms of data traffic, the volume is highest for Aero, while Maritime, Onshore Energy, Gov/Mil and Retail segments follow. CSPs are a foundational layer, i.e., a platform for user-focused applications across these satcom segments.

Near-term market pressures impacted revenues in the maritime segment across all vessel types (passenger, offshore, merchant, leisure and fishing). However, the total addressable market is forecast to grow in the long term, and as fleets become digitized, cloud-native value-added services are expected to boost satcom service revenues. Applications here can range from passenger cruise connectivity and energy management to offshore energy analytics and route optimization, sustaining demand for cloud services through the years.

Meanwhile, weather reports, ATC communications, connected aircraft services etc. are key for the aero market, driving a significant volume of data traffic. Big data applications such as health monitoring and predictive maintenance will also drive service revenues. Integrated operations via “digital oilfield” and “connected mine” plans of O&G and mining majors are further expected to advance cloud revenues in the VSAT energy satcom markets.

As such, cloud compute resources will be a key enabler for current/upcoming predictive and prescriptive analytics, as well as remote asset monitoring solutions.

The Bottom Line

The satellite-cloud ecosystem is on the cusp of various digitalization trends, in space and on the ground. Partnerships with major cloud companies also improve brand perception for satellite operators and service providers, and more such announcements are likely in the near future.

While the COVID-19 pandemic has reduced revenue potential across segments, recovery is forecasted for the mid-term. Applications are a plenty, as various end users move processes online. On the other hand, the imperative is on the service providers to understand customer requirements deeply and provide valuable analytics, to ensure cloud-based connectivity solutions are monetized in a timely manner.