[비즈한국] Recently, KT CEO Kim Young-shub030200 has garnered attention for his aggressive moves in the cloud sector. Amidst expanding domestic and international demand for cloud infrastructure, KT appears to be kickstarting its entry into the Managed Service Provider (MSP) market while pursuing a transformation into an "AICT (AI+ICT)" company. MSP refers to a model where services from overseas big tech firms are provided to client companies via outsourcing. KT has long held the top market share in the domestic public cloud market, from which global companies have historically been excluded. How should we interpret KT’s shift toward MSP, given that it already operates its own cloud services through a subsidiary?
Embarking on a Collaborative Strategy with MS… Two Overseas Trips This Summer
KT’s shift toward MSP is becoming tangible. Its key partner is Microsoft in the U.S. Since early June, CEO Kim Young-shub has made two overseas trips related to MS. According to industry insiders, Kim is currently visiting Europe to inspect collaborative cases where MS Sovereign Cloud solutions have been implemented. This visit comes two months after he met with MS CEO Satya Nadella at the company’s headquarters in Washington state on June 3 (local time) to sign a strategic partnership for collaboration in AI, cloud, and IT.
Previously, KT signed an agreement with MS covering joint research and development in AI and cloud, the development of Korean-style AI/cloud/IT services, the establishment of an AI and Cloud Innovation Center, and joint talent cultivation. The companies agreed to finalize the collaboration strategy, support areas, and contract terms by this September, and CEO Kim is personally spearheading the preparatory work. A KT official explained, "Our current cloud business orientation is focused on MSP. Collaboration with MS is part of that effort," adding that the trip was made to "verify international case studies."
Although detailed MSP business directions have not yet been disclosed, the industry predicts that KT will launch solutions applicable to public and financial sectors by utilizing Microsoft's Azure cloud technology. A project to transition KT’s internal computing network to an Azure-based system over the next five years is also underway. MS has previously established "Sovereign Clouds" in Italy, the Netherlands, and Belgium, applying data protection measures that meet the General Data Protection Regulation (GDPR) standards of Europe. In the Netherlands, public institutions such as local governments, and in countries like Italy, both private companies and public sectors are utilizing the MS cloud.
Finding a "Breakthrough" in the Pivot to MSP: Why Concerns Are Emerging
While companies responsible for systems integration (SI) for large corporations have turned their eyes to the MSP market over the past few years, the implications of KT’s transition are unique. KT is a Cloud Service Provider (CSP) that develops and operates its own cloud via its subsidiary, KT Cloud. In the domestic public cloud market, KT held a dominant 42% share in 2022, compared to NHN Cloud (17.2%) and Naver Cloud (15.6%).
If KT enters the MSP market by positioning itself as a gateway for global clouds like Azure to enter Korea, there is a risk of conflict with its own cloud services or friction within existing partnerships in the MSP sector. Nevertheless, KT is entering the MSP business due to the reality that indigenous CSPs are struggling to secure competitiveness.
Shin Min-soo, a professor of business administration at Hanyang University, stated, "KT may have judged that it is difficult for it to survive as a CSP any longer." The domestic cloud market is dominated by a few global big tech firms such as Amazon Web Services (AWS), MS, and Google. Not only is there a clear gap in technological prowess, but domestic companies were only able to maintain influence in the public sector thanks to a market structure that excluded overseas providers. However, with the Cloud Security Assurance Program (CSAP) for public institutions being reorganized into a tiered system this year, tension has risen among domestic firms. The door has been opened for foreign companies that do not host physical servers within Korea to enter the public market, albeit in a limited capacity, leading to forecasts that the foothold of domestic companies could shrink even further.
Kim Myung-joo, a professor of information security at Seoul Women’s University, pointed out, "When considering factors like power and electricity quality, building a cloud in Korea isn't necessarily advantageous. While there was a recent global MS cloud outage, it is difficult to say that domestic clouds like KT’s are currently safer or superior to Azure. It’s a matter of competitiveness."
There are mixed feelings of expectation and concern regarding KT’s strategy of shifting its focus from its own cloud to the introduction and deployment of foreign solutions. Prof. Kim said, "It could be a 'win-win' for KT as it can target demand for premium quality. If KT Cloud handles general demand, they can avoid conflict." Hwang Seok-jin, a professor at Dongguk University’s Graduate School of International Information Security, said, "It is positive in terms of providing technology with enhanced reliability alongside MS and in terms of global scalability. However, since securing a competitive advantage over overseas firms will be the key, KT’s capabilities in data migration and stability assurance are also crucial."
Some also view the move with concern regarding the weakening competitiveness of the domestic cloud ecosystem. Prof. Shin explained, "The era where the cloud dominates the internet has arrived, and the role of the cloud in the IT market will continue to expand. A major cloud operator like KT shifting to MSP implies that the territory for domestic companies has shrunk. If the scenario of moving toward MSP due to a lack of competitiveness as a CSP repeats, it could result in South Korea losing its sovereignty in the cloud market."