Can ecosystem models advance network API monetisation?

Enterprise Platforms, Executive Briefing Service

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We examine four ecosystem business frameworks to see how they might look when applied to the emerging network API opportunity to assess whether these sorts of models can unlock commercialisation possibilities in uncertain markets.

The network API opportunity

In our report Network APIs: Driving new revenue streams for telcos (April 2023) STL Partners forecast a revenue potential of more than US$22 billion globally for the top 11 network APIs by 2028 – a significant revenue opportunity for telecoms operators. Realisation of this potential depends on the telcos’ ability to select the right commercialisation strategy.

Telcos will need to distribute network APIs widely. For this, they could consider API distribution through:

  • their own platforms (providing services to large enterprises, e.g. T-Mobile’s DevEdge Platform in the US and Germany)
  • supply-side aggregators (similar to Twillio or Vonage)
  • system integrators
  • hyperscalers

But these options do have drawbacks. For example, telco-own platforms may struggle to scale (due to coverage limitations), margins and ability to add value through aggregators are limited, system integrator routes could also struggle to scale – and hyperscaler channels could risk ceding more control to these players than the telcos would like.

Work being done by the likes of CAMARA and the GSMA Open Gateway initiative to increase standardisation and interoperability of APIs may open up further distribution and commercialisation options in time. But additionally, we propose that telcos examine API distribution mechanisms that leverage the benefits of ecosystem business frameworks.

In our report Telco ecosystems: How to make them work (July 2020), STL Partners outlined several benefits of ecosystem business frameworks and why they can be particularly suited to new product and service areas where there is some uncertainty:

  • They support responsiveness to customer requirements (e.g., enable alternative feature bundling as the market moves).
  • They support continuous value-creation and innovation (partners bring in new service elements).
  • They support scale (the telco does not have to do everything on its own as more customers attract more partners, etc.).

The network API opportunity is still emerging and could benefit from the adoption of a flexible commercial approach, such as that presented by an ecosystem business framework. Ecosystem ways of working can encourage and make it easier for developers and enterprise to innovate, leveraging network API capabilities. In this report, we look at four examples of ecosystem-based business frameworks (the business models of existing companies) and consider how they might apply (hypothetically) to the network API opportunity – with a view to exploring the attractiveness of the approach for telcos navigating this area.

Our aim is to extend telco understanding of such models – as opposed to furnishing them with a specific recommendation regarding the commercialisation of network APIs – in the first instance. We wish to highlight the factors that telcos should bear in mind when considering ecosystem strategies.

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The ecosystem way

Ecosystem business frameworks are an alternative way of structuring economic activity and value creation versus vertical integration or linear, supplier-based frameworks. See Figure 3.

Comparing business frameworks

Source: STL Partners

The framework requires a strong customer value proposition in the first instance. In digital ecosystems, the value proposition typically involves using technology to link different aspects of a customer’s digital life in new ways (for example, Google Maps to show the way to a searched-for store). Once the value proposition is clear, the ecosystem creator (orchestrator) considers the components of the proposition and how to make it commercially viable (e.g. scale). They focus on their strengths within the set-up (what they do well) and invite others (suppliers/complementors) into the ecosystem to build out the proposition. This requires them to attract external stakeholders into an orchestrated business environment, where they share strong assets and capabilities with participants to help them create value for end customers (and the participant themselves). To be successful, ecosystems must therefore be designed with both customer and participant engagement and motivations in mind (insufficient participant engagement may mean supply-side failure).

Key requirements for a successful ecosystem are:

  • Putting the end-customer needs at the centre of an ecosystem to ensure the delivery of customer value (this requires a deep understanding of behaviour and motivations).
  • The ability to deliver an excellent experience for customers and participants to attract and maintain their engagement (i.e., minimising friction for all parties).
  • Enabling continuous innovation to deepen/extend relationships.
  • The ability to follow a dynamic strategic approach to enable the ecosystem to adjust, or even change direction, to accommodate unforeseen ecosystem consequences, as well as changes in customer requirements or market forces.

Table of content

  • Executive Summary
  • Table of Figures
  • Introduction
  • The ecosystem way
    • Why an ecosystem could be the best approach for APIs
  • An “association” approach – Mastercard
    • How does the model work?
    • How could this apply to APIs?
    • What does it take to work?
    • Evaluation of the approach
  • A vertical marketplace approach – Symworld
    • How does the model work?
    • How could this apply to APIs?
    • What does it take to work?
    • Evaluation of the approach
  • An OEM approach – Volkswagen/CARIAD
    • How does the model work?
    • How could this apply to APIs?
    • What does it take to work?
    • Evaluation of the approach
  • Use case marketplace – Amdocs
    • How does the model work?
    • How could this apply to APIs?
    • What does it take to work?
    • Evaluation of the approach
  • Conclusions and recommendations
    • How the ecosystem approaches are geared to succeed
    • Recommendations
  • Index

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