| Voice & Messaging 2.0: Disrupting the telcos with Rebtel, Presentation by Andreas Bernstrom, CEO, Rebtel. Will smartphones bring a wave of mobile VoIP disruption? Presented at EMEA Brainstorm, November 2011. |
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| Voice & Messaging 2.0: RCS-e, the new generation of communications services?, Presentation by Cenk Serdar, Director, Data and Communications Services, Vodafone Group, and Rainer Deutschmann, SVP Core Telco Products, Deutsche Telekom. Is RCS-e our future? And if so, what kind of future? Presented at EMEA Brainstorm, November 2011. |
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| Customer Experience: Back to the Future of Voice. Colin Lees of BT on the future of the UK voice service and the transformation of BT’s service platform. Presentation from EMEA Brainstorm, November 2011. (November 2011, Executive Briefing Service, Cloud & Enterprise ICT Stream) |  |
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| Customer Experience 2.0: Hosted Unicomms for Business, Presentation by Fabio Gori, Head, SP Marketing, EMEA, Cisco Systems. Sizing the opportunity of business communications in the cloud. Presented at EMEA Brainstorm, November 2011. (November 2011, Executive Briefing Service, Cloud & Enterprise ICT Stream) |  |
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Summary: in theory, Microsoft and Skype have the resources, the brands, the customer base and the know-how to shape the future of telecoms and become a strategic counterweight to Apple and Google. Can they do it – and what should telcos’ strategy be? (June 2011, Executive Briefing Service, Dealing with Disruption Stream).
This page contains an excerpt from the report, plus detailed contents, figures and tables, and a summary of the companies, products, technologies and issues covered.
(The 35 page PDF format report is available in full to Members of the Telco 2.0 Executive Briefing Service and the Telco 2.0 Dealing with Disruption Stream here. Non-members can buy a Single User license for this report online here for £995 (+VAT) or subscribe here. For multiple user licenses or other enquiries please email contact@telco2.net or call +44 (0) 207 247 5003.)
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Everyone knows Skype as the original Voice 2.0 company – providing free phone calls, free video, status updates, all delivered using an innovative peer-to-peer architecture, and with the unique selling point of VoIP that just worked. This report describes its business model, technology strategy, its acquisition by Microsoft, and the consequences for the telecoms industry.
Founded in 2003 by Janus Friis and Niklas Zennström, Skype was acquired by eBay in 2005 for $2.6bn. eBay ownership was a period of stagnation – although eBay also owns PayPal, it only made half-hearted efforts to integrate the two. In November 2009, eBay sold 65% of Skype to an investor group led by Silver Lake for approximately $1.9bn in cash, valuing Skype at $2.75bn.
With Skype preparing for an IPO, Microsoft announced in May 2011 that it had agreed to buy the company for $8.5bn, giving the investor group a massive return and ensuring future potentially-disruptive start-ups will also attract plenty of funding. Many commentators have suggested that Microsoft is paying too much for the VOIP company, although the price-earnings ratio is actually no higher than that of Cisco’s acquisition of WebEx. So, what exactly is Microsoft getting for its billions? Let’s take a closer look.
Microsoft has acquired what is essentially a global telephony company with 663 million registered users and very significant gross profitability. Skype contributed more net new minutes of international voice than the rest of the industry put together in 2010, according to Telegeography. Skype has never struggled to achieve growth, but its profitability has often been criticised, as has its ability to generate growth in ARPU. The following chart (figure 1) summarises Skype’s operational key performance indicators (KPIs) since 2006.
Figure 1: Skype’s KPIs: users, usage, and ARPU
Source: Skype’s S-1, May 2011
Questions have been raised about Skype’s performance in converting registered or even active users into paying users. This is critical, as ARPU is relatively flat. However, a monthly ARPU for paying users of $8 would be considered very reasonable for an emerging-market GSM operator and such an operator would tie up far more capital than Skype does. As all Skype users contribute to the system’s peer-to-peer (P2P) infrastructure, the marginal cost of serving non-paying users is essentially nothing.
Another way of looking at the KPIs is to consider their growth rates, as we have done in the following chart (figure 2). Although the growth of paying users is nowhere near as fast as that of free minutes of use, 40% growth per annum in revenue-generating subscribers is still very impressive.
Figure 2: Growth rates of Skype KPIs.
Source: Skype’s S-1, May 2011
In fact, there is very little wrong with Skype at the operating level. The following chart (figure 3) shows that, if we consider the primary challenge for Skype to be converting free users into paying users, it is actually doing rather well. Revenue and EBITDA are advancing and margins are holding up well.
With 509 million active users available for conversion, ARPU may not be that relevant – just converting users of the free service into paying users has so far provided strong growth in gross profits and could do for the foreseeable future.
Figure 4: Conversion of free users at steady ARPU drives gross profit.
Skype doesn’t make money on free calls (not even from advertising or customer analytics/insights, yet), and has to pay interconnection fees and operate some infrastructure in order to provide SkypeOut (calls to conventional telephone numbers, rather than other Skype clients), and SkypeIn (calls from the PSTN to Skype users).
Skype sceptics have argued that eventually termination charges will catch up with the company and destroy its profitability. It is true that most of Skype’s revenues are generated (over 80%) by SkypeOut call charges and that Skype’s cost of net revenue is dominated (over 60%) by the cost of terminating these calls. However, termination as a percentage of Skype’s cost of net revenue is falling and Skype’s gross margin is rising, as its enormous volume growth enables it to extract better bulk pricing from interconnect operators (see Figure 5).
To see Figure 5, the conclusion of our analysis of Skype’s finances, and…
…plus these additional figures & fables…
…Members of the Telco 2.0 Executive Briefing Subscription Service and the Telco 2.0 Dealing with Disruption Stream can download the full 35 page report in PDF format here. Non-Members, please see here for how to subscribe, here to buy a single user license for for £995, or for multi-user licenses and any other enquiries please email contact@telco2.net or call +44 (0) 207 247 5003.
Organisations, products and people referenced in the report: 3UK, AdSense, Android, Apple, AT&T, Au, Avaya, Ben Horowitz, BlackBerry Messenger, Cisco, Dynamics CRM, EasyBits, eBay, Exchange Server, Facebook, Facetime, Google, Google Talk, Google Voice, GSMA, Happy Pipe, Hutchison, iOS, iPhone, Jajah, Janus Friis, KDDI Mobile, Kinect, KPN, Lync, Mango, Marchex, Microsoft, Microsoft-Nokia deal, MXit, MySpace, Niklas Zennström, Nokia, Ofcom, Office Live, Outlook, PayPal, PowerPoint, Qik, RIM, Silver Lake, Skype, SkypeConnect, SkypeIn, SkypeKit, SkypeOut, SkypePhone, Steve Ballmer, Telefonica, Teredo, Tony Jacobs, Tropo, Twitter, Verizon Wireless, Virgin, Visual Studio, WebEx, WhatsApp, Windows Mobile, Windows Phone 7, WP7, Xbox, X-Series.
Technologies referenced: GSM, HD voice, HTTP/S, IM, IMS MMTel, IP networks, IPv4, IPv6, LTE, Mobile, NAT, P2P, PSTN, RCS, SILK V3, SIP, SMS, SS7, super node, URI, video telephony, Voice 2.0, VoIP, XMPP.
Summary: Vodafone 360 was meant to be a new, social-network centred approach to managing the customer interface. Unfortunately, it was also bug-ridden and dogged by a lack of clarity of purpose. Now, its availability on Android Market and iTunes may create a strategic opportunity for Vodafone to access more customers.
NB You can download a PDF copy of this 15 page note here.
Vodafone 360, one of the currently trendy “all your social networks in one app” products, launched in 2009 to considerable publicity and enthusiasm – not least from us. However, thanks to a variety of problems at the tactical and technical levels, it has failed to achieve the scale required for a successful platform. Vodafone is now trying to resolve this, notably by integrating 360 into the Android Market and iTunes as an app in its own right.
In this note, we discuss this move, and the possibilities opened up by repackaging operator and partner products into a pure software user experience that can be distributed to the user bases of very large app stores. This, we argue, creates a horizontal service layer that reaches across devices and connectivity providers, essentially implementing the vision laid out here by Giles Corbett of Orange’s innovation group.
This may also be an innovative way of generating relevant customer data, an alternative to the extremely complex processes of data federation and database systems integration typically seen in customer-data projects. Turning Vodafone into an app may be the answer.
At the 7th Telco 2.0 Executive Brainstorm, held in London in November 2009, Vodafone’s director of new media, Bobby Rao, presented their new social network product – Vodafone 360. We were enthusiastic. Why?
Rather than trying to bar users from going to their favourite Web services, or extract a tax from Google, Vodafone was trying to improve its users’ mobile Web experience and facilitate their interactions with Facebook, YouTube and friends. The technology approach was sensible, using Web 2.0 rather than RCS clients and such things. The Linux-based handsets had a truly impressive user interface.
Vodafone was embracing developers, making use of open-source technology, and doing things like integrating carrier billing into the content and app-store elements of the service so that their upstream customers could get paid. Using the OMTP’s BONDI standard for access to device capabilities was sensible.
The applications for Vodafone 360 were all about communication of one kind or another – instant-messaging, status-updating, sharing location, photos, and other media. It was even suggested that it might grow into voice at some point.
Rather than just barricading themselves in the telco bunker, or reaching for the symptomatic relief of more handset subsidy, Vodafone was actually trying something new and interesting. And that’s always worth watching.
8 months on, it would be unfair to call Vodafone 360 a flop, or call out the Telco 2.0 Crash Investigator, but it is hard to say that it’s been a success. Perhaps, at this point, it’s more of a case for Telco 2.0 Safety Event Reporting rather than Crash Investigation. But user adoption has been slow, there has been much negative comment, and the developer community has hardly caught fire.
Vodafone’s own actions speak volumes; they rapidly downsized the space in their retail outlets that was devoted to 360 in order to make more room for iPhones. Actually, there were signs very early on that the company’s senior management might not have been fully committed – despite the huge Vodafone UK ad budget, the initial push for 360 was hardly impressive.
Negative comment piled up; there were reports of very high returns, a buggy user experience, and a number of odd decisions. For example, the photo-sharing element didn’t support Flickr, the world’s most popular photo-sharing site, because “nobody used it”. Contacts ingestion, a key feature for any social application, was heavily criticised.
“This is what racked me off the most. After getting all my contacts merged and sorted I found that at random times I would log back on to the 360 website and find either duplicated contacts appear or the list gets shorted and a load have been deleted. Now this is grass roots basics for a contacts management program. It stores them safely and accurately and 360 does not. I therefore cannot trust it with my information. It’s a good job I keep my contacts backed up in Outlook…”
There was no support for Twitter at launch – this is telling, as the process of posting a status update to Twitter can be implemented in one line of code on a Linux/Unix system like the Samsung H1s. It’s not rocket science:
Now, Vodafone is looking elsewhere.
The most tangible sign of this is the decision to integrate the appstore element of 360 with Android Market. With 90,000 application SKUs in the Market as opposed to 8,000 in 360, this is no surprise. It could also be read as an admission of defeat. Wasn’t part of the point of 360 that it would be the commercial spearhead for JIL, BONDI, LiMo, and the related telco-sponsored TLAs like WAC?
Regarding the alphabet soup, it’s worth noting that there are renewed moves towards consolidation. For example, the OMTP is now closed, with its BONDI project and its chief Tim Raby integrating into WAC, and the remaining standardisation activities being rolled into OMA. Android is essentially a mobile-optimised Linux distribution bundled with a set of Java libraries implementing access to its mobile-specific features – this is close to the original vision of OMTP. Similarly, the LiMo/BONDI combination is a mobile-optimised Linux distribution that exposes mobile-specific features in JavaScript libraries. There is clearly at least the possibility of a meeting of the minds here, and standardisation of the APIs between distributions, access software layers, and organisational TLAs (Three-Letter Acronyms).
Obviously, the prospect of adding some 90,000 new apps with a stroke of the pen is attractive. Werner Vogels, CTO of Amazon.com, considers “selection” – that is to say, choice or variety – to be one of the critical “flywheels” that drives the growth of platform businesses. That is to say, it’s a source of increasing returns to scale, as the network effect between many buyers and sellers comes into play.
The market leader, Apple’s App Store, counts some 225,000 SKUs as of 7th June, 2010. Android Market had reached 90,000 by the 11th of July; the white-label app store provider Getjar offers 60,000. As Amazon’s experience would suggest, there appear to be increasing returns to scale – Apple has so far counted 5 billion transactions through the App Store in two-and-a-half years, while Getjar reports 900 million downloads over a significantly longer period of time. In its Q210 results, Nokia reported that the Ovi Store showed 13,000 SKUs and a run rate of 1.7m downloads/day one year after launch; assuming a linear trend, we estimate that this equals 310,250,000 downloads since launch.
But the Android integration is just as important from the point of view of hardware. To the end user, mobile is all about hardware – one of the numerous lessons from Apple is the enduring centrality of shiny gadgets in any mobile marketing effort. Arguably, there are two models for success here.
If your service (including the core telco services) is going to be tied to one specific device, it is obviously vital that the device be outstanding. Close coupling between the device and the service means that you can control more of the value chain, and also that you can control the user experience more closely. It also means that the rest of the value chain – specifically the hardware and device software elements – controls you.
If the devices are subpar, or simply drowned out in the iHubbub, the service will be too. This has consequences for tactics as well as strategy. The marketing, advertising, and retail effort has to push the device as much as it does the service. The supply chain, activation, and support infrastructure must be ready. And most of all, the device has to be ready on launch day – you can’t afford a slow start.
Alternatively, you can concentrate your effort on service, software, and tariffs, and go for the largest possible range of devices. This is the Android (and also Nokia) strategy.
It permits you to hedge your bets, creates more scope for adjustment to changing circumstances, and avoids getting into a creepy clinch with any particular vendor. It also precludes the sort of close control of the user experience that the BlackBerry-like strategy provides, unless this can be done entirely in software.
These two approaches intersect with two models of go-to-market tactics:
1. The big bang!
We’ve all seen it – Steve Jobs strides onto the podium at MacWorld as the cameras click and produces the new shiny from his pocket. Big-budget videos. Publicity stunts. Basically, it’s a huge pre-planned event, backed up by an integrated media operation cued to peak at that moment and linked behind the scenes with a carefully prepared supply chain. The advantage is, of course, concentration of effort in space and time.
The disadvantage is that once the retailers fill their stocks, and the production servers are fired up, you’re committed to going through with the launch. The flop will be all the bigger for all the concentrated effort if anything goes wrong.
2. Permanent beta
This is the anti-launch; rather than trying to seize everyone’s attention, the idea is to recruit a select band of early adopters, gradually build scale, and carry out kaizen over the medium term. Google is famous for it, as are games companies in general and the open-source world. It allows a maximum of flexibility, and permits adaptation as you go along. There is a risk that the product will never catch on, but that risk is always there.
There is, to a rough approximation, a mapping between these pairs – the superstar device option tends to require a big bang, big day go-to-market plan. It’s possible to integrate the two in that you start with the beta, and move on to a full launch when it passes some project milestone; we could call that scenario the “rolling start”. However, it’s impossible to do the opposite and move from a launch to a beta.
Unfortunately, Vodafone 360 didn’t really succeed in going for either a big bang or permanent beta approach; rather than launching 360 with one superstar device (perhaps one of the top-end Androids, or even the iPhone), or else pushing it out across the board, they chose two rather specialised devices. If Vodafone made a major publicity push, it didn’t succeed in getting the public’s attention; it did, however, succeed in generating enough publicity that everyone noticed the bugs.
Integrating into Android Market has the effect of definitively plumping for a teeming bazaar strategy, going for device diversity. It also means that Vodafone 360 will have to rely on implementing its features and user experience as a software client on the device.
But this could be a major strategic opportunity.
If you can distribute 360 applications through the Android Market, you can also productise 360 itself as a software application, and then distribute it through the Market.
This would give Vodafone an access route to the global Android user base. A detail of 360 we liked originally was that it isn’t restricted to Vodafone customers – distributing it as an application on the Android Market would take this and go further. So far, the separation of access, enablers, and services – the horizontalisation of telecoms – has mostly benefited vendors, content providers, and software developers. But this doesn’t have to be true. Converting its customer-facing product into a software application would let Vodafone play at that game, too.
This is very similar, in some ways, to our view of Google’s strategy. Google is trying to extend into the middle of interactions across a wide range of markets, taking a thin layer of value between buyer and seller; Vodafone 360 could capture a similar thin layer of value from other operators, by providing a better interface for a wide range of online services.
As well as creating a Vodafone access route onto devices that don’t live on its network, 360 might also have important consequences in terms of customer data. It is well placed to capture information on how users interact with the services it talks to; it will be only more so on Android with the range of interfaces it provides for collecting social-graph and location data. In fact, it’s fairly trivial to have an Android app receive notifications when the network signal strength changes – it could even be a way of capturing real-world network quality data.
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Operators are still struggling to get a grip on the piles of data they collect – the stereotype example is the operator with dozens of billing systems, some of which are 20 years old. Federating data across these hugely complex legacy systems-of-systems amounts to a major systems integration project as well as a significant software development and data-management challenge. There is a strong argument that it might be easier to solve this at the mobile application level, creating a new edge interface at which customer data is generated, and possibly also gaining data created by customers you don’t yet have for the core services.
After all, that’s precisely what Google did with Google Ads – rather than trying to, say, extract information from tens of thousands of websites’ server logs, they simply got their users to declare their interests as search strings and matched ads to them. So there’s a possible play for data-enriched advertising, especially as in-application ads become more common.
With this “Vodafone bridgehead” onto Android devices, there are many other opportunities. Back at the inception of 360, we noted that Vodafone was suggesting that it might eventually include a voice element. In our recent Ribbit note, we quoted one Ribbit Mobile user as saying that he wanted it to “take over the entire dialler function” of his iPhone. It is entirely possible to do this in Android. As well as providing call management, better voicemail, and integration with other social networks and contacts lists, this could use something along the lines of carrier preselection, rather as Google Voice does, to offer competing call rates.
Android devices are highly effective WLAN finders; another option would be to make use of the GAN standard and route SIP calls via Vodafone while a WLAN hotspot is available. This would make it possible to create an application that grabs the user, creates a new source of customer data, captures minutes of use, or at the very least, denies them to the enemy. We referred to Ribbit Mobile; in fact, the service could actually be implemented with Ribbit’s technology under licence.
But Vodafone could do better than that; they already have a hosted unified-comms product, Vodafone One. Just as Ribbit, being a cloud service, fits into BT’s existing sales and provisioning processes for SMBs and enterprises, so an Android-based Vodafone app would neatly fit the mobile features of Vodafone One into an effective package for distribution to individual customers. We’ve already seen that a wide variety of businesses and functions can be effectively distributed to the individual user base through app stores. Wrapping Vodafone in an app would allow them to leverage this.
There are other options in this line – self-care features could be embedded in the app, for example. Vodafone has already dabbled at this with its MyVodafone app; YouFon’s “manage your account through Facebook” is another pointer (see Figure 6, below). Or the carrier could use the app and its service back-end as the underlying technology for a range of niche MVNO propositions.
Another key capability that Vodafone could make use of is its existing pre-pay infrastructure, both the OSS and other IT resources behind the scenes and its networks of reseller agents. At the moment, prepay users need a credit card to take part in the app/content ecosystem – or at least, they need to go to the trouble of entering details on a non-keyboard device or risk having them stored on an easy-to-lose, easy-to-steal device.
But Vodafone 360 already ingests credit through the existing VF pre-pay system, so it could also pay out rewards, revenue shares, or peer-to-peer transfers through the same mechanism. And, of course, they have the M-PESA system available.
The Vodafone 360 experience demonstrates the opportunities and pitfalls of moving from a traditional telco model towards one oriented towards the Internet and based on software. Initial failures, and the recent fiasco when Vodafone decided to impose a variety of 360-branded apps on its HTC Desire users as an unannounced software update, show how difficult it can be for our organisations to adapt to these challenges.
However, we can also see how this presents an opportunity to compete on the Web majors’ and Voice 2.0 players’ own terms. If operators can develop compelling new applications and services, the vendor app store/smartphone model is a valid way of distributing them and gaining access to a wider user base. Operators have specific assets, notably their PAYG and/or Mobile Money Transfer (MMT) infrastructure, that such a move can leverage, notably by opening up the app/content store to the PAYG subscribers. At the same time, MMT operators can use this to deploy their product more widely by packaging it as an app.
Further, it seems to be a good general forecasting principle that major customer-data projects are harder, more expensive, and more complicated than expected. There is no reason to expect this to change, as the reasons are structural and rooted in the existing infrastructure and the politics and economics of privacy. As a result, it may be a good idea to seek new and additional ways of acquiring this data – Google, after all, didn’t start off by integrating a variety of legacy databases, but rather by creating a new user base. The Web 2.0 experience demonstrates that it is possible to derive useful data profiles from very low-touch customers.
The greatest opportunities appear to be in integrating such an approach with existing MMT, content, channel marketing, and Voice 2.0 ideas – using the app store paradigm to repackage the rest of your Telco 2.0 activities in the consumer and SMB sectors.
However, it is critical that operators master the tactical problems of execution in a space which is fundamentally different to traditional mobile. Customers’ ability to churn is significantly higher, and the fall-out from missteps will arrive much faster than most of us are used to.
Summary: How is the strategic rationale for BT’s acquisition of Ribbit as their ‘Voice 2.0’ platform working out? We spoke with Crick Waters, Ribbit’s co-founder and EVP.
NB You can download a PDF copy of this Analyst Note here.
The main deployment of Ribbit in BT Business was all of two weeks old when we spoke to Crick Waters co-founder and EVP, Strategy and Business Development of Ribbit, so it is a little early to be definitive about the question of whether Ribbit has yet proved worth its $105 million cost to BT.
However, in addition to aiming to use Ribbit widely to provide ‘Voice 2.0′ applications for corporate customers and SMBs, and starting to use it in its core network, BT is following a key Telco 2.0 principle and using Ribbit applications internally to improve productivity and flexibility.
In this article, Crick says ‘Voice 2.0′ applications are critical for operators to remain relevant as providers of real-time communications in a multi-screen, multi-device environment, and argues that Ribbit’s core skills are “engagement, metrics, and monetisation”. We also highlight the learning that the benefits of business model innovation are not always just improved revenue growth, and in many cases include broader benefits to the overall business ecosystem.
We’ve been following Ribbit and their efforts to create a platform for rapid development of voice & messaging applications for two-and-a-half years. The reasons why we were interested are articulated in this quote:
Further in the future, though, highly reconfigurable telephony is likely to lead to radically different product and business models for telcos. For example, civil engineers stamp out custom bridges off well-tested models based on span, load, and topography. Your telco consulting services arm will be building custom communications experiences, with the software equivalent of a flexible manufacturing system. Custom back-ends, process flows and user interfaces will be generated from tools and models. Each is created appropriate to the application and user context. Most devices will have a completely “soft” and re-configurable user interface.
When BT acquired Ribbit in the summer of 2008, Thomas Howe pointed out in a guest post that CEBP (Communications Enabled Business Processes) projects typically result in productivity gains of around 20%, and 20% uplift in productivity across the whole economy is a lot of money by anyone’s standards. We had a look at some different CEBP/Voice 2.0 business models in this analysts’ note, and discussed the technology strategy aspects here.
Many people felt BT had hugely overpaid for the company in laying out $105 million for “100 developers working on salesforce.com”, as one Oracle executive described it. As we pointed out here, though, it had within it the potential for a transformation of BT’s business – a strategy that would integrate developer APIs, open CRM systems, call centres, and broadband connectivity, across BT Retail, Wholesale, and Global Services.
That was the theory, but BT’s politics and economics didn’t quite work out like that. Ben Verwaayen’s departure from BT seemed, at least temporarily, to rob the initiative of top level support. The recession revealed the downside of BT Global Services’ (BT GS) rapid expansion, as the division turned out to be sitting on an impressive pile of bad contracts. The doomed NHS National Programme IT contracts were almost enough to add up to a major crisis in themselves, and the plummeting stock market caused BT’s pension fund to need a huge cash injection. BT shed some 35,000 jobs, and J. P. Rangaswami was transferred from BT Centre to take over Ribbit personally.
Despite all the drama at the corporate level, though, Ribbit has been quietly achieving. The launch of Ribbit Mobile, its first consumer (well, prosumer) product, got a lot of attention and favourable comparisons to Google Voice, like this CNET review, or this story on TechCrunch:
“Ribbit Mobile’s iPhone app is fine as far as it goes, but I kind of just want it to take over the entire phone function of the iPhone, which is the part of my iPhone I use the least anyway.”
Let’s repeat that: “I kind of just want it to take over the entire phone function of the iPhone…which is the part of my iPhone I use the least anyway“. One sentence sums up the potential of better voice and messaging, and the threat to the 66% of Vodafone’s revenues that consist of voice or SMS. Here’s an example: Caller ID 2.0, a feature for Ribbit Mobile that links your phone number, your address book, and LinkedIn’s API:
“Today, when a call comes in or when you make a call, Ribbit Mobile reaches into the social web and finds the recent LinkedIn updates, Facebook updates, Tweets, and Flickr photos of the person calling you. If more than one match is found, Ribbit Mobile will ask you to select the right person.”
Figure 1 – Ribbit Mobile Screenshot
Text and Image Source: http://blog.linkedin.com/2010/01/12/linkedin-ribbit/
Ribbit’s recent developer challenge shows some fascinating examples of the creativity open telephony enables – Sena Gbeckor-Kove integrated the open-source CRM system Sugar, the winner integrated telephony into an Augmented Reality application.
That’s all very well, but it’s admittedly a little shiny and tech-newsy. That said, it’s absolutely essential for a business like Ribbit that it gets attention – a developer platform without developers is fairly pointless, and Ribbit has so far signed up 22,000 developer accounts. The previous time we checked in (about a year ago) the count stood at 600.
What about the strategy? Is BT still aiming to fix Global Services with open-source software and developer APIs, as J. P. Rangaswami said when Telco 2.0 visited BT’s open-source development shop? We had a chat with Crick Waters, co-founder and EVP, Strategy and Business Development of Ribbit to find out. Here are some of the key points.
[NB. As background on BT’s organisation, BT Global Services deals in key accounts and giant contracts – multinationals, global carrier services operations, and government contracts. By contrast, BT’s small and medium-sized business products sit within BT Retail, in a division called BT Business, parallel to the traditional residential operation in Consumer.]
It is useful to understand Ribbit in the context of BT’s strategic objectives. At their 2010 investor day, BT executives said that the key strategic priorities at BT were as follows:
The last two of these are very much what Ribbit is aimed at – BT wants to defend its market share by introducing advanced features that rival operators don’t have, and to replace declining voice margins and volume by up-selling its existing small business voice and IP customers to richer networked-IT/cloud computing services. Ribbit is crucial to this strategy as its fundamentally network-resident nature means that BT can deliver better voice and messaging services to any business that takes its service. (NB. To illustrate the importance of bolstering voice revenues, Amdocs forecast an average 3% annual decline in voice revenues globally at their June 2010 InTouch event,)
BT Global Services is already making heavy use of the platform to build applications for its clients, which allows Ribbit to leverage the BT sales force and customer base, while the BT GS consultants and developers get another powerful tool to work in parallel with Salesforce.com, Sugar CRM, Avaya, Microsoft OCS, Asterisk, and friends. The very simplest demonstration of this is on the main BT website for business customers in the UK – ask them for Salesforce.com and they’ll offer you the Ribbit plug-in and Ribbit Mobile.
Providing CEBP for businesses ranging from sole traders to FTSE250 enterprises (BT’s definition of SMBs) is a significant operational challenge. There are obvious costs to delivering on-premises or even traditionally hosted Asterisk or similar products to hundreds of thousands of SMBs. If BT can provide a platform with comparable features as a cloud service, it can provision Ribbit accounts in the same way as it currently provisions telephony, ISP, or wholesale carrier-services products. This avoids the need to build a huge network of systems administrators and minimises the additional truck-rolls required. They may even be able to use their existing online provisioning workflow and CRM systems.
Rather as Telenor Objects does for Machine-to-Machine applications, Ribbit is a platform that provides horizontal CEBP and unified communications for Person-to-Organisation applications and delivers them from the cloud. As this slide from Marie Austenaa, Telenor’s VP in charge of Objects, shows, Telenor is trying to integrate an open platform business model and technology architecture with the traditional telco strengths of managed service delivery, distribution channels, and universally recognised brands.
Figure 2 – Telenor Objects Provides a Horizontal M2M Platform
Last but not least, BT also uses Ribbit in its own internal voicemail systems to transcribe voicemails into emails and forward them to their intended recipients, speeding the process of message delivery and thereby ‘eating its own Ribbit food’.
In terms of the space in the enterprise market that Ribbit is targeted at, we recently identified a gap between companies that are either large enough to pay for custom development and infrastructure, or tech-focused enough to have the skills in-house, and those ultra-simple businesses whose IT needs are met by Google Calendar and SMS. We think that Telcos’ ability to aggregate many small customers from their large customer bases, and to provide services in the cloud, may well fit them to compete in this zone of opportunity. The darker band on the chart below illustrates this opportunity zone.
Figure 3 – The Market Space for Voice 2.0 Applications Developers
The concept of “barely repeatable processes” versus “easily repeatable processes” as introduced by Sigurd Rinde, CEO of Thingamy, is also relevant here, Easily repeatable processes are the roughly 30% of GDP that consists of industrialised processes, subject to automation and kaizen. Barely repeatable processes are the rest.
Customers in the gap usually have significant scale in one or more business processes that are currently “barely repeatable processes” with their level of technology. These processes typically rely on e-mail, telephone calls, and unstructured note taking or paper systems for workflow. The distinction between “barely repeatable processes” and “easily repeatable processes”, however, is defined by the available technology. If a service like Ribbit can make the kind of CEBP traditionally reserved for much bigger (or more tech-intensive) companies available to these smaller businesses, it can allow them to move more of their operations into the ERP sector and reap the productivity gains.
Since we spoke to Ribbit, BT has announced the full integration of Ribbit into its SMB VoIP product, One Voice – essentially, Ribbit is now BT’s premier offering to business in its home market. We also expect more announcements soon in this field. Arguably, transforming the supply of IT services to SMBs is the strategic goal for BT in acquiring and integrating Ribbit.
It’s worth remembering that Ribbit’s assets weren’t limited to the code that implements the Flash API – it has a whole Class 5 softswitch underlying it all. Fascinatingly, BT is increasingly making use of Ribbit technology in its core network, as it begins to grapple with the question of what will replace the PSTN. According to Crick Waters, it’s a question of how operators remain relevant as providers of real-time communications in a multi-screen, multi-device environment, where “everything is a computer” and dial-tone is no longer enough.
For example, the increasing collective computing power of the devices at the edge of the network is rendering the network core less important. The recently announced edition of Skype for the iPhone, notably, is in fact a full Skype P2P node like the ones on PCs that make up the Skype cloud.
Apple’s attempted re-launch of video calling in iPhone 4 marks its own transition from being a device and software manufacturer to a provider of telecommunications services – powerful devices tend to bypass the network core, and Apple video calls will pass over Wi-Fi and directly between iPhones, not through the 3G video call channel.
He named convergence, multiple identities, single sign on, and switching between asychronous and synchronous modes of communication (for example, from e-mail or a ticketing application, to instant messaging, to voice, to video, collaborative editing, or telepresence, and back to update and file the ticket) as critical fields, where operators might be able to provide key enabling capabilities others could not
Ribbit co-founder Ted Griggs has been given the newly recreated title of CTO Voice in BT itself – readers with long memories may recall that BT once had a post of Head, Global Voice Technology, which was then abolished. Ribbit developers are working on BT-wide applications, and Griggs is apparently spending significant amounts of time on 21CN business – this would seem to show that there is again real commitment to better voice and messaging at BT
The biggest external Ribbit customers by sector are currently digital advertising agencies, heavy users of the click-to-call API, which lets them integrate real-time business processes with their ad campaigns and collect richer information about the potential customer and their interaction with the ad before the call begins, and then financial services companies. Financial Services firms are especially interested because of the Sarbanes-Oxley Act compliance requirements (which require accurate records of customer interactions to be kept), and also for productivity reasons – typically, in many parts of finance, much business is done on the phone in unstructured format.
Ribbit applications are useful in this context because they are used to capture calls, convert the voice stream to text, and archive it – this provides Sarbanes-Oxley compliance, and also a source of structured data about the business’s interactions with its customers. The key point here is that if you’ve got the metadata and you’ve got the conversation converted to text, not only can you pass more data about a call to the call taker, or the call originator, when it originates from a Web application, but you can also pass data about the call to an application for automated processing. Ribbit expects an arms race in voice-to-text applications.
Ribbit is planning to expand rapidly by signing up more telcos to offer the service. Evidently, the signalling/control side of Ribbit is global – it’s a Web API. The voice side, however, isn’t. The answer is for new operator partners to hook up their networks to Ribbit’s through SIP peering – Ribbit calls this a “bring your own network” model. One advantage of the SIP interconnection model is that it permits very quick deployment.
They are also interested in integrating other Telco 2.0 capabilities such as location-based services and internal CDNs, so that developers working with Ribbit can get them through the Ribbit API. Location-based services has long since become a low value, “table stakes” business, but there is convenience value in being able to get all the dependencies for an application from the same API, without adding more potential points of failure and managing other passwords, keys, and the like.
More interestingly, operators may have a strategic advantage in their extensive property footprints, all of which are of course well networked. As applications become more video- and data-intensive, and more of them have real-time features highly sensitive to latency, the importance of CDNs and also what might be called “ADNs” for Applications Delivery Networks will only grow. Deploying applications to hosting close to users saves bandwidth, reduces latency, and also provides geographical distribution and therefore resilience; Amazon Web Services will let you choose where in the world your code runs, but only to within continental scale.
BT, for example, could provide a similar service but with city-level granularity and it could do so through the Ribbit API.
Crick Waters argues that Ribbit’s core skills are “engagement, metrics, and monetisation”, and that they are working with a number of operators on their API strategy. Smaller operators are the focus of their deployment push – these are unlikely to create their own voice applications platform, and stand to benefit from joining an alliance with global reach. There is an analogy with the roaming hubs and alliances that helped to achieve universal GSM roaming and interconnection in the 1990s and 2000s.
It’s notable that, as well as cross-selling Ribbit into the UK business customer base, BT is also cross-selling BT Global Services products into the Ribbit customer base – for example, the Ribbit Web site is currently advertising hosted contact centre services, a key BTGS line of business. Overall, BT’s strategy will tend to spread the profits from better voice and messaging and their integration with Web applications across BTGS’s activities with contact centres, multinational companies, and government, and also across the BT Business element of the BT Retail division – Ribbit’s relationship with BT is in this context that of an internalised supplier of technology.
Successful execution of this strategy will be very important for BT in the future and for Voice 2.0 in general. BT is thinking about the future again, after the organisation went through a wave of introspection and loss of confidence; one sign of this is that they are considering what kind of customer premises equipment might be the future gateway for operators into the home. At the 2010 investor day, they demonstrated an iPad-like tablet device as a potential replacement for the fixed phone. Others might think a femtocell, a Google TV, or a media-server device providing content and home-automation interfaces to mobile devices around it a more plausible future. What matters is that BT is experimenting, rather than retreating into denial or getting stuck in option paralysis.
Long before that, they are clearly aiming to use Ribbit’s technology and developer community model to become the primary supplier of IT services for UK small businesses.
The main deployment of Ribbit in BT Business was all of two weeks old when we spoke to Crick Waters, so it is a little early to be definitive about the question of whether Ribbit has yet proved worth its $105 million cost to BT.
However, in addition to aiming to use Ribbit widely to provide ‘Voice 2.0′ applications for corporate customers and SMBs, and starting to use it in its core network, BT is following a key Telco 2.0 principle and using Ribbit applications internally to improve productivity and flexibility. There are a lot of telephone calls going on within a company the size of BT, so a productivity tool based on voice and messaging has obvious relevance for their internal business processes.
In our view, an essential part of the ‘Roadmap’ to new Telco 2.0 style business models is to ensure that synergies with existing business models are maximised. These synergies may not simply be additional revenues from the new line of business, but also beneficial effects on any of the five components of the existing business model as illustrated below.
Figure 4 – Five Components of a Business Model
While Ribbit is intended primarily to differentiate BT from its competitors in the SMB market, and to a lesser extent in its consumer and contact centre businesses, it also gives BT some new technical capabilities and opportunities to recruit new partners into its value network.
We think that BT’s approach to Ribbit embodies an important lesson in the development of the business case for new telco business models, which is that the cases will often be based on a combination of expected direct revenues from the new line of business, and incremental improvements to the existing lines of business. These can include:
Summary: ‘Communications-Enabled Business Processes’ (CEBP) are a key application for voice and messaging APIs. This Briefing Report illustrates three new real world examples of integrating communications into end-user business applications using web services to access telco APIs. (February 2010, Foundation 2.0, Executive Briefing Service)
‘Communications-Enabled Business Processes’ (CEBP) is an optimisation technique used by business process designers that involves integrating real time communications such as voice messaging, online chat and SMS with existing software frameworks. It is a developer / end-customer application of telco APIs in Telco 2.0 business models.
In general, enterprise CEBP projects do not create new business processes or areas of business. Instead, they extend existing legacy applications making them more efficient and faster, and very often with higher overall quality. As a powerful addition, CEBP projects provide business metrics allowing managers to optimise processes in real time. From a technology perspective, CEBP is a blend between two normally disparate worlds: the real-time, arcane and difficult technology of the telephone and the thorny, legacy filled and customised enterprise software.
This report describes three distinct CEBP implementations and opportunities:
The in-store feedback service uses phones and text messaging to collect comments and complaints from retail customers using any cell phone. The decision support application provides mobile and remote decision makers the information they require to make critical business decisions without having to be at their desk. The resource tracking opportunity shows how phones can be used to monitor and manage the use of enterprise resources quickly, easily and at scale.
The term Communications Enabled Business Process (CEBP) is relatively new, but the need is as old as business itself. CEBP is an optimisation technique used by business process designers that involves integrating real-time communications such as voice messaging, online chat and SMS with existing software frameworks.
In general, enterprise CEBP projects do not create new business processes or areas of business. Instead, they extend existing legacy applications making them more efficient and faster, and very often with higher overall quality. In addition, CEBP techniques allow managers to measure business processes in real time, providing visibility into key business metrics that would be otherwise unavailable. From a technology perspective, CEBP is a blend between two normally disparate worlds: the real-time, arcane and difficult technology of the telephone and the thorny, legacy-filled and usually customised enterprise software.
Using CEBP techniques, system integrators and enterprise developers can realise productivity gains typically unavailable using other technology approaches, providing strong motivation for them to invest in such projects. Of course, dynamic connections between businesses and customers using phones are not new; the existing contact centre market is huge and mature.
CEBP is the next natural step in the development of this market, driven by advances in Internet and integration technologies, and can be viewed as roughly equivalent to the movement away from computer punch cards towards tape drives and hard disks: instead of requiring human beings to be present for every interaction, some business to human communications can be automated.
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Summary: Telenor’s new ‘Mobile Business Network’ integrates SME’s mobile and fixed phone systems via managed APIs, providing added functionality and delivering greater business efficiency. It uses a ‘two-sided’ business model strategy and targets the market via developers.
Members can download a PDF of this Note here.
The enterprise is the key field for new forms of voice and messaging; it’s where the social and economic value of bits exceeds their quantity by the greatest margin, and where the problems of bad voice & messaging are most severe.
People spend hours answering phone calls and typing information into computers – calls they take from people sitting behind computers that are internetworked with the ones they sit behind. Quite often, the answer is to send the caller on to someone else. Meanwhile, other people struggle to avoid calls from enterprises.
It’s got to change, and here’s a start: Mobilt Bedriftsnett or the ‘Mobile Business Network’ from Telenor.
Telenor are a large, Norwegian integrated telecoms operator, and a pioneer and early adopter of some Telco 2.0 ideas. As long ago as 2001, their head of strategy Lars Godell, was working on an early implementation of some of the ideas we’ve been promoting. They also have an active ‘Telenor 2.0′ strategic transformation programme.
Content Provider Access – CPA – established a standard interface for the ingestion, delivery, billing, and settlement of mobile content of any description that would be delivered to Telenor subscribers, and was the first service of this kind to share revenue from content sales with third parties and to interwork with other mobile and fixed line operators, years before the iPhone or even NTT’s pioneering i-Mode. Later, they added a developer sandbox (Playground) as well.
So, what would they do when they encountered the need for better voice & messaging? The importance of this line of business, and its focus on enterprises, has been part and parcel of Telco 2.0 since its inception (here’s a note on “digital workers” from the spring of 2007, and another on better telephony from the same period), and we’ve only become more convinced of its importance as a wave of disruptive innovators have entered the field.
We spoke to Telenor’s product manager for charging APIs, Elisabeth Falck, and strategy director Frank Elter; they think MB is “our latest move towards Telco 2.0”.
In the Voice & Messaging 2.0 strategy report, we identified a fundamental shift in the value proposition of telephony; in the past, telephony was scarce relative to labour. That stopped being true between 1986 and 2001 in the US, when the price per minute of telephony fell below that of people’s time (the exact crossover points are 1986 for unskilled workers and landline calls, 1998 for graduates and mobile calls, and finally 2001 for unskilled workers and mobile calls).
Now, telephony is relatively plentiful; this is why there are now call-centre help desks and repair centres rather than service engineers and local repair shops. It’s no longer worth employing workers to avoid telephone calls; rather, it’s worth delivering services to the customer by phone rather than having a field sales or service force. The chart below visualises this relationship.
We also identified two other major trends in voice – commoditisation and fragmentation.
Voice is increasingly commoditised – that is to say, it’s a bulk product, cheap, and largely homeogenous. These are also the classic conditions of a product in perfect competition; despite the name and the ideological baggage, this isn’t a good thing, as in this situation economic theory predicts that profit margins will be competed away down to the absolute minimum required to keep the participants from giving up.
The provision of Voice is also increasingly fragmented and diverse – there are more and more producers, and more and more different applications, networks, and hardware devices incorporate some form of telephony. For example, games consoles like the Xbox have a voice chat capability, and CRM systems like Salesforce.com can be integrated with click-to-call services.
As a result, there’s less and less value in the telephone call itself – the period between the ringing tone and the click, when the circuit is established and bearer traffic is flowing. This bit is now cheap or free, and although Skype hasn’t eaten the world as it seemed it might in 2005, this is largely because the industry has reacted by bundling – i.e. slashing prices. Of course, neither the disruptors nor the traditional telcos can base a business on a permanent price war – eventually, prices go to zero. We’ve seen the results of this; several VoIP carriers whose business was based on offering the same features as the PSTN, but cheaper, have already gone under.
The outlook of Telco 2.0 Executive Brainstorm delegates as far back as 2007 demonstrates the widespread acceptance of these trends in the industry, and the increasing proliferation of diverse means of delivery of voice as show in the following chart.
So why bother with voice? The short answer is that there are three communications products the public gladly pays for – voice, SMS, and IP access.
Telenor’s CPA, one of the most successful and longest-running mobile content plays, is proud of $100m in revenues. In comparison, the business voice market in Norway is NOK6.9bn – $1.22bn. Even in 10 years’ time, voice will comprise the bulk of Telco revenue streams. However grim the prospects, defending Voice is only optional in the sense that survival is optional.
Moreover the emergence of the first wave of internet voice players – Skype, Vonage, etc., and the subsequent fight back by Operators, demonstrates that there is still much scope for innovation in voice and messaging, and that the option of better voice and messaging is still open.
Specifically, the possible zone of value is now adjacent to the call – features like presence-and-availability, dynamic call routing, speech-to-text, collaboration, history, and integration with the field of CEBP (Communications-Enabled Business Processes). There may also be some scope for improving the bearer quality – HD voice is currently gaining buzz – although the challenge there is that the Internet Players can use better voice codecs as well (Skype already does).
The crucial market for better voice & messaging is the enterprise, because that’s where the money is. Nowhere else does the economic value of bits exceed their quantity and cost so much.
For large enterprises, the answer will almost certainly come from custom developments. They are already extensive users of VoIP internally, and increasingly externally as well. They tend to have large customised IT and unified communications installations, and the money and infrastructure to either do their own development or hire software/systems integration firms to do it for them. The appropriate telco play is something like BT Global Services – the systems integration/managed services wing of BT.
But using the toolkit of Voice 2.0 is technically challenging. It’s been said that free software is usually only free if you value your time at zero; small and medium-sized businesses can never afford to do that.
Mobilt Bedriftsnett (MB) is Telenor’s response to this situation, aimed at Small and Medium Enterprises (SMEs). Its primary benefit is to improve business efficiency by extending the functions of an internal PBX and/or unified communications system to include all the companies’ mobile phones.
Telenor’s internal business modelling estimates the cost of CRM failures – missed appointments, rework of mistakes, complaints, lost sales – to a potential SME customer at between $500 and $2,000 a year. This is the economic ‘friction’ that the product is designed to address.
The product is based on a suite of APIs into Telenor infrastructure, one of which replicates a hosted IP-PBX, i.e. IP Centrex, solution. It’s aimed at SMEs, and in particular, at integrating with their existing PBX, unified communications, and CRM installations. There’s a browser-based end user interface, which lets nontechnical customers manage their services.
There is also considerable scope for further development, and MB also provides four other APIs, which provide a click-to-call capability, bulk or programmatic SMS, location information, and “Status Push”. This last one provides information on whether a user is currently in coverage, power level, bandwidth, etc, and will be extended to carry presence-and-availability information and integrate with groupware and CRM systems in Q1 2010.
Extensive work has been carried out with PBX/UC vendors, notably Alcatel-Lucent and Microsoft, to ensure integration. For example, one of the current use cases for the click-to-call API permits a user to launch a conference call from within MS Outlook or a CRM application. The voice switch receives an event from the SOAP API, initiates a call to the user’s mobile device, then bridges in the target number.
MB is also the gateway to a business-focused app store, which markets the work of third-party software developers using the MB API to their base of SME customers. This element qualifies it as a two-sided business model. Telenor is thereby facilitating trade that wouldn’t otherwise occur, by sharing revenue from its customers with upstream producers and also by bringing SMEs that might not otherwise attract any interest from the developer community into contact with it. Developers either pay per use or receive a 70% revenue share depending on the APIs in use.
Telenor are using the existing infrastructure created for CPA to pay out the revenue share and carry out the digital logistics, and targeting the developer community they’re already building under their iLabs project. So far, third-party applications include integration with Microsoft’s Office Communication Server line of products, integration with Alcatel-Lucent and some other proprietary IP-PBXs, and a mobile-based CRM solution, WebOfficeOne.
In a twist on the two-sided business model, MB services are primarily marketed to systems integrators, independent software developers, and CRM and IP telephony vendors, who act as a channel to market for core Telenor products such as voice, messaging, presence & availability, and location. This differs quite sharply from their experience with CPA, whose business is dominated by content providers.
Pricing is based on a freemium model; some API usage is free, businesses that choose to use the CPA payments system pay through the revenue sharing mechanism, and ones that don’t but do use the APIs heavily pay by usage.
Telco 2.0 has previously articulated the seven questions concept – seven key customer questions that can be answered using telecom’s operator’s data assets as shown in the following diagram.
Telenor’s API layer consists of Simple Object Access Protocol (SOAP) and Web service interfaces between the customer needs on the left of the diagram, and a bank of service gateways which communicate with various elements of in the core network on the right.
At the moment, the click-to-call and status push interfaces are implemented using the proprietary Computer-Support Telecoms Applications (CSTA) standard, in order to integrate more easily with the Alcatel-Lucent range of PBXs. So far, they don’t implement Parlay-X (or OneAPI as the GSMA calls it), but they intend to migrate to the standard in the future. Like Microsoft OCS, Asterisk, and much else, the industry standard IETF SIP is used for the core voice, messaging, and availability functions.
Telenor is unwilling to describe what it would consider to constitute success with Mobilt Bedriftsnett; however, they do say that they expect it to be a “great source of income”. MB has only been live since June 2009, and traffic to CPA inevitably dwarfs that to the MB APIs at present.
Mobilt Bedriftsnett makes up the Voice & Messaging 2.0 element of Telenor’s transformation towards Telco 2.0. The other components of ‘Telenor 2.0’ are:
With Mobilt Bedriftsnett, Telenor has carried on its tradition of pioneering Telco 2.0 style business model innovations, though it is relatively early to judge the success of the ‘Telenor 2.0′ strategy.
At this stage of market development, Telenor’s approach therefore shows three important lessons to other industry players.
1) They are taking serious steps to create and try ‘two-sided’ telecoms business models.
2) The repeated mentions of CPA’s role in MB point to an important truth about Telco 2.0 – the elements of it are mutually supporting. It becomes dramatically easier to create a developer community, bill for sender-pays data, operate an app store, etc, if you already have an effective payments and revenue-sharing solution. Similarly, an effective identification/authorisation capability underlies billing and payments. Telenor understands and is acting on this network principle.
NB A PDF version of this Executive Briefing can be downloaded here.
This special Executive Briefing report summarises the brainstorming output from the Enterprise Services 2.0 section of the 6th Telco 2.0 Executive Brainstorm, held on 6-7 May in Nice, France, with over 200 senior participants from across the Telecoms, Media and Technology sectors. See: www.telco2.net/event/may2009.
It forms part of our effort to stimulate a structured, ongoing debate within the context of our ‘Telco 2.0’ business model framework (see www.telco2research.com).
Each section of the Executive Brainstorm involved short stimulus presentations from leading figures in the industry, group brainstorming using our ‘Mindshare’ interactive technology and method, a panel discussion, and a vote on the best industry strategy for moving forward.
There are 5 other reports in this post-event series, covering the other sections of the event: Devices 2.0, Content Distribution 2.0, Retail Services 2.0, Piloting 2.0, Technical Architecture 2.0, and APIs 2.0. In addition there is an overall ‘Executive Summary’ report highlighting the overall messages from the event.
Each report contains:
The brainstorm method generated many questions in real-time. Some were covered at the event itself and others we have responded to in each report. In addition we have asked the presenters and other experts to respond to some more specific points. Over the next few weeks we will produce additional ‘Analyst Notes’ with some of these more detailed responses.
NOTE: The presentations referred to in this and other reports, some videos of the presentations themselves, and whole series of post-event reports are available at the event download site.
Access is for event participants only or for subscribers to our Executive Briefing service. If you would like more details on the latter please contact: andrew.collinson@stlpartners.com.
Enterprises are rapidly extending their use of the internet and mobile to promote, sell, deliver and support their products and services and manage their customer and supplier relationships. However, companies involved in the ‘digital economy’ still face substantial challenges in doing business effectively and efficiently. Telcos have a unique mix of assets (user data, voice and messaging, data and connectivity capabilities) that can be re-configured into platform-based services to help reduce the friction in everyday enterprise business processes: Identity, Authentication and Security , Marketing and Advertising , Digital Content Distribution , Offline Logistics, Transactions (billing and payments), Customer Care.
Research from the Telco 2.0™ team has identified significant potential market demand for these services which could generate new profitable growth opportunities and increase the value of the telecoms industry to investors and government.
Joe Hogan, CTO, Openet said that things happen slowly at telcos, but they also have short memories. Looking back at the beginning of AOL, they provided modems, services, proprietary browsers, and content in their walled garden. Eventually, though, they had a disastrous experience with over-the-top (OTT) players; people started independent ISPs, and you could use your own e-mail and Mosaic or later, Netscape, which was actually better.
The lesson is that, if you try to own the entire value chain, you will be disaggregated. For telcos and ISPs today, the equivalent is the dumb pipe phenomenon. We’re now seeing RFPs from operators for serious intelligent pipe projects. We expect them to start coming from cable, and from mobile operators who are seeing their dongles used as broadband access.
I think not having a policy management system will be unusual in 24-36 months time; we need throttling, subscriber management, and deep packet inspection.
The second part of our strategy, he said, is to work with the OTT players. We need to impose controls on users who are essentially abusing the service, but only in a back to back relationship with the OTTers, so as to open up the network even if significant controls are imposed. For example, if someone uses all their bandwidth in the first three days in the month but goes to Hulu, and Hulu has a relationship with the network, they can still see the video anyway. As a result, we need a highly dynamic infrastructure.
So we’ve formed a new relationship with Cisco – making sure that the infrastructure does stay smart. If you’re a bandwidth hog, you will get shaped; unless you’re on a web site with a relationship.
Policy management, then, is a strategic piece of infrastructure for vertical revenue sharing and competition. In IMS parlance, it’s the PCRF that is responsible; this means that it must be able to process a significant volume of real-time decisions. We’re looking at 3,000-5,000 transactions a second.
J.P. Rangaswami, MD, BT Design: ”The old model worked and we were good at it, but the only way we could learn about the new model was by experimenting”
Looking ahead, the cable industry’s Canoe is the VISA for advertising – a standard for the technical aspects of ad insertion, for the business model, and for the accounting, reporting and management information system. It requires the infrastructure to provider subscriber- and context-aware charging rules, integrated, context-aware policy management (so it can improve QoS in appropriate contexts), multi-dimensional rating & charging, multiple balances for subscribers (general balance, service-specific balance, points balance), notifications/advice of charge, re-direction, and comprehensive auditing and reporting to support customer service. It needs to provide high performance and be essentially invisible to the subscriber.
Laurence Galligo, VP, Communications, Oracle, presented results from a survey which suggested there was strong support for Telco 2.0 among Oracle customers. Who, she asked, has had a bad experience interacting with the public sector recently? Oracle has put a lot of focus into this recently under Smart City, their project to support improved citizen experience with government services.
For example, there is the SNEN – Single Non Emergency Number. A single point of contact for a whole range of government services outside the emergency-response sector. Value estimated at $1.2bn in five years.
We implemented this as 311 for New York City – the single point of contact led into an integrated ”citizen service centre”. This requires a lot of the underlying Telco 2.0 capabilities – to make it work, we need to authenticate the citizen, to federate their data, to carry out e-commerce transactions, to provide location-based services, and to route voice and messaging intelligently.
The result was an unified government platform – including networking, location-based services and GIS, voice and CTI, CRM, reporting, and transaction-processing systems. Working with a system integrator or software company, the Telco could become a leading partner for government in delivering better citizen services.
Glenda Akers, SVP, Telecommunications, SAP said that the mobile phone had become the preferred route for individuals to interact with organisations. But call centres were horribly inefficient – there is a need to balance quantity – the rate at which calls are processed – and quality – the outcome of the calls, and many fail at this. CTI systems are frequently very poorly integrated – hence there are lots of mistakes and much routing of calls between multiple call centres.
According to an Accenture study, 40% of agents’ time was spent dealing with calls that had gone to the wrong call centre.
And 60-70% of call centre costs are accounted for by labour; anything that can reduce the number of calls is therefore a good deal. Human agents are far too valuable to spend their time just looking up information from the database, so query-only calls must go. So – there is a clear business need to make self-care much better.
High priority sectors are those which have high volumes of traffic, complex queries, distributed resources, and which need to handle contact through multiple channels. Specifically, telecoms/IT itself, finance, retail, media, health, transport, government, unions.
BusinessObjects Mobile is the widgetry interface for SAP’s enterprise workflow systems. Some use cases are bank accounts, bills, energy usage statistics. Mostly, they are query-only, or they have a few one-click controls. The iPhone showed the way, now we want to spread it to many other devices. Web-based, so only a minimal degree of configuration required.
Telcos could provide this as a hosted service, using their identity, billing, voice switching, and device management capabilities, and perhaps also their call centres.
Thomas Howe, CEO, Jaduka said that Jaduka, his new company, differs from the Thomas Howe Co. in that it does more voice mashups for more people. Communications-enabled business processes – it’s about making processes faster and more efficient by including real-time communications, which may be voice but may not. There is a traditional heavy approach, using dialers, IVRs and call centres. This involves either heavy CAPEX, or else heavy OPEX on long term systems integration or outsourcing contracts.
The alternative is to do it on the Web. Think of it as long-tail delivery – many small applications, dealing with highly specific tasks. But the needs involved are more like the short head – because many, many enterprises have the same or similar problems. An important, but underestimated market for CEBP is within the enterprise. Many companies lock out suppliers, customers, other stakeholders and even employees in the field from their systems. CEBP breaches this – it extends the enterprise IT system outside the firewall.
Traditionally, there have been about 10 voice apps and about 10,000 nonvoice apps. The difference is that group 1 wouldn’t exist without voice but group 2 would. That doesn’t mean, though, that group 2 wouldn’t benefit from voice.
There are 4 fundamental CEBP services, out of which the others are constructed – Notifications, Diary, Click to Call, and Conferencing.
Consider the Ribbit/Salesforce app that lets salesmen leave voice messages into the CRM system an example of the Diary. Click-to-Call allows you to add metadata to the raw voice file. For narrowcast messaging: this means leaving a particular message for a particular person. It’s better than snailmail, and has a similar role to e-mail in e-commerce. But everyone has a phone number, and you can find them. E-mail isn’t the same.
Werner Vogels, CTO, Amazon.com: ”You can’t keep the whole value chain in your own hands – you’ve got to be part of the chain and take your one cent!”
Unique telco contributions here are: intelligent routing, determination between mobile and fixed numbers, information about which number is best, ability to switch between text and voice.
Voicesage did a solution for a furniture delivery service. Using notifications, confirmations, and post-delivery checks, they achieved a 10-fold reduction in missed deliveries. This reduced truck rolls, but also reduced inventory and accounts receivable. And they also made the customers happy. The solution is software-as-a-service, so there is no capex upfront. And it creates lots of interesting metrics.
Assume an average delivery cost of $70 for furniture in the US; 40,000 deliveries, of which 4% fail. There is an opportunity for a $120,000 saving at a cost of 50 cents a trip. This means additional carrier revenue of $20,000 at over 90% margin. There are appliance sales of $20bn a year in the US, 50 million deliveries per day.
But there are thousands of segments, thousands of distributors, and thousands of applications. In reality, serving these will require about a 50/50 split between ready-made solutions and custom development. Value creation requires vertical expertise being applied to horizontal capabilities. One example would be using voice messaging to monitor congestive heart failure patients. .
Software as a Service is great for customers, but not so good for systems integrators. Their business model is getting more complicated. We, the developers, want to share revenue with the integrators – but they struggle with the idea. But do they want to be cut out entirely?
We’ve stopped using the term “price per minute” – instead, we refer to value based pricing. This is the natural way for Telcos to monetise things like location, billing, and voice and to reintroduce variable (value-based pricing) into their business models.
Undoubtedly, some of the more ‘glamorous’ Telco 2.0 propositions revolve around advertising, content and entertainment. New business models from operators and Internet players in the consumer space garner much of the attention of Telco executives and media commentators. Blyk, YouTube, iPlayer, music downloads and P2P video distribution sit at the top of the agenda in terms of driving new revenue opportunities and evolving cost models. Approaches like “sender pays” data are primarily aimed at those sending large chunks of “content”.
Yet historically it has been the corporate marketplace which has driven much of operators’ traffic and profits, through large voice volumes, national and international data networks, and value-added services like system integration and hosted applications. Much of the current hype around Cloud Computing and software-as-a-service is solidly enterprise-driven, while two-sided business models involve deriving extra revenues from large ‘upstream’ organisations rather than consumers. Even the mass-market mobile operators will need to learn to engage with (and sell to) corporate technology representatives.
Although it is possible to see the long-term roadmap of “exposed” network and device capabilities taking friction out of business processes, it seems that the initial group of service options are rather more prosaic. It should be relatively easy to build on existing communications platforms like call centres and customer-service platforms, extending B2C interactions in more intelligent ways.
The feedback from the event highlighted some general agreement that the enterprise market offers significant opportunities.
But significant doubts remain as to the precise value that the Telcos can contribute, or their fit in the enterprise technology value chain. This is not surprising, especially in mobile, where many operators have shown limited interest in integrating with corporate IT and business processes, often just focusing on bulk sales of phones and minutes.
A regular speaker at Telco 2.0 events, “Mr Voice Mashup” Thomas Howe received a lot of attention at his new gig as Jaduka CEO
But although there is interest in Voice 2.0 and mashups, it remains unclear what services are there beyond next generation contact centre-type applications
Taken as a whole, it is exceptionally difficult to target the whole enterprise marketplace. The IT industry tends to sell its offerings through offering industry-specific teams, which take general software or service components and tune them for the requirements of particular verticals. Telcos will need to fit their “two-sided” offers (or just basic single-sided hosted options) into a similar structure, except for the most “vanilla” horizontal service elements. The event threw up some doubts that new upstream customers could be reached easily. One approach that seemed to resonate was Oracle’s pitch around a central contact point for all local government services, or a “311” number in US parlance.
The engagement model between operators and enterprises remains opaque. Is it about partnering or new channels & marketing techniques? Telco 2.0 believes that many operators need to be realistic – they cannot “own” the enterprise value chain simply via provision of a few APIs, when incumbent integrators and software vendors are already tightly bound to business processes.
Software vendors like SAP and Oracle could be the bridges between enterprise and Telco IT domains. These companies already have strong footholds in almost all vertical markets – and are also ramping up the reach of their applications for telecoms operators. That said, their incumbency also represents a challenge to the Telco 2.0 model, particularly where the more innovative web- and SaaS-based models conflict with large-scale “owned” in-house application architectures.
Participants were asked which of the following statements best described their view on communications-enabled business processes for the enterprise?
In theory, the enterprise segment ought to be at the heart of operators’ Telco 2.0 strategies. Irrespective of single-sided corporate retail propositions, in a two-sided world “upstream” providers are generally businesses or governments. But many of the comments during the session identified just how difficult it is to extract the value in a Telco’s inherent assets and capabilities, and apply this to corporate IT and business problems.
The Telco 2.0 Initiative believes that one of the major issues around exploiting the enterprise opportunity is that Telcos need to learn how to develop, sell and support services which are customised, as well as mass-market “basic” applications and APIs. Ideally, the technical platform will be made of underlying components (e.g. the API interface “machinery” and the associated back-office support systems) designed to cope with both “off the shelf” and “bespoke” go-to-market models for new services.
Especially in the two-sided model, there are very few opportunities to gain millions – or even tens of thousands – of B2B customers buying the same basic “product”. Google has managed it for advertising, while Amazon has large numbers of hosting and “cloud computing” customers – but these are the exceptions. Even in the software industry, only a few players have really huge scale for basic APIs (Microsoft, Oracle, Sun, etc.) across millions of developers.
Werner Vogels, CTO, Amazon.com: ”Amazon cloud services took off with the creative people and start-ups, but the enterprises came aboard because they could get agility here they couldn’t get anywhere else.”
Operators may indeed have some easily-replicable “upstream” services that could be sold through an online platform in bulk (perhaps authentication or billing, or basic APIs like location), but these often also face competition in terms of alternative technological routes to their provision. They may also need to be “federated” across multiple operators to be truly useful. Perhaps the most easy and universal horizontals will be enhancements to voice and messaging capabilities – after all, these are the ubiquitous cross-sectoral services today, so it seems likely that any enhancements will follow.
To really exploit unique assets and “take friction out of business processes”, there will also be a need to understand specific companies’ (or at least sectors’) processes in detail – and offer customised or integrated solutions. Although this does not scale up quite as compellingly, the aggregated value involved may be even higher. Even Microsoft and Oracle have dedicated solutions for healthcare or manufacturing, as well as their baseline horizontal products.
J. P. Rangaswami, MD, BT Design: ”Our measure of success should be how easy it is for customers to use the network. Margins will be like a retail business – a razor thin layer of value spread across a huge area of the economy.”
Another interesting example is that of the BlackBerry. Although today we think of mobile email as a generic capability used across the whole of the economy, the original roots of the company (pagers) were highly financial-oriented. The banking sector very much catalysed the subsequent growth in other knowledge industries (e.g. legal / consulting) and then the more general adoption among businesses of all types. This reflected not just the need for (and high value of) real-time messaging, but also other issues that a pure horizontal approach may have neglected. A specialist salesforce, an early focus on enterprise network security integration – and a large target audience of Microsoft Exchange users were all important. Even the “gadget envy” of a well-paid and dense concentration of users (Wall Street) may have helped the device’s early viral adoption.
As yet, this need for customisation and integration has not been fully recognised. The results of the vote at the end of the session were stark – perhaps surprisingly so. The vast majority of survey responses suggested that operators should attempt to build up exposed capabilities across a set of horizontals, rather than focus on the needs of specific markets.
This seems to reflect the hope for more Google/Amazon-style cross-sector offerings. But as discussed above, this may not be easy, nor will it be the whole story. It is also unlikely to work for every operator. Telco 2.0 thinks that the horizontal approach certainly makes sense in terms of the core abilities of the technical platform, but in terms of developing solutions and partnering with particular integrators or influencers, some measure of vertical specialism is often necessary.
That said, the telecom industry has not often been good at “picking winners” from an enterprise stance,
In the short term, Telco 2.0 would recommend the following:
Longer term, other considerations come into play:
