Martin Geddes: The cloud is an enable of new patterns of living and doing business

This is part one of a two-part article. For part two go here: http://www.globaltelecomsbusiness.com/Article/2656286/The-cloud-communications-service-provider-battle.html 
 
 
For well over a century we have had a global shared communications utility that offers an on-demand, standards-based, pay-for-what-you-use service that we call ‘telephony’. Profits from telephony, with SMS, are the foundation of the global telecoms business, since these pay disproportionately for the infrastructure.

The same attributes – shared, on-demand, standards-based, pay-for-what-you-use – are being used by the IT industry today to develop a new utility computing infrastructure called the cloud. This will enable IT to make the same leap of productivity and democratisation as happened for communications in the 19th century when the telegraph was superseded by the telephone.

There is a gap between the capabilities of communications systems that support human conversation, and the demands of modern commerce as enabled by cloud technology. Bridging this gap offers a substantial business opportunity.

Communications in the cloud is a paradigm shift in which power moves from ownership of data networks to control of software platforms. It sets up a new competitive dynamic between the IT and telecoms industries – and their respective ecosystems – to supply the capabilities that fill the gap.

For communications service providers, the opportunity lies in creating new and improved communications systems that support the needs of modern commerce; the opportunity for enterprises is to consume those capabilities in order to improve existing business processes, as well as invent new ways of doing business.
The true meaning of the cloud

The cloud is an enabler of new patterns of living and doing business. These new patterns demand that providers of communications services rethink their business models to reflect a qualitatively different business environment.

Typical explanations of the cloud focus on the technologies that deliver cloud computing; however, there is much more to the cloud than its underpinning machinery:
• Seen politically, the cloud blurs boundaries between regulated media, IT and telecoms industries. It makes open government possible by eliminating the distribution costs of data. It allows users to arbitrage different legal regimes for copyright and censorship. The cloud also enables people to self-organise in new ways for both peaceful and violent purposes.
• From a social perspective, the cloud is an overlay of new collaboration and communications capabilities that extend and amplify our ability to co operate with people outside our immediate organisation or geography. This will change organisational structures of all sizes, from states to firms and families.
• From an economic viewpoint, it is a way of doing business ‘on demand’, providing data processing resources with no fixed overheads and low variable costs. The cloud also represents a shift from buying products – for example, shrink-wrapped software – to services, such as SaaS. This scenario favours more agile and smaller organisations that are able to respond dynamically to customer needs.

The cloud is all of these, as well as a dream come true for every marketer in the technology business who needs a ‘new-new’ thing to hype. However, none of these descriptions truly captures the cloud’s essence, or the magnitude of its consequences for our society, economy and daily lives.
The cloud is a socio-economic revolution

The cloud offers not just a quantitative improvement in the cost of computing, storage and transmission; it provokes a qualitative change in the structure of our information society.

The efficiency with which IT accelerates pre-existing ‘industrial’ ways of doing business is achieved through tight systems integration of the manufacturing, supply, distribution and retail businesses; this requires expensive systems integration consultants to develop the software, and systems that are scaled to cope with peak volumes. These capabilities are accessible only to large corporations that can afford the high fixed costs and spread them over large volumes of transactions.

Yet we, as citizens, live in a world of readily-available and low-cost computers, phones, electronic communications and online services. Our social gestures and economic interactions are increasingly taking digital form. The resulting data has the potential to be shared globally, beyond the boundary of the particular device, server or enterprise in which it originates. The form the data takes is increasingly standardised, and comes with metadata that makes it easy to process automatically. It is possible to search, retrieve and process data at minimal cost.

Consumer services produce cheap data as the raw material for innovation. Once this data is aggregated, analysed, and exposed it provides the refined fuel for the cloud economy: cheap information. This resource affects our patterns of economic and social interaction as profoundly as did the innovations arising from the technologies driven by steam, electricity and oil.

The cloud is an infrastructure for capturing and sharing cheap information in real time. This cheap information complements bodies of cheap knowledge such as Linux and Wikipedia. Together these deliver cheap answers to social and economic co-ordination and co-operation problems, making those answers available to every enterprise and citizen.

This new abundance of cheap information has real practical implications for business strategy in the present, as old assumptions of cost and scarcity need no longer hold. A narrow focus on technology is pervasive in the IT and telecoms industries: the cloud is seen merely as a new mode of cheap computing, storage and networking, and reduced IT service delivery costs. This is akin to thinking about the benefits of the ‘cheap oil’ economy to horses and carts through creating smoother roads.

The question is, how can we discover valuable new uses for cheap information that will improve how we live, work and trade?
Putting people back into the cloud

To find rich new opportunities, we must transcend the narrow technocratic focus on data processing and data centres, a perspective that misses three vital elements of the cloud story:
1. People, who are the basis of society through their ideas, energy and spirit
2. Conversations, the mode in which people make their wide-ranging exchanges
3. Commerce, where conversations lead to mutually beneficial trade.

These elements are inherently interlinked. All markets are forms of conversation between people. The impulses of demand and supply are ultimately initiated by people, who are engaged in a negotiation over quality, quantity and price.

The efficiency and effectiveness of this conversation depend on the tools we employ. While people are both the wellspring from which revenue flows and the sink-hole for cost of sales and customer service, the centrality of the people element means that the tools for conversation – especially voice and text-based messaging – will remain critical to the way we conduct commerce. Those who provide and control the means of human conversation will have increasing power in the commercial world.

To focus only on cloud computing technology is thus to wholly miss the parallel social and economic revolution that is centred on communications, in which richer conversations enable new patterns of commerce.

The immediate problem that enterprises face is that every communications medium – whether traditional post and telephony or modern email and SMS – has limited scope to support rich conversations. For example, it may be of considerable interest to a call centre to know that a customer is roaming abroad, and that it is 3am in her time zone, and thus an inappropriate time to make a sales call. Such contextual information is valuable because it enables a conversation to be held on the right medium, with the right people, and at the right time. At present this information is either expensive to acquire, or unavailable at any price, even if both parties are willing to share it.

Such bottlenecks in passing context and process-state information occur because the needs and capabilities of people, conversational media and commerce progress at different rates. People adopt new behaviours – such as mobile roaming or online social networking – that move their conversational capabilities ahead of that of commerce.
The ‘conversation gap’

The social CRM trend represents the efforts of enterprises to catch up and exploit the conversational opportunities that social media provide. Conversely, legacy media with an analogue or pre-Internet heritage have limited intelligence and extensibility, and thus fall behind the needs of modern commerce. For instance, a standard telephone call cannot pass on a security digital certificate together with the caller ID information. An SMS cannot set itself to expire when no longer relevant. These misalignments of the capabilities of conversational media with the needs of commerce are ‘conversation gaps’ that result in inefficiency and ineffectiveness in doing business.

The root cause of the conversation gap is an unhelpful positioning of the boundary between people and machines. All too often, human beings are reduced to doing rote tasks – with attendant risks to accuracy and security – that are better suited to computers. Meanwhile, computers are designated tasks they cannot perform satisfactorily, such as understanding the nuance of a customer’s request for help. Direct human interaction is utilised to compensate for the failure modes of the tools we give customers to search for information and to service their needs.

There are five specific sub-forms of the conversation gap:
• The cost gap: The difference in operational cost between human labour and an automated system is several orders of magnitude, and errors introduced by humans cascade into further cost.
• The confidentiality gap: Human beings are asked to handle sensitive data, and data can leak.
• The customer experience gap: The customer’s time is wasted on tasks that do not create value.
• The capability gap: Our tools of conversation assume one-size-fits-all and do not provide features that reflect the diverse roles people adopt in their daily lives.
• The coverage gap: Out tools of communication at a distance fail to deliver the bandwidth and interactivity necessary to adequately substitute for ‘being there’ with someone else.

Filling these conversation gaps is a multi-billion dollar opportunity for both enterprises and communications service providers. GTB
For the second part of this article go here: http://www.globaltelecomsbusiness.com/Article/2656286/The-cloud-communications-service-provider-battle.html

Martin Geddes is the founder of Martin Geddes Consulting. For more information visit www.martingeddes.com or email mail@martingeddes.com