Scott Stonham: What the industry needs right now are simple,
flexible propositions that can be deployed in a straightforward
way and have a clear business case in their own right 
                                        
                                        
Although the last decade has seen mobile operators target new revenue streams by providing applications and services to their users, some feel that their failures have by far outweighed their successes. A decade ago the focus was on bringing new services to market to make sense of the investments made in 3G networks and licences, today the imperative remains the same as operators face not only the need to make similar investments in 4G but also the need to find revenues to replace dwindling voice income and monetise the increase in data consumption.
Operators have invested millions in the past in offerings such as their own portal-based propositions but the returns have been poor. Serial failures include O2’s Revolution and Genie walled gardens, Vodafone’s Live and 360, and there are many, many others. For some reason, operators have continued to attempt to re-invent such portals, walled gardens or ecosystems and ended up with the same outcome – a proposition that doesn’t match the needs of their customers, was costly to develop and develop for and ultimately delivered a poor return for all the investment and effort expended. Too often, operators have built cumbersome systems that took too long to construct and, when complete, lacked the flexibility to adapt to changing market requirements. This left them with an expensive and inflexible service delivery infrastructure and ultimately has meant that operators have seen new entrants such as Apple, Google and YouTube build a better reputation than the operators.
However, it’s unfair to say everything in these ecosystems was a complete failure. Content services, in particular those based around messaging, have done fairly well and operators were also successful in attracting popular services onto their portals, recruiting thousands of content and service providers in the long tail and generating good revenue in the process. Services based around messaging and voice are close to the operators’ home-ground and well understood by them and their users and that helps to explain operators’ continued appetite for applications and services of this type. In the US, cable operator Comcast last year acquired New Global Telecom (NGT) a Colorado-based business class VoIP services provider for an undisclosed sum. In addition to providing VoIP based services to small and medium businesses, NGT also provided wholesale services to operators including AT&T, Belgacom and Comcast itself and claimed to have 100,000 VoIP seats under management at the time of the sale. Cable companies have been looking to increase their market share and expand their business in the SMB sector as their core business of providing television service continues to be under threat from companies such as YouTube, Netflix and Roku. Providing VoIP-related services makes great sense for cable companies because they enable rapid diversification.
When it comes to operator ownership of rich media services companies, operator performance has been much more patchy. Early services of this type never really took off due because of slow data networks and the awkward user experience delivered by handsets and applications. In addition, developers were not keen to work with the complex tools the operators made available for creating mobile applications for their portals. Nevertheless, operator content portals in some countries did very well, and continue to do so, especially in markets with lower fixed internet penetration. The sorry fact remains that, in most markets, growth figures turned to single digit figures much faster than expected and hoped for as the applications and services on offer failed to chime with the expectations of users and operators found they had invested in technology and structures that were too cumbersome to adapt rapidly.
Arguably, particularly in the light of the subsequent success of app stores, operators with their walled garden retail environments were too early to market for users to comprehend their offering and, later, when such offerings were better understood, the operator environments were regarded as too constrained. In some respects it is a simple case of, as the former chief executive of Excite, Joe Kraus often comments, being early being the same as being wrong. Yet it could also be that operators are simply not suited by their very nature to the finely balanced business of bringing apps and services to market in sectors distant from their comfort zone. Nevertheless large service and applications acquisitions of such businesses by operators still happen. In 2008, Vodafone spent €31.5 million acquiring ZYB, a Danish company that operated a social networking and online management tool that enables mobile users to back-up and share their handset contact and calendar information online.
Speaking at the time of the acquisition, Pieter Knook, internet services director for Vodafone Group, commented: “Vodafone understands that the core of any customer’s personal and business network is the set of contacts they hold on their mobile phone. This acquisition is consistent with our strategy of delivering products and services which meet our customers’ total communications needs.”
While clearly an application that is connected to the operators’ core business, the investment was substantial. Vodafone accordingly made wider use of the money invested with many in the industry believing it formed the foundation of the Vodafone 360 proposition. A more likely view is that the ZYB investment was redeployed by the operator to form part of Vodafone 360’s People application. That service foundered and demonstrates how operators often try to take on too many difficult concepts at once. Wrapping address book, presence, back up , an app store and branded devices ultimately proved too complex a proposition to gain market acceptance and Vodafone experienced a series of delivery challenges that damaged the concept.
Instead of jumping in with both feet and making massive investments in unproven business cases and giant support structures and platforms, operators are now ready to demonstrate greater finesse in launching - and killing - services and applications quickly with minimal upfront investment. Although operators still need to invest in infrastructure and systems, that investment can be applicable to a whole portfolio of future services and applications rather than the historic investment they made in platforms for a single service area. Operators therefore are positioning themselves for whatever services and apps turn out to be successful rather than taking a gamble on a limited offer, constrained by a specific architecture/system being successful. Operators need a system that is very cost-effective because in today’s market it needs to be an enabler for future services while having a clear business case that can be justified on one service today. CommuniGate Systems, as well as others, provides a platform that is cost-effective enough to be justified on one service but also has the flexibility to deliver hundreds of services tomorrow.
While the services of tomorrow will be developed in the cloud, using enablers, features and attributes from the cloud, it is impossible today to know what these services will be. What the industry needs right now are simple, flexible propositions that can be deployed in a straightforward way and have a clear business case in their own right. The added advantage comes because the investment can be re-used to support other services as they emerge.
A lot of the hype around usage of cloud computing by operators has missed the point. Cloud isn’t just about reducing the cost of operations, it presents an opportunity to deliver rapid innovation to customers. That’s just what operators need because they’ve been playing the cost game for years and that inevitably ends in zero. As Comcast is demonstrating by its acquisition of SMB-related services, that market is of great attraction to operators and is currently underserved. Cloud enables SMBs and enterprises to access a far richer portfolio of services, some of which are enterprise grade and can be readily customised for individual enterprise use. Such customers want and critically will pay for such services and the customisation options on offer. That enables operators, especially those such as cable and mobile operators with less heritage of serving the business market, to enter new markets and generate new revenues, by enabling SMBs to make use of the cloud and the opportunities it provides. Operators have such a strong part to play in these markets because, while suspicion and mistrust surrounds much of the hype about cloud services, operators have the relationship of trust with their customers. It is time that they make use of this to bring a portfolio of relevant, attractive and customisable services to their users and generate new revenues and loyalty from their customers. GTB