Telco 2.0™ Research

Below is a summary analysis of the Enterprise Services 2.0 session at the May 2009 Telco 2.0 Executive Brainstorm.

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.

Vote

As part of the interactive process, participants were asked which of the following statements best described their view on ‘communications-enabled business processes’ for the enterprise?

1. Individual operators should focus their efforts very carefully on specific capabilities (e.g. billing and payments or customer care) and verticals (e.g. government, healthcare) and compete with point providers (such as Paypal) in these markets.
2. Individual operators should focus their efforts on building a broad set of horizontal capabilities (covering identity, authentication, security, marketing and advertising, content distribution, off-line logistics support, billing and payments and customer care) to a broad range of vertical markets as this will enable a unique value proposition and develop scale.
3. Telcos should avoid Telco enabled business processes - the market is a red herring.

Enterprise 2.0 – lessons learnt & next steps

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.

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.

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:

• Look for “low hanging fruit” around next-generation contact centres and voice mashups. These are prime targets for horizontal exploitation. Where appropriate, partner with one or more start-ups if existing internal skillsets are weak. ‘Eat your own dog food’ – sort out your own call centres first and develop skills and processes that can be applied to other industries

• Continue with plans to monetise certain other assets for enterprise utility – especially security, payments, messaging and features that can add value to logistics processes. However, work in parallel on broad commercial platforms (e.g. web-based APIs) and more customised routes to market.
• Conduct research to identify any particularly attractive near-term addressable target verticals. This can reflect existing skills/services (e.g. within an internal integration business unit), national-specific trends (e.g. major healthcare or environmental projects), local legislation (e.g. banking rules) or wider industry collaboration (e.g. GSMA projects in areas like mobile payments).
• Build a database of possible acquisition targets (for example, corporate web/telco specialists), especially those with funding vulnerabilities that may make them available at low prices in the recession.
• Start thinking about the implications of network outsourcing or managed service contracts on the ease of offering exposed service capabilities to upstream enterprise customers.

Longer term, other considerations come into play:

• Develop separate strategies for high-volume/low-value enterprise services (e.g. servicing thousands of customers via web service platforms for generic “building blocks” like authentication), and low-volume/high-value corporate projects. [Note: volume here means # of customers, not # of transactions or events: imagine a one-off deal with a government, for national health ID & patient records]. Ultimately these may use the same underlying capabilities, but the engagement model is totally different – for example, participation in a Government-led scheme to extend smart metering for utilities, or a one-off deal with a broadcaster for a new advertising and content-delivery partnership.
• Aim to work closely with one or more top-tier enterprise IT vendors to help add value to their hardware/software solutions. IBM, Microsoft, Oracle, SAP, Cisco, HP, Sun and others have large bases of extremely loyal customers.
• Look to exploit new device and network capabilities, such as sensors, cameras, enhanced browsers and widgets on phones, or femtocells in B2C customers' homes. In particular, there are various government/public-sector applications that could benefit from closer integration with citizens' technology. Examples could include authentication for local services (or even voting), or assorted types of monitoring for environmental, healthcare or public safety reasons.Do a full analysis of applications that can be hosted in the cloud – but beware the integration and “touch points” with corporates' in-house infrastructure.

Event Participants: can access the full presentation transcripts, delegate feedback, and long-term recommendations for action at the event download page (NB. the URL has been emailed to you directly as part of your package).

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