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Value added service (VAS) provider failures: insights from VAS product companies

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Dr TR Madan Mohan, Managing partner addressed Network of ICT Entrepreneurs and Enterprises (NITEE), under the aegis of Foundation for MSME Clusters (www.msmefoundation.org), New Delhi on 27th August …

Dr TR Madan Mohan, Managing partner addressed Network of ICT Entrepreneurs and Enterprises (NITEE), under the aegis of Foundation for MSME Clusters (www.msmefoundation.org), New Delhi on 27th August 2010 regarding “Value added service (VAS) provider failures: insights from VAS product companies”.

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  • 1. Indian Software Product Markets, VAS Offerings: Some Insights 27th Aug, 2010
  • 2. DisclaimerThis presentation is based on both publicly available data and interviews of key players in theindustry. Browne & Mohan takes no responsibility for any incorrect information supplied to usby ISV, product vendors or users.Browne & Mohan reports are limited publications containing valuable insights for CEO, policymakers and analysts. Academic institutions (including Open Universities in UK and others) arerestricted from distributing this presentation as background material for any course workwithout formal approval. Furthermore, no part may be reproduced, stored in a retrieval system,or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, orotherwise, without the permission of Browne & Mohan.
  • 3. Content1 Background2 Indian Software Industry3 VAS Product companies4 Conclusions
  • 4. 1 Background India has emerged as a major player in software services and development. Most of the world‟s leading software companies have established their subsidiaries and R&D centers in the country. From self-doubt and bureaucratic apathy, they have grown in revenues, stature and acquiring companies in India and abroad. The number of software product firms is on the rise and is expected to contribute to the economy through increased employment generation and intellectual wealth creation. Their multiplier effect on augmenting industrial growth and increased entrepreneurial activities are a few of the compelling factors that warrant a focused study of this sector.
  • 5. Content1 Background2 Indian Software Industry3 VAS Product companies4 Conclusions
  • 6. 2 Product Revenues Overall revenues in FY09-10 were about 15% lesser than revenues FY2008-09.
  • 7. 2 Which industry vertical took the hit Mobile products and Life Science software product companies were the highest hitprimarily as telecom service providers postponed investments. Bangalore and Punewere the two regions that had the highest impact in terms of closures.
  • 8. 2 Is Geographical focus changing Compared to FY2008-10, revenue contributions from geographies such as North America,Europe and APAC dropped significantly, while Middle East revenues grew in FY2009-10.Egypt, Qatar, Oman and Saudi Arabia became hot destination for product companies.Polaris, Nucleus, Newgen, continued to benefit from multi-country approach.
  • 9. Content1 Background2 Indian Software Industry3 VAS Product companies4 Conclusions
  • 10. 3 VAS: evolution High India in India in 2008 2011VAS IP oriented WiMaxmix convergence Data rates of 100 mbps Mobile TV Multimedia Wireless Digital voice High Speed teleconference CRBT Digital voice Broadband Full motion videos M-commerce Digital voice Download Online gaming SMS P2P Video TV Info services SMS P2A Enterprise VAS access with 3G Ringtones Data service Security services Wallpapers Contests services Analog Games Low voice 1G 2G 2.5G 3G 3.5G 4G
  • 11. 3 VAS: How structure affects End User Telecom Operator Technology Enabler Content Aggregator Customer pays for VAS Content /Application 60-70% of Total Owner revenue 10-15% of Total revenue 5-10% of Total revenue 5-10% of Total revenue Low rent and value appropriation has locked several VAS players with Telco‟s.
  • 12. 3 VAS: who was hit While Music and Infotainment are the major revenue generators, companies focused onsingle product or single delivery channel were the major hit. VAS providers with me tooofferings in location, Blogging and customer care (botched up IVR solutions) ended uploosing.
  • 13. 3 Why VAS firms failed  Major reasons for VAS Companies failures:  Single product, single vendor  Few applications with no common platform  Content aggregation  Built business around WAP or downloads
  • 14. 3 VAS Successful companies  Successful VAS strategies:  Platform play: Onmobile, Apalaya, MobME, One97  Focused on large customer base  Sticky Entertainment or Gaming experiences  Independent of Operators: Indiagames, Games2Win, Cellcast
  • 15. Content1 Background2 Indian Software Industry3 VAS Product companies4 Conclusions
  • 16. 4 Conclusions: Emergent focus areas  Services:ON DEMAND DATA / VOICE  Data connectivity on the move Broadband Access Quad play i.e Voice, Video, Data and through 3 G Device mobility with suitable core network.  E-mail and Web services on demand Share the Family for SMEPersonal Digital Photo and VideoCentre With members on  VPN service for group of customers The move  Gaming, Video Services like Live TV,  E-governance, E-health, E-education  Internet Access on the move Enterprise CUG/ VPN  Video Messaging and rich dataE Governance applicationsE HospitalE Education VoIP, traditional Telecom services
  • 17. Conclusions: Youth (15-24) Social Economic • Desire to be • High propensity to connected with spend others •Tariff plans with data • Keep up with latest and pay per service lifestyle trends schemes Technology • Faster download speed •Larger memory •Video clarity Gaming Apps Music/Movies Apps Social Networking Apps 3G Subscribers•75% of gaming customers •CRBT/Ringtones and music •Chat rooms •Video streaming for music constitute youth. downloads are perceived as videos, sports clips, expressions of one‟s •Sites like Facebook, Orkut Bollywood movies, reality•Purchased games through personality and are likely to and Twitter on mobile will shows service increase in demand. generate traffic as young •Mobile advertising: 66% of providers are 30% more in consumers keep in touch with Indian youth interested in demand •8 regional movie industries friends and follow the latest receiving mobile ads than free games offered on and 2000 music albums per trends. •M-coupons, M-tickets for the web. year within India guarantee retailers and malls. steady flow of content for •Local language apps: 60% of Singapore VAS companies users. mobile content in South India could introduce these apps to is in regional languages Indian consumers as they possess the technology and execution capabilities needed.
  • 18. Conclusions: Professionals on Move Social Economic • Desire to effectively Economic Social • Very high manage multiple propensity to spend responsibilities while • Premium pricing on the move possible because of • Assurance of affordability security Technology Technology • Faster download speed • Compatibility with office applications Core Enterprise Apps Enhancing Productivity Apps 3G Subscribers• Professionals will need • Company email and web • Video conferencing, video access to programs like access from phones apart sharing Microsoft Office for delivering from Blackberry sales pitches, presentations, • File sharing carrying proprietary content • Calendar and scheduling • Download of content• Mobile security services to • M-Commerce facilities to help ensure safety and manage business preservation of content • M-Commerce: Apps to manage credit cards, monitor • Video conferencing, CRM, bank balance, carry out online• Updates of stock market and intra enterprise web transactions financial news applications applications
  • 19. Conclusions; Women Social Economic • Desire to be • Personalized connected with family content will generate and friends more revenue per • Keep up with latest user lifestyle trends Technology • Video content • Variety of applications Social Networking/Enterprise Lifestyle Apps 3G subscribers Apps• Applications for health, • Chat forums, social • Video conferencing to keep in fashion, fitness, travel networking websites touch with family and friends• Location based apps to plan • Voice SMS, advanced SMS to • Video streaming for deciding local events continue as it is used on purchase of products frequently.• Calendar and scheduling to • M-coupons, M-tickets for retail keep professional and • Contest, reality show and mall outlets personal appointments participation enterprise applications
  • 20. Conclusions: Rural Consumer Social Economic • Desire to keep in • Low margins touch with family if expected working in urban area • Revenue to come • Use technology to from scale of ease hardships due services to lack of information Technology • Predominantly IVR due to limited literacy IVR Services Data/Entertainment Apps M-commerce Apps• Developed in regional languages • Entertainment, agriculture • Mobile banking, remittance and to cater to farmers needs related information, such as payment services via a trusted through a „virtual marketplace‟ weather, prices, distributor financial institution providing commodity rates networks conserving time and money • Expenses monitoring apps for • Mobile music /movies and farmers, small shop owners• Telemedicine services for remote entertainment services areas where healthcare options are limited • Location based services for information local gatherings,• Fixed lines can also have IVR for functions infotainment and utility based purposes• Voice SMS
  • 21. Conclusions: Product Focus Consumer segments in India that are likely to demand an increase in VAS are:  Youth (ages 15-34)  gaming, music/movies, social networking, 3G services  Professionals on-the-move  core enterprise VAS, M-commerce, 3G services, productivity apps  Women  lifestyle VAS, social networking, 3G services  Rural subscribers  IVR, data services, entertainment and M-commerce The most applicable VAS capabilities that can be leveraged in the Indian market to fit the needs of these consumer segments are:  3G services  M-commerce applications  Entertainment/Enterprise VAS  Mobile Security Services© Browne & Mohan, 2009 21
  • 22. Thank YouFor any query please contactMs Harmeet KaurAssociate Consultant157/A, 2nd Floor, 10th A MainJayanagar 1 BlockBangalore. 560 01sharmeet@browneandmohan.com91-80-26565164
  • 23. 9.1 Adachi F. Wireless Past and Future- Evolving Mobile Communication Systems. IECE Trans. Fundamentals.References 2001; E84(A): 55-60. Annual Report 2007-08. Telecom Regulatory Authority of India. October 2008. Boston Analytics. A Study of the Mobile Value Added Services (MVAS) Market in India. 2007. Chitkara N. Market Entry Strategy for Indian Telecom Market As Mobile Virtual Network Operator (MVNO). December 2007. < http://insightory.com/view/202//market_entry_strategy_for_indian_telecom_market__:_as_mobile_virtual_network _operator > Accessed July 24, 2009. Economic Times. MTNL calls global telcos for 3G bids. July 16, 2009. < http://economictimes.indiatimes.com/LATEST-NEWS/MTNL-calls-global-telcos-for-3G- bids/articleshow/4782648.cms. > Accessed on August 17, 2009. FICCI and BDA 3G & BWA: The Next Frontier.. January 2009. IAMAI and eTechnology Group at IMRB. Mobile Value Added Services in India. August 2008. Infocomm Development Authority of Singapore. Annual Survey on Infocomm Industry 2008. June 2009. Kosnik T, Gundecha M, Bajaj K. Future of Mobile VAS in India. Stanford University & BDA. December 2007. Livemint.com . BSNL revenue arrears. August 6, 2009. < http://www.livemint.com/2009/08/06150630/BSNL- revenue-arrears-stand-at.html>. Accessed August 10, 2009.© Browne & Mohan, 2009 23
  • 24. 9.2 Mathew L, Mysore J, Nair V. Is the Indian Market Ready to go “Virtual” for Mobile? Diamond Management andReferences Technology Consultants. 2006. Members List, Mobile Alliance. < http://mobilealliance.sg/memberlist.html>. Accessed July 25, 2009. Medianama. Airtel mobile VAS revenues. July 27, 2008. < http://www.medianama.com/2008/07/223-airtel-mobile-vas- revenues-at-rs-23555-crores-non-sms-57-of-vas-at-rs-13356-crores/> . Accessed on August 4, 2009. Medianama. Rcom VAS Revenues. August 1, 2008. < http://www.medianama.com/2008/08/223-rcom-vas-revenues-at- rs-109-crmonth-non-sms-vas-at-rs-91-crmonth-60-pc-of-data-card-market/>. Accessed August 10, 2009. Mobile Europe. Freemium model to predominate in mobile apps. 13 May, 2009. < http://www.mobileeurope.co.uk/news_wire/114806/Freemium_model_to_predominate_in_mobile_apps_with_VAS_reve nues_reaching_$14bn_by_2014,_says_report.html>. Accessed July 31, 2009. NDTV Profit. Bharti gears up for 3G leap. August 17, 2009. < http://profit.ndtv.com/2009/08/17233801/Bharti-gears-up- for-a-3G-leap.html >. Accessed on August 17, 2009. Press Release No 54. Telecom Regulatory Authority of India. June 2009. < http://www.trai.gov.in/WriteReadData/trai/upload/PressReleases/687/pr1june09no54.pdf> Accessed July 15, 2009. Times of India. Only 4 New Operators in 3G spectrum bid. August 19, 2009. < http://www.varindia.com/Mobility1.asp >. Accessed August 19, 2009. VARIndia. Indian Telcos Aggressive on Value Added Services. < http://www.varindia.com/Mobility1.asp >. Accessed August 19, 2009. VAS. TelecomLIVE. June 2009. < http://www.kirusa.com/press/2009/06-01-09a.pdf> Accessed July 20, 2009. © Browne & Mohan, 2009 24