Seizing The Digital Opportunity Wp


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Seizing The Digital Opportunity Wp

  1. 1. S T R A T E G I C W H I T E P A P E R Seizing the Digital Opportunity The New Application Paradigm Our current digital lifestyle is enabled by a growing ecosystem of software, devices, infra- structure and content. Forward-thinking carriers are recognizing a unique opportunity to grab a lucrative position in this ecosystem of innovation — beyond simply providing the conduit for communications. Carriers can be, in fact, the ultimate enablers and providers of innovation that further transform and enhance the way we live, work and play. By leveraging communications, context, control and content in entirely new ways, carriers can drive personalized and exciting customer experiences that ultimately translate into new revenue streams — and ensure a strategic position in the digital ecosystem of the future. Enabling the next wave of digital innovation requires exposing the network and services to third parties, in-house developers, and trusted partners in a way that encourages rapid development of exciting new applications — which in turn stimulate network use and increase revenue. At the same time, carriers must ensure protection of the network and subscribers from rogue applications. Today’s speed of innovation requires carriers to act now — to immediately put the wheels of change in motion before it is too late. This paper makes the case that if carriers want to seize this extraordinary opportunity, they must quickly establish a strategic place in the digital ecosystem or risk being further commoditized as content and applications become the key drivers in the digital value chain.
  2. 2. Table of contents 1 The imperative for service providers 1 Understanding the application opportunity 2 Creating the right application approach 3 The enabling technology 4 Measuring success 4 Conclusion
  3. 3. The imperative for service providers Carriers have invested staggering sums in network infrastructure by investing in replacing copper with fiber, adding new towers, upgrading switches and more. At the same time though, their primary voice services have been commoditized. How can carriers monetize their tremendous investment in the network infrastructure? They must now find a way to differentiate their offering and remain relevant to subscribers and enterprises. Establishing a strategic place in the emerging digital ecosystem can help create relevance anew, drive additional revenue opportunities and monetize network investments. This requires a visionary approach to application innovation — determining how to and who will develop these new applications, how they will be marketed and distributed, and what a win-win business model with third parties could look like. The new players in the ecosystem — content and application providers — cannot easily go it alone. They need access to communications, context and control, to differentiate their offerings with new capabilities. That’s why success for both application/content providers and carriers depends upon finding and exploiting a mutually beneficial business model. “Location-based services are finally emerging as one of the most promising new mobile services categories…” Thomas husson, The ForresTer Blog For Consumer ProduCT sTraTegy ProFessionals, July 9, 2009 Understanding the application opportunity While 1.5 billion downloads from the Apple App Store is clearly a success, it is a constrained success because it is limited to the Apple iPhone and the networks that support it. Likewise, BlackBerry and Nokia are attempting to replicate Apple’s success with their own application offerings. But these applications also suffer from limited reach and capability due to the inherent problems of being dependent upon devices and networks. On the other hand, carriers have built-in advantages. They are device-agnostic, can leverage their knowledge of the network to secure the privacy of their consumers, and can exploit the full depth of potential inherent in the network. The true opportunity lies in enabling a rich marketplace of multi-device, cross-carrier applications that deliver a whole new level of user experience. Consider the Short Message Service (SMS) example: the first text message was sent in 1992, but it was not until seven years later that texting really took off. That was when SMS messages could finally be sent between different networks.1 SMS is now a cultural phenomenon, but it took being network-agnostic to make it possible. Such a business model would create far greater value for all the participants in the ecosystem — service providers, device manufacturers, application/content providers and end users. And by utilizing a business model that shares a network provider’s assets with third parties creating applications, it paves the way for increased data services consumption, additional advertising revenue and revenue from applications. 1 “Hppy bthdy txt!” BBC, December 2, 2002 Seizing the Digital Opportunity | Strategic White Paper 1
  4. 4. a new aPPliCaTion examPle: Video soCial neTworking Consider the following scenario: the combination of live video sharing and networking. Say “Jim” is at an event and wants to share the event live with his friends on Facebook. Using an application that provides multi-party video sharing, Jim can initiate a video share with Facebook. His friends are notified and can connect to view the video in real time. Friends who were not online at the time can see the archived video at their convenience. With this scenario, the basic video sharing application can be free, with advertising added with video overlay for monetization. Creating the right application approach Carriers must begin formulating an approach to applications that enables them to transform their current network assets into revenue-producing application opportunities. This means defining an application approach — branded in-house development, co-branded development with customers, third-party development, or a combination of any of these strategies — and implementing an open environment to support the approach. When it comes to attracting third-party developers, carriers must be prepared to battle for attention within the developer community. There are, however, hurdles inherent in the application development market that must be surmounted in order for carriers to succeed: • Fragmentation – The current market is fragmented based on device and carrier. What is needed is a way to enable applications to run across multiple devices and networks. • Lack of network knowledge – Application and content providers do not have the network knowledge or access to network capabilities needed to foster innovation. • Shortcomings in current development programs – Current API-based development programs suffer from limited support, high costs of certification and onboarding, and no clear upfront business viability. Based on focus groups and surveys, analysts and industry experts have identified six key success factors for a win-win application business model. These factors address the hurdles above and set the stage for creating a vibrant application and content ecosystem. 1. Make it simple – It must be easy for developers to create applications that will run seamlessly on the network and take advantage of current network and system investments to deliver compelling capabilities. This includes creating automated business processes and the ability to simply develop, test and distribute applications. 2. Foster innovation – Ensure the flexibility and openness required to foster true innovation. This includes common APIs across carrier networks. It also means building a developer community to educate and inspire developers. 3. Ensure economic viability – The model needs to be economically viable for all involved. By making it easy for developers to support multiple devices and even to run the application across carriers, you can increase application revenue as well as ARPU. 4. Enable effective distribution – End users must be able to find, purchase and download applications easily. This means effective marketing, merchandising and targeting of applications, with an effective discovery process. 5. Protect the network – While providers need to open their networks, at the same time the providers must ensure network performance by maintaining control and mitigating risk of applications undermining quality of service. 2 Seizing the Digital Opportunity | Strategic White Paper
  5. 5. 6. Secure privacy – Opening the network requires greater security and vigilance against rogue applications and threats to subscriber privacy. In addition to the right business model, carriers need enabling technology that allows for rapid service creation and supports the above success factors. This technology would deliver the flexibility to develop applications either in-house, with a trusted partner, and/or by leveraging the third-party developer ecosystem. Gartner Dataquest recommends that telecommunications carriers start implementing a basic set of APIs for mobile and fixed services by 2010 so as not to miss the limited window of opportunity to establish market position. “daTaquesT insighT: why CommuniCaTions serViCe ProViders need To use aPis To exPose Their neTworks,” Jean-Claude delCroix, garTner, augusT 13, 2009 The enabling technology To implement an application approach, carriers should look for application enablement technology that speeds time to market, reduces internal efforts, and provides the foundation for rapid success. This technology should ideally enable carriers to securely expose their network assets to third parties, provide application developers with an environment that supports rapid development and testing, and deliver applications to end users via a rich, easy-to-use marketplace. Application enablement is a core competency for Alcatel-Lucent. With its deep communications industry experience, the company has the vision and technology to enable carriers to enjoy a premier place in the new connected life ecosystem. The Application Enablement solutions from Alcatel-Lucent are expressly designed to help carriers seize the application opportunity by: • Focusing on a richer set of “enablers” on the 4Cs – Delivering and managing an enriched customer experience requires addressing communications, content, control and context — the 4Cs of the customer experience. With an open and multivendor solution that provides secure access to network assets, carriers can make it compelling for third parties to innovate on the provider’s platform. • Fostering an application developer community – Carriers can provide an environment and capabilities that foster developer participation by making it easier and more attractive for developers creating applications. With Alcatel-Lucent, cross-carrier aggregation increases business viability and enables rapid development of mashup applications. • Building a thriving application marketplace – End users need to be able to easily find, purchase and download applications. Alcatel-Lucent offers a robust toolkit that lets carriers accelerate their time-to-market with out-of-the-box functionality for content management for catalog informa- tion, storefront capabilities, merchandising and marketing, advertising, payments and more. • Optimizing quality of experience – Carriers need to have the visibility and management capabilities required to protect the network and applications to ensure quality of experience. Carriers can foster innovation while throttling and securing their network’s exposure to applications. Carriers are now positioned to attract developers eager to innovate on the network provider’s platform, that can bridge the gap to content and application providers to create a win-win business model around the next wave of applications. Seizing the Digital Opportunity | Strategic White Paper 3
  6. 6. Measuring success How can carriers measure success? In order to achieve longer-term compelling bottom-line benefits, early success is dependent upon creating a high level of developer interest and participation to foster innovation. Next, a successful partnership model ensures economic viability for the parties involved. Finally, a thriving application marketplace is a sign of success and drives revenue from applications and the data services that they utilize. With a successful application approach, there are three key areas where carriers can reap the economic rewards: advertising revenues, application revenue (from either in-house developed or shared with third parties), and increased service revenue from usage-driving applications. Gartner Dataquest expects that exposing network assets will boost a provider’s average revenue per user (ARPU) by a conservative five to twenty percentage points within two years of implementation, including a positive churn effect. In fact, carriers with limited application offerings may lose customers.2 loCaTion-Based insuranCe Claims Application enablement helps enterprises differentiate their brand by delivering exceptional customer service. For example, an insurance carrier can implement an application that accesses service provider SMS, payment, location and profile capabilities to provide better, faster service to customers who have had an automobile accident. At the same time, the insurance carrier reduces operational costs by shortening claims processing times. Here is how it could work: a customer sends an SMS to the insurance provider from the accident site. The SMS is delivered to the insurance company using a service provider messaging API. With identity and location APIs, the insurance company determines the name and location of the customer, if he or she has opted in to enable sharing of these network details. The insurance provider can begin processing the claim immediately, send a tow truck to the accident site and authorize payment for a rental car for the customer. Conclusion With an application strategy and enabling technology that fosters innovation, carriers can claim a strategic place in the digital value chain, attract more subscribers through a more exciting and secure end-user service experience, and support two-sided business models that increase revenue from subscribers and generate new revenues from content providers, advertisers and other third parties. Application developers gain hassle-free access to network capabilities to deliver innovative and exciting applications — and cross-carrier and multi-device capabilities make these applications far more economically viable than today’s applications. Alcatel-Lucent is utilizing its deep industry knowledge to help service providers regain a strategic position within the connected life value chain. The Alcatel-Lucent vision on Application Enablement delivers what carriers need to foster and support application development that will help them increase wallet share and stickiness. With Alcatel-Lucent, carriers can create a win-win business model around the next wave of applications and, by doing so, recoup the investment in the network and increase ARPU. 2 “Dataquest Insight: Why Communication Service Providers Need to Use APIs to Expose Their Networks,” Jean-Claude Delcroix, Gartner Dataquest, August 13, 2009 4 Seizing the Digital Opportunity | Strategic White Paper
  7. 7. Alcatel, Lucent, Alcatel-Lucent and the Alcatel-Lucent logo are trademarks of Alcatel-Lucent. All other trademarks are the property of their respective owners. The information presented is subject to change without notice. Alcatel-Lucent assumes no responsibility for inaccuracies contained herein. Copyright © 2009 Alcatel-Lucent. All rights reserved. ASG9718091102 (12)