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September 24, 2012
After years of resistance, the telco industry is having a "Eureka!" moment. Across the globe, operators are realizing that they must make serious investments in building digital services ecosystems to stave off the threat of becoming dumb pipes.
Neither the goal nor the threat is new, of course, but what has changed over the past year is the level of commitment telcos are showing toward establishing a strong digital services business. Operators are – at last – putting substantial effort and cash behind their bids to become "centers of gravity" for new digital services ecosystems that can rival those of their OTT competitors. The leading lights of the telco digital services ecosystem movement – the likes of AT&T Inc. (NYSE: T), Telefónica SA (NYSE: TEF), Salt SA , Vodafone Group plc (NYSE: VOD) and Verizon Communications Inc. (NYSE: VZ) – are working both individually and together to change the perception that telcos have little to offer third-party digital service developers – and not just the "long tail" of lone developers working in their garages. The Service Delivery Platform (SDP) Summit 2012 in Rome this month showed that operators have a maturing understanding of the "short" and "mid" tail of B2B developers and their value to the operators' bottom line.
More operators are joining the cause, choosing to set up new lines of business to emphasize their commitment to digital service innovation. In March 2012, SingTel Optus Pty. Ltd. set up a Group Digital Life division, for example, raising an Optus-initiated strategy to group level. And the Middle East is proving particularly fertile ground for operators with digital services ecosystem strategies: Etisalat announced its Digital Services Unit in May 2012. In July 2012, KPN, NTT DoCoMo Inc. (NYSE: DCM), Rogers Corp. , SingTel, Telefónica Digital, Telstra Corp. Ltd. (ASX: TLS; NZK: TLS) and VimpelCom Ltd. (NYSE: VIP) announced an ecosystem for the development of machine-to-machine (M2M) digital services while a group of Polish operators is demonstrating the benefits of building an ecosystem to support a "short tail" of telco service developers.
Telcos recognize that a direct relationship with the developers in their digital ecosystems is critical to their business success. This is a key reason why the Wholesale Applications Community (WAC), which, if properly implemented, would have disintermediated the developer/operator relationship, remained unloved and underfunded and is now defunct. Operators must attract third-party developers through compelling business models, an important component of which is an interesting and unique set of application programming interfaces (APIs). Heavy Reading Service Provider IT Insider report "SDPs Get Retooled for Digital Services Ecosystems" highlights leading operator efforts in this area: Telefónica's Unica API program is particularly extensive, for example and the company's efforts to API-enable a broad range of network assets is expected to yield a raft of new, innovative services that Telefónica can offer to internal (short tail) and B2B (mid tail) developers.
Despite the demise of WAC, operators are still convinced they must work together in order to persuade developers to replace the growing number of communications-related APIs from Apple, Google, Twilio, WhatsApp, et al, with their own. New groupings of operators looking to federate or harmonize certain APIs are emerging, though such collaborations are distancing themselves from old-style telco standardization initiatives. This is just one instance of the ways in which operators are trying to shed their "traditional telco" image. Other examples include the introduction of their own OTT services, the launch of digital services business units and the procurement of SDP technology components from non-telco specific sources. As "SDPs Get Retooled for Digital Services Ecosystems" points out, the sea change in operator thinking has a number of consequences for the SDP market.
As operators begin to reinvent themselves in an Internet mold, this may mean jettisoning former telco-specific SDP suppliers. It was, after all, a rising star from the Web 2.0 world, Apigee Corp. , that walked away with the WAC assets. Traditional telco SDP vendors with products in areas such as API management, developer portals/third-party management systems and app store/marketplaces can expect stiff competition from counterparts entering the telco market with generic versions of these systems. Meanwhile, although operators are rediscovering the importance of an internal development/service innovation capability, which is good news for vendors of telco protocol-specific NGIN platforms in the short term, the future of RCSe/Joyn remains uncertain and the Web world is casting a shadow here, as well, in the shape of WebRTC.
The speed with which fast follower and mainstream operators now want to establish a digital services ecosystem means that they are increasingly unlikely to build a supporting platform (SDP) from discrete enabling technologies and more inclined to procure one of the pre-integrated service layer architectures or emerging white-label platforms available from major systems integrators and network equipment providers. Such architectures/platforms can be populated from a vendor's catalog of off-the-shelf third-party services and bundled with the vendor's professional services such as digital services ecosystem business case development, developer recruitment programs and risk/reward financing deals. White-label platforms are typically hosted and managed by vendors in the cloud, de-risking operator adoption of a digital services ecosystem and enabling them to start experimenting with this new business model more rapidly.
The SDP market is changing shape and expanding as operators realize that implementing enabling technology that allows them to expose a handful of core communication service and network assets is no longer enough to counter the inroads OTT service providers are making on their business. There will be new losers and winners on the SDP technology and services supply side, but the hope is that operators will build strong enough business-driven ecosystems to secure their stake in the digital services market that is otherwise passing them by.
— Caroline Chappell, Analyst, Heavy Reading Service Provider IT Insider
SDPs Get Retooled for Digital Services Ecosystems, a 36-page report in PDF format, is available as part of an annual subscription (6 bimonthly issues) to Heavy Reading Service Provider IT Insider, priced at $1,595. Individual reports are available for $900.
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