In the second part of his article examining how operators can innovate successfully, Keith Dyer hears from the industry itself
How do you innovate in a recession? With capex funds reduced, and R&D budgets under threat, it might be logical to think that profitable innovation suffers. But it could be that the recession will in fact foster more innovative thinking.
Speaking at the Cambridge Wireless International Conference, Richard Traherne, of Cambridge Consultants, said that it is during times of economic hardship that innovation is fostered, as people are forced to find ingenious solutions without throwing large resources at a problem. This in turn creates new opportunities for companies to reinvent themselves.
He quoted McKinsey stats that showed that during a downturn, there is great turnover in the established players, with 40% of companies in the top quartile of a market replaced by new companies that are prepared to innovate during the downturn.
"This makes it a great time to steal a march on your competitors," he said. Companies can do this either by lowering the cost of their products, or re-using technology, or adding a new service strategy on top of existing technology.
Added to this necessity-driven approach, is the fact that wireless in particular sits at a moment of great change. Sir David Brown, ex-chair of Motorola, said, "Never before in all history has [this industry] been met with such knowledgeable, sophisticated, aspiration, demanding consumers. We need to think of better ways of involving these consumers in our innovative processes."
Brown also said there was opportunity for the industry to enhance its scope, making all of the services and applications we use truly mobile. "Wireless touches lives but it doesn't permeate lives, people still fall back to wireline out of necessity rather than choice," he said.
Sir David said that the opportunity to do that lay in de-cluttering the mobile screen, integrating the functionality of widgets and applications, and bringing together different permutations of widgets by the second.
"The more people can intuitively personalise their wireless communications, the more value can be created in the content value chain, and the more evenly distributed the value will be," he said.
Ray Anderson, Bango CEO, told journalists that one benefit of operators not having large capex budgets is that they cannot waste money on stupid projects any more. He gave Vizzavi as an example of a doomed mega-project, fostered by vast sums of wasted operator money.
Anderson had more harsh words for operators, telling the conference that the best way to innovate was to make sure that you have as little to do with operators as possible, and to avoid recruiting people from operators.
Sony Ericsson's head of partnerships Christopher David was rather more forgiving of the operators, which is perhaps not too great a surprise, given they are a major Sony Ericsson customer. But he also spoke of the need to open up to the "crowd" to source applications and innovation.
"Operators are an important player in the ecosystem," David said, "but the more we get to open platforms and environments, we are hoping to see operators be much more open in they way they do something. When the crowd does something it doesn't marginalise anybody in the marketplace."
The former Orange CEO and current Chairman of Augere, Sanjiv Ahuja, warned attendees at Management World recently that operators need to address the opportunities provided by the new way information and entertainment is accessed and distributed. But, he warned, failure to do so would result in several operators becoming either bit pipes, or losing market value altogether.
" We are still delivering digital content in a linear way, and we need to be thinking of a different way," he said. "We have to figure out how we are going to monetise this infrastructure to deliver this digital content."
Ahuja said telcos need to take the take the real-time information and infrastructure that telcos have, the billing, authentication, location info, and monetise that.
"It's not that telco infrastructure providers don't see that, the challenge is it requires a complete transformation of their business model and that is very hard for successful businesses to go through. No company has truly succeeded in making that transformation of the business model happen," he said.
"What we in telcos have failed to do is take the data and truly turn that into business insight – and then transformed it into services our customers need and demand. That's where we as an industry are lacking, that's where we as OSS/BSS systems providers have tremendous opportunity," he said.
Keith Willets, Chairman of the TM Forum, said that the two-sided Telco2.0 business model is not a new idea, but that the challenge is in making it happen.
"The hard bit is taking the powerpoint slide and turning it into operational, technical and business reality. A lot of thinking is needed on where you differentiate and where you standardise," he said. "There are areas where we can look for standardisation, in how content flows around at very low unit cost, in enabling advertising. Because this can't add cost, it has to make money."
Simon Torrance, CEO of the Telco 2.0 initiative, said that the time is ripe for the telco industry to seek investment, as it is seen as a defensive sector during a recession.
But it will require organisational change at all levels, he said, to align with the new business models.
"Often the metrics that drive activity within service providers are not aligned with the new business opportunity you are trying to create," he said.
The answer's in the IN
The problem for operators is that before they can move to the brave new Telco2.0 world, they need to consider their current service creation ability. At the moment, this means their IN platforms, through which they deliver the bulk of their VAS.
OpenCloud's Graham Francis points out that operators will need to start the process from where they are. Many are stuck in a half world.
"Even in today's economic market, the importance of new service delivery fuels a continued appetite for complete IN replacement – based on the acceptance of an all-IP future and the desire of many operators to reach this goal as quickly as possible. Being able to support both strategies is key in an increasingly disparate global telecoms environment," he says.
The ‘augmented IN' approach takes operators to a Next Generation IN (NGIN) without requiring a complete IN platform replacement. The new application server then ‘augments' the existing platform by supporting access to a host of ‘smart' next generation services.
Interaction creates new / variant services by orchestrating combinations of existing IN-hosted services and new service logic hosted on the application server – ‘telecom service mashups' if you like.
Applications from the older, more restricted platforms can then begin the migration journey until all legacy services are transitioned and the high-cost IN can be switched off.
IN replacement, OpenCloud says, significantly speeds this process. It rapidly eliminates the OPEX requirement for supporting legacy systems, while provides immediate access to a new world of smarter, more intelligent P2P telco services.
The way OpenCloud designs the process, is that during the migration stage, applications are built in OpenCloud's development environment, creating spare capacity in existing proprietary IN platforms. Significantly, this enables operators to decommission some altogether. This is particularly relevant today as an increasing number of IN platforms are being ‘end-of-lifed' by equipment vendors.
Opertors are being told that they must access the wisdom of crowds, allow for greater customisation, and open up network and customer data to third parties. And for the most part they agree with the diagnosis.But it is them who must decide how and when to swallow the medicine.