SAP Strategy Profile: Enabling Telcos to Operate at ‘Internet Speed’

Summary: Our top-level review of SAP’s vision of how it will enable telcos to ‘operate at internet speed’ against Telco 2.0 principles and the six key opportunity areas identified in our strategy research report, ‘The Roadmap to New Telco 2.0 Business Models’. We also challenged SAP to build a Proof of Concept implementation of a complex multi-sided business model with a leading European mobile operator within one month. How did it go? (February 2012, Foundation 2.0)

 

• Below is an extract from this 17 page Telco 2.0 Report. The report can be downloaded in full PDF format by members of the Telco 2.0 Executive Briefing service here. 
• Additionally, to give an introduction to the principles of Telco 2.0 and digital business model innovation, we now offer for download a small selection of free Telco 2.0 Briefing reports (including this one) and a growing collection of what we think are the best 3rd party ‘white papers’. To access these reports you will need to become a Foundation 2.0 member. To do this, use the promotional code FOUNDATION2 in the box provided on the sign-up page here. NB By signing up to this service you give consent to us passing your contact details to the owners / creators of any 3rd party reports you download. Your Foundation 2.0 member details will allow you to access the reports shown here only, and once registered, you will be able to download the report here. 
• We’ll also be discussing business model innovation at the Silicon Valley (27-28 March) and London (12-13 June) Executive Brainstorms.
• To access reports from the full Telco 2.0 Executive Briefing service, or to submit whitepapers for review for inclusion in this service, please email contact@telco2.net or call +44 (0) 207 247 5003.

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Executive Summary

SAP’s new vision for telcos –  ‘operating at internet speed’ –  aligns well with certain Telco 2.0 principles and is supported by an interesting new set of tools, processes and pledges. To be more precise ‘operating at internet speed’ means driving change fast enough to match internet disruptors such as Google, Apple and Facebook. 

This sounds great (and would truly be a boon for operators) but we have heard this all before and from just about everybody.  Vendors making this claim need to be prepared to prove it. The Telco 2.0 team, together with a leading European Mobile Operator and a team of configuration experts from SAP, got together to build a Proof of Concept implementation of a complex multi-sided business challenge. 

The results were impressive and within a period of a month:

• we defined the challenge and business model impacts in a 2-day workshop;
• we developed a software implementation through three weekly iterations;
• we deployed a complete reporting toolkit to measure performance against key metrics; and
• all without writing a single line of software, just configuring SAP software.

The exercise convinced the Telco 2.0 team that operating at internet speed is not beyond the grasp of mobile operators, but it requires both a change in working practices and approach to partnering with key vendors. The barrier is organisational. 

Based upon the success of the exercise, we will shortly be launching “The Telco 2.0 Challenge” to the wider Telecommunications Industry, and we’re now looking for more operators who’d like to set a new Telco 2.0 challenge. To find out more please email us at contact@telco2.net or visit SAP’s stand at the 2012 Mobile World Congress in Barcelona. 

Introduction

The Telco 2.0 team was recently invited by the leadership team at SAP’s Telecommunications Industry Group to review its vision of the evolution of Telco business models and the capabilities required to support this vision. 

SAP is a world leader in enterprise application software with a turnover in 2010 of €12.5bn serving in excess of 170,000 customers in over 120 countries, including over 1,000 telco customers. SAP software has long been present in telecom operators’ finance and supply chain departments. Recent acquisitions such as Highdeal (real-time rating), Sybase (database, device management and mobile payments) and Business Objects (customer insight) together with in-house product developments such as In-Memory Computing and Cloud Computing position SAP to serve more and more of telco computing needs.

At the heart of SAP’s vision for telecoms operators is that they should be able to operate with more dynamism and flexibility. SAP aims to support telcos both internally and externally: internally  SAP enables marketing, product and pricing teams to deliver a customized experience and quickly rollout and test new services; externally SAP enables enterprise customers and 3rd parties to integrate communications services and telco data services into their own. 

Much of the SAP vision is aligned to key aspects of Telco 2.0 thinking. In this report we map the key aspects of the SAP vision to the Telco 2.0 future growth areas for telcos.  SAP also has many years experience of working with many other industries and therefore is well positioned to assist cross-industry collaboration which of course is essential to successful two-sided business models. 

This report examines the SAP vision in the context of two-sided business models, and specifically against the Six Telco 2.0 Opportunity Types identified in our recent research report The Roadmap to Telco 2.0 Business Models. It examines the tools and pledges made by SAP to support business model innovation and implantation. Finally, it examines some of the specific features within the SAP software and their applicability to telcos.

Sponsorship and editorial independence

This report has kindly been sponsored by SAP and is freely available. SAP provided input to questions asked by STL Partners’ analysts and were given the opportunity to comment on working drafts. Research, analysis, and the writing and editing of the report itself were carried out independently by STL Partners. The views and conclusions contained herein are those of STL Partners.

Analytical Framework: The Six Strategic Telco 2.0 Opportunity Areas

The most recent of these research reports, ‘The Roadmap to Telco 2.0 Business Models’ – describes the transformational path the telecoms industry needs to take to carve out a more valuable role in the evolving ‘digital economy’, and outlines six key opportunity areas in which telcos can create new value. We have used this framework to analyse SAP’s vision at a top level.

These opportunity areas sit themselves within the context of Telco 2.0’s ‘two-sided’ telecoms business model concept, in which telcos remodel their businesses to serve both traditional ‘downstream’ customers (individual and business end-users consuming traditional telco services) and ‘upstream’ customers, or ‘merchants’ who instead use telco assets in new ways to achieve business goals such as improving business processes or services. This concept and the accompanying opportunities are described in depth in The $125Bn ‘Two-Sided’ Telecoms Market Opportunity report (see also page 14). 

Figure 1 – The Six Telco 2.0 Opportunity Types

 

Source: STL Partners

The six opportunity areas are in summary:

a) Core Services

• Redefine the customer experience for telecoms via:
  • Improvement of core product portfolio (voice, messaging, connectivity, TV/media), more engaging and ‘smarter’ marketing and DRM, leveraging of online sales channels, enhanced customer interaction and care
  • Engaging differently with existing customers is important, to create loyalty and retain the customer base, and also to build the base for up-selling and providing new services. A key part of the re-engineering required is to improve customer data access, both to enable analytics and internal performance improvements, and to make it possible to enable appropriate external use of this data in the Personal Information Economy. 

b) Vertical Industry Solutions

• Extend from telecoms into IT and networking for corporate clients via ‘verticalised’ solutions.

c) Infrastructure Services

• Expand and extend wholesale and corporate offerings from network to infrastructure: 
• Provide infrastructure services such as mobile offload, data centre capabilities etc. to other operators and to corporate customers. 

d) Embedded Communications

• Integrate voice, messaging, and connectivity services into those of third parties:
• Communications-enabled business processes, voice and messaging integrated with games (for example), M2M and embedded mobility connectivity.

e) Third party business enablers

• Make (latent) telco capabilities available to third-party service providers: 
• Identity & authentication; marketing & advertising; payments; customer care. 

f) Own-brand ‘Over-The-Top’ (OTT) services

• Develop network-independent applications and services:
• Copy internet players and provide valuable applications and services ‘OTT’ – could be free or paid-for.

The Roadmap also outlines a number of generic principles for success, which at a top level may be summarised as:

• Unlocking the value and power of telco customer data is essential to both improve the design and delivery of existing services;
• Telcos need to fundamentally improve their flexibility and operational capabilities to innovate and react;
• changes enabling horizontal and ‘upstream’ partnerships will be essential to enable new business models;
• and a list of seventeen principles for disruptive innovation. 

SAP’s Telco Vision: ‘Operating at Internet Speed’

Dynamism and Flexibility lies at the heart of SAP’s vision for the Telco of the future. This future telco is a different organization from the one most of us is familiar with today. The Telco2.0 team took away four strands from this vision:

1. ‘Sensing at internet speed’:  According to SAP, tomorrow’s telco “knows” what its customers are experiencing and is able to make sense of this knowledge.  To be fair, telcos have already made great strides in expanding real-time analytics beyond network management for customer segmentation and applying different rule sets for support and promotions. However, Internet best-practice, particularly in optimizing all aspects of customer experience, is still a distant aspiration. 
2. ‘Thinking at internet speed’:  In SAP’s vision, the telco of the future is able to assimilate, evaluate and act much, much more quickly than is typical today.  Part of this is down to better information, part down to better mechanisms for enacting decisions… and part is down to the decision-making processes and tools that support these.  
3. ‘Acting at internet speed’:  For the major and successful online players, real-time A-B testing of new propositions and continuously evolving these propositions in response to customer behaviour is second nature.  Telcos do this already… for their websites, but not for their services.  Introducing new packages, policies, services, on a targeted basis, several times a day is pure fantasy for operators (particularly where they have market power and may require regulatory approval for any new service).
4. ‘Collaborating at internet speed’:  Exposing capabilities and assets to third parties for them to integrate into their own services is common on the web (at least common for the likes of Amazon, Google and Facebook).  They have spawned veritable industries around these capabilities.  Here again, we are seeing some isolated successes from telcos, but still so much work to do. 

Ultimately, in SAP’s vision, this becomes a continuous process rather than a one-off sequence.

Mapping the SAP vision to Telco2.0 opportunity growth areas

All the Telco 2.0 opportunity growth areas require a step change in the organizations’ ability to adapt and change. Indeed, this is one of the underlying strategic imperatives for change in the digital economy. There is a however a certain degree of applicability for each strand to each growth opportunity as the diagram below highlights.

Figure 2 – Mapping the Internet Speed vision against the Telco 2.0 opportunity

 

Source: STL Partners

For instance, the relatively asset intensive infrastructure services are slower moving than own-brand services. Similarly core services require less collaboration than with vertical industry solution and third party enablers.

However, in some instances, high speed sensing, thinking and acting may be required in these asset intensive services. For example, mobile offloading (an infrastructure service) requires real-time sensing and acting in it’s operation.

Equally, for some telcos, collaborating in OTT services may require more dynamism as some partners will need sensing information in near real-time…

To access the rest of this 17 page Telco 2.0 Report in full including…

• Mapping SAP’s solutions to telcos in practice
• Support for Multisided business models
• Configurable by business people, not constrained by IT
• Tools, processes and Pledges
• Supporting Vertical Industry Solutions and ‘Embedded Communications’
• Making Sense of Customer Data
• Advanced Device Management
• M-commerce
• Conclusion
• STL Partners and the Telco 2.0™ Initiative

…and the following report figures…

• Figure 1 – The Six Telco 2.0 Opportunity Types
• Figure 2 – Mapping the Internet Speed vision against the Telco 2.0 opportunity

…members of the Telco 2.0 Executive Briefing service can download it in full PDF format here.

Additionally, to give an introduction to the principles of Telco 2.0 and digital business model innovation, we now offer for download a small selection of free Telco 2.0 Briefing reports (including this one) and a growing collection of what we think are the best 3rd party ‘white papers’. To access these reports you will need to become a Foundation 2.0 member. To do this, use the promotional code FOUNDATION2 in the box provided on the sign-up page here. NB By signing up to this service you give consent to us passing your contact details to the owners / creators of any 3rd party reports you download. Your Foundation 2.0 member details will allow you to access the reports shown here only, and once registered, you will be able to download the report here.  

We’ll also be discussing digital business model innovation at the Silicon Valley (27-28 March) and London (12-13 June) Executive Brainstorms.

To access reports from the full Telco 2.0 Executive Briefing service, or to submit whitepapers for review for inclusion in this service, please email contact@telco2.net or call +44 (0) 207 247 5003.

http://www.telco2research.com/articles/WP_SAP-strategy-enabling-telcos-internet-speed_Summary

The money is moving, but can telcos move with it?

Silicon Valley 2012 Overview Report: the money’s moving, but are telcos?

 

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Summary: It was exhilaratingly clear at the Silicon Valley Brainstorm, March 27-28 2012, that critical inflection points are being reached in many key areas of the digital economy: the challenges are increasingly well defined, and the intellectual, practical and economic resources being employed to solve them have the quality, power and resources to succeed. The tantalising question for all was “how do we position ourselves and implement strategies that will enable our business to be one of those to profit from (or at least survive) these changes?” Our top-level take-outs from the event. (March 2012)

The money is moving, but can telcos move with it?

Introduction
An international group of 225 senior executives, entrepreneurs, academics and policy influencers from across the communications, media, retail, banking and technology sectors met at the New Digital Economics Silicon Valley Executive Brainstorm in San Francisco in March 2012. The brainstorm was part of a research and industry transformation programme from business model innovation firm STL Partners. Supported by leading trade bodies, the Executive Brainstorms are held on a regular basis in different parts of the world to bring together business leaders and strategists to think creatively about new growth opportunities.

Each event builds on the output of the previous one and integrates cutting-edge research, case studies and analysis from leading players. The events use a unique and widely acclaimed interactive format called ‘Mindshare’ to help clarify the important ‘next steps’ for both individual companies and industries.

The theme of the event was ‘New Business Models and Growth Opportunities in a Hyper-Connected World’, and it comprised four inter-connected one-day brainstorms covering ‘The Digital Economy 2.0’, ‘Digital Commerce 2.0’, ‘Digital Entertainment 2.0’ and ‘Digital Things 2.0’ (Agenda remider). The rest of this page summarises our top level impression of the brainstorm and key next steps. We will publish detailed reports of the sessions next week.

The Silicon Valley brainstorm was particularly exciting because it truly felt like a catalyst for productive change, rather than just another conference, just another opportunity to share and reflect on the status of the market and disruptions to it. We put this down to the event’s focus on the most pertinent questions, the quality of the stimulus material prepared and presented and, not wishing to be immodest, the improvements we’ve made to the event’s brainstorming processes which generated a higher level of energy from a wonderful crowd of open-minded senior execs from multiple converging industries. We are really looking forward to take it a step further at the EMEA Brainstorm in London on 12-13 June.

Disruptive forces driving change

 

Source: STL Partners Report ‘Dealing with the Disruptors’

To set the scene, some of the main changes in the digital economy that we explored through analysis and debate were:

• The disruption of telecoms and entertainment industries by substitution from new services and distribution channels provided by adjacent and new online players;  
• The explosion of interest in exploiting the value in personal data existing in many sources – banks, telcos, retailers and online players to name a few;
• New trends in consumer behaviour, such as the growing integration of social media and TV;
• How new technology trends such as the move to Cloud services will play out, and what role telcos can have in this; 
• Major telcos such as Verizon beginning to trial new Telco 2.0 business models that expose latent information assets and capabilities (such as identity and billing) to other industries to improve business processes;
• The ongoing quest to find successful ways to convert the world’s mobile phones to TV screens and tools for paying and transferring digital money.

Change is certain: how is less certain

In overview, there was one seeming over-riding certainty: what can happen, will happen. The uncertainties are now principally in when, how and where will these changes take place first, and which companies will be equipped and position to profit from them.

The scale and pace of change and the uncertainties of the future can seem perplexing, but analogies with other industry disruptions can show that these transitions are not unique. Jennifer Binder Le Pape from Bain described the transition of the digital photography industry between 1995 and 2005, showing how dramatically profits moved from incumbent players who failed to adapt to the changes to digital disruptors. The first chart shows the $1.9Bn 1995 profit pool dominated by film and photofinishing.

Source: Bain

The second chart shows the $3.7Bn 2005 profit pool dominated by memory manufacturing.

 

Source: Bain

With the benefit of hindsight it’s relatively easy to understand the transitions that happened in photography, and most in 1995 understood the nature if not the scale of the impact of digital technologies. Of course, even further changes have come since 2005, and just this week Facebook has spent $1 billion on Instagram – yet another disruption in history of photography, which might now be described as a feature of other digital products.

Over and above the detail and definitions of the changes in photography, the key points are a) that major changes can and do happen in industry profit pools, and b) despite the foreknowledge of coming change, few if any were able to map the complete shape of this transition out accurately in advance. This challenge faces many other industries today.

Navigating complexity

One of the factors that make the future difficult to predict is that the digital economy comprises many inter-related ecosystems and platforms, including: communications, cloud and device computing, content creation and aggregation, payments, advertising and marketing.

Major changes can arise in a number of different ways, each with their own challenges. For example, Apple and Google created entirely new platforms of massive scale. These single player disruptive innovations are rare, partly because they are so difficult to achieve, and partly because most players don’t have the market position to do this. Most players need different approaches to drive innovation. Some leading players can catalyse a market by creating a de facto standard that others join (e.g. Adobe and PDF), while others innovate on the back of broader collaboration through standards (e.g. SMS). None of these approaches is guaranteed to work.

A major Telco 2.0 report previewed at the event that we will be publishing next week outlined the different strategies available to telcos looking to build new business models, as well as the different attitudes and approaches of executives across the value chain – from telcos through to vendors and ‘upstream’ industries such as media and entertainment (email contact@stlpartners.com to pre-register). The report outlines the different possible strategies shown below, and we are working on a number of projects and pieces of analysis that explore the opportunities to drive issues forward and which we will share more on throughout the year.

Source: Telco 2.0 / Openet Strategy Paper

STL Partners’ Next Steps

We are working on a number of initiatives to help lubricate the ecosystems and the creation of new sources of value that legitimately empower and protect end-customers, as well as creating new business opportunities.

• The Telco 2.0 Initiative, of course, exists to catalyse and facilitate business model innovation for telcos and telcos’ partners, through our research, consulting projects and ongoing brainstorms. A key component of our work in the coming year is benchmarking existing telco strategies, tests and trials in practice, as well as outlining the core business models in greater detail.
• STL Partners is also taking an ongoing role in driving the business model work stream of the World Economic Forum’s (WEF) Personal Data project to establish the business models, laws, and technology standards to create and enable the personal information economy. We are working with and a team that includes many of the big players (e.g. Google, Microsoft, AT&T) and best brains (e.g. MIT, WEF, top lawyers etc.) that are trying to make this work.

STL Partners will also be driving new research and communities to support strategists in: Digital Commerce (advertising and payments), Digital Entertainment (TV, film, media and publishing); Digital Things (M2M and embedded); and Cloud 2.0 (market evolution, telco strategies and role in Telco 2.0).

To get involved

We believe that because of the complexities and inter-relationships between the ecosystems, it’s useful for participants in the different work streams to maintain a dialogue and establish understandings with participants in the other streams as well as their own. This is what we aim to achieve in our global regional brainstorms, such as the Silicon Valley event just gone, as well as sharing the latest thinking and practice in business model innovation.

To join the next Brainstorm in EMEA in London on 12-13 June, or subscribe to our ongoing research programme, please email contact@stlpartners.com or call +44 (0) 207 247 5003.

http://www.telco2research.com/articles/BR_Silicon-valley-2012-money-moving-are-telcos_Full