Monitoring the Markets

Welcome to the Transformation Resource Center

2008-10-09T22:08:00Z

The purpose of this blog is to introduce a new initiative at the TM Forum, the Transformation Resource Center (TRC), and rto welcome TM Forum members to it. I am hoping to capture here an overview of the TRC, drivers for and our working definition of transformation, some examples, and most importantly, how members can create and derive value from the TRC, as well as the broader TM Forum Web Community.

The Transformation Resource Center

Transformation is a frequently used term that embraces many areas in which the TM Forum has been active over the years. Much of the Forum's work has been aimed at systems and process transformation activities, but these activities often exist in the context of broader issues – for example, if service portfolios or business models fundamentally change, then systems and processes are impacted accordingly.

The key objective of the TRC is to establish TM Forum as a well regarded, industry neutral, major information resource for service providers on various aspects of transformation, emphasizing systems and processes, but also including business, market and portfolio perspectives.

You can find the TRC at www.tmforum.org/trc

Transformation for Service Providers

Service providers today are faced with myriad challenges in virtually every aspect of their businesses

Service portfolios are expanding rapidly, with limited understanding as to the potential success of individual new services
Customers are demanding value and simplicity, but have more choices than ever of where and how to meet their needs
Business models are shifting, as service providers increasingly realize they are part of a larger value chain, and strive to carve out their place in it
Regulatory environments are dynamic, and issues like structural separation and net neutrality have huge potential impact
Competition has intensified, as larger players have moved into adjacent markets and upstarts have developed “over the top” delivery strategies
Technology has changed radically, as networks evolve to incorporate IP routing, high speed wireless access, open services platforms, and intelligent user devices, etc.

Faced with these challenges, service providers are striving to transform themselves. Telecom transformation is the evolution of service providers from a capital-intensive, technology-focused business model to a leaner, more agile, customer-focused service delivery model.

Service providers have been engaged in transformation for some time. Some examples of this include:

Transformation of the network through migration to IP platforms, new access capabilities, collapse of multiple transmission and access functions and capabilities into much smaller boxes, and the introduction of countless new servers, as well as the more recent introduction of SDPs and IMS.
Transformation of outside plant operations, including new engineering processes and techniques, as well as improved spares inventory, skills inventory, and logistics capabilities.
Transformation of the service portfolio by leading operators, creating stronger and more complete offerings for customers, through better understanding of market opportunities and customer needs
Transformation of partnership strategies, where partners (e.g. media and entertainment companies) collaborate as equals to expand the scope and profitability of the value chain.
Transformation of new services planning, creation and implementation processes and tools, to bring new products and services and platforms to market more quickly
Transformation of the systems infrastructure through the introduction of more open, standards-based systems and software
Transformation of customer relationships, including empowering customers with more control through Web and automated interfaces
Transformation of the operations organization from focus on primarily network management functions to include end-to-end service management
Transformation of the workforce to adapt to the new realities, through training, focused hiring, and selective outsourcing
Transformation of revenue management processes, with the introduction of lower cost, more flexible charging capabilities, and to insure the integrity of revenue capture and distribution
Transformation of supply chain management to improve sourcing and supplier management
Transformation of interdepartmental processes such as service provisioning to improve responsiveness and lower costs

While virtually every service provider has some sort of transformation effort underway, and some target areas are farther along than others, a handful of early leaders have emerged. For example, BT has made great progress in network transformation with its 21C program. Telecom Italia has emerged as a leader in the transformation of its OSS portfolio. AT&T has shown leadership in establishing broad electronic relationships with its large business customers. China Mobile has emerged as a mobile content leader through its strategic partnership with content company Tencent Holdings.

Impact to TM Forum Members

Many of our members are currently implementing transformation programs at various levels. A great deal of practical knowledge is being gained in service providers; integrators and technology supplier organizations. While some of this knowledge is clearly commercially sensitive, the TRC is uniquely placed to help the industry worldwide establish a body of information. Our growing web communities allow people from many companies to collaborate online and share information. This allows the TRC to reach thousands of people in member companies, garnering ‘real world' knowledge and providing a credible source of information of transformation.

TM Forum members will then be able to use the assets of the Transformation Center in all aspects of their transformation projects, from infrastructure and systems transformations through to people and process transformations.

While it is early days for the TRC, we hope to evolve it to a sort of “one stop shop” for issues around transformation, working with the web-based TM Forum Community -

www.tmforum.org/community

A Call for Contributions and Feedback

While the notion of a Transformation Resource Center is quite compelling, the reality is that the TRC's success will be based on the value of its content. While we are diligently scouring the Forum for artifacts to be included, and we will originate some content ourselves, we are soliciting content from those with experience in transformation projects, that others might learn how to navigate the complex and sometimes dangerous routes posed by transformation initiatives. We would encourage you to send your content to our own Shira Levine for review. You'll find her at slevine@tmforum.org.

We are also looking for feedback on the TRC, and would welcome commentary on the web site, the content and the mission of the group. Please send this to me at rrich@tmforum.org

We look forward to a long and successful run for the TRC, but mostly, we look forward to supporting TM Forum members in their efforts to transform. Best wishes to all of you in your transformative journey.

Can’t come up with the next Killer App? Don’t despair, prepare!

2008-10-09T22:07:00Z

It seems that everywhere I look these days, I see despair over the demise of the killer app. Even some of my esteemed colleagues here at TMForum have observed, if not lamented, that there is no killer app. And while I agree with them, I see no reason to despair over this. The fact is, killer app or not, there is still opportunity out there for the savvy service provider who can understand the market and craft an appropriate set of solutions for it. But before we move on, let's look at some of the classic killer apps and review why recent killer apps seem to be fewer and farther between.
Here are some of the classic killer apps and platforms that they drove.

Computing
VisiCalc - Apple II
Lotus 1-2-3 - IBM PC
PageMaker - Macintosh
MS Office- Windows machines

Communications
Fax – fax machines
Voice messaging- answering machines
Mobile voice- cell phones
SMS- cell phones for younger people
Push to Talk- Nextel phones, SMR
WWW / Mosaic / HTML - Internet Access/ Broadband

Video games
Pong-Atari
Super Mario, Legend of Zelda- Nintendo NES
Sonic the Hedgehog- Sega Genesis
Tetris- Game Boy
Halo – XBOX

Quite a list- but since Visicalc would turn 30 next year, the list might make you feel a bit ancient.
I think there are 3 reasons why we in communications don't see killer apps much anymore (and why we beat ourselves up over it).

Reason 1- expectations of ubiquity

This is somewhat unique to industries that grew up as "utilities"; many people in communications seem to think that "it's not a killer app unless just about everyone has it". While this may be true of electricity, water and basic connectivity, it's not the case in other industries. If you look at the computing applications, certainly not everyone was running spreadsheets or doing electronic publishing in the early years. It was really games and later the Web and that created a mass consumer market for PCs, and most of this happened more than a decade after VisiCalc debuted. Yet those early apps were considered 'killer'. If you look at game platforms, most didn't hit the mainstream until the third generation of platforms, and are still largely restricted to selected segments (though recently expanding thanks to innovation in the Nintendo Wii). Yet those games are considered 'killer' as well.

But in communications, it seems it's not a 'killer' unless everyone is using it. Again, I think we feel this way because our cornerstone product, voice, has been adopted by just about everyone who can get it. It has even been subsidized by some governments seeking universal service. New services and apps are just not that widespread or funded. We need to tone down our expectations a bit, and understand that in the digital world it's 'different strokes for different folks". This is a major point of the LongTail , which describes the phenomenon of selling a large number of unique items in relatively small quantities.

Reason 2- platform evolution

Think about the definition of a killer app. As Wikipedia puts it, "a killer app is an application so compelling that someone will buy the hardware or software components necessary to run it." This definition worked well in the age of sparse application sets, limited hardware devices and low market penetration (which aptly describes the early stage computing and game platform industries). But since PCs have achieved mass market penetration and technological advances have made them so much more powerful, there are relatively few 'new' applications that require the purchase of new hardware. This is somewhat less true with gaming platforms, but as systems become much more powerful (e.g. the PS3), it will be less of a question of hardware capability than vendor partnerships. So while there are many new apps, very few can meet the classical definition of 'killer'.

Of course, communicatons devices are following the trends of other devices, becoming more flexible and powerful, and platforms like the Blackberry have advanced the cause of apps like mobile email. So over time new comms apps won't necessarily require new hardware purchases either. Probably the best known example of a powerful, flexible platform is the iPhone, but it is hardly the only one, as many manufacturers are moving in this direction. Now, I am not saying that users will not demand new devices at over time but as with computing platforms, performance increases will likely make changing devices less necessary over time. So again, rapid performance advancements in platforms will curtail the introduction of classically defined killer apps.

Reason 3- consumer attitudes

I may be in the minority, but I don't think most consumers go looking for killer apps, at least not in the classic definition of the term. The hallmark of consumer marketing can be summed up in two words: simplicity and convenience, and in the age of the multi-application device, consumers will only pick up a new or additional platform if it is simpler, more convenient or maybe 'cooler' or less expensive. Why would you want to carry around a separate phone, mobile data device, audio/video player and PDA, when you can do it all on one device (like the IPhone)? So anything 'new' is going to have a much better chance of rapid adoption if it runs on a popular platform.

This phenomenon is evident across a range of consumers as well. Although you couldn't classify him as a 'typical consumer' listen to Sundar Pichai, Google's vice president of product management, in a blog post announcing Chrome. "We search, chat, email and collaborate…. And in our spare time, we shop, bank, read news and keep in touch with friends..." Killer app? Or multiple applications on a single (software) platform? Sure he's a geek, but doesn't that sound like you? Throw in a little social networking, video and some games, subtract the banking and news, and it's probably pretty close to what your kids are doing. Maybe they got a few extra boxes, like a Sony PSP, but I am betting they would prefer a single one, or at least fewer function-specific devices.

So let's forget about pursuing the next killer app. Instead, let's recognize that there are many different classes of consumers (or segments if you want to use market speak). And while there are some common services they are all need, they are not searching for the same thing or anxiously awaiting the next killer app. Let's learn to understand the needs of these segments, and how they want acquire use and augment your services (hmm, perhaps this will be the topic of an upcoming blog). Let's focus on flexible, open platforms, for both ourselves and the consumer, so that we can quickly deliver these services. Oh, and this time, let's figure out how to monetize the services.

Concerned about what to do with all that spare time you were investing in thinking about the next killer app? Well, how about seeking King Solomon's mines, Desoto's fountain of youth, or maybe just a leprechaun? After all, your chances of finding them are only slightly less favorable than finding the next ubiquitous killer app.

“I’m not dead yet!” - Early results show Telecoms weathering the recession

2008-10-09T22:07:00Z

Despite concerns about the performance of telecoms companies in the face of recession and inflation, and warnings from the likes of Vodafone and Telenor, early reporters of Q2 financial results have shown some real resilience and a bit of growth.

In Europe, early reporters KPN Telecom NV and TeliaSonera AB both delivered encouraging results with revenues up and performance against most other metrics improving.

For instance, KPN's net line loss was down significantly year over year, its VoIP service has penetrated about 15 percent of Dutch households, and TV subscribers have increased to more than 650,000. KPN profits did suffer, but that was mostly due to the higher infrastructure investment (KPN's all-IP NGN construction initiative and the upgrade of the E-Plus mobile network to HSPA), and restructuring charges reflecting lower headcount.

In the States for the quarter, AT&T and Verizon grew revenues by 3.7 and 4.7% respectively while Comcast revenues were up by 11% year over year. Profit wise, Verizon was up 12%, Comcast 19% and AT&T a whopping 30% YoY

It's particularly instructive to look at service segment performance in the States:

On the plus side, wireless was the star for the Telcos, with overall revenues growing by 12-16% and data growing 45-52%. New High Speed Internet (HSI) and TV offerings garnered about 357,000 new subscribers.

On the downside, access line drops and slower DSL growth plagued the Telcos. Comcast picked up some of the slack here, growing revenues 50% in VoIP and 10% in HSI despite some significant discounting due to bundling. Comcast now claims to have 12.5% penetration in its regions with its voice product, with virtually all of it included as part of a larger bundle.

Even TV revenues grew slightly (3%) for Comcast, despite 138,000 customer defections and bundling discounts, as customers moved to pricier digital TV packages, and HDTV and DVR penetration increased.

Notably, advertising revenue declined 2% for Comcast, despite a boost from election year political advertising. Not surprisingly, this reflects the weakness in the housing and auto sectors.

So at least early results indicate that the sector is more resilient than some had predicted. I think this is due primarily to two factors:

1. Communications are embedded deeply into people's lives, and only a very serious decline in economic conditions is likely to change behavior.

2. Bundling and flat rate pricing, two market strategies that have been criticized as detrimental to revenue growth, are at least partly responsible for sector resilience. While it can be tougher to grow revenue with flat rate pricing, its predictability makes it less likely that consumers will lower their spend. And while bundling almost always means package discounting, it really discourages churn, or a move to fewer services.

Don't get me wrong here; there are still serious concerns for the industry, and the transformation efforts by industry leaders need to be at least maintained, if not accelerated. Investors are still rightfully concerned about the industry's ability to pay off capital investments with new services revenues and lower operating costs, “free” internet services remain a massive threat, and regulators don't appear to be particularly sympathetic these days. So we should not be lulled to sleep on this.

But for now, industry resilience is somewhat reassuring.