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ecember 2012 | www.tmforum.org

NEW SERVICESBEAR FRUITIdeas in action drivegrowth in the digital world

Matthew Key,CEO, TelefnicaDigital on howto succeed

New research:service providersshare their insightsand plans

Hot 10 areas ofinnovation to acton now

Sponsored by:

Report prepared for Saumya Choudhury of Ericsson Inc.. No unauthorised sh


2/36DiGitaL LiFe

Everything that can be digital will be.Weve seen the uture. And its digital. In just

ten years, the way we communicate,

consume inormation and entertainment has

been changed orever. And thats just the start.

The Digital Revolution is transorming our

personal and proessional lives. We demand

simplicity, but the complexity behind our

interconnected digital lives is only growing.

TM Forums Digital Services Initiative ocuses

on overcoming the end-end management

challenges o complex digital services,

enabling an open, vibrant digital economy.

There are fve core principles o the Initiative:

For more information on the TM Forum Digital Initiative visit www.tmforum.org/digital



3/363DiGitaL LiFe

DiGitaL LiFe

2012. The entire contents o this publication are protected by copyright. All rights reserved. No part o this publication may be reproduced, stored in a retrieval system, or transmitted in any

orm or by any means: electronic, mechanical, photocopying, recording or otherwise, without the prior permission o the publisher, TeleManagement Forum. TM Forum would like to thank

the sponsors and advertisers who have enabled the publication o this ully independently researched report. The views and opinions expressed by individual authors and contributors in this

publication are provided in the writers personal capacities and are their sole responsibility. Their publication does not imply that they represent the views or opinions o TeleManagement Forum

and must neither be regarded as constituting advice on any matter whatsoever, nor be interpreted as such. The reproduction o advertisements and sponsored eatures in this publication does not

in any way imply endorsement by TeleManagement Forum o products or services reerred to therein.

tM Fom o nd lon o ll mloy o o mm ognzon ho g on o .

Publications Managing Editor:Annie [email protected]

Editor:

Claire [email protected]

Contributor:Philip Marshall Ph.D.Founder and Chie Research Oce, Tolaga [email protected]

Creative Director:David [email protected]

Commercial Sales:Mark BradburyBusiness Development Manager, [email protected]

Nick CarterBusiness Development Director, Research & [email protected]

Senior Publisher:Katy [email protected]

Production Assistant:Aideen [email protected]

Client Services:Caroline [email protected]

Head o Marketing:Lacey Caldwell [email protected]

Report Design:The Page Design Consultancy Ltd

Vice President, Research and Publications:Rebecca [email protected]

Advisors:Keith Willetts, Non-executive Chairman, TM ForumMartin Creaner, President and Chie Executive Ocer, TM ForumNik Willetts, Chie Strategy Ocer, TM Forum

Published by:

TM Forum240 Headquarters PlazaEast Tower, 10th FloorMorristown, NJ 07960-6628USAwww.tmorum.orgPhone: +1 973-944-5100Fax: +1 973-944-5110

ISBN: 978-1-939303-03-5

Page 4

A warm welcome to this frst edition o Digital Life

By Nik Willetts, Chie Strategy Ocer, TM Forum

Page 6

Capturing the digital opportunity

By Matthew Key, CEO, Telenica Digital

Page 8How to prosper in the digital revolution?

Communications service providers understand they need

to become digital service providers. In October, TM Forum

surveyed over 150 executives rom its service provider

members to nd out how they plan to do it. Philip Marshall,

Ph.D., Founder and Chie Research Ocer, Tolaga Research,guides us through the ndings.

Page 22

Hot 10 areas or innovation

Everyone wants to innovate, yet there is much uncertainty about

how and where to invest the time, talent and unds. Annie Turneexplores 10 hot areas that are at boiling point or innovation.

Page 32

Sponsored eature

Hybris

Page 34

What is TM Forum Frameworx and how can it help you?



4/36DiGitaL LiFe4

FOrewOrD

a warM weLcOMe tO tHisFirst eDitiON OF Digital life

In the last 10 years,

how we communicate,

consume inormation andentertainment, and conduct

business has changed

orever. The digital revolution

is transorming our personal

and proessional lives at

speeds weve never seen

beore. Technology is no

longer the preserve o

wealthy nations: in the same

decade, digital services

have helped overturn

governments, transorm

the distribution o aid and

medicine, and accelerate

economic growth in

developing countries.

The impact on established

business has been proound.

The music, movie and

publishing industries, and

their entire value-chain o

production, distribution and

retail have been changed

irrevocably. Only now are the

winners and losers o thisrst wave o the revolution

becoming clear. But its not

over yet: in the next 10 years

every industry and the

global economy itsel will

be transormed. In short,

everything that can be digital,

will be.

Predicting the ultimate

eect o disruptive

technology isnt easy, and the

digital revolution has already

presented many paradoxes.

To those who said we wereabout to witness the end

o reading and literature, a

recent study showed Amazon

customers who own a Kindle

eReader device actually read

up to our times morebooks

than those who do not.

Becoming digital has simply

made it easier to purchase,

carry and so read books.

The eect on TV viewing

has also been paradoxical.

A recent study in the U.S.

showed that teenagers today

watch moreTV than ever,

thanks to second screening

and social media. Going

social makes TV watching a

more engaging experience,

and not just or teenagers:

the majority o tablet owners

regularly use their device

while watching TV too.

In a digital world that

moves at the speed oinnovation, the uture can

be hard to predict.

Only the paranoid survive

For the communications

industry, the uture is equally

uncertain. Few industries in

history have aced so many

threats and opportunities,

at the same time. As the

mobile market approaches

global saturation point, a

new breed o competition

has emerged enabled bythat very saturation and the

prolieration o connectivity.

Competitive over-the-top

services are exerting growing

pressure on the established

communications business. In

August 2012, SMS alternative

WhatsApp hit the milestone

o 10 billion sent messages

in one day. Thats a ten-

old increase in 12 months,

and just one o countless

examples o the rapid erosion

o traditional voice and

messaging services. True, its

still a raction o global SMS

trac, but its the speed o

this migration and the loss

o margins it represents

thats raising temperatures in

the board rooms o operators

around the world.

In the words o Intels

ormer CEO Andy Grove,

only the paranoid survive.Disruptive technologies

are the nemesis o any

complacent business, and

or communications service

providers, now is the time or

reinvention.

O course, connectivity is

the oxygen o the inormation

age, and data connections

and usage are only set to rise

exponentially. But providing



5/365DiGitaL LiFe

connectivity alone will not

be enough. Its bundled,

enterprise-grade digital

services delivered through

partnerships, and platorms

combined with connectivity,

that hold the keys to growth in

the ace o shrinking revenues

rom established services.

Enter the digital enterprise

Communications serviceproviders are well placed

to capitalize on this next

wave o digital opportunity.

The rst wave o the digital

revolution has ocused on

the consumer, and now

consumers are taking

that revolution into their

enterprise workplace.

Enterprise-grade, mission-

critical services including

enterprise IT-as-a-Service

are poised or growth, while

vertically-ocused solutions

such as eHealth and smart

grid are already showing

huge potential.

All o these services require

a level o trust; security and

reliability communications

companies have in their DNA.

The best eorts quality o

digital services to date wont

meet the needs o business

and lie-critical services.The communications

industry has both the skills

and assets to deliver the

reliability and security

needed or these services

to succeed. Capitalizing on

these opportunities means

making the leap rom being

communicationsservice

provider to digitalservice

provider.

Crossing the chasm to

digital services wont be

easy. Theres the existing

business to steer through

harsh conditions; ever-

increasing, well-unded

competition; shareholders

demanding rapid growth;

legacy inrastructure and

integration challenges; and

a business and technology

culture with its roots ina very dierent business

environment. Success

requires ocus, vision

and radical thinking

embracing a new set o core

competencies or a service

providers business.

Opening up or digital

Whichever way you turn in

the digital world, being open

is a universal ingredient o

success. The digital economy

has thrived because the

Internet provides an open,

common platorm and set o

agreed protocols or systems

and devices to talk to one

another.

Successul cloud services

and platorms have embraced

this open approach, oering

rich application program

interaces which reduce the

cost o integration and drivethe growth o ecosystems,

reducing the barriers to

entry or small, innovative

businesses.

As we move in to the

era o enterprise-grade

digital services, I believe

maintaining an open, agile

approach to innovation and

integration will be crucial.

For service providers IT,

this presents two challenges:

how to deliver a scalable

business platorm able to

deliver an agile and constantly

evolving set o products,

services and support multi-

partner business models at

the lowest possible cost;

and how to open up existing,

signicant capabilities

securely and globally.

As a global industry

association, at TM Forum

were energized by the

challenges ahead, and

committed to helping our

members succeed in the

digital economy. Thats why

we recently launched ourDigital Services Initiative,

ocused on overcoming the

challenges o managing

complex digital services and

enabling an open, vibrant

digital economy.

The Initiative has ve key

pillars, designed to underpin

our members success in the

digital economy, as shown in

the graphic above. The unique

research into the insights

and challenges aced by

service providers (see page 8)

included in this report is the

just the rst stage in helping

our members embrace the

opportunity o digital services.

With over 950 member

companies covering the

globe, were expanding

our members ecosystem

to encompass new digital

divisions o our current

members, as well as

attracting key enterprise

players rom a number

o verticals who have an

essential role to play in digita

services or nance, health,energy and more.

I look orward to working

with you as we take on these

challenges together, and in the

meantime, enjoy Digital Life!

Nik Willetts

Chie Strategy Ocer,

TM Forum

[email protected]

Follow @nikwilletts



6/36DiGitaL LiFe6

capturiNG tHeDigital opportunity

th dgl olon h ogh o nomo hng nd, o mn om n hngng old,

nl o mo , m n oon nd nno. by Mh Ky, ceO, tln Dgl.

FOrewOrD

The digital revolution has

already undamentally re-

written the rules o many

industries, rom music

through to photography.

This process o change is

accelerating and will disrupt

and transorm society and

almost every business.

My job is to help Telenica

transorm its business model

in order to embrace this

digital revolution. The act is

that digital will dramatically

change the way our industry

operates. In many ways it

already is and the time to

seize the opportunity is now.

Digital technology does not

recognize physical boundaries

or respect companies that

have been successul in thepast. The low barriers to

entry, the minimal cost o

innovation, and the speed

with which customers adopt

new products, and abandon

products they have grown up

with, have given the digital

revolution an unstoppable

momentum.

The opportunity or

companies like us is to sit at

the heart o this new digital

world. We have global reach,

a crucial billing relationship

with hundreds o millions

o customers, experience

working with large corporates

and governments, and huge

distribution networks in

terms o retail stores and

customer service operations.

Plus we are the ones that

are putting smartphones a

driving orce o digital into

consumers hands.

In order to seize on this

opportunity, we need to

behave and act dierently.

We should learn rom the

Internet/sotware sector,

which is more entrepreneurial

and has risk-taking at its

core. Its agile and iterative;its not araid to scrap

things that arent working

and it sacrices process

or speed. Most o all, its

about innovation and putting

a premium on doing things

dierently.

I believe that there

are three key aspects to

succeeding in the digital

space.

Open innovation

We should embrace

innovation wherever it comes

rom. As the barriers to

entry have come down, the

innovation cycle has changed

orever. Great ideas are just

as likely to come rom a lone

developer as rom within an

R&D department.

Whats more, innovation is

just as likely to emerge out o

So Paulo, Tel Aviv or Bogot

as it is rom Silicon Valley

or London. The challenge

is to identiy the ideas and

industrialize the solutions.

Thats why we created

Wayra a technology

accelerator programme,

incubating 170 start-ups

across 11 countries. Wayraallows us to identiy and

nurture groundbreaking

ideas in areas relevant to our

business.

We gain access to a wider

pool o ideas, and the start-up

companies we are supporting

have the opportunity to take

their innovations to our 300

million customers.

In-house research and



7/367DiGitaL LiFe

development undoubtedly

remains important, but

you also need to identiy

disruptive innovation rom

outside your company and

outside your industry.

Building ecosystems

Trying to control digital

services rom end-to-end

is no longer an option.

Partnerships are vital to work

with specialists in areas that

are not a core competency.

By creating a vibrant

ecosystem around products

and services, where dierent

companies play to their key

strengths, the sum can be

greater than its parts.

Take Fireox OS where

Mozilla is seeking to establisha new, open mobile operating

system based on HTML5.

We support its goals because

we believe driving open

web standards in mobile will

be the only way to ensure

innovation continues. But

we know that a new OS can

only be successul i based

on the broadest possible

cross-industry support. This

means involving as many

network operators, hardware

manuacturers, chipset

makers, content owners and

developers as possible.

Social innovation

The most exciting aspect o

the digital revolution is the

role technology can play in

changing society positively.

Combine social needs with a

new business model and you

have a recipe or success that

will create new opportunities.

Healthcare is one such

area. Public administrations

around the world are

grappling with the rising costs

o healthcare, particularly

the costs associated with

chronic conditions such asheart or respiratory problems.

In the UK, 5 percent o

NHS patients have chronic

conditions and they account

or 50 percent o the NHSs

annual budget.

We are already trialling

services in several countries

to enable people to monitor

these conditions in their own

homes and share the results

in real time with their doctor,

improving the quality and

cost o healthcare.

Financial services is

another. In Latin America,

only 30 percent o the

population has a bank

account, and yet mobile

phone penetration is over

100 percent. Activities that

we take or granted, such

as paying a bill, can involve

people taking days o work

and standing in line or many

hours. Delivering banking

services via mobile can not

only transorm peoples

lives, but also transorm

the delivery o government

services, such as pensions

or instance.

We have all looked atindustries such as music,

travel, and publishing and

thought why did they not

embrace the digital change?

Change is dicult, particularly

when you are talking about

changing a model that has

proven successul or so

many years.

The good news is that the

opportunity is signicant.

Digital is paving the way

or brand new products and

services that will introduce

new revenue streams. It has

the potential to drive huge

eciencies in the way we

operate, and it will allow us

to empower our business and

public sector customers to do

things dierently.

Thanks to our position as

a trusted service provider,

we can be at the oreront

o enabling our customers

digital lives.

This period o change

may eel uncomortable, but

my message is move ast,

embrace the opportunities,

create new ecosystems, and

build stronger businesses and

a better society.

Matthew Key

CEO, Telenica Digital



8/36DiGitaL LiFe8

DiGitaL services surveY

HOw tO prOsper iNthe Digital revolution?

th dgl olon nlng ndnd nnoon, hh h nd dng n modl nd

n nd. Noh h mo hn o ommnon, hh ndn h n dgl oym.

commnon od ndnd hy nd o om dgl od. in Oo, tM Fom

yd o 150 x om hn od mm o nd o ho hy ln o do . phl Mhll,

ph.D., Fond nd ch rh O, tolg rh, gd hogh h ndng o h nq h.

Unlike the publishing, music,

advertising, PC and other

industries, communications

day o reckoning has been

postponed by the boom in

data services. That day is

coming, though.

Networks underpin all

digital services, which are

driving unprecedented

capacity demands and

necessitating huge

investment. Yet those

who run the networks are

receiving modest revenues

rom these services. At

the same time, their core

services, phone calls and

messaging, are being erodedat an accelerating pace,

as they move rom being

charged-or, discrete (even i

bundled) services to apps.

The big question is what to

do about it.

In October 2012, TM

Forum carried out a Digital

Services Survey o over

150 executives rom within

service provider members.

This was complemented

by in-depth interviews with

some o the communications

industrys most experienced,

senior executives. The

research revealed that digital

services represent ewer than

10 percent o overall service

revenues or 40 percent o

the respondents, while only

15 percent o participants say

they account or more than 20

percent o income sobering

gures (see Figure 2).

Service providers certainly

recognize the importance

o digital services and

particularly the tremendous

rate o market take-up.Part o the problem o

responding is that executing

transormation strategies

is a huge undertaking, and

the eld is littered with

expensive ailures. It is

even more challenging now,

given the pace o innovation,

the diversity o ecosystem

players and the prolieration

o business models.

It is well-known that

service liecycles are

diminishing, but perhaps

one o the most important

ndings o the in-depth

interviews was how much

they are shortening and the

rate o change is accelerating.

For example, one interviewee

states that some o their

companys mass market

services have had their

product liecycles shorten

rom 36 to 24 months, then

closer to 12 months.

Yet the survey ound

that crucially, many o

these services and the

need or speed are notsupported by vendors (see

Figure 6 on page 14), with

about 50 percent o new

developments relying on

in-house eorts. In the

ace o these challenges,

we anticipate that

communications service

providers will rapidly migrate

to and mimic the platorm-

based approaches that are

Service providers certainly


o digital services and

particularly the tremendous

rate o market take-up.



9/369DiGitaL LiFe

being pursued by Tier 1

players like Telenica i they

prove successul.

Key considerations include:

n How to respond to players

like Apple, Google,

Facebook and Skype, who

are oering over-the-top

(OTT) services. In particular,

under what circumstances

is it better to partner with

OTT players and whendoes it make more sense

to compete? Are there

opportunities to utilize

OTT solutions as service

enablers and mimic OTT

innovations so that they can

be used in parallel markets?

n Which key assets

and capabilities can


providers use to attain

sustainable market value

and how this is expected to

change as digital services

continue to evolve?This

can vary greatly between

mature and emerging

markets, and depending

on the starting positioning

o the service provider;

such as whether they have

control o premium content

and an established data

center inrastructure. The

positioning o the serviceprovider is also aected by

the pace o innovation and

span o experimentation,

which is one o the

hallmarks o the digital

services marketplace.

n Operational transormation

strategies, in terms o

changes to organizational

structures and employees

incentives, and IT and

network transormation.

This is crucial or service

providers to reduce costs

and become agile enough

to handle the variety o

services which customers

are demanding and their

ever-shrinking service

liecycles. With the market

itsel evolving so ast,

service providers cannot

just transorm once, but

are nding they need tochange continuously. How

and what they prioritize are

the key to success.

n Market ocus and

partnership strategies

includes market segments,

whether consumer,

small, medium and

large enterprise, and

vertical industries such

as energy, transportation

and healthcare.

Communications service

providers can no longer

dominate market

categories with vertically-

integrated solutions, but

must develop partnerships

and play a lesser role

across a wider variety o

markets. This is particularly

the case in vertical market

solutions, such as those

associated with machine-

to-machine (M2M)communications, where

they must partner with

other industry specialists,

such as in healthcare,

energy and transportation.

This report investigates

the variety o digital

service strategies that


providers are pursuing, their

progress and their plans or

the uture.

A perect storm

Industry commentators

who have been anticipating

the digital economy or

many years couldnt have

predicted the manner and

rate at which it is unolding.

Within the last ve years, the

digital economy has been

simultaneously bolsteredby the prolieration o

smart devices, application

stores, cloud computing and

the extensive application

developer communities.

This has created the

ideal conditions or digital

services to thrive and caught

many industries, including

communications, by surprise.

Global smartphone penetration

already exceeds 20 percent,

having growing rom almost

nothing in 2007, when the rst

iPhone was launched.

Figure 1 shows the

smartphone penetration

estimates among the

respondents o the TM

Forums Digital Services

Survey. It shows over hal

the respondents estimate

smartphone penetration

levels o more than 20

percent, and 19.6 percent o

respondents estimate levels

greater than 50 percent.

The penetration rate osmartphones is growing at

an astonishing rate and they

will become the predominant

type o device on mobile

networks within the next

three years. The smartphone

market is dominated by

devices that run on the

Android (Google) and iOS

(Apple) operating system

environments to acilitate

extensive application

development activity. Both

Android and Apple are well

on the way to having 1 million

Fg 1: smhon non mong ondn

0 o 10%

10 o 20%

20 o 30%

30 o 40%

40 o 50%

O 50%

Don kno

wh ng o yo mhon ?

Source: TM Forum Communications Service Provider Digital Services Survey, 201



10/36DiGitaL LiFe10

apps in their respective

stores.

Even though digital

services create massive

network trac demands,


providers struggle to

monetize digital services.

Figure 2 shows that

ewer than 16 percent o

respondents can attribute

more than 20 percent o their

revenues to digital services.We believe that in most

cases, providers with greater

than 20 percent o revenues

have well-established,

premium content oers.

All the senior industry

executives who were

interviewed one-to-one

agreed that communications

service providers have

been slow to innovate

in digital services, even

though the speed o

Fg 2: emd dgl n ng o ol n o y ondn

s -n

L hn 10%

10 o 20%

Mo hn 20%

i do no kno

aoxmly h % o yo ol n om om dgl ?


(n om dglly dld oh hn o, d nd mgng)

subscribers adoption is

placing tremendous pressure

on them to do so. The key

barriers to responding were

identied by respondents

as being company culture,

technical transormation,

strategies or identiying

protable business models

and partnership strategies.

Changing company cultures

Company culture plays animportant role in attacking

the digital services market, as

does the need to continuously

evolve organizational

structures and corporate

priorities. In our survey,

we ound communications

service providers have

made tremendous eorts

to transorm their company

cultures: over 26.3 percent

(11.7 plus 14.6 percent) o

respondents believe company

culture plays a small or

negligible role in constraining

the digital service market (see

Figure 3). Yet 34 percent o

respondents (6.8 plus 27.2

percent) eel culture remains

an inhibitor, so clearly or many

there remains much to do.

The survey ound the

cultural inhibitors are

predominantly:

n complexities in gainingconsensus among internal

departments, which

respondents attribute to

the number o departments

involved, protracted

approval processes and a

lack o accountability;

n ear o cannibalizing

established product and

service revenues; and

n risk-adverse cultures.

The survey results

generally indicate strong

support rom C-Level

executives and widespread

recognition that the

dynamics o the digital

services market will demand

continued changes in

corporate cultures. There

is also an almost universal

agreement that eorts to

shit towards Internet-centric

philosophies are much atodds with traditional telecom

philosophies.

Driving partnership

strategies

Most digital services have

ragmented value chains

which demand cooperation

among multiple ecosystem

players or solutions that

are brought to market.

There is also an almost

universal agreement

that eorts to shit

towards Internet-centric

philosophies are much

at odds with traditional

telecom philosophies.




11/361DiGitaL LiFe

Fg 3: comny l o o oh nnoon

s -n

L hn 10%

10 o 20%

Mo hn 20%

i do no kno

comny l oo l o o oh nnoon


(n o ondn)

This contrasts sharply

with traditional, vertically-

integrated telecom services.

Now communications service

providers need to partner

across the value chain and

acquire competencies in

areas o strategic importance.

The ragmentation o the

value chain is particularly

acute in the M2M market,

where solutions are applied

to a vast range o services,

rom automotive and

transportation, to energy and

smart grid, healthcare andhome security.

As partnerships become

more commonplace or


providers, they will shit

their businesses rom being

product-centric to retail-

centric. Along with the

appropriately architected

solutions, this shit will

enable two-sided business

models that bring players

together to acilitate and

monetize digital service

innovations.

Our survey showed that


providers recognize the

challenges o value chain

ragmentation. Many are

developing platorms to

orchestrate cooperation and

building partnerships with

ecosystem players. In some

cases communications service

providers are acquiring key

assets in markets they regardas strategic, such as Verizons

recent acquisition o Hughes

Telematics Inc.1 (HTI ).

The partnership and

co-opetition strategies

adopted by communications

service providers are more

complicated when they

involve OTT players. In some

cases communications

service providers compete

i yo ld cloly al o exly al, l l ny o h ollong

hh ly o h hllng xnd:

Lk o c-ll o/ldh

rk kng no nogd

No l ogm o hnnlng/dlong

nno d

No ngl dmn/no x

onl o og

innl o nd don mkng koo long o g o mk nogh

F o nnlzon o xng od/

n n od dlomn

too mny nnl dmn nold o

lh gmn nd o

0% 20% 40% 60% 80%

1s TM Forum Case Study Handbook 2013, hh n d y ll mloy o o mm omny gng on o hn gong o .mom.og/dyhndook201

Many service providers are developing platorms to

orchestrate cooperation and building partnerships

with ecosystem players. In some cases, communications

service providers are acquiring key assets in markets

they regard as strategic.



12/36DiGitaL LiFe12

against OTT players, while

on other occasions they

partner with them. Based in

the survey interviews, there

is no clear consensus among

respondents about the best

co-opetition strategies, with


providers partnering with OTT

players at varying levels.

The online survey results

illustrated in Figure 4 indicate

that 28.1 percent (25.2 and2.9 percent) o respondents

believe that partnerships

are dicult to establish,

particularly in terms o:

n identiying the right

partners or new services;

n a lack o relationships with

developer communities; and

n a lack o control over the

value chain.

The act that altogether

some 57.1 percent saw

nding the right partners

as a serious problem

also indicates that other

companies are not

necessarily anxious to

partner with them: ater all

traditional telco rules, terms

and conditions have made it

dicult to do business with

them, especially or smaller,

aster-moving companies,

who so oten have had

onerous and unsustainable

terms inficted on them.

Business cases, risk

challenge investment

The rate o innovation

and diversity o digital

services make it dicult

or communications service

providers to balance their

investments in digital

services relative to those or

legacy services. The survey

results in Figure 5 show that

31.1 percent (20.4 plus 10.7

percent) o respondents think

digital services are stifed by

Fg 4: pnh ky qmn o ommnon od o d n h dgl mk

exly l

cloly l

somh l

almo l

Do no ly

pnh ny nh dl o lh


(n o ondn)



poo hoy h nh/lk o

kll ndd o ld nd o

hogh nh

Lk o lonh h

dlo ommny

p o y lk o onol n l hn

Dl o nd h gh n

o o n

0% 20% 40% 60%

unding shortalls. The top

three challenges cited by

these respondents were:

n lacking business cases

or digital services when

compared with the revenue

streams or existing

services (cited by 51.4

percent o respondents);

n internal competition or

unds (cited by 40.5 percent

o respondents); andn limited unds mean they

can only ocus on a small

number o opportunities

(cited by 35.1 percent o

respondents).

Discussions with the

senior industry executives

revealed that they had

made considerable strides

in addressing issues around

business cases through

platorm-based solutions,

and by choosing market

solutions such as cloud

computing and M2M

solutions in vertical markets.

Some Tier 1 operators, such

as AT&T, Orange, Telecom

Italia, Telenica, Verizon and

Vodaone, have implemented

innovation labs and platorm-

based solutions as ways

o carrying out aordable

experimentation that they

hope will lead to scalable

oerings they can control.

There are notable variationsin their approaches to

platorms, particularly where

OTT providers are involved.

For example:

n The ocus o initiatives

like Telenica Digital

are clear innovate to

dominate services within

its core business, partner

with strong industry players

to develop opportunities

in new markets and

create open developer

environments to enable




13/3613DiGitaL LiFe

experimentation and the

creation o new services

(see pages 22 and 23).

n Tier 1 operators like AT&T

and Verizon in the U.S.

market are unique in that

they have nationwide mobile

coverage and regulated,

partial, xed-line coverage

across the country.

Co-opetition strategies with

OTT players vary depending

on where communicationsservice providers have xed

and mobile or mobile-only

coverage. For example,

Verizon competes or

partners with Netfix or

video services depending on

whether or not it has xed

broadband/content oers in

the respective markets.

n Telstra in Australia believes

that it can partner and

collaborate with OTT

players and introduce

deep packet inspection

(DPI) technology to

manage the delivery and

security o services. This

parallels AT&Ts proposal

to introduce toll-ree data

services and charge OTT

players or their customers

usage, in eect capitalizing

on being part o a 1-800

type data service (that

is ree to the user at the

point o consumption).

Some communications

service providers, includingSK Telecom and Korea

Telecom, are lobbying their

regulator to enable them

to charge OTT players or

access to their networks.

They are not alone: among

others, Luigi Gambardella,

Head o the European

Telecom Network

Operators association,

ETNO, wants the ITU

to change its regulatory

approach to the Internet,

enorcing some kind o

sender pays principle.

While there is much talk

o this being airer that

those who generate trac

should pay or its carriage

the less oten expressed

view is that it is a way o

extending the lie telco-

type charging models.

n Most communications

service providers are being

driven by customers to

cooperate or collaborate

with popular OTT providerssuch as Google, Facebook

and Twitter. Many service

providers anticipate there

are opportunities to

leverage widely adopted

OTT capabilities as service

enablers or broader

consumer oers.

Technical transormation

underpins proft


providers technical

inrastructure has evolved

over many decades to create

vertically integrated service

silos that are optimized or

particular products. These

vertical architectures have

proved costly and infexible. In

recent years, communications

service providers have been

eliminating silos where they

can to evolve their service

environments, and reduce

costs and risks.

This is largely thanks to

standardized, commercial othe shel approaches enabled

by TM Forums Frameworx

suite o standards-based

tools and best practices (see

page 34).

Digital services are

pushing this urther because

they need a variety o new

capabilities, including the

ollowing which respondents

to the survey identied as the

most common:

n Open development

environments to provide

Fg 5: bn hllng nd nnl ndng o f dgl nnoon

exly l

cloly l

somh l

almo l

Do no ly

inmn ndng o dlo d no od dl o

Source: TM Forum CSP Digital Services Survey, 201



wng o h oh do n h

mk nl on h n modl

ely m h ld oll nhm

innl omon o nd .g.

ldng o 4G n/ong

ip6/om non ogm

Fndng dl o d o

lk o omllng n hn

omd o xng n m

Lmd ndng o dlo d mn

onnng on mll nm o

oon

0% 20% 40% 60%



14/36DiGitaL LiFe14

service enablement and

exposure.

n Automation to reduce

costs and improve

reliability, which becomes

particularly complicated

in the case o autonomous

M2M devices where

management and

monitoring must

encompass network and

device nodes.

n Flexibility to support the

greater variety and reducedliecycles associated with

digital services. Several

respondents estimated

that the liecycles or digital

services are hal those o

their established services

and say they expect

liecycles to shrink urther.

It was generally agreed that

given the pace o innovation

and changing demands in

the digital services market,

continuous transormation

eorts would be necessary.

Figure 6 shows that 55.3

percent o respondents

(38.8 plus 16.5 percent)

believe that their legacy

systems are too complex

or expensive to integrate

into the development o

new products. O these

respondents, 82.8 percent

believed that Business andOperational Support System

(B/OSS) integration was the

major concern, while 51.7

percent also cited complex

network, platorm and cloud

integration issues.

The on-going integration

challenges are serious

issues or service providers

and were investigated

as part o the study. The

Fg 6: ingon hllng o dgl

exly l

cloly l

somh l

almo l

Do no ly

ingon lgy ym oo omlx o xn o ng h hn

dlong n od




Lk o , ndd

nd n h

cnno nd ndo o oml h

ngon l on

too mny d ndo nold,

ldng o gmnd olon

comlx ngon h nok,

lom nd lod n

rq omlx ngon h b/Oss (.g. od

log, crM, llng nd hgng, mngmn

h Oss) hh oo ky/xn

0% 20% 40% 60% 80% 100%

end-to-end management

challenges are being

addressed by the Forums

Digital Services Initiative,

and the integration o the

management layer across

multi-cloud environments to

drive service assurance is a

key part o the new, practical

Multi-Cloud Management

Packs or Digital Services,

which will be available to

members rom TM Forums

website as part o theFrameworx 12.5 release in

December 2012.

The survey results in Figure

7 show that 43.0 percent

(25.2 plus 17.8 percent) o

respondents believe they

will struggle to implement,

operate and scale new digital

services protably. The

greatest concern expressed

by these respondents is the

diculties in provisioning,

activation, subscriber

management and service

assurance.

Strategies to ride the

digital wave

The strategies that


providers are adopting rom

digital services are almost as

broad as the variety services

in the ong. Figure 8

illustrates this diversity where57.9 percent o respondents

indicate that they have

collaborative approaches

and 42.9 percent indicate

that they have competitive

business strategies or digital

services. In addition, 35.7

percent indicate connectivity-

centric strategies.

In reality, communications

service providers could be




15/3615DiGitaL LiFe

Fg 7: ingon hllng o dgl

exly l

cloly l

somh l

almo l

Do no ly

Oon dly n mlmnng/ong/lng oon o n

ol o




Hd o mng oon o

nm o on/ong omn

chllng h hgng,

n, lmn .

Dl n oonng, on

on mngmn nd

n

0% 20% 40% 60% 80%

(n o ondn)

expected to embrace all

these strategies, depending

on the services they

oer. It is this diversity o

requirements that proves

the most challenging aspect

o providing digital services

and is their primary agent or

change.

While 12.7 percent o

survey respondents lack

a clear strategy or digital

services, it is heartening to

see that almost 60 percentrecognize that partnerships

and collaboration are

necessary to succeed in the

digital services market.

Given its huge momentum,


providers across the globe

are addressing the many

challenges o digital services

with vigor, placing bets and

investing heavily in the market.

While there are dierences in

their go-to-market strategies,

the most are ocusing on our

categories o digital services,

namely:

n vertical industry solutions

and M2M, typically with

vertical sector emphasis

towards transportation,

energy and healthcare;

n cloud-based services

including established

inrastructure and platormas a service oerings

in addition to a variety

o cloud orchestration,

management and security

solutions;

n socially-orientated,

unied communications and

inotainment, which build

on their legacy in telephony

and messaging; and

n premium content with the

Fg 8: th d dgl g oommnon od

No l gy

conny: Fo on odng

onny om , hgng

o h hy onm

com: Dly om h xngdgl od y ong /

ndld ln

On: n o ly ll o o h o

hh nnlz donl n

m o onm x nddh

collo: m nh h

dgl (o h o) od nd

k o dd l o ho


0% 20% 40% 6

whh o h ollong mn d yo omny n gy

od lhd dgl (.g. ol md, , voip, lod .)

(l hk ll h ly)



16/36DiGitaL LiFe16

greatest innovation

occurring among players

that have premium

content.

Although communications

service providers are

expanding their large,

small and medium

enterprise oers, they still


o maintaining robust

consumer oers, given

the size o the consumer

market and its growing role

in dening solutions or the

enterprise market. Many

o the respondents plan to

target the small and medium

enterprise (SME) markets

by hardening consumer

solutions by adding security

and quality o service

capabilities.


providers priorities vary

among market segments,

which is illustrated in Figures

9 and 10. Figure 9 shows

priorities or the post-paid

and pre-paid consumer

markets and reveals that the

highest priority or post-paid

services are associated with

multimedia digital content

or multi-screens and

personal consumption, and

richer social media-oriented

communication services/

unied services.

This contrasts the service

priorities or pre-paid

subscribers, which are less

certain and place more

emphasis on partnering

with third-party content

and platorm providers to

deliver unique, content-rich

services, such as hybrid

social-media applications.

Figure 9 shows the

digital service priorities or

Within the prosumer/SME market, communications

service providers recognize the blending o unctionality

that is commonplace in the consumer market.

Fg 9: commnon od oonng g o lz on h dgl h onm


Dgl s po (pod conm) Dgl s po (pd conm)

Mlmd dgl onn o ml-n nd

onlzd onmon modl

indy- h Hlh,

m gd, nnl , M2M

c api o hd-y o xng

l h llng, nd go

dlo ommny ond o api

clod-d X---s .g. in-

--s (is), plom---s (p),

so---s (ss) olon nd

l/mol dko

pn h hd-y onn nd lom

od o dl nq, onn-h

.g. hyd ol-md lon

rh, ol md-ond ommnon

/nd ommnon

0% 20% 40% 60%

No ll MdmLo Hgh


onlzd onmon modl

indy- h Hlh,

m gd, nnl , M2M

c api o hd-y o xng

l h llng, nd go

dlo ommny ond o api


--s (is), plom---s (p),

so---s (ss) olon nd

l/mol dko


od o dl nq, onn-h

.g. hyd ol-md lon


/nd ommnon

0% 20% 40% 60%




17/3617DiGitaL LiFe

the large enterprise and

prosumer/SME market

segments. In these markets,


providers are placing higher

priority on industry specic

services such as eHealth,

smart grid, nancial services,

M2M and cloud-based

X-as-a-Service such as

Inrastructure-as-a-Service

(IaaS), Platorm-as-a-Service

(Paas), Sotware-as-a-Service

(SaaS) solutions and virtual/

mobile desktop.

In addition, within the

prosumer (see page 27)/SME

market, communications

service providers recognize

the blending o unctionality

that is commonplace in the

consumer market, giving

some emphasis to richer,

social media-oriented

communication services/

unied communications.

Unifed communications

go social

By stressing richer,

social media-oriented

communications,


providers are augmenting

their old-style telephony

and messaging oers, with

social and Internet messaging

capabilities. This can be

broadly classied as social

and unied communications.

The viral adoption o social

networks like Facebook

illustrates how radically and

quickly communications is

changing and the robustness

and scalability o social

communities. As unied

communications gain broader

market adoption, users

identities become blurred

with the prolieration o IP-

based social networking and

messaging solutions.

Fg 10: commnon od oonng g o lz on h dgl h n,om nd sMe


Dgl s po (Lg en) Dgl s po (pom/sMe)


onlzd onmon modl

indy- h Hlh,

m gd, nnl , M2M

c api o hd-y o xng

l h llng, nd go

dlo ommny ond o api


--s (is), plom---s (p),

so---s (ss) olon nd

l/mol dko


od o dl nq, onn-h

.g. hyd ol-md lon


/nd ommnon

0% 20% 40% 60% 80%


onlzd onmon modl

indy- h Hlh,

m gd, nnl , M2M

c api o hd-y o xng

l h llng, nd go

dlo ommny ond o api


--s (is), plom---s (p),

so---s (ss) olon nd

l/mol dko


od o dl nq, onn-h

.g. hyd ol-md lon


/nd ommnon

The viral adoption o social networks like Facebook illustrates

how radically and quickly communications is changing and

the robustness and scalability o social communities.

0% 20% 40% 60% 80%

No ll MdmLo Hgh



18/36DiGitaL LiFe18

Encouragingly, many o

the surveys respondents

recognize they cannot rely

on using their control o the

subscribers phone number

as a means o controlling their

customers identities, hence

will be increasingly pressured

to embrace and integrate

other communities such as

Facebook and Twitter.

Players like Telenica

are developing platormcapabilities to compete

directly against OTT players

in their core markets and

collaborate in areas where

OTT providers can extend

oers into new markets.

Others like AT&T, Telstra,

Turkcell and Zain Group are

taking more partnership-

oriented approaches.

In addition, we generally

observed a tendency or

smaller players in their

respective markets to partner.

Service liecycles

are diminishing due to

accelerated innovation. One

interviewee states that some

o their mass market services

have seen product liecycles2

decrease rom 36 to 24

months, then closer to 12

months. In addition, many o

the new services lack vendor

support, with about hal o

new developments relying

on in-house developments.

In the ace o these

challenges, we anticipate

that communications service

providers will rapidly migrate

and mimic the platorm

approaches being pursued by

Tier 1 players like Telenica

i they prove successul.


providers are looking to

platorms that underpin theirsocial media and unied

communications strategies,

that will provide highly

reliable core communications

on the one hand while

enabling innovation on the

other. This includes eciently

integrating personal

subscriber inormation with

other relevant service and

business intelligence.

Although many platorm

initiatives target next

generation network

technologies, they are equally

relevant to 2G network and

SMS messaging environments.


providers globally are using the

services platorms to bundle

innovative SMS messaging

and telephony services. As an

example, Zain Group recently

used its value-added services

(VAS) platorm as the basis

or a purpose-built platorm

or tracking the location and

maintaining the security o

a group o Haj pilgrims rom

Pakistan.

Cloud services have

a silver lining

The promise o capital and

operational eciencies,

and aster service delivery

is driving the prolieration

o data centers and cloudservices. Indeed, cloud was


providers number one priority

regarding their strategies

to capitalize on the digital

services with enterprises,

prosumers and SMEs as

illustrated in Figure 9. They

are clearly anticipating robust

revenue opportunities rom

cloud services.

Almost all the Tier 1


providers have been acquiring

or building massive data

center resources and oering

a variety o IaaS and/or PaaS

oers or many years. Now

they are expecting that

demand or cloud services

will evolve in parallel to the

digital services market and

with the prolieration o

mobile broadband, driving the

need or:

Communications service providers are looking to

platorms that underpin their social media and unifed

communications strategies, that will provide highly

reliable core communications on the one hand while

enabling innovation on the other.


2See TM Forums Product Lifecycle Management an introductory guide,whichwill be available ree to members rom the Forums website rom December 2012.



19/3619DiGitaL LiFe

n continued cloud service

capacity provided through

inrastructure, platorm and

SaaS oerings;

n increased security

demands, such as in

identity management and

data protection; and

n The orchestration o

services across public and

private cloud boundaries.

Premium content hitsthe multiscreen

Many service providers, like

AT&T, Comcast, Telstra and

Verizon, have the rights to

premium video content such

as sports and news channels.

They are capitalizing on this

content with multiscreen

strategies or delivering

content among TVs, tablets

and smartphones.

For example, Telstra in

Australia leverages its rights

to Foxtel video and exclusive

rights to sporting events,

delivering the content across

company-branded tablet and

smartphone devices. Telstra

also bundles its service with

other inotainment, such

as messaging and music

services.

Verizon also oers a

multiscreen solution and

partners with players like

Netfix and Redbox to enable

delivery o content to mobile

devices outside its xed

broadband ootprint.

Players like Telstra and

Verizon dont believe that it

is necessary to control the

ownership and aggregation

o content, rather they are

ocused on controlling the

distribution o content and

associated transactions. Their

agenda is to ensure usersconsume more content in

more places.

As weve mentioned

already, communications

service providers could

benet greatly by integrating

premium content with other

social media and unied

communication capabilities to

improve users experiences

and benet rom third party

service innovations.

Even communications

service providers who lack

direct control o premium

content recognize its

importance in their overall

digital media strategies. Their

strategies involve acquiring

premium content assets (such

as via Netfix), identiying

ways to wrap the content to

add value and dierentiation

to the content, and integration

across devices to ensure it

Pervasive communications, web services and developer

communities, and the availability o low-cost sensor

networks is driving opportunities in vertical markets

and machine-to-machine services.

can be consumed how, when

and where the customers

choose.

In Figures 9 and 10, the

role o third-party content or

rich service does not receive

as high a priority as many o

the other capabilities listed.

However, in interviews

with senior executives rom


providers, it is clear they

believe premium content,whether acquired directly or

through partnerships, will

play an important role in the

consumer market in uture.

Vertical markets and M2M

Pervasive communications,

web services and

developer communities,

and the availability o low-

cost sensor networks is

driving opportunities in

vertical markets and M2M

services. Most notably,


providers are pursuing these

opportunities where they have

achieved a high penetration

rate or their services and are

seeking ways o extending

the market and their income.

Hence M2M solutions are

being widely implemented

by communications service

providers across a variety

o industries, including

healthcare, energy,

transportation, smart cities,

retail and exploration. They are

partnering with (and in some

cases acquiring) companies

which have specialist vertical

capabilities and expertise

needed to deploy and run

M2M services.

Communications

service providers are also

implementing their ownplatorms or partnering

with companies like Jasper

Wireless to deliver common

device management and

basic service orchestration

unctionality or M2M

services. Others are working

to oer the expected rise

in demand or sophisticated

network and device end-point

management systems to

ensure they perorm reliably

and securely.

Most o the Tier 1

respondents to our survey

have established M2M

initiatives, resulting in a

slew o partnerships with

companies like Mercedes

and BMW in the automotive

industry, GE Healthcare

and Johnson & Johnson in

healthcare, and Tesco in retail

Throughout the interviews,

M2M services were the



20/36DiGitaL LiFe20

most commonly identied as

requiring partnership.

The key challenges that

respondents associate with

M2M services include:

n the need or low-cost,

automated service

provisioning and

management;

n industry standards,

particularly or interaces

across the ecosystems; andn nimble IT inrastructure

able to mash M2M with

other capabilities, such

as social networking and

inotainment in the case o

automotive.

The survey results shown

in Figure 11 indicate that


providers have diering

strategies towards the M2M

market and between verticals.

Most commonly they plan

to position themselves as

inrastructure and connectivity

providers, ollowed by platorm

providers. Fewer than 30

percent o them plan to

dominate their respective

vertical and M2M sectors with

pre-packaged solutions and

some 15 percent have no

clear strategy.

These results align withthe one-on-one interviews

with senior executives rom


providers. However in these

discussions it became clear

that service providers are

more likely to oer end-to-end

solutions in M2M markets

which are ragmented and

without clear ecosystem

leaders, such as in smart cities

or smart-building solutions.

Conclusions

In the ace o major

disruption, communications

service providers across

the globe are transorming

to respond to the digital

services challenge. Although

our study demonstrates

their approaches are varied,

several key trends are

evident. In particular:

n communications service

providers generally

recognize that partnership

strategies3 are core to

their success as digital

services become more

common. These strategies

require a cultural shit

as well as the service

providers identiying the

areas where they can best

add sustainable value.

Our survey revealed

that communications

service providers perceive

the most challenging

partnerships to be those

associated with the

OTT players, where the

boundaries o co-opetition

have yet to be properly

established.

n Internal organizational

issues hamper the progresso communications service

providers digital service

strategies. Some progress

has been made, but internal

culture and structures

are generally slow to

embrace Internet-centric

philosophies, which are

so at odds with the ethos

o traditional telecom. To

overcome these challenges

Fg 11: commnon od gonnng l mk

No l gy

conny: pod inn onny,

nldng omzd o nok nd

ll

in: pod dnd n

(xldng onny, .g. lod-

om, y, qly o , .)

plom: pod lom o l o oh

l o dl nd mng dgl

(.g. mngd M2M )

Domn: pod -kgd, nd-o-nd

dgl olon dly o o

l (.g. od hlh monong

dly o hlh od)


0% 20% 40% 60%

whh o h ollong mn d yo omny n gy

od lhd n l-od dgl (.g. Hlh, m gd,

lm, .) (l hk ll h ly)

Internal organizational issues hamper the progress

o communications service providers digital service

strategies. Some progress has been made, but internal

culture and structures are generally slow to embrace

Internet-centric philosophies.


3See Managing partnerships an introductory guide, which will be available tomembers rom the Forums website rom December 2012.



21/362DiGitaL LiFe


providers are hiring

personnel and in some

cases acquiring companies

to gain competencies.

n The transormation o IT

and operations is critical

i communications

service providers are to

support digital services

reliably and economically.

Successul transormation

strategies involve muchmore than optimizing

legacy systems. They

need highly automated

solutions which anticipate

the autonomous nature o

many digital services, plus

the consistency to enable

third-party development.

Horizontal integration

is necessary so that


providers can monetize the

intelligence encompassed

in IT and operational

systems, and o course

as discussed on page 8,

there is the burning need

or aster time-to-market

as competition hots up and

service liecycles become

much shorter. TM Forums

new Digital Services

Initiative and its Frameworx

suite o standards-based

tools and best practices

are designed to help its

members do exactly that

see page 34.

Although IT and

operational systems

transormations to support

digital services are still

in the early stages, Tier

1 players like Telenica,

Vodaone, Telecom Italia,

Orange and Verizon

are betting on platorm

solutions which denetheir commercial strategies

or business services.

We expect the most

commercially successul

platorms and approaches

will be adopted by other

providers.

n Throughout the study,


providers identied M2M

as being core digital

services that they had

already (or were planning)

to implement. The M2M

verticals that were regularly

identied in the study were

energy, healthcare and

automotive/transportation.

The communications


partnering with companies

which have vertical industry

expertise or acquiring

companies to gain it.

n Many o the


providers interviewed in

the survey have extensive

data center resources rom

which to deploy a variety

o cloud-based services,

including traditional IaaS

and PaaS oerings, plus

service orchestration

among public and private

clouds, and a variety o

security services.n Premium content eatured

prominently in our survey,

particularly among those


providers which have

access to it, whether

through ownership rights

or partnerships. Many


providers are looking to

capitalize on their premium

content with multiscreen

strategies which span TV

screens, tablets, laptops

and smartphones, and

incorporate a variety o

personalized, targeted

advertising solutions.

n Communications


most challenged by their

strategies or social media,

unied communications

and OTT inotainment.

Most notable are

partnership strategies

or OTT voice and instant

messaging providers

and social networks like

Facebook. In most cases,


providers have opted to

partner with the respective

providers and anticipate

that they can add value to

the improved customer

experience they enable.Some Tier 1 providers like

Telenica have opted

to partner with the OTT

players or innovative new

services and compete or

services such as unied

communications that it

regards as core to its

business.

Big changes right across

the digital landscape

are redening the

communications industry.

It is entering an era o

extensive experimentation

and the emergence o

business models and service

oers that are not even

contemplated today.

TM Forum would like to

thank all those who took part

in the survey or their time

and insights.

Many communications service providers are looking

to capitalize on their premium content with multiscreen

strategies which span TV screens, tablets, laptops and

smartphones, and incorporate a variety o personalized,

targeted advertising solutions.



22/36DiGitaL LiFe22

iNNOvatiON

HOt 10 areasfor innovation

innoon m on o h mo lkd-o o gh o h n n m.

eyon n o nno, y h mh nny o ho nd h o n h m,

ln nd nd. H, ann tn xlo 10 ho h olng on o nnoon.

Beore we embark on

our exploration o these

areas, it is worth refecting

that innovation is oten

seen as being something

entirely new, but this is not

necessarily the case. The

denition o to innovate,

according to The Oxford

English Dictionaryis to

introduce as something

new to make changes.

Hence innovation4 is not

solely about the exotic and

original, its oten about

doing what you do already

but better whether aster,

cheaper, more eciently

and more eectively, or a

combination o all o them.

Its also about a mindset

seeing the possibilities,having the wits to act on

them and push that action

through. This might mean

making big changes or

renements as you go along

or even abandoning a project

at a late stage i it turns out

to be impracticable.

The key is to learn and i

youre going to ail, ail ast,

learn and move on, closely

coupled with never losing

sight o the customer and

understanding how what

youre proposing will aect

them.

Whether its looking to

pricing models that more

closely refect what services

cost to deliver and support

investment in next generation

inrastructure or launching

a new portolio o digital

services, these two rules

apply.

#1 Execution is the key

There is no such thing as a

billion dollar idea, the key

is execution how you

put it into practice. Simplyconcentrating on a bright

idea, rather than how you can

make it happen, is doomed

to ailure. This combined

with a constant ocus on

the customer has to be

the top consideration, no

matter what course o action


providers are considering.

Or as Tim Cook, now CEO

o the worlds most valuable

company ever, Apple,

reportedly said in the 1990s:

I youve lost the battle, one

way to win is to move to a

new battleeld.

At that time, Microsot was

at its peak while Apple had

had a near-death experience

in 1997.

Apple continued with and

greatly improved its existing

business, paring down its

complex, large portolio o

products and continuing to

pay close attention to the

design and user interace o

the new ones.

Under Cooks oversight,

it also straightened out itsmessy supply chain (although

at the time o writing, this

problem had again reared its

ugly head in the atermath

o the iPhone 5 launch), and

all while looking or pastures

new. In 2001 the company

introduced the iPod and

iTunes, paving the way or

Innovation is oten about

doing what you do already

but better whether aster,

cheaper, more efciently

and more eectively, or a

combination o all o them.

4See TM Forums Creating an Innovative Organization an introductory guide, available ree to members rom our website rom December 2012



23/3623DiGitaL LiFe

the iPhone in 2007, the App

Store in 2008, the iPad (2010)

and iCloud in 2011.

On the way through, it has

all but destroyed the music

industrys business model,

changed the ace o the

Internet and mobile phones,

had a proound impact on

the communications sector,

dealt a hammer blow to

the PC market and, as a

sideline, the late Steve Jobs

also transormed animation

through Pixar.

Apple is perhaps the

exemplar o the all-important

point that innovation doesnt

have to be about new ideas,

execution is the key. The

MP3 ormat had been around

or years beore Applebundled it into an easy-to-

use ecosystem that was

seamlessly integrated with

a series o highly desirable

consumer devices.

It speaks volumes that

company names which

become the words or

various digital unctions to

Google is to search online,

to Skype is to use VoIP

(although most o its users

probably dont know that),

Facebook is synonymous

with social networking and

PayPal with paying or things

securely and painlessly online

werent new ideas as such.

They succeeded because

they made things that people

wanted to do easy, thereby

playing to mass markets

rather than geeks.

Its also a sharp reminder

that innovation isnt

something you do once

remember when the Sony

Walkman was a world-

beating, mass market brand

and product, synonymous

with personal music?

#2 Dont write o small

ideas as not being

sufciently impactul

Theres another big lesson

rom Apples story too or

the music companies who

agreed to allow Apple to sell

their inventory on a revenue-

share basis, iTunes didnt

move the needle at the

time. They ailed to see that

iTunes would all but destroy

their highly protable, time-

honored business model,

as one wit pointed out, by

making it easier to buy digital

music tracks than steal them.

Likewise its all too easy

or service providers who run

multi-billion dollar operations

to write o relatively small

ideas as not being suciently

impactul to bother with.

They would do well to

consider M-PESA in Kenya,

which has between 20 and

30 percent o the countrys

gross domestic product

fowing through it annually

(estimates vary).M-PESA accounts or some

16 percent o Saaricoms

(provider o the M-PESA

services, now owned by

Vodacom) revenue, more

than it makes rom SMS. But

the real point is that it is hard

to put an exact gure on how

much Vodacom has gained

in terms o customer loyalty

and rst-mover advantage

through M-PESA. New

services arent just about

protability, but attracting

and keeping customers,

strengthening the brand and

giving customers what they

want and beneting rom

partnerships.

Again M-PESA is a good

illustration: although Kenyas

banks vigorously opposed

M-PESA initially, they have

beneted greatly. They stand

to gain a whole lot more

too, as Saaricom moves

to transorm M-PESA into

a multi-play ecosystem,

building a platorm that will

orm the heart o its value-

added services. It will deepenand expand its relationships

with nancial institutions to

broaden its portolio and also

intends to open the platorm

up to other third parties to

enable them to oer services

too.

In a nutshell, Saaricom is

seeking to increase customer



24/36DiGitaL LiFe24

loyalty (in part through a new

M-PESA top-up scheme that

oers 10 percent discount

see page 28 or more about

the importance o pricing

innovation) and through

better, more consistent

customer experience across

the board.

In the next section we

look at how some service

providers are already tackling

the challenge o creatingnew lines o business and

business models while

running (and improving) their

core operations.

#3 Implementing big

changes while running

core activities

The communications industry

has been talking about

transormation or a long

time, but oten what weve

described as transormation

has in act been about

improving what we do

already, rather than making

undamental operational

changes and introducing new

revenue streams.

The act is, service

providers need to do both

and the ocus on innovation

around digital services must

be proportionate as revenue

streams will be small in theshort and medium term.

For instance, Telenica

reckons its core revenues are

likely to drop by around 25

percent by 2015, while digital

will only make up around 10

percent o the total over the

same period. Its critical that

operators do not lose sight o

the importance o managing

their core business as well as

they can and there are lots

o improvements that could

be made, particularly around

customer experience, which

needs to be embedded in all

approaches.

It has been noted many

times that innovation is

requently stifed by the

dead hand o the parent

corporation, and that one

solution is to set up an

incubator or separate businessunit that is not imbued with

the corporate culture.

Little wonder there is a

growing trend or ormer

telcos to disaggregate into

ocused business units. For

instance, in March 2012,

Singtel Optus announced the

ormation o three business

units, including Group Digital

Lie, whose aim is to become

a leading player in the digital

ecosystem, with innovative

digital services, while leaving

the rest o the business to

get on with its core activities.

However, Telenica s

similar move has attracted

the greatest amount o

attention. In September

2011, the service provider

announced a new division,

Telenica Digital.

The company says, Its

mission is to seize theopportunities within the

digital world and deliver

new growth or Telenica

through research and

development, venture

capital, global partnerships

and digital services such as

cloud computing, mobile

advertising, M2M [machine-

to-machine communications]

and eHealth, (see page 27).

At the same time,

Telenica reorganized

geographically into two

units: Latin America will

continue as a business unit,

while Spain has been olded

into the wider European

operation. In addition, the

company has set up a global

resources unit, running HR,

group purchasing, IT and

technology.

There is acute interestin how things work out or

Telenica, certainly i things

appear to go well, it could

become the blueprint or

running a communications

services company.

#4 Devices: Whats HTML5

got to do with anything?

I you dont get it yet, you

will. The arrival o HTML5

the mark-up language or

presenting web content is

going to have big implications

or the communications

industry in the widest sense

and on many ronts.

Apple bet against the

Internet and Google with

its App Store and in the

short-term at least looks

to have won spectacularly.

The beauty o the App Store

(apart rom the revenue

share or the storekeeper)is that the contents are

pre-packaged, optimized or

mobile, task-specic and

screened or conormance to

these principles.

HTML5 has the potential

to enable communications

service providers to break

the app stores stranglehold

and move out o the walled

gardens back into the wild

Apple bet against the

Internet and Google with

its App Store and in the

short-term at least looks

to have won spectacularly.

iNNOvatiON



25/3625DiGitaL LiFe

o the true Internet and

some operators havent been

slow to see the potential.

The big shortcoming o

app stores is the level o

control exerted by Apple in

particular. The Maps debacle

is a good example o how

this will become increasingly

annoying or users many o

whom preer Google Maps

on their iPhones through

the browser, in what isessentially an HTML5 app.

In February 2012 Telenica

Digital announced it is to

develop a phone built around

what it called the Fireox

mobile OS, working with

Fireoxs creator, Mozilla

the beta version went live in

November 2012. They will

develop an architecture to

support HTML5 applications

on phones using web

application program

interaces. Those HTML5

applications will access the

underlying capabilities o

the phone that previously

were only available to native

applications.

The strategy is to reduce

mobile operators reliance

on other mobile operating

systems and provide a range

o eature-rich handsets,

including low-cost onesto drive the take-up o

smartphones in developing

markets. In July 2012,

Telenica Digital announced

it had secured support or

its plans rom Deutsche

Telekom, Etisalat, Smart,

Sprint, Telecom Italia,

Telenica and Telenor or

the project and would oer

Fireox OS-based devices in

Brazil early in 2013.

Whether or not HTML5-

based mobile apps will

supplant native mobile apps

in some markets at least

remains to be seen. Certainly

the LiMo Foundation, an

operator-backed initiative

that proposed using Linux as

an open mobile OS, did notachieve its goals, although

the world has moved on

since then.

On the plus side, the

take-up o mobile services

in emerging economies

is booming (Arica is now

the second biggest market

ater Asia-Pacic) and there

is a huge pent-up demand

or aordable devices or

Internet access.

It is possible that in

developed markets, well

see users reacting against

being orced to choose

between competing, closed

ecosystems, which is where

we seem to be heading with

Amazon, Apple, Google and

Microsot, with the latter two

moving into producing tablet

devices intended to compete

with the iPad, iPhone and

iTunes.The combination o

HTML5, prolieration o LTE

and more widespread use o

Wi-Fi to ofoad trac rom

cellular networks are likely to

result in more content (see

page 27) being stored in the

cloud, making consumers

more agnostic about devices

and operating systems.

As Randal Stephenson,

CEO, AT&T, has argued, this

should drive down the price

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