Hosted VoIP

Earlier this month, I participated in eComm 2009, which is a very different type of conference from ITEXPO (News - Alert). The focus there is more about the overall challenges facing the telecom industry, along with a look at emerging opportunities for service providers. I came away with a number of ideas that fit well with my column, and this edition will start with some big picture themes. Over the course of three days, we heard from a few dozen speakers covering a wide range of topics, and what follows is a composite sketch of the major themes I think service providers need to focus on.

 

Regardless of what type of service provider you are, the business economics are changing faster than your ability to adapt. We’re all familiar with the scenario of declining revenues for core services and the shifting patterns of how subscribers communicate. Wireline is shifting to wireless, TDM is shifting to IP, revenues are shifting from voice to data, single mode is shifting to multimode, bandwidth is shifting from being scarce to abundant, paid is shifting to free, leadership is shifting from conventional players to industry outsiders, etc.

 

Each of these shifts poses fundamental implications for service providers, and taken together, they present an almost insurmountable challenge for those not prepared to adapt. This outcome was spelled out clearly during a presentation from Ribbit (News - Alert), which used a Darwinian framework to explain how natural selection determines survival. The key idea here is that the worlds of telephony and computers are becoming so intertwined that a new species is emerging, and in essence, will represent the next stage of evolution in communications.

 

This may seem too abstract for today’s service providers, but after hearing numerous variations on this theme over three days, I have no doubt there is a great deal at stake here, and I know that most service providers struggle with these issues every day. This is particularly true for Tier 1 operators, who generally understand the landscape, but by virtue of their size and organizational structure, are greatly constrained in their ability to respond.

 

While these operators have two valuable assets – a network and paying subscribers – we saw numerous examples during the conference of why it is so difficult to leverage them in today’s market. New services simply take too much time and money to launch and the success rate is too low. Martin Geddes - now with British Telecom – spoke about how operators have not been innovative, and one does not have to look far see that virtually all of today’s hot products and services are coming from outside the telecom space.

 

So, where does this leave service providers? For those willing to embrace what’s coming, there is lots of opportunity. We heard from several thought leaders about emerging technologies and business models that any service provider can take advantage of. The key lies in looking beyond traditional services and finding ways to incorporate new things. That’s a given, but what it really means is thinking about providing value around the overall communications experience, and not just telephony. Most service providers are moving in this direction, but there is still a lack of understanding about what defines value for end users. This is especially true in the consumer world, where the end user is usually the paying subscriber, so there is a very direct connection between supply and demand. To varying degrees, value is defined by a mix of services paid for by the subscriber, and increasingly from free services subsidized by advertising.

 

This mix is less prevalent in the business world, and there is the added challenge of the disconnect between end users and those who pay the bills. Aside from the low end of the SMB market, most business end users do not pay directly for these services, making it quite difficult to define value. In this economy, most service providers addressing the business market do not have the luxury of conducting market research with customers to learn what value really means to them.

 

In these cases, the onus falls on the service provider to think and act outside the box and not be afraid to try new things. We saw many examples at the event of applications that can be brought to market quickly and inexpensively, which greatly reduces the risk of tweaking the value proposition. Part of thinking outside the box involves creating new experiences. One of the profound aspects of Internet communications is that for the first time, innovation in consumer applications is ahead of the business market. As the blended work/home digital lifestyle becomes the norm, service providers should be looking at how to adapt new consumer applications for business use.

 

Social media is the most obvious example, and the audience was very friendly to the likes of Twitter, Facebook (News - Alert) and Flickr. They are just as likely to use these tools for everyday work as they are for being social with friends and family. While there may be limited potential to monetize these tools with business customers, their importance is growing in terms of the value equation.

 

The key is finding ways to add these to the overall mix in order to provide a more complete communications experience. Otherwise, business customers will scale back their service and look elsewhere for the rest, which increasingly can be found on the Web through any number of cloud-based offerings. The cloud opens up another topic altogether, but not in this segment. I’ll simply conclude by saying there were a number of business-focused offerings at the event that build further on the cloud concept and social media, and will discuss them further in my next column.