Alcatel-Lucent

Between April and June 2009, we embarked on a study and talked to representatives from approximately 35 global ACPs to understand how players in the value chain could collaborate to combine the trusted capabilities from the network with the speed of innovation from the Web. We asked them questions like:

• What capabilities would be valuable to their applications and content?
• Who did ACPs typically partner with to deliver applications?
• Who might they be willing to partner with?
• What were the challenges and opportunities of partnering with network providers?

Here’s what we learned.

ACPs see benefits in working with NPs

As part of the Alcatel-Lucent study, ACPs were asked about areas where they thought working with NPs would provide the most benefit. Following are the top 5 areas our respondents identified, in order of importance:

1. Bandwidth availability
2. Quality of Service (QoS) reliability
3. Subscriber data
4. Identity management
5. Scalability

The research confirmed our hypothesis that NPs are uniquely positioned to offer selective exposure to the network capabilities identified above. It also validated that together ACPs and NPs can create new value in a managed and secure way. This collaboration can facilitate new business models and improve revenue growth as well as return on investment.

When should this collaboration start? Right now. Independent of NPs’ market strategy, we believe that the infrastructure required for innovation is the same, whether exposing capabilities to their own in-house teams, or to a trusted circle of partners, or to a wide community of developers. And irrespective of the type of partner they choose, the result is the same—reduced time-to-market and cost of service creation. Following are a couple of real-world examples that are starting to demonstrate value.

ng Connect is one example of an industry initiative that brings together a broad spectrum of partners in an ecosystem. They are collaboratively developing proofs of concept, expanding the boundaries of business opportunities and accelerating time-to-market. Ultimately, it’s about increasing the value for all players in the chain and accelerating the speed for new service introduction.

Sprint is an example of a network provider exposing location capabilities to ACPs for service innovation. They are using the location information from end users (opted-in, of course) while protecting the privacy and security of their customers.

By obtaining access to a user’s location, new exciting technologies such as Geofencing—a virtual fence that is activated when a user enters or exits an area—is now a reality. With Geofencing, users receive location-relevant content at the right place and time. Imagine craving your morning coffee and then receiving a coupon for 50% off at your favorite coffee shop directly to your phone when you approach that location.

Speeding up innovation

Traditionally, software has been developed and sold in big chunks. It is now developed in smaller reusable pieces, such as APIs, enabling rapid innovation.

These APIs are ultimately small pieces of software that perform a particular function. Developers take the functions and mix them together to create new applications. Google Maps is an example of a popular API that many developers and end users can tap into to create new applications and “mash-ups.”

In a technology-intensive industry, everyone is trying to figure out how to speed up new services and applications development. And on the Web, the speed and pace of innovation is fast. APIs allow many developers to come up with new ideas and implement them very quickly. Creativity comes from a lot of different sources, including multiple internal organizations, developers and end users. Speeding up innovation and reducing time-to-market, development costs and risks are key reasons to use APIs.

Today, some NPs are exposing select capabilities, such as location. ACPs can use these capabilities to create mash-ups with other third-party services to deliver innovative applications. (See Figure) This exposure occurs on top of a High Leverage Network (HLN). The HLN allows NPs to have the lowest cost per bit as well as instrument the network to bring in new revenues and implement new business models.

Application enablement combines the innovation from the Web and trusted capabilities of the network

The opportunity is significant

We estimated the ACP market was approximately US $800 billion (€572.5 billion) in 2008 and growing at double digits. This market includes:

• Search/graphical advertising (e.g. Google)
• e-Commerce (e.g. Amazon)
• Online travel planning (e.g. Expedia)

But the growth in this market will stall unless new investments in infrastructure are made and new value can be passed from the network to the applications with a resulting improvement in the end-user experience.

Our initial estimates indicate that a new market can be created by expanding the relationship between ACPs and NPs. We anticipate at least an additional US $100 billion (€71.5 billion) can be created over the next 5 years. The new expanded market would offer among other things:

• Highly scalable or elastic bandwidth
• Traffic and quality management
• Immersive communication capabilities
• Personalization and payment with privacy management

Today, a number of ACPs have relationships with NPs, particularly in the mobile space. However, without expanding collaboration, end-user experiences will deteriorate due to bandwidth-hungry applications and video.

NPs have an interest in exploring further value from the network and have an opportunity to gain in areas including:

• New business models such as revenue-sharing and software-as-a-service
• New revenue streams from subscribers, advertisers, verticals and third parties
• Expanded business opportunities using network capabilities in new ways, including multiscreen services

ACPs can benefit when NPs selectively expose network capabilities. This exposure can enable the efficient creation of richer applications with less risk and quicker time-to-market.

End users can benefit with innovative new applications and a non-intrusive, personalized experience. Content is no longer tied to a single service or platform, but is available in the format people want whenever and wherever they want it. It’s about end-user control, simplicity and efficiency. End users, both consumers and enterprises, will reap the most rewards from ACP and NP collaboration.

Conquering challenges

Our respondents positioned NPs as the second most valued partnership type needed in an ecosystem to deliver services and applications. NPs were positioned right after hosting/utility providers. This is not surprising because ACPs need cost-effective, scalable, on-demand capacity, which has often been delivered by hosting/utility providers.

NPs can help familiarize ACPs with network capabilities that can augment and differentiate services offered by ACPs, resulting in the expanded revenue prospects that collaboration can offer. NPs must make it very clear to ACPs that what NPs have to offer complements, rather than competes with, the ACP offerings.

NPs can enhance their value as a potential partner to an ACP by offering:

• Diverse partner ecosystems
• Subscriber data knowledge
• Variable business/cost models
• Enhanced security features

Exposing network capabilities in a secure and controlled way is the first step to automate and speed service creation and innovation.

What’s next?

We’ve learned that ACPs are exploring possibilities and weighing their options. NPs are in the position to selectively expose trusted capabilities from the network. As ACPs and NPs begin to work together, the following things will need to be addressed:

• Raise awareness of:
• NP differentiation and capabilities
• ACP requirements and business challenges
• Develop mutually beneficial business models for all players in the value chain
• Find ways to measure value

Our findings indicate that collaboration between ACPs and NPs can provide an opportunity to broaden the channel, provide business model stability, and bring a better experience to the end user. What is your view?

We are always interested in hearing what our readers think. Are there additional challenges and benefits that you’ve experienced? What are your plans for working in this space? We’d like to hear from you in the comment section below.

If you are interested in learning more about the results of our application enablement primary research, contact enrich.editor@alcatel-lucent.com.

To contact the author or request additional information about this article, please send email to enrich.editor@alcatel-lucent.com.