Carriers have lost a great deal of their relevance for end users. People of all shades, individuals, employees, information workers, etc, are looking for solutions that meet their demand, not connectivity per se.
In our view, four trends matter significantly for carriers since they strike at the heart of their customer facing relationships in the shape of changing end-user behaviour:
Applications have become the focal point for end-users. Phone or connectivity features are less interesting. The carrier brand is not seen as the destination to turn to for app-demand. Merely 18% of business users would turn to a carrier for apps compared to 49% who go directly to the classic app stores. Carriers ought to get closely involved in HTML5 development as it paves the way for OS-independent Web-based apps, thus potentially limiting the influence of operating systems like iOS or Android over the ecosystem. Carries must strive to accommodate where possible app developers to remain somewhat influential ecosystems players.
Users buy devices directly. There is an increasing push by device manufactures (traditional like Samsung and Apple and emerging such as Google, Amazon etc) to sell devices directly to the customer, both business and consumer, and outside the carrier channel. This robs carriers of their main service distribution channel and undermines their potential to monetise value added services.
Carrier-selection is becoming more ad-hoc and temporary. The emergence of embedded software SIMs “interrupts” the relationship between user and carrier. End-users will increasingly be able to select carriers after they purchase a device and for certain circumstances like content consumption or for international roaming. As a result price wars for basic connectivity will increase once again.
SaaS vendors must collect customer insights for innovation and compliance.
As of the end of last year, about 30% of companies from our Forrsights Software Survey, Q4 2011, were using some software-as-a-service (SaaS) solution; that number will grow to 45% by the end of 2012 and 60% by the end of 2013. The public cloud market for SaaS is the biggest and fastest-growing of all of the cloud markets ($33 billion in 2012, growing to $78 billion by the end of 2015).
However, most of this growth is based on the cannibalization of the on-premises software market; software companies need to build their cloud strategy or risk getting stuck in the much slower-growing traditional application market and falling behind the competition. This is no easy task, however. Implementing a cloud strategy involves a lot of changes for a software company in terms of products, processes, and people.
A successful SaaS strategy requires an open architecture (note: multitenancy is not a prerequisite for a SaaS solution from a definition point of view but is highly recommended for vendors for better scale) and a flexible business model that includes the appropriate sales incentive structure that will bring the momentum to the street. For the purposes of this post, I’d like to highlight the challenge that software vendors need to solve for sustainable growth in the SaaS market: maintaining and increasing customer insights.
Corporate CIOs should not ignore the network-centric nature of cloud-based solutions when developing their cloud strategies and choosing their cloud providers. And end users should understand what role(s) telcos are likely to play in the evolution of the wider cloud marketplace.
Like many IT suppliers, telcos view cloud computing as a big opportunity to grow their business. Cloud computing will dramatically affect telcos — but not by generating significant additional revenues. Instead, cloud computing will alter the role of telcos in the value chain irreversibly, putting their control over usage metering and billing at risk. Alarm bells should ring for telcos as Google, Amazon, et al. put their own billing and payment relationships with customers in place.
Telcos must defend their revenue collection role at all costs; failure to do so will accelerate their decline to invisible utility status. At the same time, cloud computing offers telcos a chance to become more than bitpipe providers. Cloud solutions will increasingly be delivered by ecosystems of providers that include telcos, software, hardware, network equipment vendors, and OTT providers.
Telcos have a chance to leverage their network and financial assets to grow into the role of ecosystem manager. To start on this path, telcos will provide cloud-based solutions that are adjacent to communication services they already provide (like home area networking and machine-to-machine solutions), such as connected healthcare and smart grid solutions. Expanding from this beachhead into a broader role in cloud solutions markets is a tricky path that only some telcos will successfully navigate.
We are analyzing the potential role of telcos in cloud computing markets in the research report Telcos as Cloud Rainmakers.