A New World for the Mobile Industry

As I described in earlier articles, I believe that there are  Eight Core Industry Disruptors that are driving key tipping points – The Mobile Seesaw – that are ultimately redefining the mobile ecosystem.  These tipping points, or key strategic questions, serve as a useful framework for developing scenarios for the potential future of the mobile industry.   The creation of industry scenarios is a valuable means to comprehend and envisage a multitude of uncertain and interconnected factors in a tangible and actionable way.  These scenarios paint a picture of plausible future worlds in five years time.

 While there are several plausible future scenarios, I believe that there are two key scenarios that are both more likely to transpire, and are the most informative in identifying  key business choices and helping in developing winning strategies for future success.

Mobile Segments – Back to the Future

This is a world not that dissimilar to today, or to the industry over the past five years or so. Mobile 2.5 or Mobile 3.0?  Industry consolidation continues with large players dominate in each segment of the value chain.  The large players focus on their core strengths in their respective segments of the value chain, seldom venturing into other parts of the ecosystem.  The traditional application to device to connectivity model continues, although it is dominated by 3 largely independent operating platforms.  The mobile operators retreat back to largely providing connectivity and leaving other aspects of the customer experience to be delivered by the dominate players in the other relevant parts of the value chain.  This détente, or coopetition, amongst all of the players means that they all seek way to create extra value by using their core strengths and capabilities (e.g., network, channels, advertising) to augment other offers.  Most of the industry innovation in this scenario occurs in the start-ups; although, successful ones are quickly gobbled up by the behemoths in the consolidating industry seeking innovation.

The key attributes of the tipping point continuum that characterize the Mobile Segments scenario are:

1.             Applications – applications resident on the device purchased through a traditional app store

2.             Mobile Networks – traditional mobile, licensed spectrum networks rule and continue to explode; alternative networks largely remain for niche uses

3.             Device Centric – largely independent, and non-interoperable devices, based on 3 independent operating platforms, continue to be subsidized by MNOs

4.             Traffic Growth – operators cope with continued explosive growth by lowering network costs and improving efficiencies, as they focus primarily on being connectivity providers

5.             Mobile Operators – Core mobile services (e.g., voice, SMS, email) will continue to be largely delivered by the MNOs

Mobile Explosion – A World Without Wires

This is a world where everything is wireless.  Aside from big pipes to big TVs and fixed devices, everything else is connected over a wireless network.   Access type doesn’t matter, as the end user is completely unaware as to which of the multiple, inter-related, licensed and unlicensed, networks he is using to connect his device to the Internet.  Although three large platform ecosystems still dominated, there is good interoperability between devices, networks and applications or services.  Much of this interoperability is driven by mobile cloud.  The most compelling mobile services are delivered through the mobile cloud; finally delivering on the long awaited promise of services delivered anywhere, anytime and on any device.  Competition increases within, and across parts of the mobile value chain, as the number of networks increases, platforms and devices become interoperable and services are easily delivered at scale through the mobile cloud.  The lines between the segments in the value chain begin to blur as each of the players both compete and seek ways to partner or collaborate with others to help to enhance and differentiate their offering.  Once arch rivals, mobile operators and OTTs (over-the tops), seek collaborative opportunities to leverage their core capabilities to create new value for themselves.

The key attributes of the tipping point continuum that characterize the Mobile Explosion scenario are:

1.             Mobile Cloud – while applications will not completely disappear, innovative and integrative services will largely be delivered through the mobile cloud

2.             Mixed Networks – a HetNet (heterogeneous network) of licensed and unlicensed access will provide the most cost efficient and effective network at time of need

3.             Ecosystems – inter-operative ecosystems will allow people to use what they want, on whatever network, without any control from the mobile operators

4.             Profitability –  players will seek new sources of value and revenue enhancement strategies as the scope of competition increases

5.             Over-the-Tops – With multiple networks and platforms available , OTTs find new ways to connect with their customers; although they do value collaboration with MNOs for competitive differentiation

Future articles will explore the challenges and key choices that each of these scenarios will impose and successful strategies for different players in the newly defined mobile value chain.

The Mobile See-Saw - Tipping Points Re-Defining the Mobile Industry

The eight industry disruptors that I described earlier are creating a number of tipping points in the mobile industry – the outcome of which could radically alter the mobile ecosystem as we know it.  These key strategic questions are defining the future framework of how the mobile industry looks and operates.  The answers to these questions fall along a continuum, like a child’s see-saw or  teeter tooter, strongly tipping the industry in one direction or another.  Understanding these tipping points and their possible outcomes allows us to better define the future characteristics of the mobile industry.

I believe that the following 5 tipping points, or key strategic questions, are fundamental in framing the future characteristics of the mobile ecosystem.

1.       Applications versus Mobile Cloud

-        Will services continue to be delivered from an application resident on the device or be delivered on-demand through the cloud?

-        Will the business model switch from purchasing per application to paying for a service per usage or subscription?

2.       Mobile Networks versus Wi-Fi

-        Will the explosive growth of data traffic require that mobile operators increasingly use Wi-Fi to meet demand?

-        Will the cost to the user and improved experience force people to increasingly use Wi-Fi over mobile networks for connectivity?

-        Will the rise of Wi-Fi centric devices, increased availability and technology advances create an  alternative “mobile” Wi-Fi network?

3.       Devices versus Ecosystems

-        Will users purchase the device , for its own value, or simply as a means to access a broader ecosystem?

-        Will we have a universal, interoperable mobile ecosystem or a number of powerful, closed systems?

-        Will the mobile operator continue to exert power to control and subsidize  devices and functionalities on their networks or will all devices be equally welcome on all networks?

4.       Traffic Growth versus Profitability

-        Will mobile operators find ways to increase the revenue per MB or will they be forced to focus largely on cost containment to maintain network profitability?

-        Will mobile operators continue to make significant network investments or will they drastically scale back because they can’t get adequate returns on investment?

5.       Mobile Operator versus Over-the-Tops (OTTs)

-        Will OTTs displace significant revenues from the mobile operator’s core services (e.g., voice, SMS) or will they be more niche players?

-        Will mobile operators control or collaborate with OTTs or will they be relegated to principally transporting the OTT services on their mobile networks?

-        Will end users consume services beyond connectivity from mobile operators or will they see OTTs as the key providers of these services?

Future articles will explore how the potential outcome of the these tipping points will re-shape the mobile ecosystem and successful strategies for different players in the newly defined mobile value chain.

Now Is the Time for SPs To Invest in Cloud Services for SMBs

Small and medium-sized businesses (SMBs) are leading the way to cloud services. In fact, according to analyst estimates SMBs represent two-thirds of the public cloud market and are growing much faster as a cloud segment than enterprisesYet, many service providers (SPs) are wondering whether the rate of SMB cloud adoption makes it worthwhile to invest in cloud and managed services for SMBs.

Cisco IBSG recently undertook unique customer research to better understand what SMBs really want from cloud services and the size and scope of the market opportunity.  Highlights of the SMB Cloud research reveal some interesting findings: 

1.  SMBs’ awareness of cloud services has dramatically increased, resulting in an audience that is more discerning and demanding.

2.  Nearly half of SMBs will spend more than one-third of their IT budgets on cloud and managed infrastructure services in 2013.

3.  There is high, pent-up demand for software as a service (SaaS) and managed infrastructure services (IaaS) over the next two years. SMBs’ investment plans include advanced options such as conferencing and collaboration, managed VoIP, storage, and hosted business apps, in addition to the more basic services they currently use.

4.  Security assurances and demonstrated business impact are the key buying factors. Service providers need to emphasize that security is an integral part of the offer to help SMBs make the leap to cloud and managed infrastructure services.

5.  “Services tailored for SMBs” are the single biggest driver of provider choice. SMBs want offers that reflect an understanding of their businesses, and don’t want to pay for features they don’t value.

6.  SMBs look for cloud-based and managed infrastructure solutions—not stand-alone, technology-led offers. They gravitate to integrated solutions that let them accomplish everyday tasks more efficiently and effectively, without investing time to manage the technology on which they rely.

7.  Service providers are well placed to take advantage of the SMB opportunity. They are preferred suppliers to SMBs, with the ability to offer the network-based features SMBs want (such as integrated security, end-to-end performance, and reliability guarantees).

Now is the time for SPs to invest in bringing integrated SMB offers to market. To be successful, SPs need an in-depth understanding of the specific needs and concerns of the SMB market and should consider partnerships to help them introduce cost-effective, integrated solutions. Perhaps most important, service providers must be able to credibly guide SMBs as they embark on cloud investments—helping them overcome barriers and realize the value of cloud and managed services.

 Download the paper

8 Strategic Inflection Points Redefining the Mobile Industry

There are a number of major disruptions, or strategic inflections points, in the mobile industry which are radically altering the entire mobile ecosystem as we know it.  Some of these disruptions have been slowing building up steam over the last couple of years; although, many of these have just started and have yet to really play out.  However, these strategic inflection points are causing, and stand to cause even greater, disruption and uncertainty in the industry.

The following 8 key strategic inflection points that I believe will re-define the mobile ecosystem.

1.       Explosive Demand for Mobile Data –a 26-fold between 2010 and 2015

-        Cost challenges of building mobile networks to supply explosive demand

-        Monetization challenges  – how to make money  from increased demand?

2.       The Rise of Software Platforms – from “walled gardens to walled ecosystems”

-        From battle of devices to battle of ecosystems (e.g., Apple, Android, Windows)

-        A world dominated by Apple and Android ecosystems

-        The  ecosystem and its capabilities (e.g., apps) are what is important to the mobile user rather than  network connectivity, which is seen as a given

3.       Availability of New, Fast Mobile Networks

-        LTE Everywhere – battle for new services to get ROI and differentiate from 3G

-        Rise of Wi-Fi – quickly becoming a viable alternative or complement to mobile networks as it is often free, good coverage, better experience and fits well with the rapid growth in nomadic devices.  Could Wi-Fi be a viable competitor to LTE?

4.       A More Active Regulator in Many Countries

-        Spectrum gatekeepers – most operators are hungry for more spectrum

-        Public policy - desire to have universal broadband coverage

-        Net Neutrality – openness of the internet, strengthens the OTT model

-        Protecting the mobile customer – concerns over pricing, data caps, roaming fees

-        Industry structure and policy –  more discerning about acquisitions and consolidation

5.       Changing Industry Structure

-        Industry consolidation in every segment of the value chain – each segment dominated by 2-3 players

-        Major mergers and alliances – e.g., AT&T/T-Mobile, Nokia-Microsoft

-        Limited opportunities to expand in a dominant way into other segments of the value chain

-        Market and innovation leadership concentrated in few major companies – e.g., Apple, Google

6.       Growth of Network Connected Devices – Internet of Things

-        Tablets, eReaders, gaming devices, Machine –to-Machine, etc.

-        Everything is becoming connected – e.g., home, healthcare

7.       Move to Cloud Delivery Models – “everything as a service”

-        Happening much faster than anyone had expected

-        App store model (application client) vs. the mobile cloud model (service)

8.       The Rise of the  OTT Threat – largely the battle for video distribution and services

-        Threat to existing video providers - e.g., NetFlix and Hulu vs. cable TV

-        Monetization for network providers – how do they get a bit of the OTT pie?

-        Economic balance of the ecosystem – network providers need a return to invest, OTTs largely successful based on cheaper operating model (content, distribution) – not a sustainable economic model

Future articles will explore how these inflection points will re-shape the mobile ecosystem and successful strategies for different players in the newly defined mobile value chain.

Will Wi-Fi Be the Death of Mobile?

In 97 countries around the world there are now more mobile devices than people. No wonder mobile networks are clogged with massive amounts of new traffic!  Mobile operators are struggling with how they can provide customers with the mobile broadband experience they expect, in a cost effective, scalable and profitable manner.  Cisco’s Internet Business Solutions Group (IBSG) believes that Wi-Fi, the “silent sleeper” of wireless access networks, may hold the answer.

The mobile industry is on the brink of a fundamental change. Just think of some recent key developments: There has been massive growth in Wi-Fi-enabled smartphones, tablets, cameras, and game consoles—and nearly half of network traffic growth is Wi-Fi. The number of Wi-Fi access points is also growing, with more and more free public access. At the same time, economic modeling by Cisco IBSG shows that mobile operators can reduce costs and improve customer experience by offloading mobile data to Wi-Fi networks. It’s not surprising that Wi-Fi is becoming an integral part of wireless network design. Wi-Fi has truly come of age and now realistically represents a viable wireless access network.

But will Wi-Fi be a complement, or competitor, to mobile wireless networks? Consider the following:

1.   Wi-Fi covers most of the places where we are: 80 percent of the time, people connect to the mobile Internet from their home, office or other indoor location—all areas that are addressed by Wi-Fi.

2.     Much of what we do is nomadic, not mobile: Two-thirds of the activities people do on smartphones are nomadic activities such as email, web browsing, gaming, using productivity tools and making video calls.  Wi-Fi is ideal for these activities. 

3.   New nomadic devices will consume even greater amounts of mobile data: While a smartphone typically consumes 24 times the data of a standard mobile phone, a tablet consumes 122 times more and a laptop 515 times more than a mobile phone.

4.   Consumers will happily use Wi-Fi as an alternative to mobile: Our research shows that U.S. smartphone users already use Wi-Fi a third of the time to access the Web.

5.   Wi-Fi can offer a more cost effective solution, and a better user experience: Wi-Fi delivers higher speed, good coverage and a better experience—all at a lower cost than mobile.  Complex price structures and device-specific data plans could actually encourage users to migrate to Wi-Fi. 

6.  There are several ways to make money from Wi-Fi: In addition to the traditional business of retail hotspots, there are now several other viable access models where operators can make money by charging mobile carriers or other Wi-Fi providers. 

Several types of service provider can create winning strategies to succeed in Wi-Fi. Mobile operators can use Wi-Fi to offload growing data traffic. Existing Wi-Fi network providers can (1) sell wholesale access to mobile operators for data offload, and (2) sell access and value-added services to retail hotspot owners.  Integrated providers, who typically already have both mobile and some Wi-Fi capabilities, can use Wi-Fi to offload data traffic from their mobile networks and differentiate their fixed broadband offers.

Wireless networks will evolve over time, but one thing is certain: Wi-Fi is a critical element in mobile networks. Wi-Fi is not the death of mobile, but it is the beginning of a new chapter for this revolutionary industry. 

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A “Marriage Made in Heaven”: Mobile Devices Meet the Mobile Cloud

The huge popularity and rapid growth of smartphones over the past couple of years has been truly breathtaking. At the same time, cloud computing has become the new way of delivering—and charging for—IT services and functionality.

While research has been conducted on mobile and cloud computing as separate trends, to date very little data has existed on the impact of mobility and cloud together—especially with regards to the impact on devices. To understand this dynamic market better, Cisco Internet Business Solutions Group (IBSG) surveyed 1,016 U.S. mobile users to understand their current and future needs with regard to the mobile cloud.

Findings from the research about mobile devices provide important insights for SPs. For example:

·        Almost half (45 percent) of survey respondents already have smartphones. Most remarkable, the survey revealed that up to 60 percent of U.S. mobile phone subscribers could be smartphone users by the end of 2013.

·        Smartphone owners are selecting their devices primarily to acquire the best functionality. Fifty percent of smartphone respondents indicated that device functionality is their key buying criteria, followed by brand and ease of use.

·        Smartphone users are much more comfortable using cloud services than non-smartphone users. Given smartphone users’ demographic profile and technological sophistication, it is probably no surprise they are already big consumers of cloud-based services in the traditional PC world.

·        Smartphone users are particularly excited about the opportunity to move unique mobile-specific features and capabilities to the cloud. They especially want to combine the microphone and speaker capabilities of their devices for speech recognition (75 percent over the next one to two years).

·        Smartphone users are also interested in a thin-client device that would allow them to access all of their content and smartphone functionality from the cloud. Similarly, smartphone users were interested in a mobile-cloud-based virtual desktop infrastructure (VDI) service that would allow them to arrange a computer desktop to reflect their personal preferences and view the same configuration on any mobile (or other) device.

Mobile operators are well positioned to prosper from the mobile cloud. On average, respondents rated their level of satisfaction with the overall mobile experience a 7.8 out of 10. By studying the findings and implementing the recommendations described in this paper, SPs can benefit by understanding the size of the opportunity, developing strategies for growth, and differentiating their offerings. Note: This is one in a series of papers that evaluate the Cisco IBSG survey results from four distinct perspectives: overview, business users, consumers, and devices (this paper).

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Top 5 Predictions for the Future World of Mobile Cloud for Businesses

Mobility and cloud computing are colliding. So, what does this mean for the future of mobile devices? How soon will video-conference calls on our mobile devices become commonplace? How can service providers (SPs) enhance their competitive position by delivering cloud and managed services?

While research has been conducted on mobile and cloud computing as separate trends, to date very little data has existed on the impact of mobility and cloud together. To understand this dynamic market better, Cisco IBSG surveyed more than 1,000 business users to understand their current and future needs with regard to the mobile cloud.

The top findings may surprise you:

1) By the end of 2012, business users will routinely attend video-conference calls on their mobile phones while making use of other video endpoints such as desktop webcams and telepresence stations. Today, only 20 percent of users have this capability.

2) Business users also want to switch back and forth between device types in real time. For example, if I’m on a call on my mobile device and I walk into the office, the call would seamlessly switch to my office phone.

3) Additionally, using virtual desktop integration (VDI), many users are seeking to replicate the desktop experience on their mobile devices, enabling these devices to become true extensions of both work and personal desktops. This will provide more flexibility and improved productivity while on the go.

4) By 2012, professional and personal boundaries will blur on mobile devices. Business users want a unified mobile cloud experience to access both professional and personal content from one device to increase productivity and improve work-life balance.

5) We will see a shift from smartphones to thin-client, cloud-based mobile devices. Applications and data will also be stored in the cloud, rather than on the desktop. Our survey respondents felt a thin-client approach would enhance security by reducing the risk of losing content and applications in case their devices were lost or stolen.

Developing a portfolio of mobile cloud services now—including mobile extensions of enterprise cloud applications such as video conferencing and collaboration—will be the key to success for SPs.

SPs should begin by using mobility as a lead value proposition for cloud strategy versus non-SP competitors. Next, it is important to develop an integrated device strategy by utilizing capabilities such as speech recognition and messaging history that lend themselves to the features and functionality of mobile devices. The strategy should include the creation of cloud services that address both business and personal use (e.g., gaming and social networking). Finally, SPs should deliver the promise of fixed mobile convergence for business users with seamless voice and data experiences that span fixed and mobile networks.