P E R S P E C T I V E
The Future of
Mobile Applications
Changing Business Models for the Mobile Communication Provider
Infosys Technologies Limited
Plot No. 44, Electronics City, Hosur Road, Bangalore - 560100. India
Tel.: + 91 80 28520261, Fax: + 91 80 28521747, e-mail: flyppmktg@infosys.com www.infosys.com/flypp
CEO Priorities
Mobile operators are differentiating themselves to drive growth and value creation. Current differentiation strategies include upgrading networks to improve capacity, coverage and reliability; enhancing customer service to develop close relationships with customers; and providing innovative products and services.
These strategies assume that the way forward will be to wrest market share from other service providers. However, this viewpoint may be somewhat short-sighted.
Recent years have seen rapid technological advancement in mobile handsets and applications. Mobile applications now have the potential to transform customer experience on a ubiquitous scale. This new wave of innovation offers a sound platform for market expansion. It is now the CEO’s responsibility to proactively seize the opportunity that awaits.
Shift in Value Equation
Historically, mobile operators have focused on deploying cellular networks and relied on these networks to create value for their businesses. Now, connectivity and mobility have become commodities of modern-day life and are taken for granted by customers. The value equation has shifted from network availability to customer centricity. In the words of Vodafone™ CEO Vittorio Colao,“It is not the brand talking any more and telling the customer what to do... it is the customer who will decide. I am trying to steer the whole company in this direction.”
While mobile communications providers have begun the march towards customer centricity, Internet companies have long been practitioners of customer-led
personalization. By putting the customer in the driver’s seat, the Internet has fundamentally changed the way in which people interact with their chosen services and applications. More importantly, it has progressed beyond customer empowerment to customer-led personalization, whereby customers can determine the terms and context of their experience.
These two business models one focusing on a
standardized ‘one-size-fits-all’ product and the other on a rich and innovative product set offering flexibility, personalization and choice, cannot co-exist for long. The Internet model, with its attractive proposition of application diversity and personalization, is likely to prevail.
Mobile operator firms must therefore focus on evolving their products and services ‘the internet way’. What’s
more, they must launch their application initiatives quickly, if they hope to match their fleet-footed rivals from the mobile device and Internet world. On the flip side, operators uniquely possess a treasure trove of information about customers’ needs, behavior, and usage profile which can enable better personalization and service propositions. Mobile companies can now create value by expanding the boundaries of their market to a much broader view of application-driven commerce and entertainment for the emerging digital consumer.
The Following is a Suggested Roadmap: Stake a claim in the applications business:
Since connectivity has become commoditized, it offers little competitive differentiation. Applications, on the other hand, can make or break customer experience. Hence, the ability of mobile communications companies to deliver a memorable customer experience through lifestyle-enhancing applications and content will shape their ‘moment of truth’.
Expand the innovation network:
Until recently, mobile communication providers controlled the content and applications accessible to their
customers. It is now clear that a ‘walled garden’ offers little chance of success against the phenomenally successful app stores. It is now time for the ‘creative destruction’ of the walled garden. In its place, operators should create an open innovation ecosystem powered by a global community of developers, independent software vendors (ISVs) and partners.
Rewrite competitive boundaries:
The mobile communications business has already begun to shift from a network and mobility focus to lifestyle enablement. The future will belong to those companies that successfully monetize applications that transform customer experience. It is important for mobile
communication providers to recognize that competition for this future industry dominance will come from all quarters, including Internet, applications and mobile device companies.
Leverage customer knowledge to go the Internet way:
Under these changed circumstances, mobile
communication providers’ key to success lies in creating relevance, immediacy and impact on customers. They will need to leverage customer data to deliver an ‘internet like’ personalized user experience while eliminating clutter and providing the comfort and assurance of the brand and service.
Author’s Profile
Deepak Swamy
Associate Vice President Communications
Media and Entertainment (CME) Practice Infosys Technologies
Deepak heads strategy development for Infosys’ global CME practice. He has 19 years of consulting and entrepreneurial experience in the communications industry. Most recently, he was a partner with Infosys Consulting in London where he advised several communications service providers on business strategies in the areas of convergence and new service platforms.
Deepak has represented Infosys at the World Economic Forum’s Digital Ecosystem steering committee and at the Rutberg Wireless Summit. He has addressed numerous industry conferences in the areas of IMS and convergence applications. He is the author of more than a dozen articles on convergence and services transformation including a feature in the TeleManagement Forum’s NG-OSS compendium, and has been quoted in Telephony, America’s Network, Telecom magazine, Billing World and TMCnet among other industry publications.
Deepak holds a bachelors degree in electrical engineering from the National Institute of Technology in Rourkela, India and an MBA from the University of Rhode Island.
Applications: The Future of Mobility?
Skeptics may ask how the mobile applications opportunity, valued at US$ 2-3 billion globally in 2009, can either threaten or rejuvenate the US$ 1.5 trillion communications industry. While their questions are valid, there is reason to believe that things can change dramatically for the mobile applications business within the next few years. Consider these trends:
App-centric business model for higher profits:
Studies show that very few companies have recovered their investment in advanced wireless networks and 3G infrastructures. More telling is the fact that the profitable operators have a significant play in the applications business. Interestingly, NTT DOCOMO™ is one of them, pioneering the applications-centric model by offering the i-mode service with a menu of standard and optional application packages, such as ‘Osaifu-Keitai’ mobile wallet, i-motion™ multimedia service and i-area™ location information service. Connectivity and high-speed data transfer are sold only as enablers of various i-mode packages and not as the principal offering.
Following the phenomenal success of handset-driven application marketplace, many operators are pushing through initiatives to create their own branded app stores. This has met with mixed results. Upon examining operator strategies for monetizing applications and application-enabled products and services, it becomes evident that the focus on the ‘application marketplace’ alone may be misplaced. Understanding and meeting the needs of the emerging digital consumer may be the starting point of the journey towards mobile lifestyle enablement.
Customers are demanding more applications:
Digital consumers have become voracious users of interactive mobile applications, downloading over 170 million instances per month in November 2009. The wave of bottom-up, consumer-inspired innovation on the Internet will next manifest in the mobile domain, albeit on a much larger scale given the ubiquity of mobile devices. Mobile ubiquity will compensate for the functional limitations imposed by the small screens of handheld devices. The trend is already visible. Value Added Services account for almost 30% of telecom revenues in China and Japan and 20% in Europe.
Although demand is highest for consumer applications, there is a rising trend in business application downloads by individual consumers as well as IT buyers at small and
medium sized companies. This comes as no surprise given that a majority of employed people use their mobile phone for work- related activities such as sending email and accessing information, and hence have a need for productivity-enhancing applications.
Developer-innovator networks are lending impetus to applications:
The strong consumer pull for versatile mobile applications is matched by the push of developer networks that have proved their innovation potential on the Internet. Leveraged effectively, these two forces can work in tandem to put an increasing number of innovative applications into the hands of end users faster than ever before.
All these trends point to a dramatic transformation in the role of the operator and a clear opportunity to lead the way with new applications and services delivered to subscribers in an Internet-like ‘have it your way’ model.
Conclusion
Forward-thinking mobile communication providers with an eye on early-mover advantage must take action today to prepare for the future.
Redraw the lines:
At a strategic level, they must be willing to challenge their own view of the business and redefine boundaries if required. Rigid organizations with a closed mindset stand to lose share to more flexible and nimble competitors. Each operator must evolve their own method to combat competition not just among licensees of spectrum but increasingly from new-age competitors.
Innovate in partnership:
Mobile operators and communication companies, acting as conduits today, must become innovators and co-creators in order to derive maximum monetary value from the interactions they facilitate. Faster service innovation will breed higher customer loyalty and unlock new revenue streams. The innovation efforts of widespread developer networks have already proved superior to those of in-house resources. Therefore, mobile communication providers must expand their networks and application ecosystem by admitting innovation-led partnerships with best-in-class third party vendors. Last but not least, they must render their networks, platforms and infrastructure capable of supporting a massive innovation network comprising thousands of partners.
Know your customer:
The application-centric model can only be built on a strong foundation of knowledge of customers’ preferences, habits and context of usage. At present, mobile communication providers gather valuable information about their customers; all that remains is to derive insights that can then enable the market differentiated application offerings. That’s easier said than done, because even now, mobile communication providers relate to customers not as individuals but ‘faceless’ subscribers, often identifying them by number!
Application richness and relevance will rely on powerful personalization, based on customers’ past usage; purchase, browsing and social recommendation history and handset type. Discovery, purchase and use of applications will be de-cluttered and simplified. Mobile communication providers must also recognize that each customer is different and has many different lifestyle contexts. By offering more ‘doors’ and channels for consumption of applications, operators can meet the needs of the customer in their work, leisure or entertainment contexts.
Mobile communication providers must also learn the art and science of ‘social merchandising’- leveraging the power of social networks to act as marketing ‘force multiplier’. By dynamically sharing browsing,
recommendation and purchase history, social networking can evolve from an Internet tool to a force that drives the adoption and use of entire new categories of applications and services.
Mobile communication providers must leverage their unique competitive advantages including knowledge of customer usage and behavior, ongoing relationships, and trusted brand status to win in the journey of application-driven lifestyle enablement.
Applications: The Future of Mobility?
Skeptics may ask how the mobile applications opportunity, valued at US$ 2-3 billion globally in 2009, can either threaten or rejuvenate the US$ 1.5 trillion communications industry. While their questions are valid, there is reason to believe that things can change dramatically for the mobile applications business within the next few years. Consider these trends:
App-centric business model for higher profits:
Studies show that very few companies have recovered their investment in advanced wireless networks and 3G infrastructures. More telling is the fact that the profitable operators have a significant play in the applications business. Interestingly, NTT DOCOMO™ is one of them, pioneering the applications-centric model by offering the i-mode service with a menu of standard and optional application packages, such as ‘Osaifu-Keitai’ mobile wallet, i-motion™ multimedia service and i-area™ location information service. Connectivity and high-speed data transfer are sold only as enablers of various i-mode packages and not as the principal offering.
Following the phenomenal success of handset-driven application marketplace, many operators are pushing through initiatives to create their own branded app stores. This has met with mixed results. Upon examining operator strategies for monetizing applications and application-enabled products and services, it becomes evident that the focus on the ‘application marketplace’ alone may be misplaced. Understanding and meeting the needs of the emerging digital consumer may be the starting point of the journey towards mobile lifestyle enablement.
Customers are demanding more applications:
Digital consumers have become voracious users of interactive mobile applications, downloading over 170 million instances per month in November 2009. The wave of bottom-up, consumer-inspired innovation on the Internet will next manifest in the mobile domain, albeit on a much larger scale given the ubiquity of mobile devices. Mobile ubiquity will compensate for the functional limitations imposed by the small screens of handheld devices. The trend is already visible. Value Added Services account for almost 30% of telecom revenues in China and Japan and 20% in Europe.
Although demand is highest for consumer applications, there is a rising trend in business application downloads by individual consumers as well as IT buyers at small and
medium sized companies. This comes as no surprise given that a majority of employed people use their mobile phone for work- related activities such as sending email and accessing information, and hence have a need for productivity-enhancing applications.
Developer-innovator networks are lending impetus to applications:
The strong consumer pull for versatile mobile applications is matched by the push of developer networks that have proved their innovation potential on the Internet. Leveraged effectively, these two forces can work in tandem to put an increasing number of innovative applications into the hands of end users faster than ever before.
All these trends point to a dramatic transformation in the role of the operator and a clear opportunity to lead the way with new applications and services delivered to subscribers in an Internet-like ‘have it your way’ model.
Conclusion
Forward-thinking mobile communication providers with an eye on early-mover advantage must take action today to prepare for the future.
Redraw the lines:
At a strategic level, they must be willing to challenge their own view of the business and redefine boundaries if required. Rigid organizations with a closed mindset stand to lose share to more flexible and nimble competitors. Each operator must evolve their own method to combat competition not just among licensees of spectrum but increasingly from new-age competitors.
Innovate in partnership:
Mobile operators and communication companies, acting as conduits today, must become innovators and co-creators in order to derive maximum monetary value from the interactions they facilitate. Faster service innovation will breed higher customer loyalty and unlock new revenue streams. The innovation efforts of widespread developer networks have already proved superior to those of in-house resources. Therefore, mobile communication providers must expand their networks and application ecosystem by admitting innovation-led partnerships with best-in-class third party vendors. Last but not least, they must render their networks, platforms and infrastructure capable of supporting a massive innovation network comprising thousands of partners.
Know your customer:
The application-centric model can only be built on a strong foundation of knowledge of customers’ preferences, habits and context of usage. At present, mobile communication providers gather valuable information about their customers; all that remains is to derive insights that can then enable the market differentiated application offerings. That’s easier said than done, because even now, mobile communication providers relate to customers not as individuals but ‘faceless’ subscribers, often identifying them by number!
Application richness and relevance will rely on powerful personalization, based on customers’ past usage; purchase, browsing and social recommendation history and handset type. Discovery, purchase and use of applications will be de-cluttered and simplified. Mobile communication providers must also recognize that each customer is different and has many different lifestyle contexts. By offering more ‘doors’ and channels for consumption of applications, operators can meet the needs of the customer in their work, leisure or entertainment contexts.
Mobile communication providers must also learn the art and science of ‘social merchandising’- leveraging the power of social networks to act as marketing ‘force multiplier’. By dynamically sharing browsing,
recommendation and purchase history, social networking can evolve from an Internet tool to a force that drives the adoption and use of entire new categories of applications and services.
Mobile communication providers must leverage their unique competitive advantages including knowledge of customer usage and behavior, ongoing relationships, and trusted brand status to win in the journey of application-driven lifestyle enablement.
CEO Priorities
Mobile operators are differentiating themselves to drive growth and value creation. Current differentiation strategies include upgrading networks to improve capacity, coverage and reliability; enhancing customer service to develop close relationships with customers; and providing innovative products and services.
These strategies assume that the way forward will be to wrest market share from other service providers. However, this viewpoint may be somewhat short-sighted.
Recent years have seen rapid technological advancement in mobile handsets and applications. Mobile applications now have the potential to transform customer experience on a ubiquitous scale. This new wave of innovation offers a sound platform for market expansion. It is now the CEO’s responsibility to proactively seize the opportunity that awaits.
Shift in Value Equation
Historically, mobile operators have focused on deploying cellular networks and relied on these networks to create value for their businesses. Now, connectivity and mobility have become commodities of modern-day life and are taken for granted by customers. The value equation has shifted from network availability to customer centricity. In the words of Vodafone™ CEO Vittorio Colao,“It is not the brand talking any more and telling the customer what to do... it is the customer who will decide. I am trying to steer the whole company in this direction.”
While mobile communications providers have begun the march towards customer centricity, Internet companies have long been practitioners of customer-led
personalization. By putting the customer in the driver’s seat, the Internet has fundamentally changed the way in which people interact with their chosen services and applications. More importantly, it has progressed beyond customer empowerment to customer-led personalization, whereby customers can determine the terms and context of their experience.
These two business models one focusing on a
standardized ‘one-size-fits-all’ product and the other on a rich and innovative product set offering flexibility, personalization and choice, cannot co-exist for long. The Internet model, with its attractive proposition of application diversity and personalization, is likely to prevail.
Mobile operator firms must therefore focus on evolving their products and services ‘the internet way’. What’s
more, they must launch their application initiatives quickly, if they hope to match their fleet-footed rivals from the mobile device and Internet world. On the flip side, operators uniquely possess a treasure trove of information about customers’ needs, behavior, and usage profile which can enable better personalization and service propositions. Mobile companies can now create value by expanding the boundaries of their market to a much broader view of application-driven commerce and entertainment for the emerging digital consumer.
The Following is a Suggested Roadmap: Stake a claim in the applications business:
Since connectivity has become commoditized, it offers little competitive differentiation. Applications, on the other hand, can make or break customer experience. Hence, the ability of mobile communications companies to deliver a memorable customer experience through lifestyle-enhancing applications and content will shape their ‘moment of truth’.
Expand the innovation network:
Until recently, mobile communication providers controlled the content and applications accessible to their
customers. It is now clear that a ‘walled garden’ offers little chance of success against the phenomenally successful app stores. It is now time for the ‘creative destruction’ of the walled garden. In its place, operators should create an open innovation ecosystem powered by a global community of developers, independent software vendors (ISVs) and partners.
Rewrite competitive boundaries:
The mobile communications business has already begun to shift from a network and mobility focus to lifestyle enablement. The future will belong to those companies that successfully monetize applications that transform customer experience. It is important for mobile
communication providers to recognize that competition for this future industry dominance will come from all quarters, including Internet, applications and mobile device companies.
Leverage customer knowledge to go the Internet way:
Under these changed circumstances, mobile
communication providers’ key to success lies in creating relevance, immediacy and impact on customers. They will need to leverage customer data to deliver an ‘internet like’ personalized user experience while eliminating clutter and providing the comfort and assurance of the brand and service.
Author’s Profile
Deepak Swamy
Associate Vice President Communications
Media and Entertainment (CME) Practice Infosys Technologies
Deepak heads strategy development for Infosys’ global CME practice. He has 19 years of consulting and entrepreneurial experience in the communications industry. Most recently, he was a partner with Infosys Consulting in London where he advised several communications service providers on business strategies in the areas of convergence and new service platforms.
Deepak has represented Infosys at the World Economic Forum’s Digital Ecosystem steering committee and at the Rutberg Wireless Summit. He has addressed numerous industry conferences in the areas of IMS and convergence applications. He is the author of more than a dozen articles on convergence and services transformation including a feature in the TeleManagement Forum’s NG-OSS compendium, and has been quoted in Telephony, America’s Network, Telecom magazine, Billing World and TMCnet among other industry publications.
Deepak holds a bachelors degree in electrical engineering from the National Institute of Technology in Rourkela, India and an MBA from the University of Rhode Island.
P E R S P E C T I V E
The Future of
Mobile Applications
Changing Business Models for the Mobile Communication Provider
Infosys Technologies Limited
Plot No. 44, Electronics City, Hosur Road, Bangalore - 560100. India
Tel.: + 91 80 28520261, Fax: + 91 80 28521747, e-mail: flyppmktg@infosys.com www.infosys.com/flypp
