What is a telco marketplace? It's surprisingly hard to define
Many large communications service providers offer capabilities they refer to as marketplaces, primarily to deliver IoT services. But when digging a bit deeper, it becomes clear that there is no common, industry-agreed definition of what a telecom marketplace is or what it should offer. This excerpt from our new report explains.
Dawn Bushaus28 Jul 2021
What is a telco marketplace? It's surprisingly hard to define
The concept of a marketplace is not new to communications service providers (CSPs). Indeed, many Tier 1 operators offer capabilities they refer to as marketplaces, primarily to deliver IoT services. But when digging a bit deeper, it becomes clear that there is no common, industry-agreed definition of what a telecom marketplace is or what it should offer. This excerpt from our new report explains.
It helps to start where there is consensus: Most digital marketplaces rely on platforms. Below is how Tom McFadyen, Founder of marketplace developer McFadyen Digital, explains platforms and marketplaces in his book Marketplace Best Practices: Transforming Commerce in the Platform Economy. McFadyen draws on Platform Revolution, the book by Geoffrey G. Parker, Marshall W. Van Alstyne and Sangeet Paul Choudary which is widely credited with articulating the platform business concept.
So, rather than playing a direct role in the supply chain, a company builds a digital ecosystem connecting consumers with producers of goods and/or services, making it easy for them to do business. There are many variations on this theme, but Airbnb is a good example of a true marketplace. The company brings buyers (travelers) together with suppliers (owners of homes and apartments all over the world) so that they can conduct business with each other. Airbnb doesn’t handle the transactions between the buyers and sellers, but it earns revenue by charging service fees to the parties.
While this is the definition of a marketplace associated with platform business models, the term “marketplace” is commonly used in other ways as well. For example, many CSPs refer to their B2B2X portals aimed at enterprises as marketplaces, and TM Forum members often discuss the idea of a software marketplace where CSPs can procure IT solutions.
Another area of agreement is that marketplaces and other types of digital ecosystems are enabled and supported by an IT infrastructure platform. Usually, standard APIs are used to expose the data and capabilities of the infrastructure platform to partners and customers.
Amazon Web Services (AWS) is the quintessential example of an infrastructure platform. Amazon Founder Jeff Bezos famously mandated that all software teams expose data and functionality through service interfaces designed from the outset to be open to external developers. In less than 20 years, his mandate has resulted in creation of a half trillion-dollar business that supports all the company’s other endeavors including Amazon Marketplace.
With these ideas in mind, we offered a few possible definitions of a telecom marketplace in a survey of 80 CSP respondents from 67 unique companies and 64 supplier respondents from 34 unique companies. We wanted to find out which best represents the vision of CSPs and their suppliers, but we allowed respondents to write in an answer if they did not agree with any of the choices. Only a small percentage wrote in responses, and most were similar to our definitions. The graphic below compares the results.
It helps to start where there is consensus: Most digital marketplaces rely on platforms. Below is how Tom McFadyen, Founder of marketplace developer McFadyen Digital, explains platforms and marketplaces in his book Marketplace Best Practices: Transforming Commerce in the Platform Economy. McFadyen draws on Platform Revolution, the book by Geoffrey G. Parker, Marshall W. Van Alstyne and Sangeet Paul Choudary which is widely credited with articulating the platform business concept.
“Marketplaces are a type of platform that promotes and enables transactions between multiple parties, such as a customer and a third-party seller. Marketplaces generally do not fulfill the products or services purchased. Marketplaces generally charge fees for enabling the transaction.”
So, rather than playing a direct role in the supply chain, a company builds a digital ecosystem connecting consumers with producers of goods and/or services, making it easy for them to do business. There are many variations on this theme, but Airbnb is a good example of a true marketplace. The company brings buyers (travelers) together with suppliers (owners of homes and apartments all over the world) so that they can conduct business with each other. Airbnb doesn’t handle the transactions between the buyers and sellers, but it earns revenue by charging service fees to the parties.
While this is the definition of a marketplace associated with platform business models, the term “marketplace” is commonly used in other ways as well. For example, many CSPs refer to their B2B2X portals aimed at enterprises as marketplaces, and TM Forum members often discuss the idea of a software marketplace where CSPs can procure IT solutions.
Another area of agreement is that marketplaces and other types of digital ecosystems are enabled and supported by an IT infrastructure platform. Usually, standard APIs are used to expose the data and capabilities of the infrastructure platform to partners and customers.
Amazon Web Services (AWS) is the quintessential example of an infrastructure platform. Amazon Founder Jeff Bezos famously mandated that all software teams expose data and functionality through service interfaces designed from the outset to be open to external developers. In less than 20 years, his mandate has resulted in creation of a half trillion-dollar business that supports all the company’s other endeavors including Amazon Marketplace.
Defining concepts
With these ideas in mind, we offered a few possible definitions of a telecom marketplace in a survey of 80 CSP respondents from 67 unique companies and 64 supplier respondents from 34 unique companies. We wanted to find out which best represents the vision of CSPs and their suppliers, but we allowed respondents to write in an answer if they did not agree with any of the choices. Only a small percentage wrote in responses, and most were similar to our definitions. The graphic below compares the results.
The top three definitions of a marketplace are the same among CSPs and suppliers, although the top choice is different for the two groups:
B2B2X portal – CSPs favor this model which is not a true marketplace but a portal where the telco sells its own services and those of partners. The key here is that the CSP remains in control of the relationship with customers, usually small and medium businesses (SMBs). This model is already well established.
Open marketplace – the most popular option among suppliers (second among CSPs) is an open marketplace operated by an independent third party. This is a true platform business model that allows CSPs to offer services in competition with other companies, potentially other CSPs, along with partners that may offer IoT services, cloud services, security, etc. Notably, neither CSPs nor suppliers are comfortable with the idea of a hyperscale cloud provider operating the marketplace.
Software marketplace – this definition is quite different from the others, but we expect interest to grow in a software marketplace where CSPs can buy components that comply with the TM Forum Open Digital Architecture (ODA) to build their IT and network infrastructure. The ODA is a component-based software architecture that enables CSPs to evolve to a fully automated, cloud native operations environment that relies on analytics and AI to deliver zero-touch services.
As noted in the introduction, “owning” the customer is still very important to CSPs. Indeed, it is the top driver for developing a marketplace, with 78% of CSP respondents citing it as a significant or very significant reason.
B2B2X portal – CSPs favor this model which is not a true marketplace but a portal where the telco sells its own services and those of partners. The key here is that the CSP remains in control of the relationship with customers, usually small and medium businesses (SMBs). This model is already well established.
Open marketplace – the most popular option among suppliers (second among CSPs) is an open marketplace operated by an independent third party. This is a true platform business model that allows CSPs to offer services in competition with other companies, potentially other CSPs, along with partners that may offer IoT services, cloud services, security, etc. Notably, neither CSPs nor suppliers are comfortable with the idea of a hyperscale cloud provider operating the marketplace.
Software marketplace – this definition is quite different from the others, but we expect interest to grow in a software marketplace where CSPs can buy components that comply with the TM Forum Open Digital Architecture (ODA) to build their IT and network infrastructure. The ODA is a component-based software architecture that enables CSPs to evolve to a fully automated, cloud native operations environment that relies on analytics and AI to deliver zero-touch services.
Marketplace drivers
As noted in the introduction, “owning” the customer is still very important to CSPs. Indeed, it is the top driver for developing a marketplace, with 78% of CSP respondents citing it as a significant or very significant reason.
Most of the other top drivers reinforce this idea of controlling the relationship with customers. Farther down in the list is customer demand for a marketplace model, with about half of CSP respondents saying it is a top driver.
It is not surprising that CSPs are wary of a marketplace hosted by a hyperscale platform provider. Most respondents work in IT roles, and they believe that CSPs are capable of developing their own platform businesses. Had more respondents been from divisions responsible for sales to enterprises, however, the results may have been different.
The relationship between CSPs and cloud operators is complex. On one hand, CSPs are partnering extensively with platforms such as AWS, Google Cloud Platform and Microsoft Azure as they move their operations and increasingly networks to the cloud. But hyperscalers also can be potential competitors for the relationship with customers, particularly large enterprises.
About 10% of CSPs and a slightly lower percentage of suppliers favor a marketplace where CSPs can procure software components. TM Forum’s research has found that the cost to the telecommunications industry of selecting and procuring software and services such as product catalogs and ordering and billing systems is about $1 billion per year. By adopting the ODA, CSPs can radically change how they discover, procure and implement IT and network components, making the process far simpler and less expensive.
Most CSPs surveyed for this report believe that the ODA can change the way software is procured and implemented, and perhaps do away with the traditional request-for-proposal (RFP) process altogether. About two-thirds of CSP respondents said they are familiar with ODA and believe it can help the process, while 17% believe ODA can eliminate the RFP.
It is not surprising that CSPs are wary of a marketplace hosted by a hyperscale platform provider. Most respondents work in IT roles, and they believe that CSPs are capable of developing their own platform businesses. Had more respondents been from divisions responsible for sales to enterprises, however, the results may have been different.
The relationship between CSPs and cloud operators is complex. On one hand, CSPs are partnering extensively with platforms such as AWS, Google Cloud Platform and Microsoft Azure as they move their operations and increasingly networks to the cloud. But hyperscalers also can be potential competitors for the relationship with customers, particularly large enterprises.
The best strategy may be for CSPs to partner with cloud providers in arrangements that allow the CSP to be the key point of contact for customers that want management of end-to-end services. While hyperscalers may want branding and platform control, in most cases they do not want to provide extensive customer support. This opens the door for CSPs to deliver end-to-end solutions that include a cloud partner.
Selling software
About 10% of CSPs and a slightly lower percentage of suppliers favor a marketplace where CSPs can procure software components. TM Forum’s research has found that the cost to the telecommunications industry of selecting and procuring software and services such as product catalogs and ordering and billing systems is about $1 billion per year. By adopting the ODA, CSPs can radically change how they discover, procure and implement IT and network components, making the process far simpler and less expensive.
“Ultimately, CSPs want to move away from the established way of procuring assets,” says Tayeb Ben Meriem, Coordinator of OSS Standardization at Orange. “It could be a physical asset or software asset. But when I procure an asset, I don’t want to invest in testing and certifying this asset. I want the marketplace to take care of that.”
Most CSPs surveyed for this report believe that the ODA can change the way software is procured and implemented, and perhaps do away with the traditional request-for-proposal (RFP) process altogether. About two-thirds of CSP respondents said they are familiar with ODA and believe it can help the process, while 17% believe ODA can eliminate the RFP.
