How do platform principles apply to telcos?

What is a platform and how does it apply to telcos? To start with, let’s be clear about what we mean by platforms. A platform strategy can have two key elements:

  • a platform business model – rather than playing a direct role in the supply chain, companies build digital ecosystems or marketplaces connecting consumers with producers of goods and/or services, making it easy for them to do business (think, Airbnb, Amazon Marketplace, eBay and uber);
  • a platform-based IT architecture, which supports electronic marketplaces and facilitates the digital business model (think, Amazon Web Services or Microsoft Azure).

Many platform businesses began with a platform business model in mind, so they purposely built their infrastructure to support such a model from the outset. Others, including most communications service providers (CSPs), must evolve their business models to take advantage of existing infrastructure. And if examples are needed that this evolution is possible and can be outstandingly successful, note that Apple, the world’s most valuable company, was originally a hardware vendor and that Amazon started out selling books online.

What do you think?

We wanted to know whether CSPs and their suppliers share this view of platforms, so we proposed two
definitions or allowed respondents to select ‘both’ or ‘other’, with an opportunity to write their own definition. Most CSPs and suppliers (see graphic above) said they see platforms as creating digital ecosystems and providing platform-based IT infrastructure.

Some respondents found both definitions too limiting and offered alternatives. We particularly like this one, courtesy of Dave Duggal, Founder and Managing Director, enterpriseWeb: “a set of organizing principles and capabilities for transforming to a digital service provider; as such platforms are for modeling domains and the processes that run across them – a universal application layer for designing and executing highly-dynamic, performant, scalable and resilient services”

Defining platform as a “universal application layer” that can be used broadly to model any domain means CSPs can use this approach to transform all aspects of their businesses, from business processes to operational and
business support systems (OSS/BSS) to the network itself.

It’s interesting to note that about 15 percent of operators said digital ecosystems on their own are the true definition of a platform business. This could be the result of their job function – respondents with business responsibility as opposed to a technology focus were more likely to select the marketplace definition. But it could also mean that respondents don’t fully understand all the components and potential of a platform strategy.

Amazon leads the way

Amazon is perhaps the best example to illustrate the potential. Back in the early 2000s Amazon was just an online bookstore. Then the company’s CEO, Jeff Bezos, mandated that all technology teams within the company expose their data to each other and communicate through specified application program interfaces (APIs). He didn’t allow any other form of inter-process communication, and he insisted that these interfaces be exposable to the outside world, which was key.

This gave rise to Amazon Web Services (AWS), whose value today is estimated to be $160 billion. The success of the web services business has enabled Amazon to invest in other parts of its business such as retail, devices, its Marketplace for third-party sellers and producing TV content. CSPs have a unique opportunity to turn their networks and OSS/BSS inside out the way Amazon did, and our survey results (presented in Section 2 of our research report – see box above) indicate that many of them grasp the potential.

Becoming a curator

Operators have an opportunity to move beyond connectivity to become platform or digital ecosystem curators, enabling many verticals. The World economic Forum predicts this market could be worth $650 billion during the next 10 years and others suggest it could be even larger. The trick is figuring out how to turn the opportunity into reality.

“I believe it’s time for us to change our mindset as an industry,” TM Forum’s CEO, Nik Willetts (see video below), said during a keynote at TM Forum Live! in May. “The world has changed around us. The industry is having, if you like, a midlife crisis. We’re no longer sure what the future holds for us, but we know it’s no longer just about dominating linear value chains. It’s about embracing ecosystem economics and platform-based business models, where value is created through cocreation and collaboration, leveraging network effects to enable us to grow with phenomenal speed.”

Partnering for success

Operators must collaborate not only with customers but also other CSPs and digital-native cloud providers like Amazon and Microsoft – in short, telcos must embrace partnerships with companies they traditionally have
seen as competitors.

There may not be a big enough market for every CSP to operate its own marketplace or Microsoft Azure-like platform, but there is certainly opportunity to partner with these companies and others to create a network of platforms, on top of which CSPs can offer services such as end-to-end assurance, data analytics capabilities, security, and charging and billing.

We look at the sorts of services CSPs can offer here.


About The Author

Snr Director, Research & Media

Annie Turner has been researching and writing about the communications industry since the 1980s, editing magazines dedicated to the subject including titles published by Thomson International and The Economist Group. She has contributed articles to many publications, including national and international newspapers such as the Financial Times and International Herald Tribune, and a multitude of business-to-business titles. She joined the TM Forum in 2010 and is responsible for overseeing the content of the Research and Publications portfolio.

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