MENA TELECOMS SUMMIT 2015 DELIVERING THE DIGITAL FUTURE CAPTURING VALUE THROUGH MULTI-SIDED PLATFORMS 11 NOVEMBER 2015 EDWIN GRUMMITT
Developing new multi-sided platform (MSP) businesses enables telcos to capture greater value from digital economy services The digital economy presents a significant opportunity for all players: encompasses all economic activity mediated by software, enabled by telecoms infrastructure we forecast a total digital economy market size of USD5.9 trillion by 2020, more than three times larger than the forecast for traditional telecoms services. Capturing their share of the digital economy opportunity is one of the main challenges facing telcos today. Developing new multi-sided platform businesses enables telcos to capture greater value from digital economy services: leverages telcos strengths, while outsourcing innovation to other parties generates value by capturing the network effects of bringing together suppliers and end users. 2
3 CONTENTS INTRODUCTION MULTI-SIDED PLATFORM MODELS CORE vs COMPLEMENTARY APPROACH CAPTURING VALUE ABOUT ANALYSYS MASON 3
Examples MENA telecoms summit 2015: Delivering the digital future The definition of the digital economy is simple but broad 4 The digital economy is all economic activity mediated by software and enabled by telecoms infrastructure Goods and services within the digital economy can be broadly grouped as: intrinsically digital streaming video, ebooks, computing services, Facebook including core telecoms services such as voice, messaging and data substitutes for established equipment and services virtual private communications networks, security services, virtualised PBXs the marketing and sales of physical goods Amazon, ebay. 4
The addressable digital opportunity for telecoms operators is forecast to be greater than for traditional services by 2020 5 Market size by type, USD trillion, worldwide, 2020 Digital economy 5.9T 2.4T 3.5T 1.8T Developed countries Developing and emerging countries Total Traditional telecoms (excluding devices) Source: Analysys Mason, BCG Note: We define traditional telecoms as fixed+mobile, excluding pay TV. 5
Revenue opportunity MENA telecoms summit 2015: Delivering the digital future A position closer to the traditional telco business model in the digital economy space is the most feasible for operators 6 Opportunities to move up the digital economy value chain Telcos naturally fit in the role of infrastructure provider or service enabler Moving up the value chain adds complications to the existing business Application development and service delivery End-to-end provider, including devices Service enabler ( platform ) Infrastructure provider ( dump pipe ) Investment requirements and risk involved 6
7 CONTENTS INTRODUCTION MULTI-SIDED PLATFORM MODELS CORE vs COMPLEMENTARY APPROACH CAPTURING VALUE ABOUT ANALYSYS MASON 7
The multi-sided platform business model is based on the creation of cross-group network effects 8 Market side A Market side B Provide each other with cross-group network effects Group A Group B Affiliation Affiliation Multi-sided platform 8
Moving to an MSP business is an opportunity for telcos to exploit cross-group network effects, as pure digital economy players do 9 Example Same-side network effects Cross-group network effects Traditional telco More people with mobile phones attract more users to buy a mobile phone YouTube Uber Video gaming More viewers increase the hit rate of YouTube s recommendations engine More customers improve the drivers feedback More customers increase competition for available drivers More users playing an online multiplayer game offer more opponent variety More viewers attract more content providers, more content attracts more users More customers drive take-up for drivers, which in turn improves the service for customers More gamers attract more games developers and publishers 9
Telcos can launch multiple MSPs to address different opportunities 10 B2B2C B2B2B End users End users Connected car platform ehealth platform SME cloud services Service providers Service providers Service providers Service providers Service providers Service providers 10
Deutsche Telekom has invested in a healthcare business unit and is focusing on key assets to build enabling platforms 11 Deutsche Telekom s remote patient monitoring service 500 CVD patients Weight, blood pressure, ECG Brandenburg Hospital Data analytics by physicians ehealth Connect platform Managed connectivity, security, BSS, data analytics tools, logistics and distribution Separate healthcare business unit Investing in building healthcare platforms that leverage their core technological capabilities to take end-to-end healthcare services to market ehealth Connect is a B2B platform focused on providing end-to-end capabilities including devices, managed connectivity, application hosting, backoffice support, BSS and logistics to healthcare providers Deutsche Telekom s Physiogate base station GeTeMed s ECG device Supports billing, payment and settlement between disparate players in the ecosystem as well as its partners Clinical data flow Treatment, advice Platform services 11
Multi-sided platforms are a timely solution for telcos which offer strategic benefits and leverage their intrinsic strengths 12 Strategic benefits Outsourcing innovation transfer innovation risk and product development costs to third parties Competitors can drive growth for the host platform Insulation from the strategic uncertainty and cost of responding directly to the threats posed by Internet giants Leveraging intrinsic strengths Established customer relationships Big data Product development Transmission networks Data centre and cloud services NFV/SDN Timelines Mature systems and frameworks Analytics and NFV/SDN available and economical Mature capabilities to support traditional telecoms services Expansion into new business services is increasingly relevant 12
13 CONTENTS INTRODUCTION MULTI-SIDED PLATFORM MODELS CORE vs COMPLEMENTARY APPROACH CAPTURING VALUE ABOUT ANALYSYS MASON 13
An MSP can be introduced as either a core service in its own right, or as a complement to existing core services 14 Description Complementary MSPs can complement a company s core business, in order to achieve a different business objective Core MSPs can be created as the core business of an existing or new company Example (non-telco) Apple Core: selling devices at high profit Complementary: platforms to increase loyalty Xiaomi Core: ecommerce platform Complementary: selling devices at low profit Example (telco) AT&T Drive Core: connectivity Complementary: platform to enable incar services that drive data consumption Vodafone e-health Core: data analytics support for clinical trials Complementary: M2M connectivity 14
Devices are Apple s core business, while the platform services are largely complementary Apple s ecosystem MSPs as Complementary 15 Media and content producers Developers Accessories manuf. Banks Stores Apple devices itunes App Store Apple Store Apple Pay MNOs Apple users (consumers) Business partners (e.g. IBM) Apple users (businesses) Platforms Core business Market side 1 (suppliers) Market side 2 (consumers) 15
1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015 3Q 2015 Percentage of revenue MENA telecoms summit 2015: Delivering the digital future This is reflected in Apple s revenue breakdown, with devices consistently generating more than 80% of the top line Apple s revenue breakdown by product line, 1Q 2012 3Q 2015 MSPs as Complementary 16 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Other products Services Mac ipad iphone Source: Statista.com, retrieved on 2 September 2015 16
MSPs as Complementary Apple fully realised its potential when it started managing the ecosystem of core and complementary services 17 17
MSPs as Complementary AT&T s connected car proposition, Drive, aims to capture streaming data traffic while in the car 18 Simplified view of AT&T Drive End users (i.e. drivers) AT&T offers automotive OEM partners a managed connectivity service: infotainment services, voice recognition, partner management and multi-sided billing. Volvo Audi? GM? Tesla? AT&T Drive AT&T Digital Life app iheart Radio Streetline Platforms Market side 1 (suppliers) Market side 2 (consumers) 18
MSPs as Core Xiaomi, on the other hand, uses devices as a complementary offer, shifting the core business onto their App Store Xiaomi s ecosystem 19 Media and content producers Developers Banks Stores Xiaomi devices Youku Todou (online streaming) Xiaomi App/MIUI Store MIUI Social Hub Xiaomi mobile payment MNOs Xiaomi users Platforms Core business Market side 1 (suppliers) Market side 2 (consumers) 19
MSPs as Core Vodafone is developing applications to support its connectivity offering in clinical trials and the pharmaceutical sector 20 Vodafone s proposition for clinical trial and pharmaceutical companies Volunteers and subjects worldwide Clinical trial companies Managed connectivity, security and data analytics tools Vodafone M2M SIMs / devices Third-party products and services Electronic data capture Trial data Worldwide connectivity to support clinical trials in many countries SaaS platform to assist data collection SIMs and managed connectivity for tablets and other medical-grade devices Mobile Relationship Manager SaaS solution to encourage patient engagement Beyond the pill working with pharmaceutical companies to develop tools to provide more-tailored support to patients depending on their condition Clinical data flow Treatment, advice Platform services 20
21 CONTENTS INTRODUCTION MULTI-SIDED PLATFORM MODELS CORE vs COMPLEMENTARY APPROACH CAPTURING VALUE ABOUT ANALYSYS MASON
Technical platform Strategy and planning Value proposition MENA telecoms summit 2015: Delivering the digital future The successful development of a multi-sided platform business requires three cross-functional pillars to be in place 22 Platform business pillars and foundations Digital economy platform business Activities associated with pillars and foundations Procurement Technical platform Systems capabilities assessment APIs definition Strategy and planning Mission and vision definition Buy or build case assessment Strategic framework definition Delivery capabilities (e.g. SDN, data analytics) Ecosystem management Value proposition Product development Identification of market sides Go-to-market plan (for both market sides) 22
23 CONTENTS INTRODUCTION MULTI-SIDED PLATFORM MODELS CORE vs COMPLIMENTARY APPROACH CAPTURING VALUE ABOUT ANALYSYS MASON 23
Contact details 24 Edwin Grummitt Partner edwin.grummitt@analysysmason.com Basel Tel: +41 61 5881000 Fax: +41 61 5881011 basel@analysysmason.com Boston Tel: +1 202 331 3080 Fax: +1 202 331 3083 boston@analysysmason.com Madrid Tel: +34 91 399 5016 Fax: +34 91 451 8071 madrid@analysysmason.com Manchester Tel: +44 (0)161 877 7808 Fax: +44 (0)161 877 7810 manchester@analysysmason.com Cambridge Tel: +44 (0)1223 460600 Fax: +44 (0)1223 460866 cambridge@analysysmason.com Milan Tel: +39 02 76 31 88 34 Fax: +39 02 45 07 53 23 milan@analysysmason.com Dubai Tel: +971 (0)4 446 7473 Fax: +971 (0)4 446 9827 dubai@analysysmason.com New Delhi Tel: +91 124 4501860 newdelhi@analysysmason.com Dublin Tel: +353 (0)1 602 4755 Fax: +353 (0)1 602 4777 dublin@analysysmason.com Paris Tel: +33 (0)1 72 71 96 96 Fax: +33 (0)1 72 71 96 97 paris@analysysmason.com London Tel: +44 (0)20 7395 9000 Fax: +44 (0)20 7395 9001 london@analysysmason.com Singapore Tel: +65 6493 6038 Fax: +65 6720 6038 singapore@analysysmason.com 24
Research from Analysys Mason We provide dedicated coverage of developments in the telecoms, media and technology (TMT) sectors, through a range of research programmes that focus on different services and regions of the world. Research portfolio PROGRAMMES Service Assurance Customer Experience Management Customer Care Revenue Management Analytics Network Orchestration Software-Controlled Networking Service Delivery Platforms Service Fulfilment Telecoms Software Market Shares Telecoms Software Forecasts PROGRAMMES Fixed Networks Wireless Networks Spectrum Network technologies Telecoms software Consumer and SME services Regional markets To find out more, please visit www.analysysmason.com/research PROGRAMMES Mobile Services Mobile Devices Fixed Broadband and Multi-Play SME Strategies Digital economy PROGRAMMES PROGRAMMES Global Telecoms Forecasts Asia Pacific The Middle East and Africa European Country Reports European Core Forecasts European Telecoms Market Matrix Digital Economy Strategies Digital Economy Platforms Future Comms and Media IoT and M2M Solutions 25
Consulting from Analysys Mason 26 For 30 years, our consultants have been bringing the benefits of applied intelligence to enable clients around the world to make the most of their opportunities. EXPERTISE Performance analysis Technology optimisation EXPERTISE Radio spectrum auction support Consulting portfolio Commercial excellence Transformation services Performance improvement Radio spectrum management EXPERTISE Policy development and response Margin squeeze tests Analysing regulatory accounts Expert legal support Media regulation Postal sector costing, pricing and regulation Regulatory economic costing Net cost of universal service Regulation EXPERTISE Transaction support Commercial due diligence Regulatory due diligence Technical due diligence Spectrum policy and auction support Strategy and planning EXPERTISE Market research Market analysis Business strategy and planning Market sizing and forecasting Benchmarking and best practice National and regional broadband strategy and implementation To find out more, please visit www.analysysmason.com/consulting 26