I presented at a recent sales conference for a large security / IT solution provider on the evolution of the telco industry and the role security and protection plays in that evolution.  I show below a cut down version of the slides I presented, removing the discussion on specific market opportunities and actions.

In the discussion on telco evolution I focused on 4 area:

• Web evolution: discuss the 3 phases of web evolution and the emerging role of a "trusted agent." Operators know much more about their customers than web service providers.  Critically, ad-sponsored models mean the advertiser is the customer not the user.  However, for telcos the users are the customers, hence telcos have far better fit in being the trusted agent than most web service providers. Yet operators remain dumbfounded on how to adopt this role.  TiVo and Amazon are two examples of trusted agent, e.g. with TiVo I turn on my TV and my favorite shows as well as suggestions of shows I may like are there.  TiVo uses my data to create a vastly better experience than flicking through uninteresting channels.  Operators can do what TiVo does but on a much broader scale.
• Power of devices: we've moved to the PC model for mobile devices, and as STBs include Java so that will be the case for IPTV within a few years.  In mobile we'll likely consolidating onto 5 OS (Operating Systems), significantly reducing the fragmentation that's stifled growth in mobile applications.  However, end devices will need protection.  An operators' security layer must focus on the device, as well as the network and services.
• Customer perceptions:  I've covered this in several previous articles, customers no longer make a distinction between web and voice services they're all just services.  For operators to remain relevant as service providers they must play a role across a broader range of services, and not just act as a pipe-provider also a trusted agent.
  
• Rate of service innovation:  Operators are opening their networks to increase the rate of service innovation, but in doing so its never been easier to get malware onto a phone and in time a STB.  The 'elephant in the room' in opening the network is security.  Operators must take an integrated approach using their SDP (Service Delivery Platform): including network, devices and services - because its about their customers NOT just their network.
  

In summary: customer data, trust, security and protection are critical for operators to get right in this emerging environment.

Operators need an integrated security and protection layer, not point solutions for each service as is the case today.  That is protection from malware across all network services e.g. IP, SMS, MMS, WAP push, widgets, apps, etc.  And protection in the network, in devices and in services.

SDP vendors need an integrated security solution across network, services and end-points, which means a partnership with a leading security/protection technology provider is key.  Its a rapidly growing problem as its a highly profitable and more importantly safe criminal business compared to drugs or prostitution; hence a specialist security/protection partner is essential.

Even though M1 is a small mobile operator, roughly 1M customers, it remains one of the most innovative mobile operators.  M1's business strategy is simple: to constantly deliver value to its customers by rolling out new and innovative applications and services.  In mid-2008, M1 began its search for a next generation service delivery platform (NG SDP) to provide a framework for traditional telecommunication services, next generation of value-added services, and enabling it to remove its old IN that limited its ability to innovate.

M1 selected an open source JAIN SLEE (Java™ APIs for Intelligent Networks Service Logic Execution Environment) solution provided by its long-time IT partner hSenid, called the mChoice SDP.  M1's relationship with hSenid goes back to 2002. For nearly eight years, hSenid has helped M1 implement major projects such as the deployment of MySQL cluster, mChoice Rewards, mChoice Recharge, and mChoice Reporting - a comprehensive business intelligence system to help M1 to make strategic decisions and revenue calculations. These solutions were built on open source, resulting in significant cost savings in terms of licensing and maintenance fees.

The standard application programming interfaces (APIs) help M1 provision, control and bill for all the value-added services they provide, whether the services are developed in-house or created by third-party application.  This is a key point the APIs are not just for third parties, they're for internal consumption as well.  M1 set out with the objective of looking for a SOA (Service Oriented Architecture) based solution, given their enterprise architecture.  I discussed SOA in this article.

For M1 its main benefits in adopting a NG SDP are:

• Opens up service innovation, letting third parties offer services to M1's customers or using M1's network capabilities to their customers, which opens up 1000s of new applications and services;
• Launch new services faster, moving from months to days in launching new services (factor of 10 improvement);
• Protects existing investments while enabling future growth, i.e. reusing amortized equipment, e.g. SMSCs, while putting growth onto lower cost platforms (a 10/100 factor cost reduction for growth); and
• Lower operational overhead by simplify on-boarding, contracts, etc. enabling M1's limited people resources to launch 100s more services each year.

hSenid's whitepaper provides more details on the M1 case study. 

There's an interesting discussion the industry needs to have on whether a SOA or a looser web-centric integration framework is the right long-term approach.  For smaller operators this distinction is mute, but the larger the operator, the closer its cost-basis need to tend towards Google - as in the limit they're both service providers.

API Management has been touched upon by several articles in this weblog.  To expand on this topic to help us understand its function and strategic importance to operators I've put together a whitepaper with Sonoa Systems, a leading provider of API Management to companies such as MTV Networks, Alcatel Lucent and Guardian Life Insurance.  The API Management whitepaper is available here.  

To set the scene on what is covered in the whitepaper: within and between enterprises APIs have been used for over two decades, from the early days of EDI (Electronic Data Interchange) to today's rich RESTful protocols. The reason API Management arose is that delivering simplicity in APIs to developers involves significant complexity in operations for the provider, some of the issues include:

• Authentication and security from multiple providers;
• Multiple API calls and calls across multiple services;
• Different protocols, API versions, and interaction models;
• Variance in performance between different APIs;
• Composition of off-network APIs such as Facebook and Twitter
• Poor visibility into API performance;
• Limited troubleshooting and debugging capabilities for API calls;
• Limited bandwidth, connectivity issues over the wireless network;
• Scalability of the servers underlying the API endpoint;
• Limited memory, CPU, storage on the device limits the client-side API processing capability.

APIs are also fundamental to telecommunications; there is a very long history. Back in 1878 the world's first commercial telephone exchange was opened in New Haven, USA. The switch exposed an interface that enabled people to make requests to set up telephone calls. Over 130 years later telephony switches are still exposing an API for exactly the same purpose. What has changed is the magnitude of types of requests and the sources of those requests - people, computers, private branch exchanges, credit card machines, and many other clients.

As waves of technology have followed the birth of the Internet 40 years ago, enabling the emergence of the World Wide Web about 20 years ago, driving widespread broadband access over the past 10 years.  We have now reached a point where telecommunications and the web are merging into a powerful pervasive services platform.

Previous work has shown that capability exposure has the potential to raise average ARPU by 12-36%. There are many examples of operators today making money out of capability exposure such as Telenor's Content Provider Access which generates $100M per year. Globe in the Philippines generates 1000 new value added services per year with over 1B transactions; that project had an ROI (Return On Investment) of under 2 months. And Telus was able to launch 40 rather than 4 applications per year to its small medium business segment and lower its cost to launch new services by over 75%.

However, operators' networks remain surprisingly under-utilized by the millions of developers building the web; Apple shows the power of harnessing that community for just one proprietary handset. Critical factors in its success are providing direct access to a large engaged customer base; and of relevance to this discussion a rich, easy to use set of web-centric APIs within a common framework. Developers care about cash and/or fame - customers are necessary for both. Operators must reach a point where web developers consider an operator's STB as easy to reach as an internet site is today for the delivery of their services.

Wholesaling capabilities is a core competence of operators since the emergence of the intelligence layer on top of the telephony switch. As an example, 800 (free phone) numbers are a capability that is applied to many business problems. Operators do not create "airline customer complaint toll-free phone services," they enable businesses do that with the capability they wholesale. This is a critical point: APIs are not limited to consumer applications; rather, enterprises are major adopters of APIs. For example, in an enterprise workflow where a request to made for a new purchase, this triggers a message to the approving manager, who confirms the order is OK, and the order is placed. If the messaging and confirmation are done via an SMS or automated phone it can speed up a business processes from days to minutes - which is a very compelling business case.

As telecom and web merge the operator can wholesale a multitude of capabilities, including messaging, billing, click to call, mobile content, conferencing, location, single sign-on, address book, age verification, identity, profile, presence, call control, mobile lookup, IPTV content, connection status, quality of service, messaging short codes, video streaming, set top box APIs, mobile device APIs, to name just a few. All of these need to be provided under the secure policy control operators provide today for their customers. As these APIs are offered to web developers, most operators are struggling to provide the simplicity and scale necessary to gain adoption while maintaining security and reliability of these services.  The figure below shows the role of API Management.

Operators are sitting on a gold mine of capabilities. A new generation of applications are being built by a rapidly expanding pool of developers. These developers are trained in web applications and services, searching for differentiation, and driving consumer demand for mobile internet service. Success will be driven by the population of innovative apps, which in turn will be driven by the simplicity and consistency of access to the operator's capabilities.  API management plugs a critical gap in an operator's ability to monetize its existing capabilities and more importantly enable a rich, easy to use set of web-centric APIs within a common framework and a consistent security model to engage the millions of web developers building applications today.

I know it is frustrating for many in the telecom industry that have just persuaded their management team to invest in API exposure, that we must now step-up-the-game and invest in API Management.  But we've got to try and increase our rate of innovation towards that of the internet to remain relevant to developers, partners and most importantly our customers.  The API Management whitepaper is available here.  

The 4th annual SDP Asia Conference took place in Singapore from 27-28 October 2009.  It was as well attended as ever, with over 70 attendees from around the region.  Some of the operators presenting at the conference included:

• Krishna N Basudevan, GM, Information Technology, Aircel Ltd, India;
• Clark Lam, Director of Service Platforms in Consumer Products, SingTel, Singapore;
• Rahadian Krishna Sundara, Head of Business Research, R&D Center PT Telkom, Indonesia;
• Andrea Demaria, Project Manager Service Layer & Messaging Innovation, Telecom Italia, Italy;
• Alex Ibasco, Group Head, Strategic Business Development, Smart Communications, Philippines; and
• Dr. Jan-Bon Chen, Chunghwa Telecom, Taiwan.

For me the key theme was a shift in the focus of the conference away from 'why an operator should deploy a next generation SDP' to commercial and operational performance improvement.  Operators such as SingTel and Telecom Italia were sharing their deployment experiences from 3 years of operations.  I show below a summary of some of the slides I found interesting at the conference.  In my opening presentation I claimed we've reached the end of the beginning in the SDP story, the focus must change from technology to how the SDP can transform operators so they remain relevant to customers as service providers, not just bit pipe providers.

My presentation at the conference was titled "SDP Evolution: Revolution, Convolution, Amalgamation or Elimination?"  I examined the impact the confluence of several critical technologies / developments have on the SDP such as: cloud computing/managed services; and open initiatives such as Joint Innovation Labs, GSMA's OneAPI, OMTP's BONDI, and OSGi (Open Services Gateway initiative).  Reviewing key trends in operators' requirements and their competitive environment as web and telco converge on the handset.  Presenting a view on the current and likely future evolution of the SDP: will it change, get more complex, will silos finally consolidate, or will it simply go away?  A key message was the importance of API management for operators across the device, network and web.

On Thursday the 29 October I ran a one day workshop at the conference entitled: Application Stores, Developer Communities, Content, Games and Widgets: Strategic Market Review and Operator Opportunity / Risk Analysis.  A sample of the workshop is shown below.

I also presented at a supplier event during the week on why Operators need Developers, presentation is show below.  The week spent in Singapore was a turning point for me in the SDP journey.  SDP is now a core part of an operator's capability set, the challenge now is how to use the capabilities provided to remain relevant to customers as service providers given the Over The Top (OTT) Tsunami that's about to hit the industry.  What we've witnesses to date with Skype, Jahjah, Yahoo! IM, YouTube, and Hulu is only a trickle, the OTT business case now makes business sense.

The 4th annual SDP Asia event takes place in Singapore from 27-28 October 2009.  Some of the operators presenting will be:

• Krishna N Basudevan, GM, Information Technology, Aircel Ltd, India;
• Clark Lam, Director of Service Platforms in Consumer Products, SingTel, Singapore;
• Rahadian Krishna Sundara, Head of Business Research, R&D Center PT Telkom, Indonesia;
• Alex Ibasco, Group Head, Strategic Business Development, Smart Communications, Philippines; and
• Dr. Jan-Bon Chen, Chunghwa Telecom, Taiwan.

On Thursday the 29 October I'll be running a day-long workshop at the conference entitled: Application Stores, Developer Communities, Content, Games and Widgets: Strategic Market Review and Operator Opportunity / Risk Analysis.

The devices at the end of operators' networks are now at the fore-front of the convergence of web and telco. Once upon a time those devices were controlled by the operator, today those devices are becoming increasingly open; enabling most of an operator's value added services to be bypassed, including voice! The workshop will provide an independent review of the technologies; operator initiatives, e.g. Vodafone, Verizon, China Mobile and Softbank's Joint Innovation Labs;  operator successes / failures; review the bypass threat; and evaluate opportunities created by the convergence of web and telco. The objective is to provide a fact
based and quantified view of the emerging threats/opportunities and provide attendees with an action plan on how to respond.

In the workshop I'll be covering topics such as:

• Emerging app store ecosystem; 
• Simplify explaining what are widgets, data services and APIs;
  
• How JIL (Joint Innovation Labs), W3C (widgets), OpenAPI, BONDI, AJAX, and SDP all fit together;
• Deep dive into OneAPI, BONDI, JIL, Zembly, and OneApp;
• Examining in detail the developer communities and stores of Apple, Nokia Ovi and Android;
• Explain the developers' perspective, and the critical problems an operator must solve to retain value in this emerging market;
• Deep dive into operator initiatives such a:
• Vodafone Betavine;
• Verizon Developer Community;
• Orange Partner;
• Telenor Content Provider Access; and
• Cricket Communication.
• Then focus upon quantifying the opportunities and threats; as well as identifying strategies and action plans both operators and suppliers can adopt in the emerging market.

I'll also be presenting the moderating several sessions.

SDP Evolution: Revolution, Convolution, Amalgamation or Elimination?

• Examining the impact the confluence of several critical technologies/ developments have on the SDP such as: cloud computing/managed services; and open initiatives such as Joint Innovation Labs, GSMA's OneAPI, OMTP's BONDI, and OSGi (Open Services Gateway initiative)
• Reviewing key trends in operators' requirements and their competitive environment as web and telco converge on the handset
• Present a view on the current and likely future evolution of the SDP: will it change, get more complex, will silos finally consolidate, or will it simply go away?

Operators-Developers Dialogue : Creating A Killer Application Development Environment with SDP - Driving The Customer Experience And Adopting Open Innovation Models

• How can operators create an attractive application development environment for third party developers?
• What are the unique enablers they can offer in the short and long term?
• How do they see the collaborative ecosystems being structured? For example, should they partner with other operator and equipment providers' development communities?
• How can SDP provide a unified network service creation and service exposure infrastructure for new and innovative services?
• How do they intend to monetize the applications created by third parties?

Panelists will be:
Varun Arora, CEO Home Camera, Singapore (who is the winner of the InfoVision Award at the Broadband World Forum - a first for a Singaporean company)
Alex Ibasco, Group Head, Strategic Business Development, Smart Communication, Philippines
Peggy Kuo, Executive Director, APAC Consulting Media, Singapore
Emillie Guldner, Business Development & Sales Asia Pacific, Mobile Distillery, Singapore

Examining the Changing Business Drivers for SDP & Ensuring Return on Investment

• When does an SDP deployment make business sense?
• What are the key metrics to track SDP deployment performance?
• What is the key to achieve rapid and low-cost deployment of SDP?
• What can be done to minimize the risks of implementing an SDP?
• How can you optimize the ROI of your SDP implementation?

The above session will be a "fire-side" chat with Clark Lam, Director of Service Platforms in Consumer Products SingTel.  I'm just wondering where Informa's getting the fire from?

SDP Asia provides a unique forum where innovations, hype and emerging business models are adapted into what specifically will work for the diverse Asian markets.

I recently completed a report for Mind Commerce entitled: "IMS (IP Multimedia Subsystem) Status Report: Emerging from the Trough of Disillusionment?" This report provides a valuable independent IMS status report that can help all in the industry have a clear view on its current status and the likely paths operators will take in the evolution of their networks.  Its available from Mind Commerce.

A previous weblog entry asked for responses to a small IMS survey. This weblog article presents some of the results.  The respondents came from across the world, across operators and suppliers, and across all functions.  Though there is a bias towards suppliers, Europe and the technology office.

The figure below shows the response to the question, "If you're an Operator what is your IMS status?"  Most of the operators are either "watching and waiting," or in lab trial; none were deploying.  In the IMS Status Report 8% of those operators surveyed were deploying IMS.

The figure below shows the response to the question, "What do you see as the main barriers to IMS deployment?"  Clearly business case dominates, as was the finding in IMS Status Report. With complexity, lack of devices and cheaper alternatives following in importance.
The figure below shows the response to the question, "What do you think will be the initial problem IMS solves when deployed?"  Converged voice / multimedia platform is the clear leader.  In the IMS Status Report multimedia was less of a focus, given the poor performance of video communication services; however, the online survey had a greater percentage of suppliers; while the IMS Status Report focused on operators.
The figure below shows the response to the question, "Do you think any of the following will be a driver for IMS within the next 4 years?"  LTE takes the lead, again the greater vendor component to the survey has a significant shift in the results.  For most GSM-based mobile / converged operators LTE is unlikely to be such a driver.
The final figure below shows the response to the question, "Do you think any of the following present a viable alternative to IMS for the next 4 years?"  This result was more consistent with the IMS Status Report with a broad range of technology alternatives either delaying, or providing a stepping stone towards an IMS core. 

Its interesting to compare and contrast the results of the online survey to that of the IMS Status Report. Its clear there remains a significant gap between operators' and suppliers' views on this topic. The IMS Status Report. provides an independent and quantified view of what is happening in the industry on IMS (IP Multimedia Subsystem), through the presentation of results from an industry-wide survey that encompasses 137 interviews, 101 of them being operators.  Its available from Mind Commerce.

The Broadband World Forum is the main telecommunication industry's event for broadband, drawing thousands of attendees from more than 100 operator companies and all the top broadband vendors.  Keynotes at the event came from industry leaders such as Hans Vestberg, CEO Ericsson, Jean-Phillip Vanot, SVP of Innovation and Marketing for Orange, and Mika Vehviläinen, COO of NSN.  The plenary sessions packed out and main theater at CNIT in Paris, and at the same time the exhibition floor was packed.

One of the highlights at the event for me was HomeCamera, who I reviewed on this weblog as a start-up to watch, won the InfoVision Award.  Its great to see innovative services being recognized by the IEC at the same level as the big names such as Huawei and NSN.  This was a key theme of the conference, across all the keynotes was the importance of enabling open innovation from third parties to maintain an operator's relevance as a service provider to customers, not just a pipe provider. 

Following this theme I ran a session "Stimulating Service Innovation through the Application Developer Community: Open Innovation".  On the panel were:

• Varun Arora, CEO HomeCamera;
• Christophe Francois, VP Mobile Multimedia Products and Services, Orange Partner;
• Sean O'Sullivan, CTO Dial2do;
• James Steadman, Senior Director, Product Management Oracle; and
• Ian Valentine, CEO, Miniweb.

The panel covered the ecosystem of operator, middleware and developers, so we could achieve an adequate breadth of views.   The panel is also a mix of voice 2.0, web 2.0 and TV 2.0 developers.  There is much to be gained by mobile and broadband operators looking at how the TV guys package their content, and for the TV guys to see the challenges operators face in creating development communities and application stores.  The session was purely discussion, no slideware.  An interactive session with the audience.  I only asked the opening question, the audience and the panel did the rest.

To set the scene I reviewed some of the challenges operators face given their decade long search to work with developers.  I reviewed the critical result of a developer survey I ran earlier this year were 50% of developers who had engaged with operators have given up, its described in the slides I gave at the Cable Labs conference.  Another example is Fonolo, at the 4GWE conference the CEO made a statement I hear too often; "We tried working with operators, it was too hard, we gave up and now go direct."  BTW, Fonolo, is one of Time Magazine's Top 50 websites, I reviewed Fonolo as a start-up to watch last year.  I tried (and failed) to help Fonolo get into operators; the general reaction from operators was "Cool, I love it.  But I'm not sure because...."  I was hoping for the reaction, "Cool, I love it.  Let's get it in the App Store and see what customers think."  Its not just processes, a cultural change is required in being open to innovation; rather than risk avoidance.

I opened with the question, "If you could have one wish to make working with an operator easier, what would that wish be?"  Some of the issues raised included:

• Fair revenue share, with 70/30 being one limit, but operators taking increaing share for additional services such as marketing;
• Speed: short time to get to market, Apple claims the fastest time from code for customer, Microsoft claims 10 days, Verizon Developer Community aims for 14 days;
• Simplicity in the processes for getting in front of the customer.  Most operators hide their customers away from developers, leading to developer frustration.  An operator's core value is delivering a large engaged audience to developers; and
  
• Let customers decide, operators have proven poor in consumer service selection, let's face it they're mostly grey-haired or balding 40/50s males; its not an ideal demographic for 'picking' services.

From that, the discussion moved onto the challenges of:

• Visibility, given Facebook's >350k apps and iPhone's >65k apps; what can operators do to help developers promote their apps;
• Marketing, the importance of the operator to actively market applications;
• Device fragmentation, a critical technology issue for operators to mitigate;
• Value and relevance of customer info, such as phone activity, SMS history, in network / out network, etc; and
  
• Similarities between TV and Mobile industries in the emerging app ecosystem with many insights on packaging provided by the TV industry from Ian Valentine of Miniweb.
  

In the time available we were only another to scratch the surface of the topic, we did not have a chance to cover:

• Charging for APIs (Application Program Interface);
• Charging for testing;
• Enterprise stores;
• Operator in competition with developers, as some operators plan to build their own apps/widgets;
• Store within a store concept, e.g. an Orange store in Nokia Ovi store; and
• Operator collaboration to avoid re-certification, e.g. say Telenor approves an app, why is that not good enough for other operators.

After the session the organizers came in and asked us to move onto the next sessions as the discussion was continuing long passed the end of the panel session.

In a later article I'll review some of the sessions I attended in the Conference agenda which included more than 250 speakers in over 50 breakout sessions, keynote addresses, plenary panels, and workshops.  Sessions such as 'Demystifying SaaS/ Cloud Computing: The Myths versus the Facts' with presenters from Amazon, Salesforce.com, Amdocs, BT, and IDC proved very interesting.

I recently completed a report for Mind Commerce entitled: "IMS (IP Multimedia Subsystem) Status Report: Emerging from the Trough of Disillusionment?"  This report provides a valuable independent IMS status report that can help all in the industry have a clear view on its current status and the likely paths operators will take in the evolution of their networks.  Its available from Mind Commerce.  I'd like to thank everyone who generously gave their time in helping me create this report.

Report Structure
This report provides an independent and quantified view of what is happening in the industry on IMS (IP Multimedia Subsystem), through the presentation of results from an industry-wide survey that encompasses 137 interviews, 101 of them being operators.  The report also includes operator and supplier case studies, presenting as factually as possible the current state of the art; without the hype and marketing spin that has frustrated many people on this topic.  These two objectives are reflected in the two main sections of this report: market survey results and case studies which include Verizon, China Mobile, and Vodafone Spain.

Key Findings

• IMS remains niche, with only 8% of those operators surveyed deploying IMS.  Note, none of those operators have completed the conversion of their network, all considered it a 5-7 year process.  
• Another 12% are in an extended field trial, which is characterized by services being launched on the IMS core, with in some cases paying customers; but a decision has not yet been made to commit to service migration onto the IMS core.  
• IMS does not appear to be entering a period of rapid adoption, rather a linear growth in initial adoption over the next 5 years, with by 2014 about 32% of operators commencing an IMS deployment.  
• Regionally, NAR (North America Region) provides the bulk of the growth in years 2010 and 2011, while EMEA (Europe Middle East and Africa) and APAC (Asia Pacific) regions provide the bulk of growth in later years.  
• Lack of business case, lack of standards compliance and BOSS (Business and Operational Support System) integration were the top three barriers to adoption as identified by operators.  

Target Audience

• Mobile (CDMA and GSM), fixed, broadband and cable operators: providing an independent status report to cut through the marketing hype to aid in the definition of a realistic network evolution plan.
• Network equipment providers: giving the market analysis necessary to determine where and when to make product investments, better meet operator requirements, better aid operators in their network evolution, and guidance on where to focus sales resources over the next 5 years.
• Related network component suppliers, e.g. business and operational support system software suppliers, service broker / service middleware providers, SDP providers, customer premise equipment suppliers, mobile handset and software suppliers: providing the market analysis necessary to determine where and when to make product investments and where for focus sales resources.
• Application developers: whether to invest in building IMS applications, and where to focus.
• Investors: where the investment opportunities reside in the emerging IMS landscape.

Companies interviewed for this report include: AT&T, Belgacom, Bermuda Telecom, Bharti Airtel, BSkyB, BT, Cable One, Charter, City Telecom, Cox, Deutsche Telekom, Etisalat (and operating companies), Hong Kong CSL, Indosat, KPN (and operating companies), Kuwait Telecom, Maxis, Mobilcom, O2, Optus, Orange / France Telecom (and operating companies), Qtel, Rogers, SingTel, Sprint, Swisscom, T-Com, T-Mobile (and operating companies), Telecom Italia, Telecom New Zealand, Telefonica (and operating companies), Telenor (and operating companies), Telstra, Telus, Three (and operating companies), TWC, Verizon, Vodafone (and operating companies), 4dk, Alcatel Lucent, AppTrigger, Argela, Camiant, Cisco, Comneon, Comptel, Converged Network Systems, Dialogic, Ecrio, Espial, Genband, HP, hSeind, HTK, Huawei, IBM, Intellinet, jNetx, Motorola, NeuStar, Nokia Siemens Networks, Oracle, OpenCloud, Sigma Systems, Tekelec, Telcordia, TM Forum, Veraz, Wipro.

Mind Commerce asked if I'd put together an IMS Status Report. Its an attempt to provide an independent and quantified view of what is happening in the industry.  I'm also including some operator and supplier case studies, presenting as factually as possible the current state of the art; without the hype and marketing spin that has frustrated many people on this topic.

An analogy I've used in my interviews is; IMS presents a destination, however, there's no map on how we get there from where we are today.  I hope this report will provide some insight into the different paths operators are taking to aid operators in defining an appropriate network strategy and to aid suppliers in making appropriate product and sales investment decisions.

I'm currently working through a list of 140 interviews.  I would like to thank all those that have given their time through this process.  I've been gladdened by the openness of all, expect Ericsson whose PR group has blocked all my attempts to talk with my many friends in that organization about IMS.  If I've not contacted you and you think I should be talking to you please let me know.  I've also put this small IMS survey together if all you have is less than 5 minutes.  Click here to take the IMS survey.

OpenCloud ran a great panel discussion event last week entitled "The Stranded Service Provider," accompanied by a white paper that's available on their website.

On the panel were myself and:   

• Tereza Borges, head of NSN's next gen applications
• Keith Dyer, Editor of Mobile Europe
  
• John Logsdon, MD of NetDev
• Marlon Bowser, MD of HTK
• Kris Kimbler, Executive Editor Moriana Group
• Graham Francis, Marketing, OpenCloud
• Chris Haddock, Alliances & Partnerships, OpenCloud
  

Some quotes from the white paper that explain why operators are stranded include:

• "Service Providers are stranded by a 25 year old operating system. Imagine a web application developer trying to compete in today's market using Windows 1 as its operating system! The truth is, much of the infrastructure supporting today's networks is stranded in the mid 1980s. Unfortunately for Service Providers, their customers are living in 2009 and their expectations of Service Providers is increasingly shaped by services on the web (such as Google, Facebook and Twitter) and consumer equipment providers (for example Apple, Sony and Nintendo). Even evolved IN products only pay lip service to IT and web based technologies, yet do not enable Service Providers to play a significant role in the emerging services landscape beyond connectivity."
• "Change can only come from within, for some Service Providers it will be a stark financial hole in the business model that prompts change, while others will recognise the large gap in their service innovation ability from their customers' perspective. Both will be adopting processes and technologies to enable them to play a part in the emerging services landscape by understanding developer's needs, exposing capabilities, enabling service reuse, and leveraging their core voice assets by mashing them up with the web. This will allow them to share in the value created in the new service delivery landscape, and avoid becoming commoditised pipes to the Net."

The panel discussion covered many issues, such as the failure to launch of IMS, the migration to IP for transport yet the lack of migration for session control.  So networks now enable service bypass without putting operators in a position to add value.  The role openning the network plays internally (between marketing and network operators) and externally (both strategic partners and third parties), as discussed in this article The Telco API: Potential to raise ARPU by up to 36%.

A point I raised was the responsibility NEPs (Network Equipment Providers) must play in stranding operators.  They asked operators to believe not think on IMS which has wasted years, they've failed to deliver an integrated, open, standards based application server infrastructure, and failed to help operators manage the risk in migrating their IN (Intelligent Network) into the 21st century.  Now blame also lies with operators, but my point was to highlight the critical role NEPs play in rescuing the stranded operator - and hence the importance open, standards based application servers such as OpenCloud play in rescuing the stranded operator.

In the article Reinventing the On Device Portal - The App Store, I reviewed how Apple's implementation of its App Store on the iPhone provides a template for operators and how the struggling ODP (On Device Portal) can come into its own. 

I've reviewed the ODP landscape, its struggles and evolution in previous weblog articles.  Originally created to improve the operator's walled garden portal experience, it was over-sold as providing a solution across all devices.  In practice, the user experience of an ODP on a significant minority of devices was a good way of deterring customers from data services.

The Operator's App Store is not a new concept; there are early adopters, for example: Verizon AppZone is built using mPortal's ODP.  The critical issue is not technology; operators must simply commit, pre-load their ODP App Store, and have an integrated storefront strategy.  Fortunately, given the processing power in phones today, most devices are now addressable by ODPs.

Cricket's MyHomeScreen is an excellent example of such as implementation, supplied by mPortal.  Firstly, its preloaded; its front-and-center of the customer's experience, see figure below - its the overlay bar/carousel with cute icons; its much more than a widget engine it has a back-end to provide a unified storefront and integrated into the operator's back-end systems.  Services included in MyHomeScreen:

• Website widget, and of course any website can be presented as a widget
• Storefront widget for graphics, tones, themes, games or ringbacks.  Here Cricket can aggregate a number of catalogs to present a unified storefront - see the The Emerging App Store Ecosystem article on why this is important to operators;
• Account status widget to see the prepaid balance, call detail records, status of orders, etc;
• And of course the the usual weather, news, gossip, entertainment widgets;

Cricket has shown the industry how to tackle the consumer electronic and OS app stores head on.  Rather than complain about Nokia Ovi, operators now have a template on how to deliver an integrated storefront experience across the web, content, games, customer relationship management and all the other services they provide, all front-and-center of the customer's phone experience.

There are 4 main application store provider categories:

• Operating System: Google Android, Microsoft Mobile
  
• Consumer Electronics: Apple, Nokia (Ovi), RIM, Sony, Nintendo, Microsoft Xbox
• Mobile Storefronts: Getjar, Handango, and in the future Amazon (they've already started with Kindle)
• Operator: Vodafone (Live), OrangeWorld, O2 Active

Though the term app store is not entirely correct, as some stores includes content (ringtones, movies, music, etc.), games, and bookmarks (widgets); the name has stuck and its a good as any.  The app stores have different foci, e.g. Apple is widgets and games, not broader content, that's through iTunes.  Nokia Ovi is virtually everything.  And operator stores have traditionally focused upon content, though some operators have recently brought in a separate widget engine, e.g. T-Mobile's web'n'walk widgets - which is a browsing experience optimized for mobile.  A widget is like a bookmark with the page's code preloaded, so only the user specific or new data is downloaded, speeding downloads and improving user experience.  Other stores like Getjar provide games and applications (not content or widgets) to a broad range of devices including the myriad of JavaME devices, while Handango focuses on smartphone games and applications.

A technical point I want to mention is widget engines are not application stores, they are simply a way to make browsing the web by a mobile phone easier.   App stores are inherently proprietary to solve the problems of security, DRM (Digital Rights Management), application signing, and performance. iPhone, Windows Mobile, Blackberry, Google Android, NokiaOvi, and Yahoo Mobile are have proprietary app stores.  An operator may use a browser with a W3C widget engine to improve the web experience, but they're going to need to build a proprietary app store around a browser - just like Apple did with iPhone.

Because the CE / OS (Consumer Electronics / Operating System) run on proprietary OSs this requires them to build a dedicated application development community.  Its important to note operators have been selling content through WAP browsers, SMS and ODPs (On Device Portal) for many years without an operator specific developer community because the Java and Symbian development communities solved that problem for them.  This is a key point, a $31B mobile content market exists without the need for an operator to create a dedicated developer community.

In examining the app store ecosystem shown in the diagram below, CE / OS app stores now have a direct consumer relationship.  Once operators struck the deal with Apple, Pandora's box was finally opened for direct customer access.  Some CE/OS stores , e.g. Nokia's Ovi, claim they will work with the operator's billing engine (generally premium SMS through an aggregator) which can double the price a customer pays for an app, so customers will likely choose a direct billing relationship or use prepaid gift vouchers like Apple. 

In the customer's buying decision for an iPhone or a Google phone the app store is front and center of the user experience (UE) and proposition.  For Operators the app store has not had such prominence in either the UE or proposition; hence its much lower engagement.  But this is changing with the larger operators such as Vodafone, Orange, Verizon, etc. making significant investments.

Examining the consumer ecosystems in the diagram below, I break the market into 3 segments CE/OS, storefronts and operator stores.  You'll see I highlight operators can use all channels to market for their applications, e.g. remote control of DVR, web based service management, conference calling, yellow / white pages.  Currently operator do not use these channels, which I've discussed in this article.  This demonstrates they're still thinking like network operators not service providers.  The Mobile Storefronts and Operators do not require dedicated developer communities as they use standards based platforms, generally they ingestion content from developers direct and partner with developer communities, e.g. Sun's Java mobile and embedded community, Microsoft's developer network, Oracle's technology network, Ericsson's Mobility World, etc.  We're seeing some of the larger operators build their own communities, but it remains unclear whether this is really necessary.

Looking to the future, the CE/OS stores will continue regardless of commercial sucess as its needed to sell the devices, as that's where the money is made.  Mobile Storefronts have a few options: build the brand to be recognized as the preferred mobile store (difficult once Amazon gets in on the act), consolidate, or partner with operators to provide a white label turnkey store solution.  Either way their customer relationship is secondary compared to that of the CE/OS or operator stores.

Operator developer communities are the current focus of experimentation, the larger operators are placing their bets.  And some are open to other operators joining their ecosystem, as announced by Steve Glagow of Orange Partner at the Smart Pipes conference last month.  The key will be to deliver an integrated experience to the customer, like Apple iPhone, with a single interface for all content, applications, widgets and services.

This isn't an 'either-or' app store battle, customers happily use multiple website for buying their goods, e.g. Amazon, Barnes and Noble, JR.com, etc.  And customers even spend time visiting several stores to buy their groceries, e.g. Safeway, Costco, the Sunday farmer's market, and the local deli for that great pastrami.  Hence customers will accept and use multiple stores on the phone. 

The battle comes in delivering an integrated experience on the phone.  The device and OS stores have the edge over the operators' stores.  Hence why JIL (Joint Innovation Lab, discussed in the Smart Pipes conference) is focused on building its own app store and leveraging its combined purchasing power to influence some handset manufacturers to play fair.  In the interim while the "chess pieces" are being moved in the industry, smaller operators can do much with their existing content stores to grow a $31B market into a $100B market through improving the user experience by copying some of Apple's app store features and using the CE/OS stores to sell their applications because they're service providers not just network operators!

As mentioned in a previous aricle on virtualization I use SaaS (Software as a Service) and PaaS (Platform as a Service) interchangeably as I remain unconvinced of the difference from a customer's perspective.  The cloud computing market size, depending upon how it's defined, is estimated to be about $50B by 2011, of which 70% is in PaaS/SaaS, 30% in IaaS (Infrastructure as a Service).

Within PaaS we must define the focus of the platform, e.g. web applications, CRM applications, billing applications or SDP.  Google, through its App Engine offer, enables businesses to host their websites and data in the Cloud and enable them to use services like BigTable. The two things are important to note:  you can only host python applications as of today and you pay per bandwidth, storage and CPU used for hosting this web application; and you can easily integrate with other Google Services and Google Accounts.

Amazon does not offer a way to host web applications on the Cloud, but simply provides virtualized hardware (IaaS).  The main IaaS providers I see in the market are: Amazon, Joyent, Flexiscale, Reckspace, f5 and GoGrid (plus there are lots of brokers and niche providers).  The savings come through economies of scale and statistical multiplexing to give a higher average processor utilization (>50%) compared to a typical 10-20% untilization within an enterprise, generally a factor of between 5-7 in savings is possible, which is significant.

So the choice a customer makes between IaaS and PaaS needs to analyze:

•  Vendor Lock-in: if you deploy on Google or Microsoft Clouds, you make a choice on both technologies and with which services you'd like to integrate;
•  Ease of Use: deploying a web application is easier to do than deploying and managing a complete infrastructure; and
•  PaaS or IaaS: do you want the Cloud Provider to offer you a way to host your applications (if you can accommodate with their technical restrictions) or an infrastructure allowing you to host your applications (without restrictions) the way you want?

Operators pour money into their data centres and custom systems integration; Vodafone Live as a great example of a vast custom CDM (Content Delivery Management) development with little to show in service differentiation or lower operational costs.  Today, suppliers such as Ericsson and IMIMobile (see this previous article) offer content delivery management as a PaaS, smaller operators have widely adopted this approach.  

I think this trend will naturally extend to the SDP as operators look to minimize investment in large speculative SI projects.  Hence, there is an immediate business opportunity for the NEPs (Network Equipment Provider) to deliver a PaaS SDP, especially to small and medium sized operators or operators undergoing rapid growth.   A PaaS approach allows the operator to flexibly customize their platform to react to local market conditions, while taking advantage of the 5-7 times cost advantage of using a cloud based approach.

However, for both IaaS and PaaS the critical issue is SLAs (Service Level Agreement), this is going to be a critical barrier for many operators.  SLAs within the data center are easy; the challenge comes for the end-to-end SLA (which includes the WAN, and enterprise network availability.)  Here the need for remote infrastructure to monitor and manage link availability in partnership with operators is essential, as well as integrate into the existing network infrastructure.  SLAs are one of the reasons Google is investing in undersea optical capacity and other global optical infrastructure, to enable it to get preferential access to global connectivity to offer its cloud services with a global SLA.  Some operators are in an advantageous position, they can provide the WAN SLA, hence why I think PaaS in telco is an interesting opportunity especially for SDP.

The analogy I'm drawing here is between an operator's IN platform and an enterprise's / web service provider's application server.  

The Intelligent Network (IN) enables both fixed and mobile operators to differentiate their proposition by providing value-added services in addition to the standard voice and messaging telecom services such as PSTN, ISDN and GSM services on mobile phones, e.g. 800 numbers, prepaid, etc.  In IN, the 'intelligence' is provided by a server called the SCP (Service Control Points).  There are other nodes, which provide triggers and databases, but I'll keep it focused on the core function.  IN is based on the Signaling System #7 (SS7) protocol between telephony switch and other network nodes in the network operator.  The main driver of IN was previously all new features and services were implemented directly in the switch. This made creating VAS (Value Added Services) slow and expensive.  So IN enabled a degree of separation, however, as we can see by the woefully slow rate of telephony innovation compared to the web, it only partially achieved this objective.  Today, IN is ham-stung by proprietary vendor implementations, which continue to 'lock-in' operators to specific suppliers and limit service innovation.

An application server hosts an API (Application Program Interface) to expose business logic and business processes for use by applications.  The term can refer to: services that are made available by the server, or the software framework used to host the services such as WebLogic, WebSphere, JBoss, and GlassFish to name just a few.  The main benefits of an AS are in lowering the Total Cost of Ownership (TCO) by:

• Centralizing the business logic making upgrades, config changes, etc. easier;
• Easier security as data and application logic must pass through this point;
• Improving performance of applications in heavy use environments; and
  
• Making application/service creation easy: the server does the hard programming, so developers can focus on business logic.

The AS can be thought of as the enterprise/web service provider's SCP.  Given the rate of innovation demonstrated by the web service providers compared to telco; and the need for operators to adopt systems that enable it to take advantage of the ecosystems being generated on the web; moving to an AS from their proprietary SCP would functionally make sense.  Then there's always the statement that telco is special/unique, it requires low latency, high availability, high throughput; which means enterprise systems are not addressable.  This was true perhaps 5 years ago; however, today telcos' requirements are no longer the 'gold-standard;' financial services, military applications, and healthcare have more stringent requirements in availability (zero downtime), latency (sub millisecond), and scalability.  But adopting a proprietary AS still risks some of the lock-in risks of the legacy IN.

A driver behind open source is the software development costs in organizations are between 10-15% of total costs. It's the business model that drives the cost and value.  When IBM was evaluating Linux, they estimated it took a development investment of about $400m to create a competitive OS; they estimated that Linux would receive about $800m in development investment through being open source!  Double what IBM could afford!  Socially it enables a more effective use of our development resources.  So an open source AS, focused on telco enables a larger development community to innovate on both the platform and applications.

Open source in the enterprise is now mainstream:
"By 2010, Global IT organizations will use open-source products in 80% of infrastructure-focused software investments and 25% of business software investments."  Source Gartner.
"58% of IT execs reported that they now use Open Source for mission critical applications, 79% now use open source in application infrastructure, 62% view open source software as capable of delivering significant business payback, and 80% viewed factors other than cost such as open standards support, use of code, and avoiding lock-in."  Source Forrester/Unisys.

The question on stability has long since passed; in many respects open source now provides a more stable platform, given the broader and more diverse development investment.  We're even seeing some large operators declare open source as their preferred software model.  As in the enterprise, open source is going to happen for an operator's IN as it lowers the total costs of ownership by up to 90%.  M1 in Singapore is leading the way with its adoption of an open source IN from hSeind.  The web service providers have clearly demonstrated service innovation on an AS is much faster than on a closed, proprietary IN.  The current economic environment may prompt more rapid adoption by operators as they focus on operational costs; and operators have already successfully adopted open source for their BOSS (Business and Operational Support System).

So if an operator is looking at an NGIN (Next Generation IN), don't continue in the current proprietary rut: consider an open source AS and finally compete with the web service providers.

Virtualization is a hot topic, made more so by IBM's potential acquisition of Sun; two leading proponents of virtualization and cloud computing.  From an enterprise perspective the drivers for virtualization are saving cost; and improving employee efficiency, manageability of IT and enterprise security.  Take for example desktop virtualization, e.g Sun Ray thin clients, it's your standard PC experience except its running in the cloud so you can use any client as your own, no boot-up time, screen as you left it the night before, and the data is kept within the enterprise.  Other virtualization examples include Salesforce.com, a leading light in Software as a Service (SaaS), virtualizating the CRM (Customer Relationship Management) application.

Virtualization can be applied across a number of aspects, e.g. data center, server, application, service, desktop, database, storage, mobile device, network, and the focus of this paper the service delivery platform (SDP.)  By the way, I'm going to look at the opportunities and threats virtualization presents to telcos in another article coming soon.

These virtualizations fall into two broad categories, SaaS and IaaS (Infrastructure as a Service).  The SaaS model is being extended to include Platform as a Service, e.g. BT Ribbit's (communications focused) and Sun's Zembly (social network focused) which provide development environments.  The distinction between SaaS and PaaS is more marketing, e.g. Salesforce.com has Appexchange for developers to create new applications, so could claim to be a PaaS; hence I'll use SaaS and PaaS interchangeable until someone points out the error of my ways.

We're seeing operators deploy SDPs as a traditional licensed product running on servers within their IT infrastructure.  But what does SDP virtualization mean to operators?  Are the cloud based SDPs a threat or a complement?

There are two main functions of the SDP: Service Factory (e.g. iPhone SDK) and Service Shop (e.g. iTunes).  The Service Shop can sell to a number of customers, e.g. consumers, enterprises or developers, though the developer shop is really more of a factory store.  The Service Factory provides the tools to ensure the application works on and can use capabilities being exposed by the device and/or network/factory.  Now within the SDP there are functions such as policy, identity, security, charging, cataloguing, sand-box, etc.  I'm not going to go into those details in this article.

Looking at how the cloud SDPs are monetizing themselves:
BT Ribbit's, charge for communication APIs, e.g. seats, calling, texting, transcription, etc.
Sun's Zembly, charge for use of their hosting infrastructure;
Mashery, charge for API use which they aggregate making it easier for developers to access;
Microsoft Azure, none made public, but given its focus on working with operators will likely look at revenue share or hosting charges; and
Salesforce.com, charge for seats and additional revenue from applications.

But back, like a broken record, to the fundamental issue - customer access.  Sun's Zembly is focused upon social networks, e.g. Facebook, where you can create cool apps, like 'stamping on friends' rather than 'poking' them, and get ad revenue from the impressions, of which Sun takes its share for hosting.  Salesforce.com has an extensive customer base and sales force, the apps help sell its core service and win additional revenue.  Mashery and Ribbit provide services that require enterprises to bring their own customers, e.g. Mashery's hosting of 'developer.nytimes.com' or Ribbit's focus on verticals such as Salesforce.com customers or the 'travel and hospitality' sector.

So the consumer/enterprise Service Shop is clearly something that an operator needs to have if it wants to sell services.  Going back to the Factory analogy, there are multiple stages in production, e.g. dye factories, cloth factories, and jeans factories.  A telco's role in service exposure (location, presence, calling control), policy, identity, security, and charging means it's the finishing factory that ensures the product is fit for purpose, wraps it up in a pretty bow and addresses it to a specific customer.  Which means an operator's Service Factory must be able to work with the many other cloud based factories, e.g. Microsoft Azure, partner operators with their development programs, Sun Zembly, etc.  However, such a factory runs the risk of being bypassed, by others further up the supply chain going direct to the consumer.  How operators as an industry structure their factories to minimize this threat as been discussed from an industry perspective in these articles.

• Why the Mobile Industry needs to keep an eye on Cable's Canoe Ventures
• Options on how the Telco industry can work with the App Development Industry
• The Long Slow March towards a Utility Business Model: Mobile World Congress Summary 2009

What all this means to an individual operator's SDP plans will be explored in another article coming soon :)

Yesterday (3rd Feb) I gave a presentation at the SCTE (Society of Cable Telecommunication Engineers) Canadian Summit in Toronto on "Enabling the Multi-Screen Experience: Case Studies in Third Party Multi-Screen Services." In it I reviewed the need for change in how operators create new services, explained the role of Open Innovation, and used a simple home surveillance service, Home Camera, as a case study.  The presentation is shown below.

In a recent IDC report, "Securing the Bundle: How Home Security and Monitoring and reduce Cable/Telco Churn," showed the significant impact services such as Home Camera can have in retaining and attracting customers.

Given many MSOs (Multi-Service Operators) have pulled back on their mobile plans, and the threat posed by the PS3, Wii, TiVo, Xbox, Apple TV, etc. is not receiving the press of the Apple App Store - see this article for more information on the emerging service platform threats.  The drive to meet this emerging threat was not that apparent.  Because MSOs act in unison trough the industry leadership of Cable Labs and the SCTE; they have perhaps the best chance of success as an industry in the unified adoption of service innovation compared to disparate initiatives of their mobile and fixed 'cousins.'  Or perhaps the MSOs have decided the utility model, a best in class pipe, is the best option rather than fight in the services domain?

In a previous weblog article on "Open Access Service Examples," one case includes an "Operator Community Widget."  Where I provided some use cases on how an operator can harness Facebook.  The business model for the operator would be to insert itself into the 16%-20% of online time being spent for social communications; enhancing that experience; and using it for both advertising and stimulating consumption of operator services.

I've talked about the Apple App Store in many articles last year, e.g. Open Innovation and Application Developer Needs "Part 1" and "Part 2," and "End of year Review."  It provides an open service platform where operators could place their application.  For example, an AT&T iPhone subscriber could have a Verizon app (VZapp) on their iPhone.  Or an iPod Touch customer could similarly have that VZapp application.  

Here's an example use case for a VZapp on an AT&T iPhone:

Fred hops on the bus to his local coffee shop.  While passing a bill board advert for Lost, he realizes he'll be out tonight, so remotely sets his FiOS DVR (Digital Video Recorder) to record the show, as well as checking if there are any old shows he should delete.  He then watches the local news from his FiOS TV service remotely.  While drinking coffee he sees on Facebook a friend has just bought an exclusive track from Verizon Media Store (see previous operator Facebook app use case) that they talked about yesterday, so he does the same.  He then messages/calls his friend (who is on Verizon) for free, asking what she thinks of the new track.  Before Fred leaves the coffee shop he checks out the latest VCAST exclusive videos, then does a local search (location provided by iPhone / iPod Touch) GPS) for the nearest pizza joint.  This could all be done with the VZApp.  The scenarios do not need to be limited to consumer applications, there are many business scenarios.

The iPhone provides a platform for operators to experiment in the role of being 'just' a service provider.  Even though they may have lost a mobile network customer, they can still maintain the relationship and revenue with their other services.

On the 16th January Apple App Store achieved 500 million downloads, granted most of the downloads are for free applications.  But regardless this is a great achievement and a testament to focusing upon the needs of the customer and application developer.  The Apple App Store was not the first App Store, some of its predecessors include: O2 Revolution, Verizon AppZone, 3 X-Series, Mobile2Market, Windows Mobile Catalog, NGage, Nokia Download Store, etc.  An important factor in its success is it caters for one platform common to two devices, the iPhone and the iPod Touch.

Comparing the iPhone and iPod Touch, on form factor the iPhone is bigger and heavier than the Touch. It weighs in at 4.8 ounces and 11.6 mm depth versus the Touch's 4.2 ounces and 8mm thickness.  The biggest gap in my personal experience is playback time for the iPod Touch I can get 38 hours (claimed 36) versus <18 hours for the iPhone (claimed 36 hours) because it's also a phone, not just a player.

Trying to find the number of iPod Touch devices on the market has proven challenging.  Gathering data from sources such as Admob latest impression figures, on Amazon.com the iPod Touch remains the top selling MP3 player, and other estimates on MP3 market shares.  In 2008 the total MP3 player unit sales was 250m, so even if just 4.5% of the market is iPod Touch, that's over 10 million devices sold in '08.  If you check out your local Walmart or Target, you'll see inventories are low; the iPod Touch proved a popular present, as reflected in Apple's recent numbers were it made a record net profit of $1.61bn and posted record revenue of $10.7bn for the quarter to the end of December.  Apple sold more than 22 million iPods and more than four million iPhones in that quarter.  This means that potentially over half the downloads in the App Store are from the iPod Touch, and it looks like it's the faster growing of the two devices.

What's opening up is an interesting spectrum of mobile / nomadic usage, see diagram below, at one end the mobile phone that's small, lightweight and doesn't need recharging every day, on the other end laptops.  Then in the middle the iPhone and iPod Touch.  The iPhone provides the functionality of a phone and a good-enough web/entertainment experience; while the iPod Touch provides that good-enough web/entertainment experience in your pocket.  For some customers their existing phone is good enough, and the iPod Touch provides a good enough player/portable games device/web experience.  For others the iPhone provides the convergence of both.  For others the iPod Touch is simply a cool MP3 player and games machine.  This raises a critical issue for operators, what should they use as a framework for comparison of app store performance? Should the iPod Touch usage statistics be counted as part of the iPhone stats, especially when comparing to other smart-phones?  They're apps that are being purchased, or at the least free and downloaded; but if they are included why not include downloads of games and content to other devices such as games consoles?  Should the iPod Touch downloads only be compared to Sony PSP (44M sold) downloads, or to other devices such as the Sony PS3 (20M sold) or the Nintendo Wii (46M sold)?  Should games be broken out as a separate category? A simple answer is: "a download is a download," regardless of what the device is capable of or the download used for - they're generally going over an operators network.

The diagram below shows the spectrum of service platforms, from fixed devices such as the Nintendo Wii and desktop PC, to nomadic devices such as the Sony PSP and iPod Touch, to fully mobile devices. The market breaks down into devices where the manufacturer controls most of the application action; though for example with the Wii, once you have the web browser installed you can go direct to the BBC iPlayer site to download shows.  The pervasiveness and processing power of laptops and desktops generally enables service providers to deliver their services with minimal control from the device manufacturer.  But the phone is an enigma in this landscape.  Most phone manufacturers have failed to dominate like Apple; the lack of processing power and limited functionality of phone browsers has limited over the top providers; so operators have filled the gap.  But increasingly today the apps offered through those operator stores pale in comparison to the Apple App Store.  So operators have to raise their game to that of Apple, Sony and Nintendo. Examining the advantages Apple, Sony and Nintendo have:

• Generally a 'one platform store' so effort is focused on ensuring compatibility and quality.
• Beautifully simple yet visually pleasing user experience, it encourages you to linger and shop around;
• Developers needs have been met with:
• A simple revenue share (70/30) or license agreement, hence a clear path to cash;
• A market size measured in tens of millions of units, for example the iPhone and iPod Touch combined is likely greater than 20m devices, the Nintendo Wii has sold 46M units;
• A platform commitment measured in years, not months - as is the case with many phone manufacturers; and
  
• Direct access to customers.

For operators this has several implications:

• They need to work together to achieve a similar market size because only a fraction of their customers' devices are truely addressable;
• They need to focus on a few platforms, and commit to them over multiple years;
• Get the browser issue sorted as soon as possible, so service innovation is made easier.  This has its risks, but they're being left behind;
• Get out of the way and let the customer and application developer innovate; and
• Make the user experience simple yet visually pleasing, the App Store is on the home page of the device, the customer just clicks and starts downloading cool stuff.

The challenge is this requires co-ordination across device manufacturers, operators and multiple groups within the operator.  For operators the decision is back to my crossroad analogy from the MWC weblog entry last year: "Operators take a left and follow the ISP route, or continue along the current strategy, or perhaps take a right along a path that enables and enhances services over their network."  The left route requires drastic downsizing to that of a utility business, continuing along the current path is untenable, the right route requires whole organization and value chain commitment.  Today's piecemeal approaches are not competitive with other app stores to which they will be judged by the customer.  As discussed in this previous weblog article, its customers' expectations that are changing the game, and at the moment they are changing it faster than operators are responding.

Many of the incumbent vendors are bringing their old IN (Intelligent Network) systems to end of life; and in some cases proposing technology that was built 5-10 years ago so is generally based on old or proprietary architectural principles, e.g. Ericsson TSP (Telecom Server Platform) - some of us may remember the TSP announcements made back in 2000. Unfortunately, such stale technology is not going down well with some operators. Hence, this has opened up an opportunity for a range of NG IN (Next Generation IN) vendors, e.g. Oracle, IBM, OpenCloud, jNETx, etc. Who are using standards based IT architectures, combined with a technology refresh to enable operators to do much more with their old voice networks.

Some 'back of the envelope' figures on the NG IN market size: assuming 1k operators refresh their IN, currently they'll be paying on average between $10-20m in maintenance and other legacy related costs. Assuming NG IN comes in at 20% of the cost (which I've seen for a number of operators), that's still a $2-4B market.

The move to NG IN is much more than simply implementing a standard IT architecture to lower platform costs and dramatically lower support costs. Many countries have implemented number portability, so most calls include an IN look-up. Hence, NG IN enables an amazing range of services to be added to the good old voice network. I show just a few examples below, many of which where discussed over 10 years ago. However, with the move to NG IN and the pervasiveness of the internet in most businesses, we finally have a chance to realize some of these convenient services.
 

1. I call the dentist, make an appointment and its added to my calendar, I also receive an SMS alert reminder for the day before the dentist appointment;
2. I call a pizza company's 800 number and the call's routed to their local office, without the need to enter my zip or share location information outside the carrier;
3. When I'm traveling with a >5 hour timezone difference, at night in my current timezone the calls are interrogated before being connected to avoid those "middle of the night calls" from the US;
4. I call a friend and as its ringing, a service announcement lets me know I could make this a video call or high quality audio call with the press of a button;
5. Ring back when free is finally available;
6. When an anonymous call comes in (without caller ID), they have to say who they are and wait until I confirm it's OK to connect;
7. I'm in a meeting, I receive a USSD message rather than a direct call, with the options to accept/reject/call-back;
8. I call a restaurant to make a reservation, they place the appointment in my calendar and send me the restaurant contact details and menu via MMS;
9. I call directory services, asking for the number of the nearest photocopy/printers, I receive an MMS with the contact details and directions from where I am.
10. While on the phone to the local take-out deli, I pay for the pastrami-reuben (heavy on the sauerkraut, light on the cheese) using my phone account by just keying in the security code from my phone;
11. I'm driving, a friend sends a text, they receive a reply asking to call if its urgent because I'm driving.
12. I call my friend's mobile, they've left their phone upstairs at their home so they do not hear the phone ringing, I call again and on no-answer for the second time the call diverts to the home phone.

These examples may not have the sizzle of some of the the Web2.0 use cases described in previous articles, but there's still many opportunities to make calling more successful, convenient and connected to internet based services.

A previous article provided 'A Managed Services Primer.' Managed Network Services (MNS, aka Outsourced Network Operations) was a $10B business in '08, with a CAGR (Compound Annual Growth Rate) of 16%.  Europe accounts for 45% of the market.  The leading supplier in the market, Ericsson, rips-out other supplier's equipment and installs its own in the networks it manages (e.g. in H3G Sweden).  So for any supplier in the telecoms industry, if you can not deliver your product as a managed service, you may not be delivering it for much longer.  

MNS breaks down into network outsourcing and service hosting.  Network outsourcing is buy far the larger business, roughly $8B, compared to service hosting at roughly $2B.  Service hosting tasks (or managed services, the term used in this article) include product/service definition, service delivery platform development, service delivery platform operation, content acquisition and management, application and content development, and application operation.  The focus of this article is on managed services, and uses IMIMobile (IMI) as a case study in the success of this category.

IMI's converged mobile and online technology platforms enable it to deliver managed content services to over 80 mobile operators and media companies around the world. IMI's product portfolio includes a Service Delivery Platform, carrier grade messaging platforms and gateways, applications for data services, web services and voice platforms Customers include Airtel, Vodafone, Virgin Mobile, Google, Reuters and Yahoo!. This is a critical point, IMI could sell products, but they do not; they sell a managed service based on their technology.  

BSNL (Bharat Sanchar Nigam Limited) and IMI partner to deliver a personalized ring back tone service (PRBT), launched in 2007 and branded BSNL TUNES.  They achieved 1 million customers within 52 days of launch, and passed 2 million customers back in early 2008.  IMI manages the technology and service on behalf of BSNL.  BSNL gains in this relationship as they avoid capital investment, significant system integration costs, the operational costs of yet another platform to be managed, and all for a relatively small share of the revenue generated by the platform.  For IMI, they can re-use their existing managed services platform, avoiding the costs of implementing a BSNL version of their solution; and they can re-use the service marketing experience of other deployments to help BSNL sell the service more effectively through appropriate inventory and effective marketing campaigns.  As BSNL has discussed, the platform managed by IMI provides a foundation upon which they can launch further VAS (Value Added Services).

This model need not be limited to mass market services, it also enables service experimentation.  For example IMI has a UGC (User generated Content) service called UnIspace, which is deployed in Malaysian operator Maxis.  UnIspace enables customers to share audio, video (including 3G video calls), pictures and text; and have the opportunity for customers to earn rewards (e.g. free airtime) when other members of the community download their content.  As with the BSNL case, IMI's managed service avoids capital investment, significant system integration costs, the operational costs of yet another platform to be managed; while enabling the 'service recipe' to be crafted for the local market. 

For the VAS being deployed today, one thing is clear; local market factors matter more than ever in service success.  These factors includes local culture / social norms, competitive / regulatory environment, pricing, internet availability, competitive / complementary services, etc.  These factors make determining service success difficult.  A common refrain from many application developers is operators are always expert on what services will NOT work in their market.  IMI's managed services model provides an example of how to lower the barrier to entry for new services to enable operators to experiment more freely and hence let the market decide on service success.