CAPTURING VALUE THROUGH MULTI-SIDED … position closer to the traditional telco business model in the digital economy space is the most feasible for operators Opportunities to move

MENA telecoms summit 2015: Delivering the digital future

© Analysys Mason Limited 2015

MENA TELECOMS SUMMIT 2015 DELIVERING THE DIGITAL FUTURE

CAPTURING VALUE THROUGH

MULTI-SIDED PLATFORMS

EDWIN GRUMMITT

11 NOVEMBER 2015



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.

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CONTENTS

INTRODUCTION

MULTI-SIDED PLATFORM MODELS

CORE vs COMPLEMENTARY APPROACH

CAPTURING VALUE

ABOUT ANALYSYS MASON

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© Analysys Mason Limited 2015 4

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.

The ‘digital economy’ is all economic activity mediated

by software and enabled by telecoms infrastructure

Ex

am

ple

s

The definition of the digital economy is simple but broad

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5.9T

3.5T

2.4T

Total Developing and

emerging countries Developed countries

1.8T

Traditional telecoms

(excluding devices)

The addressable digital opportunity for telecoms operators is

forecast to be greater than for traditional services by 2020

Market size by type, USD trillion, worldwide, 2020

Note: We define traditional telecoms as fixed+mobile, excluding pay TV.

Source: Analysys Mason, BCG

Digital economy

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Re

ven

ue

op

po

rtu

nit

y

Investment requirements and risk involved

Infrastructure

provider

(‘dump pipe’)

Service

enabler

(‘platform’)

Application

development

and service

delivery

End-to-end

provider,

including

devices

A position closer to the traditional telco business model in

the digital economy space is the most feasible for operators

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

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CONTENTS

INTRODUCTION



CAPTURING VALUE


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Market side A Market side B

Multi-sided platform

Group A Group B

Provide each other with cross-group network effects

Affiliation Affiliation

The multi-sided platform business model is based on the creation

of cross-group network effects

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Traditional

telco

More people with mobile phones

attract more users to buy a mobile

phone

YouTube

More viewers increase the hit rate

of YouTube’s recommendations

engine

More viewers attract more content

providers, more content attracts

more users

Uber

More customers improve the

drivers’ feedback

More customers increase

competition for available drivers

More customers drive take-up for

drivers, which in turn improves the

service for customers

Example Same-side network effects Cross-group network effects

Video gaming

More users playing an online

multiplayer game offer more

opponent variety

More gamers attract more games

developers and publishers

Moving to an MSP business is an opportunity for telcos to exploit

cross-group network effects, as pure digital economy players do

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Telcos can launch multiple MSPs to address different opportunities

B2B2C B2B2B

eHealth platform Connected car platform SME cloud services

End users End users

Service

providers

Service

providers

Service

providers

Service

providers

Service

providers

Service

providers

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10



Deutsche Telekom has invested in a healthcare business unit and

is focusing on key assets to build enabling platforms

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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, back-

office support, BSS and logistics to

healthcare providers

Supports billing, payment and settlement

between disparate players in the

ecosystem as well as its partners

Deutsche Telekom’s remote patient monitoring service

eHealth Connect platform

Managed connectivity, security, BSS, data

analytics tools, logistics and distribution

GeTeMed’s

ECG device

Deutsche Telekom’s

Physiogate base

station

500 CVD

patients

Weight, blood

pressure, ECG

Brandenburg

Hospital

Data analytics

by physicians

Clinical data flow

Treatment, advice

Platform services

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Multi-sided platforms are a timely solution for telcos which offer

strategic benefits and leverage their intrinsic strengths

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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

Established customer

relationships

Big data

Product development

Transmission networks

Data centre and cloud services

NFV/SDN

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

Strategic benefits

Leveraging

intrinsic strengths

Timelines

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CONTENTS

INTRODUCTION



CAPTURING VALUE


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Description

Example

(non-telco)

MSPs can complement a

company’s core business, in

order to achieve a different

business objective

Core: selling devices

at high profit

Complementary:

platforms to increase

loyalty

MSPs can be created as the core

business of an existing or new

company

Complementary Core

Apple

Core: ecommerce

platform

Complementary:

selling devices at low

profit

Xiaomi

An MSP can be introduced as either a core service in its own right,

or as a complement to existing core services

Example

(telco)

Core: connectivity

Complementary:

platform to enable in-

car services that drive

data consumption

Core: data analytics

support for clinical

trials

Complementary: M2M

connectivity

AT&T

Drive

Vodafone

e-health

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Apple

devices iTunes App Store Apple Store Apple Pay

Media and

content

producers

Developers Accessories

manuf.

Banks

Stores

Apple users

(consumers)

Apple users

(businesses) MNOs

Business

partners

(e.g. IBM)

Platforms Core business Market side 1

(suppliers)

Market side 2

(consumers)

Devices are Apple’s core business, while the platform services are

largely complementary

MSPs as Complementary

Apple‘s ecosystem

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Source: Statista.com, retrieved on 2 September 2015

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


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%1

Q 2

01

2

2Q

20

12

3Q

20

12

4Q

20

12

1Q

20

13

2Q

20

13

3Q

20

13

4Q

20

13

1Q

20

14

2Q

20

14

3Q

20

14

4Q

20

14

1Q

20

15

2Q

20

15

3Q

20

15

Per

cen

tage

of

reve

nu

e

Other products

Services

Mac

iPad

iPhone

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Apple fully realised its potential when it started managing the

ecosystem of core and complementary services


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▪ AT&T offers automotive OEM partners a

managed connectivity service:

– infotainment services, voice recognition,

partner management and multi-sided

billing.

End users

(i.e. drivers)

AT&T

Digital

Life

app

AT&T Drive

iHeart

Radio

Volvo Audi? GM? Tesla?

Street-

line …


AT&T’s connected car proposition, Drive, aims to capture streaming

data traffic while in the car

Platforms Market side 1

(suppliers)

Market side 2

(consumers)

Simplified view of AT&T Drive

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Xiaomi

devices

Xiaomi

App/MIUI

Store

MIUI Social

Hub

Media and

content

producers

Developers

Xiaomi

users MNOs

Youku

Todou

(online

streaming)

Xiaomi

mobile

payment

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

Platforms Core business Market side 1

(suppliers)

Market side 2

(consumers)

Banks

Stores

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20 Vodafone is developing applications to support its connectivity

offering in clinical trials and the pharmaceutical sector

MSPs as Core

Managed connectivity,

security and data

analytics tools

Vodafone

M2M SIMs /

devices

Third-party

products and

services

Volunteers and

subjects worldwide

Clinical trial companies

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

Vodafone‘s proposition for clinical trial and pharmaceutical companies

Clinical data flow

Treatment, advice

Platform services



CONTENTS

INTRODUCTION



CAPTURING VALUE


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Ecosystem management

Delivery capabilities

(e.g. SDN, data analytics)

Tech

nic

al

pla

tfo

rm

Str

ate

gy

an

d p

lan

nin

g

Va

lue

pro

po

sit

ion

Digital economy

platform business

Technical platform

Procurement

Systems capabilities assessment

APIs definition

Strategy and planning

Mission and vision definition

Buy or build case assessment

Strategic framework definition

Value proposition

Product development

Identification of market sides

Go-to-market plan (for both market sides)

The successful development of a multi-sided platform

business requires three cross-functional pillars to be in place

Platform business pillars and foundations Activities associated with pillars and foundations

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CONTENTS

INTRODUCTION


CORE vs COMPLIMENTARY APPROACH

CAPTURING VALUE


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Contact details

Edwin Grummitt

Partner

[email protected] Boston

Tel: +1 202 331 3080

Fax: +1 202 331 3083

[email protected]

Cambridge

Tel: +44 (0)1223 460600

Fax: +44 (0)1223 460866

[email protected]

Dubai

Tel: +971 (0)4 446 7473

Fax: +971 (0)4 446 9827

[email protected]

Dublin

Tel: +353 (0)1 602 4755

Fax: +353 (0)1 602 4777

[email protected]

London

Tel: +44 (0)20 7395 9000

Fax: +44 (0)20 7395 9001

[email protected]

Madrid

Tel: +34 91 399 5016

Fax: +34 91 451 8071

[email protected]

Milan

Tel: +39 02 76 31 88 34

Fax: +39 02 45 07 53 23

[email protected]

New Delhi

Tel: +91 124 4501860

[email protected]

Paris

Tel: +33 (0)1 72 71 96 96

Fax: +33 (0)1 72 71 96 97

[email protected]

Singapore

Tel: +65 6493 6038

Fax: +65 6720 6038

[email protected]

Basel

Tel: +41 61 5881000

Fax: +41 61 5881011

[email protected]

Manchester

Tel: +44 (0)161 877 7808

Fax: +44 (0)161 877 7810

[email protected]

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Documents

CAPTURING VALUE THROUGH MULTI-SIDED … position closer to the traditional telco business model in the digital economy space is the most feasible for operators Opportunities to move