Unlocking the Value of Service Provider Assets to Win the … customer relationships, expand their view of customer touchpoints, increase channel productivity, and become the channel

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Unlocking the Value of Service Provider Assets to Win the SMB Customer

SMB Connected Office and the Channel Experience

AuthorSeanan Murphy Service Provider Practice

May 2009

Cisco Internet Business Solutions Group (IBSG)

Cisco IBSG Copyright © 2009 Cisco Systems, Inc. All rights reserved.

1

As telecommunications service providers (SPs1) attempt to offset declines in legacy revenues by moving into adjacent segments such as enterprise IT services, they may be overlooking an attractive and underserved market: the small- and medium-sized business (SMB2) sector. To date, SPs have focused their efforts in the highly competitive market for enterprise IT services to build critical mass for service offerings. Nevertheless, SMB customers have the makings of an attractive market for IT providers and SPs due to their:

• GrowingneedforservicesastheITenvironmentincreasesincomplexity

• LackofITlegacythatwouldcomplicatethesituationforSPs

• HighadoptionratesforbothIPandmobiletechnologies

• Limiteddo-it-yourselfsubstitution

TheSMBcustomer,however,oftenisviewedasdifficulttoserve,withsmallpoolsofaddressable spend per customer, a significant amount of vertical diversity, and often widegeographicdispersion.Thesecharacteristicscanraisesalesandmarketingexpensesaswellasmakeitdifficulttomeetthevarietyofneedswithinthissegment.

Some IT service providers, such as IBM, have achieved a measure of success in the SMB market by creating repeatable, prepackaged plays using price to attract customerswhilerelyingonpartnerstoselltheirservices.3 According to IBM, packaged services are approximately one-third the price of traditional, labor-based consulting engagements.4

In the context of telecommunications, large service providers often address SMB customer needs through simple extensions of existing consumer offerings or slightly repurposedenterpriseservices.Littleefforthasbeendevotedtotakingadvantageofincumbent providers’ SMB customer touchpoints. Apart from fixed and mobile voice, SPs have struggled to crack the code of scaling managed services for SMB customers. SolvingthisissuewillunlockthedoortoalargeproportionoftotalglobalITspending.

Unlocking the Value of Service Provider Assets to Win the SMB CustomerSMB Connected Office and the Channel Experience


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1. TelecommunicationsserviceprovidersarereferredtoasSPsthroughoutthiswhitepaper.

2. SMBsaredefinedasfirmsemployingbetween20and999employees.Firmsoutsidethisrangeare“smallofficehomeoffice”(SOHO)orenterprise.

3. “ITOutsourcingandManagedServices,ATripleTreeIndustryAnalysis,”TripleTree,2005.

4. TechnologyBusinessResearch(TBR),IBMGlobalServices,FourthCalendarQuarter2006,page9.

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2 Cisco IBSG Copyright © 2009 Cisco Systems, Inc. All rights reserved.

A“newbreed”ofthird-partyproviderswithofferingssuchassoftware-as-a-service(SaaS), infrastructure-as-a-service (IaaS),5 and platform-as-a-service (PaaS) is begin-ningtopenetratetheSMBmarketthroughincreasedscale,“one-stopshop”deliveryofservices,andintensefocusoncustomerexperience.Increasingly,thenetworkisbecomingthedeliveryplatformforthisnextgenerationofservices.Thegrowingconsumption of multitenant, on-demand infrastructure and applications creates an opportunityforintegratedSPstoaddressSMBcustomersinnewways.Providerscancapitalize on their impressive selection of offerings and extensive customer touch-points,inadditiontoplacingtheircoreassets—wirelineandwirelessnetworks—atthecenter of on-demand offerings.

Topositionthemselvesbest,SPsneedtoaddressthisemergingopportunity.First,theymust architect compelling—and extensible—offers built around SMB customers’ need forcollaboration-centricsolutions,“anywhereaccessibility,”andtheirrisingadoptionofSaaS.Oneexampleofsuchoffersiswhatwecallthe“ConnectedOffice,”whichwediscussinmoredetail(seeFigure4).Second,SPsmustrigorouslyfocusontheir SMBcustomerrelationships,expandtheirviewofcustomertouchpoints,increasechannel productivity, and become the channel of choice for next-generation SPs. Thesetwoaspectsaremutuallyreinforcing,withawell-constructedoffermakingiteasier to sell, and increased channel productivity attracting the third-party providers thatcouldfurtherextendtheofferandmonetizechannelinvestmentwhileimprovingcustomer experience.

SMB: An Attractive SegmentDue to their need to be lean operators, SMBs lack the do-it-yourself IT competition of enterprise customers; this is especially true as the size of the customer decreases. At thesametime,theSMBneedstechnologytostayconnectedwithitscustomerbaseandtooperatethebusiness.SMBs’needtostayleanandkeepheadcountlow—coupledwitharequirementfortechnology—drivesthemtoseekthird-partyprovidedservicesandeasy-to-integratesolutions(seeFigure1).Thisisreflectedinthefactthatservices represent 40 percent of total U.S. medium-sized business IT spending.6

Asawhole,SMBsaccountfor48percentoftotalinformationtechnologyspending(includingtelecommunications)—andtheiryearlyspendingisgrowingfaster (8.1percent)thanthatofenterprises(estimatedat7percent,butmorerecently reviseddownward).7 At the same time, the composition of SMB spending is shifting awayfromtraditionaltelecommunicationsservicestoIP,mobility,andIT.

5. Infrastructure-as-a-serviceissometimesreferredtoasutilitycomputeandstorageand,morerecently,asaservicecomponentofcloudcomputing.

6. “2006–2007U.S.MediumBusinessOverviewandMarketAssessment,”AMIPartners,2007.Notethat“mediumbusiness”isdefinedasbetween100–999employees.Theratioiscloseto50percentofITspendoncetelecommunicationservicesspend(minutesandbytes)isexcluded.

7. “EconomicCrisisResponse:WorldwideITSpending2008-2012ForecastUpdate,”J.F.Gantz,S.Monton,A.Toncheva,IDC,2008;“EconomicImpactonITSpending:MarketDynamics&InsightsonUSITSpending,”K.Burney,CompassIntelligence,2008.


Cisco IBSG Copyright © 2009 Cisco Systems, Inc. All rights reserved. 3

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Capturing SMB Segment Value: Barriers to SuccessAchievingsignificantpenetrationofITserviceswithintheSMBsegmentisachallengeforlarge-scaleprovidersthatalsoserveenterprisecustomers.Servicesmorefrequentlyare provided by local, value-added resellers or small-scale IT shops. IT services often areofferedusinga“hightouch”model,whichislargelydriventhroughapplicationlaborutilization instead of through operational leverage. In contrast, SPs typically have had greater success in this segment due to the relatively undifferentiated nature of the productofferingaswellasoperationalleverage.

The IT services market has traditionally regarded the SMB segment as too difficult andtooexpensivetoaddressprofitablywiththetypical“hightouch”ITapproachtoservices.AnindividualSMB’sITbudgetisextremelysmallwhencomparedtotheaverage enterprise spend. SMBs have a much higher business failure rate and tend to be geographically dispersed, adding to the lack of attraction. As a result, SMBs’ IT needs often go unmet and the opportunity remains untapped.

Figure 1. SMBs Turn to Third-party Providers for IT Assistance

Sources:“EaseofIntegrationforRouters,SwitchesandHubsIsTopSMBPurchaseDriver,”YankeeGroup,2004;“U.S.SmallBusinessOutsourcing,”CompassIntelligence,2005;“U.S.SmallBusinessOverview,”AMIPartners,2005-2006

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Cisco IBSG Copyright © 2009 Cisco Systems, Inc. All rights reserved.4

Next Generation of IT SPs Cracks the Code The next generation of IT service providers takes direct aim at the bread-and-butter activities of IT services firms—namely installation and customization, integration, andoperations,makingitpossibletoofferITservicesatalowincrementalcostpercustomer. Next-generation providers offer multitenant, hosted solutions over the Internet,typicallywithasimpleonlinesalesprocess,on-demandprovisioning,andrapid time to productivity through deployment of basic productivity tools, collaboration applications, and seamless application enhancements.8Thislow-cost,high-touch

Localand LD

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8. “SoftwareasaServiceUpdate,”TripleTreeIndustryAnalysis,SpotlightReport,Q42006.

Figure 2. IT,IP,andServicesDriveSMBSpendingGrowth(RelativeSpendingandGrowth,2008–2010)

Source:CiscoIBSGanalysis(2007)ofAMIGlobalModel,1H2006


combination is successfully attracting SMB customers. Next-generation providers of servicessuchasIaaS,SaaS,andPaaSarenotonlydisruptingthesoftwareindustry, butchangingexpectationsforthewayITserviceswillbeprovided.

Threekeycharacteristicsofnext-generationservicesallowSPstocrackthecodeofthe SMB market:

Scale—Next-generationmodelsscaleacrosscustomers.Theiruniquecharac-teristics—sharinginfrastructureandsoftwareacrosscustomers—drivethelowincremental cost per customer typical of a largely fixed capital investment. Providers make significant up-front investment in capabilities (research and development in softwarecreationorprovidingagoodcustomerexperienceontheInternetrequiresasophisticated infrastructure). In contrast, traditional IT service providers operate largely variable-costbusinesses.Thesedifferencesturnthemodelonitshead,requiringnext-generation providers to sign up as many customers as possible instead of seek-ing large pools of spending.9

One-stop Shop—Next-generationprovidersalsotendto“preintegrate”withanecosystem of partners or offer easy integration through APIs. A preintegrated ecosystemofservicesofferstheSMBcustomera“one-stopshop”forIT,allofwhichcan be purchased on a monthly basis or through advertising-supported models. As a result, SMB customers reduce or eliminate time spent finding, negotiating, installing, integrating, or operating their IT infrastructure, and can focus on core business activities.10Forexample,CircleL,acommercialroofingcompanyinFloridawith800employees in 10 locations, used SaaS solutions and reduced its IT headcount from 15to2.Italsoeliminatedredundantbusinessprocesses,increasedproductivityby 50percent,andreducedmanualreconciliationandauditortimeexpensebymorethan$100,000ayear.CircleLimplementedSaaSinoneweek,whichyieldedimmediatereturn on investment.11

Customer Experience—Although next-generation providers take advantage of softwareandinfrastructuresharingtodrivethecostofservicedown,theyalsomaintain an intense focus on customer experience. These providers recognize that an outage can have serious business impacts12 and that ease of use is essential to adoption.Manyprovideweb-basedtraininganddetailedinformationonlineabouttheir offerings.13 At the same time, they address the significant transaction costs14 that maybeassociatedwithaservicescontractbymakingiteasyforcustomerstoadopttheseservices;customerscanadoptsomeofthesesolutionswithouteverspeaking

Cisco IBSG Copyright © 2009 Cisco Systems, Inc. All rights reserved. 5

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9. Foragooddiscussionofthesecharacteristicsandtheirimpactonthebusinessmodel,see“SaaSSuccess,”TrebRyan,CEO,Opsource,Inc.,Upgrade, Software&InformationIndustryAssn.,October/November,2007.

10. ForagooddiscussionontheimpactthatreducingthesecostsmayhaveontheattractivenessofSaaSrelativetocommercial,off-the-shelfoptions,see“TheBusinessModelof‘Software-as-a-Service,’”DanMa,SchoolofInformationSystems,SingaporeManagementUniversity,2007IEEEInternationalConferenceonServicesComputing(SCC2007).

11. http://us.intacct.com/customers/#circle

12. In2005andagainin2006,Salesforce.comexperiencedamuch-talked-aboutservicedisruption(“Salesforce.comOutageCutsUsersOff,” StacyCrowley,IDGNewsService,Infoworld,December20,2005).Sincethattime,Salesforce.comprovidesonlinesystemstatus,bothreal-time and historical, at http://trust.salesforce.com

13. Forexample,WebExprovidesrobustonlinetrainingonWebExUniversity:http://university.Webex.com/training/student/content/welcome.do

14. ForagooddiscussionoftransactioncostsandITservices,see“ProductionandTransactionEconomiesandISOutsourcing:AStudyoftheU.S.BankingIndustry,”Ang,S.,&Straub,D.W.,MIS Quarterly,535-552,1998.;transactioncostsreferto“theeffort,time,andcostsincurredinsearching,creating,negotiating,monitoring,andenforcingaservicecontract.”

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Cisco IBSG Copyright © 2009 Cisco Systems, Inc. All rights reserved.6 Cisco IBSG Copyright © 2009 Cisco Systems, Inc. All rights reserved.

toasalesrepresentative,andusesophisticatedITserviceswithinaday(forsmallbusinesses),oraweekortwoforlargeroperations.

Thelowincrementalcostofofferingtheseservices,“notouch”provisioning,minimizationof customization and integration, and ease of use make it economical to serve the needs of SMB customers. This next generation of IT service providers solved the problem of howtoservetheSMBcustomer,andbuiltcriticalmassinalong-underservedmarket,settingthestageforbusiness-modeldisruptionoftheITservicesmarket(seeFigure3).

Figure 3.FinancialModelComparison:SaaSversusASPs

Sources:CiscoIBSGanalysisofcompanyfinancialdataforEquinix10K,December31,2005;USinternetworking10K,December31,2000(lastyearreporting);Salesforce.com10K,January2006;Oracle10K,December2005.

Anumberoffactorswillboostadoptionofthisnextgenerationofservices:

• Increasedavailabilityofconnectivitythroughbroadbandwireless

• Investmentsinincreasedsecurityandflexibilityofdatastorageoptions

• EaseofcustomizationandintegrationthroughAPIsand“mashups”

• Entryofayounger,Internet-savvygenerationintotheworkforce

Software-as-a-serviceintheUnitedStatesisexpectedtogrowto$11.5billionperannum by 2011,15withsomeestimatesashighas25percentoftotalenterpriseapplication spending per annum by 2011,16whichcouldrepresent$186billion17 in total global spending.

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15. “SaaSDemandSettoOutpaceEnterpriseApplicationSoftwareMarketGrowth,”Gartner,Inc.,2007.AmorerecentGartnerstudyexpectsthemarkettogrowto$14.8billionin2012(“GartnerSaysWorldwideSaaSRevenueintheEnterpriseApplicationMarketsWillGrow27PerCentin2008,”GartnerResearch,October22,2008.RetrievedDecember12,2008,fromGartner:http://www.gartner.com/it/page.jsp?id=783212)

16. “SaugatuckInsightsonSaaSandOn-DemandInfrastructureAdoption,”CharlieBurns,MikeWest,SaugatuckTechnology,Westport,CT,2008.TheseestimatesareunderscoredbyarecentstudyconductedbyMcKinsey&CompanyandSandHillGroup,inwhichenterprisecustomersexpectedtoallocate21percentoftheirapplicationbudgetstosubscription-basedandon-demandsoftwaremodels(“EnterpriseSoftwareCustomerSurvey,”Dubey,A.,Mohluddin,J.,Baljal,A.,&Rangaswaml,M.,McKinsey&Company,SandHillGroup,2008).Similarly,MerrillLynchestimatedthat12percentofthetotalsoftwaremarket,estimatedat$744billionby2011,wouldshiftto“cloud”providers,creatinga$95billionmarket(excludingadvertisingrevenues)by2011.Ifpotentialadvertisingrevenuesareincluded,thenumberclimbsto$160billion(“TheCloudWars:$100+BillionatStake,”MerrillLynch,2008).

17. ForthetopendofourestimatesinFigure6(below),weusethemoreconservativeestimateof$95billionin2011from“TheCloudWars:$100+BillionatStake,”MerrillLynch,2008.

Cisco IBSG Copyright © 2009 Cisco Systems, Inc. All rights reserved. Cisco IBSG Copyright © 2009 Cisco Systems, Inc. All rights reserved. 7

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The Network Is the Platform—SPs Can Capitalize on the Shift TheshifttoprovidingservicesoverthenetworkinsteadofonpremiseswillbenefitSPsas the next generation of service providers strives to expand its reach to the business customer,spending30to60percentofitsrevenuesonreachingthemarketandshifting delivery of IT onto the Internet instead of on premises.18 SPs’ product portfolio ofwireline,wireless,andITservices,aswellastheirextensivecustomertouchpoints,position providers to take advantage of this shift and retain their base of small- to medium-sized business customers.

To address the three characteristics described in the previous section (scale, one-stopshop,andcustomerexperience),SPswillneedto:

• Architectmoreholistic,easy-to-use,highlyscalableserviceofferingstargeted towardtheSMBcustomer,withhighlyattractive,collaborativeofferingsatthecore

• Attractnext-generationserviceprovidersaspartnerstomonetizetouchpoints

• Investincreatingabettercustomerexperienceacrosstheircustomertouchpoints

These investments are mutually reinforcing, as they enable a platform for the creation of organic ecosystems to integrate SPs’ services easily into applications through mashups.

The Connected Office: The Next-generation SP Offering The Connected Office is a foundational set of services that can be extended through partner-provided applications and services to meet the specific needs of particular SMB segments or verticals. These foundational services not only must include the right components (from a service perspective), but also must collectively and individually beofferedasextensibleservicesusingwebservicesorotherservice-orientedarchitecture(SOA).Extensibilitywillenablethesecomponentstointegratedirectly intoapplicationsthroughmashups.Findingwaystotrulyintegratetheseproductsin avalue-addedway—notjustbundlingthem—isimportanttoreducingchurn.

TheConnectedOffice(Figure4)isacollaboration-centricsolution19 that extends to mobiledevicesandintegratesintotheSP’sportfolioofofferings,whichmayincludenetworkcontextservices(presence,location-basedservices),e-commerceplatformsand hosted sites, hosted IP contact centers, and third-party applications.

18. Forexample,inthemostrecentSalesforce.com10K,salesandmarketingexpenses(inthousandsofdollars)are$376,480,whiletotalrevenuesfortheyearwere$748,700.Salesandmarketingexpensesrepresent50percentoftotalrevenues.SeeForm10-K,Salesforce.comInc.,filedFebruary29,2008fortheperiodendingJanuary31,2008.Netsuiteincurred(inthousandsofdollars)$57,932insalesandmarketingexpensesrelativetotheirrevenuesof$108,541,representingapproximately53percentofrevenues.SeeForm10-K,NetsuiteInc.,filedMarch26,2008fortheperiodendingDecember31,2007.Thehighpercentageofrevenuesspentonsalesandmarketingisafunctionofthesecompaniesbeing“newentrants”intotheITmarketandseeking to gain share. But this spending must be balanced against continued product development and other priorities. Thus, highly productive routes to market are critical.

19. Gartnerestimatesthatcontent,communications,andcollaborationmarketsarethesinglelargestcontributortoSaaSmarkets.“GartnerSaysWorldwideSaaSRevenueintheEnterpriseApplicationMarketsWillGrow27PerCentin2008,”GartnerResearch,October22,2008.RetrievedDecember12,2008,from Gartner: http://www.gartner.com/it/page.jsp?id=783212


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Figure 4. TheConnectedOffice:SMBServicesMarketRepresents“WhiteSpace”forSPs

EffectivelyconstructingaConnectedOfficevisionandroadmaprequiresanunder-standing of the most attractive core service components of a compelling SMB offer (such as collaboration and mobility), the synergies among core components (fixed andmarginalcosts),andthemostattractiveofferstructure(alacarte,basic/premium,all-in-one, and so forth).

Making it easy for third-party providers to integrate and extend the foundational offer canmaketheofferacorecomponentofacompleteofficesolution,whichraisescustomerswitchingcosts.Extendingtheofferrequires:

• Openingthefoundationalofferandtelecommunications,compute,andstoragecapabilitiesasaplatformthroughAPIs,webservices,orotherSOA

• Creatinganeasy,low-transaction-costvehicleforthird-partyproviderstomonetize their investment, such as enabling customers to add services to their foundational offer at the click of a button, or sharing advertising revenues

ExtensibilitythroughAPIswillenableSPs’componentstointegratedirectlyintoappli-cationsthroughmashups.Creatingalow-costvehicleforthirdpartiestomonetizetheirinvestment means that SPs spend less time and take on less risk than is associated withthenegotiation-basedapproachtocreatingpartnerships.

Forexample,BThaslaunchedWeb21CSDK,asetoflibrariesthatmakesitsimplefordeveloperstoconsumewebservicesexposedbyBT(seeFigure5).Indoingso,BThasexposeditsnetworkassetstodevelopers,creatinganimprovedcustomerexperiencefor SMB customers.

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Figure 5.BTWeb21CSDKOffering:Network-as-a-service—ValueAddforApplicationProviders

Source:BTWebsite,2007

AsBT Web21CSDKdemonstrates,SPsoffertheattractiveandextensiblecoreoffering,distributionplatform,infrastructure,networkcontextservices,andthego-to-marketvehicleforthird-partyproviders.Thiswillenablethecreationofan organicecosystemthatcanextendSPs’coreofferingatalowcost.

One-stop Shop: Enabling the Next Generation of SPsTocontinuetogrow,next-generationproviderswillneedto:

• Continuetodrivepenetrationinfragmentedandlate-adopterSMBsegments

• Expandgeographically,and/or

• Begintoaddresstheneedsoflargercustomers

Eachoftheseoptionswillrequireaforwardinvestmentinchannel,incontinuedenhancements of the product, and in operations. Although large next-generation providers(suchasAmazon,whichhasaglobalbrandandpresence)mayhavethe“reachtosucceed”20intheseexpansionstrategies,mostnext-generationproviderswillnot.Asaresult,providerswillseekthebestchannelstoreachthemarket.Determiningwhichchannelsare“best”requiresananalysisofthepotentialimpactandcostsofusing a particular channel partner.

20. Forexample,brandnameandglobalpresence.


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SPs have characteristics that could make them an attractive go-to-market route for next-generationproviders,butSPsneedtoaddresssomeoftheirownweaknessestobecomethe“channelofchoice.”Theirstrengthsincludeabroadarrayofcustomertouchpoints, foundational offers that are typically attractive to a large percentage ofSMBcustomers(communications,storage,andwebhosting),andtheabilitytodistribute applications over fixed or mobile environments.

SPs’historyofpartneringwithportalssuchasYahoo!isinstructive.AlthoughportalprovidersrecognizedthebroadreachofSPsandviewedthemasakeychannelintotheconsumermarket,theyfounditdifficulttodobusinesswiththem.First,negotiationswerelengthy.Then,oncedealsweresigned,integrationbetweentheonlineandtelecommunicationsproviderswascomplexandoftenfailedduetothecomplexityofSPs’ operating and business support systems; in some cases, order and billing errors seemedtonegatethevalueofdoingthedeal.Finally,consideringthatby2011,thesizeoftheworldwideSaaSmarketwillbeintherangeof$11.5billionto$95billion(exclusiveof potential advertising revenues), and that sales and marketing spend by SaaS providers rangesbetween30percentand60percentofrevenue,effectiveuseofSPs’channelscoulddeliverawin-winsituationtobothSPsandSaaSproviders(seeFigure6).

Figure 6. Using SPs as a Channel Creates Significant Revenue Opportunities for Both SaaS Providers and SPs

SPswillalsoneedtoaddresschallenges,however,includingsuboptimal,stovepipedchannelsaswellaslengthynegotiation,integration,andlaunchtimes.

Worst-caseScenario1

WW SaaS Marketby 2009 US$40B

Sales and Marketing %Spend of Revenueby SaaS Providers3

30%–60%

Potential Savingsby Using

SP Channels4

$2.4B–$4.8B

Potential Freeing ofCash for RevenueSharing with SPs5

1 IDC Data (assumes that U.S. market is one-third of worldwide market).2 Triple Tree Data (assumes that U.S. market is one-third of worldwide market).3 Triple Tree Data (note that Salesforce.com sales and marketing spend has consistently been >50% of revenue).4 Assuming that ~20% of sales and marketing spend can be saved by taking advantage of SP channel capacity.5 Assuming that ~50% of savings can be reinvested with SPs in infrastructure.

$1B–$2B

Best-caseScenario2

US$150B

30%–60%

$9B–$18B

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Customer Experience: Reinventing the Channel ExperienceMost telecommunications providers have an extensive array of existing touchpoints withSMBcustomerstheycouldenhancetoprovideacompellingroutetomarketforthird-party application and infrastructure providers. These touchpoints may include provider retail stores, presence in big-box retailers, existing customer relationships across both fixed and mobile services, strong customer brands (especially true for mobileproviders),“feetonthestreet,”onlineportalsforbillpayorotherservices, value-added resellers, and contact centers.

Suchawidearrayoftouchpointsisexpensivetoreplicate,particularlyacrossawidegeographicregion.Andtheexperiencewithserviceproviders—fromaservice,support,andsalesperspective—isoftenstovepiped.Forexample,serviceofferingssuchaswebhostingandnetworkservicesmaybeofferedbydifferentsaleschannels;the retail presence may be disconnected from other channels. This abundant array of touchpoints is an untapped opportunity to provide a connected, consistent, and compellingcustomerexperience,makingtelecommunicationsprovidersthe“channelofchoice.”

Providers need to identify and prioritize the key channel enhancements to increase awarenessoftheirofferings,monetizetheirchannelassets,andincreasechannelproductivity. To illustrate, SPs could enhance their retail stores to create rich experiences for SMB customers by taking advantage of in-store digital signage and interactive demonstrations. SPs could also invest in virtual sales training to reduce the learning curve, create a commerce platform for third-party providers to reduce dependenceon“feetonthestreet”sales,andtakeadvantageofvirtualcollaborationsolutions to increase sales productivity.

Conclusion: Unlocking the Value of SPs’ Assets Theinformationtechnologyvaluechain,ofwhichnetworkservicesandmanagedservices are a part, is undergoing significant change due to the rising adoption of services-orientedarchitecturesandweb-centric,on-demandinformationtechnologyservices. Internet investments of the 1990s and important technology developments sincethattimehavecombinedtocreateanewwaytoofferandconsumeinformationtechnology.Investorswhoignorethistrendwilldosoattheirperil,giventheInternet’sability to reshape leadership dramatically among enterprise technology companies and business models over the next decade.21

ServiceproviderscancapitalizeontheshifttoIT“ondemand”bydevelopinginnova-tivewaystolinktheirassetstothedeveloping“ondemand”ecosystem,reinvigoratingthe SMB customer’s experience across all touchpoints, and making investments to facilitate service delivery across all types of access. Service providers can also apply “ondemand”approachestothewaytheirservicesaresoldandofferedtoyieldgreaterprofits; reducing transaction costs and increasing scalability through utility are the keys tochangingtheeconomiccostequation.

21.“ITSpendngSurvey:Mapping2007,”GoldmanSachsGroup,Inc,December5,2006.

More InformationThe Cisco Internet Business Solutions Group (IBSG), the global strategic consulting arm of Cisco, helps CXOs and public sector leaders transform their organizations—first by designing innovative business processes, and then by integrating advanced technologies into visionary roadmaps that address key CXO concerns.

ForfurtherinformationaboutIBSG,visithttp://www.cisco.com/go/ibsg

Ciscohasmorethan200officesworldwide.Addresses,phonenumbers,andfaxnumbersarelistedontheCiscowebsiteatwww.cisco.com/go/offices.

©2009 Cisco Systems, Inc. All rights reserved. Cisco, the Cisco logo, and Cisco Systems are registered trademarks of Cisco Systems, Inc. and/or its affiliates in the United States and certain other countries.

Allother trademarksmentioned in thisdocumentorwebsiteare thepropertyof their respectiveowners.Theuseof thewordpartnerdoesnot implyapartnership relationshipbetweenCiscoandanyothercompany.

(0812R)

KK/LW155580409

Americas HeadquartersCisco Systems, Inc.SanJose,CA

Asia Pacific HeadquartersCiscoSystems(USA)Pte.Ltd.Singapore

Europe HeadquartersCiscoSystemsInternationalBVAmsterdam, The Netherlands

The bottom line is that providers need to take a hard look at all their assets to becomethe“channelofchoice,”whichwillopenawidearrayofrevenue-sharingandpotential advertising opportunities, and expand the SMB relationship by increasing the breadth of connected solutions that the SMB customer buys through the telecommuni-cations provider.

FormoreinformationabouthowSPscanunlockthevalueofSMBs,pleasecontact:

Seanan MurphyService Provider PracticeCisco Internet Business Solutions Group Phone:+17034840526 E-mail: [email protected]

AcknowledgementsAarti Gurnani Bryan Mobley Scott PuopoloWagdy Samir Cisco IBSG Service Provider Practice

Documents

Unlocking the Value of Service Provider Assets to Win the … customer relationships, expand their view of customer touchpoints, increase channel productivity, and become the channel