From Alone to Alliance
How saying yes to ecosystems can
transform your business
Google the word ecosystem, and you’ll learn how populations of living species work together with their physical elements for survival. The greater the biodiversity, the more stable the ecosystem becomes and the more resilient to adversity – evidence that dynamism sustains life.
This definition is just as relevant in the industrial world, and telecoms in particular appears ripe for an evolution toward broader collaboration. Overwhelming traffic growth paired with decreasing revenues mean CSPs must find new sources of income. At the same time, the move toward cloud and the on-demand provisioning model of network-as-a-service promise to add scale when and where it’s needed while subtracting complexity and cost. In addition, 5G technology offers fresh opportunity, especially with asset-intensive industries like manufacturing, logistics and transportation which must still transition to digital.
With the prospect of new business models, solutions and applications, CSPs must be more open to directing or participating in some form of open ecosystem that allows partners and competitors to collaborate and innovate for a collective benefit. In fact, in an Accenture study, 60% of the 1252 executives surveyed pointed to building ecosystems as the primary path to disrupting their markets, and telecommunications ranked one of the top three industries most capable of sustaining the required partnerships.
We spoke to leaders from two companies pursuing opposite ecosystem approaches – a directed model exemplified by Salesforce AppExchange and a non-directed model championed by Nokia OpEN – to understand what’s behind the success of their communities.
Salesforce: A new model for a new era
It was 2005 when Salesforce – a customer relationship management (CRM) platform – made its first foray into the digital marketplace. Today, its AppExchange store boasts 5,000 solutions and more than six million customer installs.
The company’s growth can be attributed in part to an evolution of network capabilities toward cloud in the early 2000s, which made software-as-a-service more palatable to enterprises. Baman Motivala, Salesforce Regional Vice President of ISVs says it was the embrace of ecosystems as a pipeline for innovation that hardened the company’s success.
Know your why
Motivala says the first question a company must ask when determining its ecosystem strategy is: Why. There must be a specific customer problem that needs solving.
“The why is super important and needs to be aligned with a strategic goal at the executive level of the company,” says Motivala. “An ecosystem play requires resources, and it requires patience because the payoff might not be immediate. The payoff could be several quarters or even several years out.”
Salesforce’s mantra “API first” articulates the goal of easy integration within the ecosystem community, to speed up innovation and lower cost. AppExchange welcomes as many partners as want to build on its platform, but Salesforce tiers its own investments. The company focuses on partners who are using the platform to innovate substantial businesses and have a very clear go-to-market plan because, as Motivala says: “Partnering is often harder than selling directly to each other.”
Investment is calculated on four factors: the partner’s total number of customers, how much Salesforce technology they are using, how much revenue they are generating through the partnership, and how much that revenue is growing.
And revenue is not a pure number for Salesforce.
“There are partners with multi-billion-dollar valuations, others that are just starting out. Many of those new ones are not generating a lot of absolute revenue in terms of the revenue share agreement, but the growth is phenomenal. We give them the same treatment as a company generating 20 to 30 times more because we believe that growth will continue,” Motivala explains.
Since Salesforce is a broad platform in terms of its portfolio and target markets, the company sometimes ends up partnering with competitors. “Some are amongst our most successful partners in terms of customer penetration and revenue generation for themselves,” says Motivala.
Other more verticalized partners thrive within the ecosystem. Veeva Systems, for example, is focused on life sciences companies like Pfizer. The enterprise cloud provider customized its solutions using the Salesforce platform and its development tools. As the relationship grew, so did Veeva’s solution offerings and customers, and the company IPO’d in 2016. Similarly, Vlocity started out building cloud and mobile software solutions for six verticals on the Salesforce platform. Earlier this year, Salesforce announced its acquisition of the company.
“Partners help us penetrate deeper into those verticals,” Motivala says. “Take something like telco, the sub segments in that industry that require software are broad and deep. So even though we may provide a solution, there are still so many processes and sub-segments within that industry where we need companies to complement what we deliver. And that's what these partners do. They help us go deeper in these industries.”
Open your art
Being open is clearly a differentiator for a successful ecosystem, but it doesn’t mean it’s easy. “We try to be as open as we can with our product roadmap,” Motivala explains. “That openness can be very scary, but it enables our partners to pivot and identify other opportunities where they can further extend the solutions that we're creating. In the long run with the right kind of relationships, openness tends to drive value.”
Nokia: OpEN to innovation
Like Salesforce, Nokia adopted an API-first mindset when it initiated its digital platform Open Ecosystem Network (OpEN). To remove the friction that typically impedes collaboration, OpEN offers on demand cloud-hosted labs as a service, which can accelerate prototyping and development during co-creation, and employs digital terms and conditions such as non-disclosure agreements when establishing new communities.
“The industry is built in a way where everyone thinks of everything as top secret,” says Akin Akintola, OpEN’s Value Growth Lead. “You have firewalls behind firewalls, and in order to get a partner to co-create with you, they need to sign five agreements. We created something in front of the firewalls that's able to pull data on demand from within the Nokia asset base. And we created simple contractual frameworks that allow us to co-create.”
Platform for growth
Akintola says that, at the beginning, the OpEN team posed an important question: What if networks could transform to be more like platforms?
“When networks become super easy to deploy, when you're able to spin up a particular network or function to a certain capacity on the edge, on-demand, to fit specific use cases...that gives you the opportunity as an operator to overlay specific applications to serve a unique market,” Akintola says. “With the proliferation of APIs and the Network Exposure Function, operators can dynamically expose capabilities or services to application providers and create new value, targeted at specific use cases or industries. It changes the game completely.”
And while many CSPs still prefer to silo those application providers, going it alone is no longer a viable option, argues Akintola. “Operators have a finite subscriber base,” says Akintola. “If Facebook sat with one operator, then Facebook would not be effective. An application needs to access multiple networks and resources to be able to function effectively.”
In addition, the expectation for how fast CSPs can innovate is greater than their capacity to deliver. Exposure to disruptors like internet content providers and web-scale companies who have adopted a platform-based approach or implemented disaggregated networking has shown what’s possible in terms of innovation and collaboration. 5G may prove the catalyst that convinces CSPs to adopt a similar ecosystem model and go beyond proprietary efforts.
“5G is an interesting opportunity because it really forces the dialogue,” says Rob Marson, who heads the optical-networking focused Wavehub ecosystem which uses the OpEN platform. “We're seeing this openness occurring across all types of technology, be it wireline or wireless, but I do think 5G is now allowing that type of capability to become pervasive. We're seeing a lot more awareness around ‘the art of possible’ that 5G is helping expose.”
Focus on the business
Marson subscribes to the same tenet as Motivala – that an ecosystem can only survive if it is business driven. For now, that focus is on the need to drive efficiencies and create new market opportunities for CSPs, often leveraging automation and machine learning.
Nokia, Altran and Cataworx used a secure WaveHub collaboration community on the OpEN platform to design and prototype a solution that automates the offer-quote-and-fulfillment process for connectivity services. The innovation eliminates hundreds of emails and reduces to seconds a process that previously took months.
For example, Marson points to a WaveHub co-innovation involving system integrator Altran and start-up software vendor Cataworx. The project stemmed from an ACG Research report that showed up to 70% of operators viewed complex business processes as a barrier to deploying transport connectivity services. The trio used a secure WaveHub collaboration community on the OpEN platform to ideate and define a solution, and using WaveHub Labs – Nokia’s digital sandbox of simulated networks providing exposed APIs – designed and prototyped a solution that automates the offer-quote-and-fulfillment process for connectivity services. The innovation eliminates hundreds of emails and reduces to seconds a process that previously took months.
Marson says WaveHub and the approach to open, digital collaboration is itself becoming a competitive differentiator and proved instrumental in a recent win for Nokia with a major service provider.
The future ecosystem
So, what will ecosystems look like in a decade?
The main challenge for service providers remains cultural. Until co-opetition is encouraged and embraced, ecosystems will gain little traction. “That mindset has to change,” Akintola says, but adds that the industry is already starting to evolve, not only toward networks-as-a-platform but also toward platforms of platforms. “This allows an orchestrator platform to sit on top of multiple networks and serve up the capabilities of one or a combination of those networks to an application provider. So, one application provider can easily access resources from two or three operators to drive a new application or business model.”
According to Motivala, ecosystems won’t be just two partners trying to sell. Communities will broaden so that customers are not only consuming from the ecosystem but contributing as well.
“You’re starting to see this in discussions large automotive companies are having, not only for selling cars but in how they work together with their suppliers,” says Motivala. “It will be broader types of ecosystems with different players where companies will also look to solutions that are maybe considered something physical, like a truck or an elevator or a factory. Platforms won't be limited to a software platform; they will be a combination of physical and software from non-traditional software players.”
If the predictions are true, telecom ecosystems will become even more diverse and provide the rich, dynamic environment needed to sustain many more generations of growth.
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