Distilling market noise into market sense

VisionMobile is the leading research company in the app economy and mobile business models. Our research and workshops help clients compete and win in their rapidly changing industries.

Business model polarity: a win-win proposition for telcos and developers

[There's 10s of telco programs targeting developers. But they all lack commercial traction. Isn't it about time for telcos to question their approach? Guest author Jose Valles argues for a ‘polarity change' in the telco business model and discusses the need to rethink the telcos' relationship with developers.]

VM blog - Business model polarity

In life, we tend to take many things for granted; the Sun will rise and set every day and a compass will always point North. But we mustn’t forget that things do not, and in some cases should not, remain constant. The Earth’s magnetic poles are known to reverse their polarity every few hundred thousand years and then, the compass no longer points North, but South.

In business, we also need to question assumptions and remember that things do change. In the mobile industry, telcos (mobile network operators) have been around for over 20 years – many many generations in telco speak – but their relationship with developers has always been lukewarm at best ; telco APIs haven’t seen any significant take-up by developers.

What telcos need to do is to fundamentally question their assumptions about the software world and change their business model towards developers – in other words change the ‘polarity’ of their business model. Here’s why:

Some historical context

It is widely accepted that telcos desperately need developers; in today’s app economy, developers are a key source of innovation. If telcos want to capture value and innovation, they need to capture developer mindshare.

In the past 5 years, we have seen 10s of telco developer programs launch with different end-goals and flavours but with the same result: lack of commercial traction. Why have so many telco investments failed to see significant developer adoption? Failure is not such a bad thing, provided we can understand what went wrong and how we should fix it.

I would argue that most telco API programs have lacked two key ingredients; the lack of web mentality and a developer-centric business model.

The Web mentality

If you go to www.programmableweb.com, you can find thousands of APIs that allow developers to enhance their software and mobile apps with functionality coming from third party businesses. Functionality ranging from Google maps and eBay purchases to Tesco grocery lists, New York Times articles and pizza ordering can be accessed through cloud APIs. For a developer, this is an unprecedented source of content for their apps.

How do businesses like eBay, Tesco or NYT make it appealing to developers to use their APIs? How does the web world attract developers?

It’s the business model; in the web world APIs are often free (or freemium) so that developers don’t need to worry about upfront costs. It’s about ease-of-use; they’re also plug-and-play so that developers can experiment with functionality and see how it works. It’s also about adaptability; web businesses also adapt and change their APIs based on how developers use them.

That sounds easy. But what about telcos?

The telco mentality: the developer pays

If you go to any of the telco API programs that are out there and check their SMS API specifications, the first thing you will come across is the PRICE LIST.

Well, that may work if you have a strong developer brand or if the attractiveness of your APIs are top-notch but, honestly, that’s not the case with telcos. Developers dislike telcos – and I can say that working for a telco.

We telcos don’t have a good reputation in the developer space. And what do we telcos do?  We charge developers!

That’s not a developer proposition; it’s a wholesale mentality. And how do telcos think we are going to be able to compete in this space when much more agile voice application platforms like Twilio, Teleku, Jaduka or Vivox get fremium pricing and technology right?

The business model polarity change

 

If telcos are to grab developer attention, we need to see developers not as wholesalers – that is not a source of revenue but as the missing link between customers and telco services. When developers drive traffic or service usage we need not charge them, we need to thank them. And we need to charge not developers but end customers. We need to let developers focus on finding new ways to innovate with apps using telco capacities, not to worry about whether they have enough cash flow.

In other words, we telcos need to change our business model polarity; rather than using a “developer-pays” model, we need to move to a “customer-pays” model. If developers create apps that use telco APIs, they drive traffic or usage which benefit both the user and the telco. It’s not the developer that needs to pay – it’s the user.

VisionMobile blog - Business model polarity

Consider this; a developer builds an SMS-to-Twitter service; the user sends a new tweet by as a text to a shortcode. The reply, an SMS back to the user, is then paid by the developer. The developer is penalised for generating traffic to the network. This is the “developer pays” model and it doesn’t work.

In the “consumer pays” model, a single API allows the user to pay for both outgoing and return SMSes in one shot and the developer gets to use the API for free. The developer can focus on building a viral service and won’t have to worry about success costs.

This is a fundamental polarity change; instead of the developer paying for access to network resources, the consumer pays, and the network benefits from increased messaging revenues.

APIs like SMS or voice can also be exposed under both polarities. In this case, the developer can choose if they want to use SMS or voice APIs in a developer-pays or customer-pays polarity, depending on the nature of their app or service.

Winning with developers

We telcos need to experiment with business models. We need to learn from how developers adopt and use APIs and pivot our business model until we get to a proposition that’s truly win-win for both developers and telcos.

As the Earth’s magnetic poles shift naturally, telcos also need to question assumptions. We need to reverse the business model polarity for telco APIs in tune with the web and look for new ways to attract developer talent and new ways to satisfy customer needs. We need to fundamentally change the developer perception towards telcos if we are to succeed in helping telcos capture a share of the innovation out there.

- Jose Valles
Head of BlueVia
@josevalles49

[Jose has been working for over 10 years in different parts of Telefonica. Since 2009, Jose has been building a concept under the working name “Open Telefonica”, which ended up bringing BlueVia to life. The BlueVia business model does not just make APIs free, but it also pays the developer. “If developers use our APIs, we pay them back for the usage”. Check it out.]

  • http://twitter.com/JoseValles49 @JoseValles49

    Hi Sebastian

    Thanks for your comments and questions. Let me share my views on your questions:

    1. On your question on whether we want to become enablers vs current control freaks. My answer is yes, definitely.  APIs give us the chance to release functionality in a controlled way. The "control" here is not used about processes or products but about customer identity, billing, etc… all the sensible things behind a telco service

    2. Of course it has to be done to and for developers. There are some issues in terms of how can telcos manage this activity but, let's be clear, there are some partners out there that would love to help

    3. If there's a room for Telcos to be relevant…. Well, we are going to live in the next 10 years an explosion of the number of devices connected to Internet. Telcos, as their core business, will keep on having the role to connect those devices and, depending on the way people will interact with those devices, Telcos should play a significant role in things like identity management, security, etc… Definitely, we still have a chance to add value to this ecosystem

    KR
    Jose

  • http://www.GeniusPort.com Mobile App Training

    Hi Jose and Sébastien

    You both have a valid points. The current situation and app economy demand telco's become open to that change. If this change happens it will be a great avenue for developers.

    Cheers
    John

VISIONMOBILE BLOG

Distilling market noise into market sense

The surprising business model of OTT2 messaging apps

04 OTT2 messaging apps

In the first part of this two-part blog post, we introduced a second tidal wave of mobile ecosystems (after Android/iOS),…

Continue reading ...

From 4 to 4000 apps: disruption deja-vu in the car industry?

Automotive-report_illustration_web

What if cars were like mobile phones? There are some eerie similarities between the approaches of car makers in 2014,…

Continue reading ...

Emerging developer opportunities in Enterprise & Productivity apps

Enterprize_developers_illustration_HD

Andreas Pappas shares our latest findings, from our Business & Productivity Apps report which takes a look at developer opportunities…

Continue reading ...

VISIONMOBILE STRATEGY

Workshops & research on Developer-centric Business Models

Apps for connected cars? Your mileage may vary

Automotive-report_illustration_web

Car makers are now entering unfamiliar territory as some of their latest product innovations have nothing to do with driving.…

Continue reading ...

Developer-Centric Business Models

Dev business models

Developer-centric Business Models is the first-of-its-kind workshop designed for business leaders who want to decode the mechanics of developer-centric business…

Continue reading ...

M2M Ecosystem Recipe

M2M-Ecosystem

M2M is rapidly approaching a tipping point. Lower technological barriers pave the way for new entrants in the market. As…

Continue reading ...

VISIONMOBILE RESEARCH

Research on the app economy and developer ecosystems

Business and Productivity Apps

Enterprize_developers_illustration_web

Business and Productivity Apps is a research report that explores the emerging enterprise app market and uncovers untapped opportunities for…

Continue reading ...

Developer Economics Q1 2014: State of the Developer Nation

DNAapps

The 6th edition of our ongoing Developer Economics series presents the latest trends in app development, based on our survey…

Continue reading ...

How can HTML5 compete with Native?

DE12c5_web

A research report by VisionMobile, taking an in-depth look at HTML5 development, uncovering the gaps in developer tools, showcasing the…

Continue reading ...