Software-As-A-Service has been a buzzword in technology circle for quite some time. Salesforce.com has been an excellent example of on-demand customer relationship management. They claim 47,700 customers using 800+ applications in 15 different languages. However technology companies have been very cautious in their approach products when it comes to building a services model around it. The Sep. 09 news from Cadence introducing SaaS solutions for semiconductor design is a good step in EDA and overall technology industry.
Though there are several restrictions and constraints in the services introduced right now, it speaks volumes about the margin pressure the product vendors are facing and thus the newer revenue models.
I have been talking to a number of product vendors in telecom industry in particular, who have been thinking on the similar lines but seem quite confused. This is primarily because of the inherent product / licence sales mindset that they grew up with. Further, there are always decision influencers who negate this idea, either because they fail to see it coming in their market segment or are too resistant to change.
One segment in particular, which can leverage SaaS and build an alternate revenue model in technology space is the telecom test and measurement (T&M) equipment vendors. There are only few of them who have been able to survive the intensely competitive market scenario and are always under revenue pressure. However in the process of optimisation and product consolidation, most of them introduced the concept of unified platform for their products, few years back. Most of them have one or more platforms to host applications to test protocol conformance, field scenarios and applications. A large part of this offering can be introduced as SaaS, there by generating an alternate revenue model.
Most of these T&M manufacturers are however wary of license revenue losses. The key lies in creating a business model where there is a fine balance in license sales and services sales. Pricing model is the key and if price point of service is created in such a way that it doesn't impact volume equipment sales, they can target the potential customers who cannot afford fully configured T&M equipment. And there is a significant possibility of larger services sales than anticipated, if the business model is crafted carefully and services are delivered well. The more ambitious players can also look at a collaborative business model, where they provide platform as a service and allow partners to host and manage applications. Through this model, this particular industry segment can potentially expand their market base to outsourcing industry, R&D institutions as well as allied industry, which need such services at a lower cost.
The benefits of this model are well known. It is of additional benefit to T&M equipment manufacturers, who spend good amount of money in pre-sales as well as after sales support, equipment maintenance and logistics.
The T&M equipment players seem to be fine today, because none among them have come forward with SaaS. But the way the industry is going, it can be very well anticipated that someone will look forward to change.
SaaS is 'IN' Technology Industry
Mobilising the Trends for Wireless Broadband in India
Understanding and harnessing the consumer trend To effectively understand and harness the consumer trend, it is important to identify the segment who is either waiting for wireless broadband or will hook-up easily when available. It is important for the ecosystem to understand the behaviour of this segment from a globalised society perspective as well as regional and local perspective to provide as much services to them as they desire. Globalisation and liberalised market has done some interesting things to our society and has significantly changed the behaviour of consumers. While it may not be a true statement for Indian consumers as a whole, it is particularly true for a particular segment. I would call this segment to be trend-setters. They are 20+ male / female (please do not generalise them as youth segment. This bracket of consumers are educated, working , financially middle and upper-middle class, internet is part of their life, they are information hungry, gadgets freak, love the idea of instant gratification, act as opinion leaders, are aware of trends in foreign societies and like to set trends in their own groups. This group follows to concept of word-of-mouth marketing to decide what to buy and what not. This bracket is the sweetest spot as data subscribers of broadband wireless. However it is important to understand their needs and desires. It would be over ambitious to set-up a VAS company creating ringtones and movie clips, hoping to make big bucks from this segment. I am not saying that they do not want ringtones, music and movie clips. They need them but they need lot more other things such as social and career networking, information intelligence and convenience in their daily lives. The interesting aspect of this bracket is that they influence not only peers but also people in age groups above them as well as below them. Effective regulation to develop healthy competition in the entire ecosystem Regulation has a greater role to play now than it was in the case of 2G and 2.5G based mobile telephony. Regulatory policies are as much important as competition, economic policies and market conditions, if not more. With globalisation and liberalised markets open to MNC Investments, business propositions are critically evaluated on political conditions and regulatory landscape. The telecom regulatory body in India is one of the biggest advocates of consumers and this reflects in their policies, recommendations and guidelines. So far, the focus has been limited to enhancing subscriber base and penetration. However, in the emerging scenario it is important to look at policy framework as one that: Lot of people debate over these topics in their respective groups and organizations and there are always views on both sides of the argument. However some of the key points where I believe TRAI needs to enhance its scope, are: European operators are consolidating their mobile networks to create NetCos and ServCos. This is happening as a result of second or third level optimisation in their respective markets. Nonetheless, it is a great example of collaboration and competition together. And considering the country is readying to deploy 3G networks, it would be appropriate for network operators to collaborate for reducing CAPEX, OPEX as well as for better services to MVNOs. Further, innovation is required in network planning processes, RAN operations, IT Infrastructure management and service delivery platforms. There is ample technology available to enable the innovation in processes around these areas.
Yesterday, I was invited at WiMAX India 2008 conference as a speaker. It was centred on wireless broadband expansion in India in light of government's aim to reach 20 million subscriber base by 2010. The current subscriber base (on wireline broadband) is less than 4.5 million. Wireless (through 3G and WiMax) is being seen as the saviour to achieve this seemingly unthinkable target. Most of the speakers appeared very upbeat, though most seemed to agree with the fundamental challenge of the nation in terms of electrical power and PC penetration. I am not a pessimistic person, nonetheless I see huge and multifold challenges with this aim and thus I decided to speak on mobilising the key trends in the positive direction.
With the announcement of 3G spectrum auction as well as WiMax deployments, the scenario of Indian Telecom is set to change drastically. On one hand, wireless broadband is about to arrive with a plethora of opportunities for the entire ecosystem and on other multiple new challenges are going to crop up. Added to this, the MVNO, MNP, internet telephony and possible changes in long-distance calls are going to bring a whole new set of challenges to be addressed.
While one may debate on this point, I believe the emerging trends and behaviour need to be the prime point of consideration than the technology, to be able to harness the maximum from the technology and the market.
So far, Indian service providers have been very happy with subscriber growth, profitability margins (even with very low ARPU) and significant increase in rural subscription uptake. This scenario may change with due impact on ARPU and profitability margins even though service providers continue to add subscribers.
3G and WiMAX are for data and the real growth lies in data, even though voice seems to be the main application in near future. How should the scenario be changed so that broadband is used for data for everybody’s benefit? While some may argue on the need of data beyond a certain segment of the society, I do not think it to be that way. The challenge lies in harnessing the demand of a particular consumer segment and leveraging this segment to broaden the demand base.
I believe the three key levers to address the drivers of broadband in India are:
Innovation to address the challenges being posed by a score of constraints
Finally, Innovation is a lot stronger requirement to address CAPEX requirements, OPEX, falling ARPU and probability of falling profitability margins. In my opinion, there is a strong need for innovation today than ever before for reasons mentioned earlier and the directions for this innovation involve processes technology, end-user and ecosystem as whole.
3G Regulatory Policy: A Few Points to Ponder
I tend to come back to this topic again and again. It’s tricky, complicated as well as a topic of profound impact to the industry and economy in an emerging market, such as India. Since the intent of 3G spectrum auction was announced; TRAI, Indian government, Cellular Operators Association of India (COAI) and industry analysts are debating over a number of topics of interest to Indian telecom scenario and competitive positioning of various players. It is worth looking at few points that either lack emphasis or are being missed out: The emerging markets have the benefit of leveraging from the experience of early 3G adopters and repeating their mistakes today will be a larger cost, which economies like India should rather avoid.
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