Over The Top: Too high to reach?

Recently, Facebook got WhatsApp (a mobile multichannel messaging startup) for $19B. It’s still too early to comprehend the rationale of this move: Buying market share? A bubble effect? An ingenious strategy move that aims squarely at service providers? A stupid buyout that will sink FB stock? Time will tell.

However, we can draw some conclusions on what this means for telco service providers. Over the top services (as they usually call the services they cannot comprehend, and cannibalize their market share) have value. And it’s a train they have to catch. Let me tell a story here:

Some time ago, while working for a small systems integrator, we had been setting up a public IaaS cloud provider for the lcal market. The first approach, based on the free Cloudstack edition was a breeze to work with, very very cheap and quite reliable. The number of customers we attracted was… two. A couple of months later, we revisited our strategy – this time, the platform was based on VMware vCloud directory (the very first deployment in the regional market), targeting mostly enterprise customers (and our own customers as well). Things moved a bit better, slowly gaining sales traction. However, this was not enough. A plain IaaS offering would only sell as fast as customers would face the dilemma “buy or rent” and opted for renting infrastructure.

The way forward was to bundle applications with our cloud. We turned to software vendors, hoping to deliver preconfigured cloud servers bundled with software targeting small and medium businesses, with a SaaS licensing scheme. A good move, don’t you think? Guaranteed SLA 99,99%, with preinstalled popular CRM & ERP apps, licensed as a service, no upfront costs, no commitment. Customers would flock to our cloud. Eventually however, they did not. The problem was the total miss of customer addressable market.

Would you like fries with that?

Would you like fries with that?

Let me explain a few things: Building a cloud does not mean that it will sell by itself. We were a small integrator with a cloud service. Our customers were mostly medium enterprises buying services and infrastructure from us. We managed to upsell IaaS to these customers and attract a few new ones. However, no matter how attractive a SaaS offering would be, we had to address a market we did not have any access to. And that’s why we failed.

What does this have to do with telcos and OTT services? A lot. Telcos sell data & voice; they have been doing that forever. On top of their data services lives the entire IaaS, PaaS, SaaS, *aaS ecosystem. The revenue telcos see from the immense value of OTT services is the data rate, nothing more. They don’t capitalize on this market, even though:

  • They own the platform and medium
  • OTT services customers are the same customers they serve,

thigns we lacked when we launched our IaaS and SaaS cloud services. It seems that OTT services are at a cloud reach, don’t they? Every telco can setup an IaaS platform, add some sauce on top (applications, that is) and address their own customer base. We are not referring to telcos-gone-cloud (Verizon/Terremark), we are talking about service portfolios that address a very large part of any telco customer base.

My guess is that all it takes are good synergies here and exploitation of local markets: Upsell services to existing customer by letting other vendors cross-sell their products and services. There are lots of moving parts here, the most important challenge being to build an efficient ecosystem, reach & upsell to own subscribers and produce value to the end consumer. One needs to step into customer shoes, tick the right boxes from a desired service list, find the right partners and deliver these services from established sales channels.



4 responses to “Over The Top: Too high to reach?

  1. Great piece. Describes the Greek reality very well. In this market where buyers are hesitant, synergies are a good way for upselling – or selling for that matter!

  2. Thanks Taso! Things are quite dissapointing… We have the largest SP that for a few years now resells cloud services without actively pursuing sales. Another one has not launched IaaS, although they have the service delivered for at least 10 months. One more has developed IaaS (solid and high quality services IMHO), however they cannot market the product very well…

  3. I often wonder: Could “bad marketing” be the reason that such a “good idea” doesn’t “fly”? But then I remind myself that in other parts of the world, cloud and XaaS sells so very easy…

  4. Tasso, let’s not forget where we stand: Greece is an emerging market. Our ICT market has never been a part of the EU core (eg, CRM adoption still at ridiculously low rates as official studies show), so don’t expect the market to reach the maturity levels of others anytime soon.
    Nevertheless, I firmly believe that large service providers have to take initiatives. The fact that adoption rates of mobile computing are impressive shows that telcos can influence the market in very short time, so my opinion is that indeed, bad (or the lack thereof) marketing is a very important factor in our cloud services lag.

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