Contributing Industry Expert		Contributing Analyst
	Chris Bray Telecoms Industry Solution Sales IBM		Lorenza Brescia Principal Analyst, Managing Partner Telecom Strategy Partners

Interview Summary
Chris Bray speaks on the importance of advances in communication and networking capabilities, and on the new industry, revenue, and enterprise models that will drive business innovation for competitive advantage.

Lorenza Brescia: Advances in communications and networking capabilities today offer organizations almost unlimited opportunities to create business advantage by conducting business anywhere, anytime, using multiple types of devices and communications. How can organizations use communications and networking to achieve strategic business advantage?

Chris Bray: I think this is not an optional move for companies today. Those who don't adapt and use these technologies, devices, and networks will not be able to compete in the modern world. IBM has mobile-enabled its workforce for years, which has resulted in effective time management, business efficiencies, and huge cost savings as we have released property holdings in expensive areas of cities.

There are obvious applications like workforce management that benefit directly from the flexibility afforded by these advances in technology, but ultimately everyone will have to use them. It will be also a matter of culture, and obviously young people will be more attracted by the opportunities offered by technology in term of being reachable anywhere at any time and by the sense of freedom linked to that. The nomadic workers will have also to have a good level of auto-motivation, as the distance from the company and from its own boss can lead sometimes to a sense of isolation. But I am sure the new generations will enthusiastically embrace this opportunity and drive the market and the companies towards mandatory adoption of those technologies.

Lorenza Brescia: Organizations have the potential to create and support innovative new business models, from advanced collaboration environments to customer self-service to mobile workforce support. How will those models drive business innovation for competitive advantage?

Chris Bray: IBM has recently completed a piece of strategic analysis on the evolution of business models covering three fundamental types of business model change:

• Industry model innovation
• Revenue model innovation
• Enterprise model innovation

To give few examples, on the industry model innovation we have analyzed the move Apple did in totally transforming the music world. The music industry now needs to rethink its approach and begin incorporating technology into the model itself. Apple understands this very well and has even begun to overcome the problem of teenagers without credit cards through its gift card approach. The music industry could create a super e-commerce and music-sharing site containing far more than the 3,500,000 songs on iTunes. They could set up music purchasing accounts with banks so that teenagers without credit cards can easily purchase songs, or implement loyalty programs where sharing music can be used to motivate the purchase of music among friends. They could implement a subscription model, similar to e-music, and at the same time offer a purchase model on a song-by-song basis … and so on, all new models that need to be analyzed in order to increase the health of the industry music.

On the revenue model innovation, we have analyzed the Gillette model. Gillette innovated the pricing model by giving away razors and making money on the blades. Gillette dreamed up the idea of disposable razor blades. Before that time, razor blades were thicker and were simply sharpened, a time-consuming and imprecise process that no one enjoyed. Gillette's innovation was to make the blades thin enough and inexpensive enough that they could simply be thrown away when they dulled. At first, the company couldn't sell the blades for as much money as it cost to make them, but then he had a brilliant idea: he would give away the razor handles. People who got them perceived them as being valuable-but only when fitted with one of Gillette's blades. So there was a subtle yet forceful psychological pressure to maintain that value by continually buying the blades. After a few months of blade sales, the cost of the handle was recovered and Gillette began to make a profit. Within a decade, Gillette's company dominated the razor market.

This trend is strong [and] alive today, pushed by the Web 2.0 applications that are changing the way on how and why we purchase items. For example, look at the eBay model, and to the opportunity [to] leave evaluations both for the seller and for the item you have just bought. Sellers have to keep a good reputation on the net, as buyers are becoming more and more smart and do not accept to buy something that does not fully satisfy their expectations.

Going to the enterprise model innovation, here the trend is clear: enterprises concentrate more and more on their core business and outsource IT and ICT tasks to external companies for which this is the core business. IBM is a valuable partner for many of them.

In addition, IBM's latest C-level survey of telcos highlights business model change as the most important aspect for telecommunication companies in the coming year. The threats posed by the likes of Google and its peers can't be ignored much longer. Traditional telecommunication companies have today a too-high level of costs, being … related to a high amount of parallel networks to support, or to a not-optimized integration of recently acquired companies. The result is a revenues/employees ratio [that is] extremely high with respect to Web 2.0 companies, an aspect that strongly reduces their competitiveness also in term of innovation.

Lorenza Brescia: Operators wishing to stand out in the marketplace will have to offer user-friendly features across multiple access technologies. For these types of services to work smoothly, there are needs for both vertical and horizontal roaming. Which offer can provide today operators for billing across different WLAN networks and offering uniform log-on procedures? And how [will] ISP and mobile operators will share this market opportunity?

Chris Bray: Again, this is more a question of being left out if the operator does not align with this trend, as nearly all service providers are becoming "full service providers" and very few companies will survive as single-technology-solution providers. This trend has its main reason in the fight for churn reduction: as you can imagine, if the end user is able to get all the services he wants by his actual service provider, he will be less tempted to search for a substitute.

As a confirmation for that, we have to consider that today even Vodafone offers broadband.

So, roaming (horizontal and vertical) will become a de facto standard, and at some point between now and 2020, we will have a single multi-functional device that will roam seamlessly across multiple networks and multi-various applications. The questions are how quickly will that happen and how do companies (all along the value chain) continue to make money while the development takes place. In term of timing, I think this will not materialize before 2010 for Europe, North America, and APAC [in their] healthiest markets, and it will go in parallel with the availability of appropriate handsets and robust fixed and mobile networks that will push the analysis and the treatment of traffic to very deep levels. In term of opportunities for earnings realization, I think that there will be significant M&A activity in the rest of the decade as ISPs and mobile operators will merge or will be acquired by the healthiest companies.

Lorenza Brescia: Wireless broadband services promise to deliver untethered freedom to the end user while enabling service providers to realize new profitable revenue streams. Do you think that the actual reality [can] match the promise?

Chris Bray: We know that often technology hypes run ahead of people's abilities to understand and use it. Generally, as a rule of thumb all technologies take about seven years to mature, and 3G and WLAN are classic examples of that in recent times. For the same reason, I think that WiMAX and IMS will not become mainstream solutions overnight.

If we look at service providers, which are constrained by their legacy systems, processes, culture, and flexibility, their world is poised to become ever more complex in the next few years if they can't adapt and critically develop a proper partner ecosystem.

They must be able to revert the aspect of being inefficient dumb pipes and contrast the voice and traditional data revenues fall. Cost-cutting will still be high on SPs' agendas, but the implementation of new business models embracing Web 2.0 thinking becomes critical, as does the implementation of [a] sensible system and software solution. Also SOA with its implicit reuse will be critical.

Google, eBay, Amazon, etc., have shown what new business models and innovative thinking can produce-which of the SPs will be good enough/bold enough to follow?