Exploring marketplaces for software & services: The big picture
This excerpt from our new report explains why communications service providers are optimistic about the potential for owning marketplaces and participating in them.
Tim McElligott
Dawn Bushaus13 Jul 2021
Exploring marketplaces for software & services: The big picture
This excerpt from our new report, Exploring marketplaces for software & services, explains why communications service providers (CSPs) are optimistic about the potential for owning marketplaces and participating in them.
The Amazon Marketplace has forever altered how people (and companies) buy goods and services. Access to a huge number of sellers and lightning-fast fulfillment are now standard expectations for customer experience, and CSPs have been taking notes.
Since 2012, CSPs’ average revenue per user has declined between 13% and 36%, despite significant investments in infrastructure. By contrast, the cloud computing market grew by 24% in 2019 (pre-pandemic). CSPs cannot continue to provide competitors with physical networks without finding a new way to protect and expose their value. They can do this as providers of not only connectivity, but also networking and operations assets, management capabilities and perhaps most importantly data.
There are other reasons for operators to strongly consider new business models including marketplaces. Innovators are everywhere and most of them want to reach their audiences digitally, either through their own web portals, a partner’s platform or a broader B2B2X marketplace. In all cases, connectivity is required to link buyers with sellers and the supply chain in between. Often the products themselves require connectivity.
But marketplaces do not come in a one-size-fits-all style. Our report explores potential configurations and how CSPs can play in marketplaces from a position of strength.
Many operators have already started down this path by initiating relationships with partners to build digital ecosystems, executing proofs of concepts and even launching limited marketplaces, particularly for IoT services. By partnering to expose assets through common information and data models such as the Open Digital Architecture (ODA) and Open APIs, telcos can add value to connectivity services.
During our research, we surveyed 80 CSP executives from 67 unique companies around the globe and their suppliers globally to find out what the drivers and challenges are in creating marketplaces, and whether one approach is favored over another. Job roles of the CSP respondents include CIO, senior VP of strategy, heads of engineering and IT, and senior and enterprise architects, among others. We also conducted many in-depth interviews with executives from CSPs and suppliers.
We especially wanted to understand how CSPs and their suppliers define marketplaces. Some operators are simply looking to create B2B2X portals where they sit at the center selling services, while others envision being participants in open platforms hosted by other companies. Smaller percentages of CSP respondents said they envision a software marketplace for ODA-compliant IT and network components or an internal marketplace that their business units can use. However, in the survey we only allowed respondents to choose one of the options. A CSP could have multiple visions or definitions, so it is possible that the low percentage is not reflective of the true level of interest.
The Amazon Marketplace has forever altered how people (and companies) buy goods and services. Access to a huge number of sellers and lightning-fast fulfillment are now standard expectations for customer experience, and CSPs have been taking notes.
Since 2012, CSPs’ average revenue per user has declined between 13% and 36%, despite significant investments in infrastructure. By contrast, the cloud computing market grew by 24% in 2019 (pre-pandemic). CSPs cannot continue to provide competitors with physical networks without finding a new way to protect and expose their value. They can do this as providers of not only connectivity, but also networking and operations assets, management capabilities and perhaps most importantly data.
There are other reasons for operators to strongly consider new business models including marketplaces. Innovators are everywhere and most of them want to reach their audiences digitally, either through their own web portals, a partner’s platform or a broader B2B2X marketplace. In all cases, connectivity is required to link buyers with sellers and the supply chain in between. Often the products themselves require connectivity.
This drives home the reality that no CSP or cloud provider can deliver everything their customers want or need without the contributions of partners. A thriving and well-oiled digital ecosystem through which partners seamlessly interconnect to pass data, execute contracts and deliver solutions is a necessity.
Exploring the potential
But marketplaces do not come in a one-size-fits-all style. Our report explores potential configurations and how CSPs can play in marketplaces from a position of strength.
Many operators have already started down this path by initiating relationships with partners to build digital ecosystems, executing proofs of concepts and even launching limited marketplaces, particularly for IoT services. By partnering to expose assets through common information and data models such as the Open Digital Architecture (ODA) and Open APIs, telcos can add value to connectivity services.
During our research, we surveyed 80 CSP executives from 67 unique companies around the globe and their suppliers globally to find out what the drivers and challenges are in creating marketplaces, and whether one approach is favored over another. Job roles of the CSP respondents include CIO, senior VP of strategy, heads of engineering and IT, and senior and enterprise architects, among others. We also conducted many in-depth interviews with executives from CSPs and suppliers.
Defining marketplaces
We especially wanted to understand how CSPs and their suppliers define marketplaces. Some operators are simply looking to create B2B2X portals where they sit at the center selling services, while others envision being participants in open platforms hosted by other companies. Smaller percentages of CSP respondents said they envision a software marketplace for ODA-compliant IT and network components or an internal marketplace that their business units can use. However, in the survey we only allowed respondents to choose one of the options. A CSP could have multiple visions or definitions, so it is possible that the low percentage is not reflective of the true level of interest.
While more than a third of CSP respondents view a marketplace as a platform business hosted by a neutral third party, they are decidedly uncomfortable with the idea of a cloud platform provider like Amazon Web Services, Google Cloud or Microsoft Azure operating the platform. CSPs very much want to “own” the customer. In fact, keeping control of relationships with customers is the No. 1 driver for operating a marketplace, according to our survey.
Throughout our report, we explore the competitive and cooperative relationships that are necessary to advance telco marketplaces. Download it to understand:
However, by insisting on owning the customer, CSPs may be missing an important opportunity to tap new sources of revenue in unfamiliar markets.
Throughout our report, we explore the competitive and cooperative relationships that are necessary to advance telco marketplaces. Download it to understand:
- Why the time is right for CSPs to build and participate in marketplaces, and what the drivers are
- The models telcos are using to deploy marketplaces and where they are offering them
- Why CSPs still want to control the relationship with customers
- Why they prefer a neutral third-party marketplace operator over one hosted by a hyperscale cloud providers
- What the advantages are of a software marketplace for ODA-compliant components
- Why suppliers are skeptical about killing the RFP (request for proposal)
- Challenges to implementing marketplaces and why the mental shift to the marketplace business model may be more difficult than the technical shift
