There is a huge trend underway in technology: The move from pipelines to platforms. Platforms have displaced pipelines to take the business world by storm – whether it’s a video platform such as YouTube or a housing platform such as Airbnb. The same trend is taking hold in the telecom world, where service providers need to respond by building open platforms for the telco cloud.
Let’s start defining pipelines vs. platforms. The concept has been described by authors Marshall W. Van Alstyne, Geoffrey G. Parker, and Sangeet Paul Choudary in the book, Platform Revolution, as well as in an article published in the Harvard Business Review (HBR) last year, titled, “Pipelines, Platforms, and the New Rules of Strategy.” A pipeline, according to the authors, creates value by controlling linear activities in a value chain. Think of the way you buy a cable service, then get a cable box, then buy movies from the cable company. Platforms, on the other hand, connect producers and consumers with a higher value exchange. An example is the Apple App Store.
The most successful services today, whether it’s the iPhone, Netflix, or Airbnb, are platform models that have created rich ecosystems that deliver a huge amount of value toconsumers. The platform gives the consumer a tool to get access to what they want whenever they want it.
One could argue that pipelines are in decline and platforms are on the rise. The cable companies,classic pipeline businesses,are feeling pressure from Netflix and YouTube, which are open platforms. The iPhone, in conjunction with Apple’s App Store model, disrupted the telecommunications markets’ former pipeline model, whereby they controlled the distribution of handsets.
Need evidence that this is happening? Think of how the world’s major mobile phone manufacturers – Nokia, Samsung, Motorola, Ericsson, and LG – once controlled 90 percent of the industry’s profits. Then Apple stole the show and took away large chunks of market share – along with a bulk of the profits. All of this was driven by the iPhone platform model.
Apple created a better platform. Just as Netflix created a better platform for video content, putting control into the hands of the users, rather than distributing the content from within a walled garden, Airbnb unlocked huge amounts of housing capacity and gave consumers more choice, whereas Uber allowed riders access to a global platform for ride sharing.
How disruptive are these platforms? Let’s just look at ways the platforms have crushed incumbents in respective markets and created trillions of dollars of value in just a few years.
|Industry||Example of Insurgent Platform||Incumbents||Value of the Platform|
|Digital Entertainment||Netflix||Cable TV||Instant Selection and Wider Range of Choice|
|Hotel Industry||Airbnb||Hotel Companies||Instant Access to Excess Housing Capacity Worldwide|
|Transportation||Uber, Lyft||Taxi Companies||Instant Dispatching and Simpler Payment Model|
|Music||iTunes and Spotify||Record Companies||Consumer Gets Direct Digital Access to Multiple Catalogs|
|IT Serivices||Amazon||Hardware "Box" Companies||Ease of Use, Fast Access To New Technology, and Economy of Scale|
So how will the communications world emulate this model? How can service providers reverse the trend of losing out on new opportunities to provide their customer’s value?
The answer is that communications providers need to create new, open platforms that can unlock more value for both customers and partners. One of the key areas to focus on is the access network.
Technologies such as Software-Defined Networking (SDN) and Network Functions Virtualization (NFV) are introducing more open technologies and ecosystems to enable the telco cloud to be built pursuing a platform model. But what about the access networks? It’s still the land of proprietary, legacy pipelines – in dire need of open platforms that can unlock value.
Imagine an access network with an open ecosystem, customer web-based provisioning, and software-defined deployment that requires fewer truck rolls and service technicians. In short, the communications market is looking to build the Airbnb of access, where bandwidth is accessible with a few clicks on the screen. This is the promise of Software-defined Access (SD-Access).
This requires building a flexible operating system with software-defined control and a broad ecosystem of interoperability. Just as Airbnb connected users with newfound resources, service providers can find the spare resources to deliver to their customer base.
Service providers need to accelerate their move to an open, cloud architecture to enable SD-Access and gain access to the platform model. This will require a large shift in mindset to displace decades of evolution of the “pipeline” business, where service providers introduced one service at a time. The communications industry needs to put more power into the hands of its customers, giving them a platform that enables them to connect to more resources.
R. Scott Raynovich has been a technology analyst and journalist for 20 years. He is the founder and principal analyst of Futuriom (www.futuriom.com), a technology analysis firm.