How Service ProviderS can USe aPis To reclaim THeir

How Service Providers can Use
APIs To reclaim their stake in
the Application Value Chain as
‘Smart Network Providers’
WHITE PAPER
CONTENTS
EXECUTIVE SUMMARY .............................................................................................................. 3
INTRODUCTION: SERVICE PROVIDERS AND APP STORES . ........................................................ 3
OVERCOMING THE BARRIERS: THINKING DIFFERENTLY ABOUT INNOVATION . ........................ 4
What service providers have to offer ........................................................................................ 4
MONETIZING APP STORES: SEEING APIs AS BILLABLE ELEMENTS
AND EMBRACING NEW BUSINESS MODELS .............................................................................. 5
TECHNOLOGY REQUIREMENTS: ACHIEVING LOW-RISK API EXPOSURE ................................... 6
CONCLUSIONS . .......................................................................................................................... 6
ABOUT AMDOCS INTERACTIVE .................................................................................................. 7
EXECUTIVE SUMMARY
Service providers are in danger of missing out on one of the
fastest growing and most potentially lucrative segments in today’s
communications value chain: mobile and web-based applications
delivered via app stores. Hindered by traditional mindsets, business
processes and technologies, service providers are ceding potential
app store revenues to more nimble device manufacturers, operating
system vendors, and Internet and content providers.
Key to service providers’ ability to tap into the potential of the
app store market is their ability to change how they perceive their
application program interfaces (APIs), as well as how they work
with third-party developers. By rethinking their business models
and how they leverage their network and business assets, service
providers can successfully tackle the app store market and achieve
tremendous return on investment for their efforts.
Introduction: service providers
and app stores
When Apple launched its App Store for its iPhone® and iPod® Touch
mobile devices in July 2008, few people would have believed that in
less than a year, the store would see its billionth app sold.
The number of Smartphone users accessing mobile applications stores
is expected to reach 100 million in 2013.1 It’s clear that more of
today’s consumers are pursuing an always-connected digital experience
in which mobile applications are increasingly important.
Traditionally, service providers have reigned over the communications
value chain. For some service providers, this role is now threatened by
their inability to take the initiative in the rapidly evolving mobile and
web applications market. Why haven’t service providers jumped on the
bandwagon? Key barriers exist:
> Mindset. Service providers aren’t accustomed to working with
a large community of small developers – but they’ll have to shift
gears if they hope to catch up with the new velocity of business
innovation on the web.
> Lack of Openness. Service providers often lack the technology
and business openness that would allow a dynamic community of
developers and partners to easily and securely access their network
and business services to create truly compelling applications.
Service providers are ideally positioned to take advantage of the
boon in the app store market – if they can adopt a fresh view of this
marketplace, establish new business models to monetize app stores,
open their system and network infrastructures and deliver to developers
the right tools, in the right way, to sustain these new ventures.
Device manufacturers, operating system vendors, Internet companies,
and content providers are all jockeying to own the customer experience.
By their absence, service providers – and their revenues – risk being
marginalized. If they’re not careful, service providers will be relegated
to the status of “dumb pipes” carrying other organizations’ high-value
content to customers.
Not surprisingly, other device manufacturers and operating system
vendors have followed Apple into the mobile app store fray, including
Google, Microsoft, Nokia, Palm and Research in Motion (RIM). Largely
absent from this market, however, have been service providers.
1
In-Stat, March 2009
3
Overcoming the barriers:
Thinking differently about
innovation
To compete and win in this new digital economy, service providers
need to prove they can become the destination of choice, for their
customers’ digital experiences – and for the app developer community
that caters to them. To do that, they need to think differently about
innovation – and about their network and business assets they have
traditionally held so closely.
Service providers hoping to join the apps bonanza must tap into the
innovation of developers – not just a handful of large developers, but
the hundreds of thousands of smaller developers who thrive in the
world of mobile and web apps.
As Twitter, Facebook and others have proven external innovation
by third-party developers is a critical ingredient in the strategy of
any platform seeking exponential growth and increased customer
stickiness. Service providers must consider how they will get in the
app store game, focusing on attracting as many developers as possible
to their platform, rather than to competing channels available in the
market. To do this, service providers must be willing to expose more of
their own assets, including network services and business enablers –
and the relevant APIs – to third-party developers.
What service providers have to offer
Service providers have significant assets in their networks and business
systems. These assets, properly conceived and packaged, could be
enormously attractive to third-party developers.
For example, small developers don’t have the time, money or ability
to invest in sophisticated billing capabilities. By offering developers
access to their proven billing functionality and trusted customer billing
relationships, service providers furnish a benefit unmatched by other
app store providers such as device manufacturers or operating system
companies. For developers, the service provider’s billing infrastructure
itself becomes an enablement path.
A service provider can also merchandise developers’ products to its
entire user base using multiple established distribution channels, such
as web portals, on-deck portals, and digital TV.
Or consider the invaluable benefit to developers of being able to
authenticate a particular user against the subscriber’s database. For
example, the ability to check a user’s parental control settings before
granting access to certain content represents a major source of value
that a service provider can extend to third-party developers.
Additionally, service providers can enable developers to embed voice,
presence and other capabilities into apps to make them more functional
and personalized for consumers.
Service providers are ideally positioned: established between customers
and the cool content and mobile applications they seek, and the network
and business enablers that can truly enrich their app experiences.
Now, what service providers need are ways to better monetize the app
store marketplace.
FIGURE 1
Example of Potential Service
Provider APIs that can be exposed
to a Developer Community
4
Seeing APIs as billable
elements and embracing
new business models
In traditional communications markets, service providers’ billable
elements have been atomic elements of value, typically metered data,
voice usage and messaging. In the mobile app store market, however,
a new billable element has emerged: the API. In this case the primary
“customer” paying for the API is the third-party developer, where
payment may be direct or indirect, as in, charged as a larger revenue
share for the operator, according to the business model in place.
In the indirect model, developers and service providers enter a revenue
sharing arrangement.To date, service providers have grown accustomed
to 50/50 revenue splits with their (mostly) large development partners.
In contrast, Apple and other app store providers are likely to divert
70 percent or 80 percent of the revenue stream to their third-party
developers. Service providers serious about establishing successful app
stores will need to move toward this more uneven split.
For example, let’s say a service provider begins with a 20% revenue
share for the basic upload and distribution of apps through the app
store. A higher revenue share can be charged automatically based on
sales volumes or bandwidth usage tiers.
Obviously, a wide range of models are possible. By making it easy for
developers to do business with them, service providers will discover
they are in an ideal position for monetizing apps.
Service providers also need to keep in mind the other key elements of
the business case for having an app store in the first place: increased
stickiness and prevention of subscriber churn. By retaining high-end
customers, service providers can hold on to more of their revenues.
And attracting developers with engaging mobile apps is an excellent
way for service providers to keep subscribers from straying.
Nevertheless, monetizing APIs is not just a business issue. Service
providers must consider the technical requirements to exposing their
network and business assets in a safe and controlled manner.
Although the basic monetization model for app stores is revenue
sharing for the download of apps. On top of that basic structure,
service providers can also charge developers for value-added items
such as access to call management, location, presence, or contact
information; in-app advertising; and similar premium activities.
5
Technology requirements:
Achieving low-risk API exposure
Historically, service providers had valid reasons for shying away from
opening their APIs to developers. Service providers worried about
the risks of third parties abusing their networks, or overloading the
network with too much content, or introducing inappropriate content.
These concerns can be addressed by investing in a platform that
provides an open services gateway and developer tools that support
the necessary elements of service exposure and policy management,
as listed below:
> Expose network services and business enablers as APIs.
The platform must convert network protocols to simple web
service protocols (SOAP, REST) that can be exposed and used
by developers.
> Apply and enforce policies for these APIs. For instance, the
system must deliver rock-solid security measures, including access
control as well as policies around settlement, charging and other
accounting activities. It should include automated processes to
attach policies, publish new services, and perform entitlement
checking and enforcement of multiple policies at once.
> Make it easy, intuitive and safe to manage the complete
lifecycle for network, BSS and OSS service exposure.
Features such as dashboards, intuitive search functions and other
management tools empower service providers to take control of
massive-scale service exposure. The complexities of lower-level
network APIs can be hidden so that operator services are made
available easily to a broad development community. Conversion of
higher-level web services using standard protocols such as SOAP
and REST also enhances manageability.
> Streamline partner relationships. By automatically enabling
partner access and enforcing business terms (pricing, SLAs, etc.)
as specified in each partner’s contract, service gateway technology
can reduce time to market and eliminate errors.
> Deliver the APIs to developers. Through tools such as software
development kits (SDKs), the platform should enable discovery of
published services and allow developers to subscribe to specific
services with various service level agreements (SLAs).
> Monitor API usage. The gateway should offer real-time
monitoring for system operations and troubleshooting of system
bottlenecks, to ensure high throughput, high availability, low latency
and load balancing. Ideally, developers should be able to receive alerts
and error handling messages according to pre-defined thresholds,
leading to automated and accurate monetization when service
consumption details are fed to the partner settlement system.
> Bill for API usage and settle with developers over consumers’
payments for applications that use these APIs. Built-in
integration with partner settlement systems will enable new revenue
streams and monetization of exposed services. Real-time statistics
on system operations and events should be logged automatically
for use later in payment settlements. Settlement engines should
not only support a variety of settlement models (e.g. subscription,
pay-per-dip, revenue share tiers), but also provide the flexibility
required to easily test new community engagement business
models, such as a monetary reward for beta testers.
conclusions
App stores represent a considerable revenue opportunity for service
providers. Equally important, however, service providers must enter
the mobile app store market before they risk becoming obsolete
– or at least, in a much weaker position – in the future of the
communications market.
The controlled, low-risk exposure of service providers’ network and
business services represents a unique value proposition to web and
mobile developers. For service providers, it enables not only innovation,
but also new revenue streams and the monetization of exposed services
– which, ultimately, maximizes the ROI of service providers’ network
and business investments.
By leveraging their considerable assets, opening their APIs to thirdparty developers, creating powerful ecosystems around their platforms,
service providers can end up winners in this exciting new market.
6
ABOUT AMDOCS Interactive
Amdocs Interactive’s mission is to power service providers’ success in the digital economy by providing
an integrated platform that enables personalized and profitable online customer experiences. Our
portfolio spans app store enablement, commerce, partner collaboration, self-service, and with the
recent acquisition of ChangingWorlds, leading personalization and mobile portal solutions. We have
also developed a truly unique Experience Design & Consulting Center where our experts can help
service providers deliver the optimal user experience to their customers.
Amdocs interactive is a unique and innovative business unit within Amdocs. For more information,
visit http://www.amdocsinteractive.com/.
ABOUT AMDOCS
Amdocs is the market leader in customer experience systems innovation, enabling world-leading
service providers to deliver an integrated, innovative and intentional customer experienceTM at
every point of service. Amdocs provides solutions that deliver customer experience excellence,
combining the software, services and expertise to help its customers execute their strategies
and achieve service, operational and financial excellence. A global company with revenue of
$3.16 billion in fiscal 2008, Amdocs serves customers in more than 50 countries around the
world. For more information, visit Amdocs at www.amdocs.com.
Amdocs has offices, development and support centers worldwide. To see the most current
contact information for all Amdocs offices worldwide, please refer to our website at
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