Tagged: Coopetition

Coopetition in the cloud age (2)

 

“Coopetition replaces competition as telcos aim to cut costs and grow revenue streams (…) in the face of changing consumer trends, operators must try to preserve their EBITDA (earnings before interest, tax, depreciation and amortization) margins and thus are looking to reduce spending and maximize their profit (…) there will continue to be more cooperation and collaboration between telcos and other players at every stage of the value chain.” – “Coopetition Replaces Competition…” by Sylwia Boguszewska at Pyramid Research.


Some of you have already guessed that “coopetition in the cloud age (1)” hints that cloud and telco economics could have more things in common than they happen to be different. Telcos used to advance “walled gardens” and, therefore, systems formed by black boxes and closed ecosystems, but coopetition became an unquestionable fact at the turn of the century and is now taking place in full force.

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I created the above chart just to structure my thoughts and to help visualize a continuum, one which can be completed with known real life examples.

I started working in the telecomm industry in the late nineties, soon after the deregulation of that market in the United States. Prior to that, so-called PTTs (Post, Telegraph and Telephone) dominated this sector in their respective home countries, most were stated owned monopolies. While there were success stories regarding teledensity and standardization, the thinking was that marker forces would help drive a new wave of innovation and accelerate the shift from analog to digital technologies. As a matter of fact, there are studies that correlate the quality and availability of digital infrastructure with a country’s productivity and wealth creation.

Just a few years later, hyper-competition arose in some areas as a number of players sought to challenge and displace the incumbents. New value and business models kicked in. Conventional power players felt des-intermediated as fast growing assets such as “content” and innovative online services stole the spotlight. “Access” and “data transport” risked to be “commoditized” to a point at which sophisticated networking technologies and capital intensive gear and services were dismissed as mere “dumb pipes.” Since, the shadow of tacit collusion on either side has been a concern for regulators.

My thinking is that a healthy mix of competition and coopetion, which also includes partnerships with academia, creates the most value in absolute terms. Given that benchmark, any other model undermines market potential and value creation. One other thought, hyper-competition is likely to correct itself while collusion and monopoly behaviors might not. So, erring on the left side of the chart can cause less overall damage than falling on the right side, which might read counter intuitive to some benevolent industry veterans.

Now that we are advancing the cloud age, executive decisions on “when and where to compete or cooperate” are becoming only more frequent. As an example, there are competitive advantages to be gained when advancing a “de-facto standard” based on proprietary technologies. Speed to market, risk taking and seamless integration fully justify that… why wait. However, communities driving open source initiatives and standards are thriving too. When successful, they can also drive speed to market by de-risking investments and allowing for loosely coupled systems to work by means of APIs, application programmable interfaces and platforms.

So, what path to follow is one of today’s most pressing innovator dilemmas. My experience in product management is that what works well in some situations might not necessarily do the job on some other occasions.  Moreover, statistically speaking, business recipes that seem to succeed over and over might fail expectations when taking things to new levels or under changing conditions, as well as when market entry barriers have been lowered and a one trick pony does not longer help differentiate.

What makes us smart is figuring out what answer applies to what objective and in what context. Going through the journey of prototyping and experimenting helps most of us: “if we knew what it was we were doing, it would not be called research, would it?”  – Albert Einstein.

Hope that this topic is of interest. Another article will follow.

Coopetition in the cloud age

“Coopetition is thought to be a good business tactic between two businesses that can lead to expansion of the market and the formation of new business relationships. Coopetition is a form of strategic alliance and is common particularly in the computer industry between software and hardware firms.”Investopidia.

“There is an ugly word used to describe the fact the rivals in business some times have to find a way to work together – coopetition. In the ICT* industry everyone knows that, on occasions, competitors have to hold their noses and talk to each other.”The ugly truth about competition by Bob Tarzey with Channel Register.


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The telecommunications industry is a good example of a “coopetitive environment” where a number of service providers:

  • collaborate in developing standards
  • negotiate business relationships under interconnect and peering agreements, wholesale carriers’ carrier models and virtual network operators
  • unbundle access to infrastructure and services as prompted by deregulation

This is also true for those supplying them with technologies, gear and services. Generally speaking, many of today’s deployments do entail rather sophisticated multi-vendor environments. That can be driven by any of the following:

  • large scale projects that would necessarily involve more than one vendor
  • two (or more) vendors are asked to be aligned as part of a service provider supply chain strategy
  • decentralized decision making leading to a variety of relationships across units and geographies
  • a best of breed selection strategy that requires end to end systems integration
  • co-creation projects where the service provider involves more than one supplier
  • and when no single vendor has all that is required in the company’s product and services portfolio

Note that carrier grade requirements are set to ensure high availability and, therefore, robust and reliable services. The whole needs to perform as one end-to-end system. Coopetition is, therefore, a fact of life for an industry characterized by demanding service level agreements.

Interestingly enough. embracing the cloud age takes coopetion to new levels because of:

  1. ubiquitous connectedness, ground breaking agility and unprecedented speed
  2. off the shelf hardware and software products that become readily available online services on demand
  3. digital assets living and morphing in data center environments under utility business models
  4. the relentless unbundling of (virtual) machines and (software defined) instruments
  5. distributed assets and processes, openness leading to mashups and end-to-end automation
  6. coopetition and a mindset that amounts to a “cloud noveau” culture and a generational shift

I will follow up with another article that will further develop the above six points and the underlying paradigm to start with.


*ICT: Information and Communication Technologies.