FROST & SULLIVAN ON THE “MEGA TREND” IMPACT OF MOBILE DEVICES

Category: March 2012 - Mobile Advertising & Integration

Trends which have a profound impact on the business environment over a period of time are
termed ‘Mega Trends’ by Frost & Sullivan, the global research & consulting firm with a history of
over 50 Years.
Mega Trends are defined as global, sustained and macroeconomic forces of development that
impact business, economy, society, cultures and personal lives, thereby defining our future world
and its increasing pace of change. Mega Trends have diverse meanings and varying impact on
different industries, companies and individuals. Analysis of these Mega Trends and their
implications forms an important component of a company’s future strategy, development and
innovation process, and directly impacts product and technology planning. To address this very
important issue amongst its global customer base, Frost & Sullivan embarked on an ambitious
global project to identify the top 50 Mega Trends. A global team of 150 analysts and consultants,
with expertise in various industries and economies, convened to brainstorm, scenario-plan and
generate ideas for future growth opportunities for businesses. The result was an insight into how
these trends will change the pace and scenario of life as we know it as well as the repercussions of
these trends in business. Some of the Mega Trends identified by Frost & Sullivan include “Smart”
emerging as the new green, Geo Socialisation, Innovating to Zero, Beyond BRIC, The Next Game
Changers, Space Jam, Personal Robots, e-Mobility and New Business Models, to name a few.
Frost & Sullivan is looking at all Mega Trends they expect to affect global technology companies:
anything from Connecting Subscribers to Connecting Devices, Cloud Computing, Urbanisation and
Smart Grids, but considering the current topic of Asian e-Marketing, this article will focus on the
most important Mega Trends related to mobility.
Moving from Connecting Subscribers to Connecting Devices
Prices of mobile devices, as well as the tariffs for mobile services, have declined sharply, resulting
in unprecedented growth in subscriber and penetration numbers. Mobile penetration in most
markets today exceeds 100%. The economic added value, that was created based on providing
mobility to consumers, has been significantly exploited. The Blue Ocean Strategy of creating new
economic value is to shift the paradigm to connecting devices instead of connecting consumers. It
is quite possible that, if executed well, penetration levels of 800% or a total connected device
ecosystem exceeding 80 billion devices by the year 2020, will be the result.
Whilst the connecting devices trend, i.e. Machine to Machine (M2M), is not new, the current
ecosystem is ripe for an accelerated take up of this trend. Rapidly declining prices of radio and
telecom infrastructure is a key enabler. Added to that is the fact that most countries today have
ubiquitous broadband coverage – both fixed as well as wireless. The availability of platforms such
as Android and iTunes, amongst several others, help leverage the collective innovation capability
amongst millions of application developers globally. The baton for discovery of the applications has
been passed on to the consumer and this wisdom of the crowds’ phenomenon helps accelerate the
development and innovation cycle.
The consumer electronics industry will be a key benefactor of this Mega Trend. Devices which
operate in a networked environment will enable consumers to drive a greater degree of
personalisation. There will be an explosive level of innovation that will come through from the
convergence of these two industries: consumer electronics and connectivity. In many instances, the
connectivity piece will be completely transparent to the end-user. We have seen the first signs of
this emerging business model in the offering from Amazon Kindle, with global connectivity and
completely transparent carriage charges for users. Carriage costs are marginal compared to the
overall benefit for Amazon, as well as the consumer, and hence the consumer does not get charged
for the usage of data separately.
Implications for Telecom Service Providers
This Mega Trend is a huge growth opportunity for the telecom service providers (telcos). Whilst the
revenue streams will possibly be as low as a few cents per device per month, the number of
devices that will be connected is huge. The telcos undoubtedly will earn revenues from the
connectivity piece. This will, however, be commoditised and the margins will be under continuous
pressure. The battle will be intense for the incremental revenues from the creation of the
ecosystem.
The first wave of the data connectivity phase has been won by Google, Apple, Facebook and other
Over the Top (OTP) players. The upcoming wave of connecting consumer devices will attract the
electronic giants such as Sony, Samsung, Panasonic, Philips and others. These companies
approach the market from a very global perspective and their scale will be significantly higher than
the telcos. The competitive advantage for a telco resides in its strength in operational excellence, its
monthly billing relationship with its customers and its strong local distribution presence.
Telcos need to adopt a two pronged approach to succeed. Firstly, they need to develop strong
global partnerships with the likes of Sony, Apple, and Google, and be an early entrant into the
market to garner a significant share of the connectivity pie. Secondly, there are several areas which
will favour the telcos more than global players, including sectors like the development of smart
cities, security solutions and other business to business solutions. Telcos are in a powerful position
to be a one stop solutions provider to enterprise customers by helping them navigate this connected
device ecosystem. Telcos will have to develop capabilities or partner companies with skills in
business consulting and IT integration to make this possible.
Implications for System Integrators (SIs)
An important requirement for the connected device paradigm to become reality would be to stitch
customised solutions to address both the consumer and enterprise requirements. This opens a new
opportunity for the SIs of the world to work with ecosystem partners in order to design solutions
such as transportation solutions for a smart city and / or home delivery system for consumers. The
SIs will, however, need to design these solutions with newer business models, which are OPEX-
based, maybe using the Cloud computing paradigm. In addition to the current SIs, other players
from the ecosystem and beyond, like automation players, and / or infrastructure players, are
expected to enter the market.
Implications for Enterprises
The connected device ecosystem will enable companies to collect real time information on the
usage of their products and services. This will significantly improve the quality of products, increase
the pace of innovation and most importantly lead to better utilisation of global resources. Business
models will change from outright purchase of products to pay as you go, as information about exact
usage trends will be available. Insurance companies may offer customised annual premium
packages based on a consumer’s driving habits, rather than the one size fits all approach they
adopt today. The increased sophistication in cars will translate into the development of collision-less
vehicles. Whilst a lot of these may sound futuristic, Frost & Sullivan believes strongly that many of
these scenarios will be real by the year 2020.
By Manoj Menon, Partner & Asia Pacific Managing Director, Frost & Sullivan