Guest Post: Amdocs on living with Google
When service providers think of their strategies with Google, there are three facts that need to be taken into consideration:
• Google is here to stay.
• Location is the most recent service to have been ceded to Google. Voice is next in line.
• Google can also drive service providers' success.
We believe that the convergence of communications and the Internet is a fact - and that service providers, rather than competing with Google on all fronts, should actually seek to incorporate its services and apps as much as possible in order to enrich the overall customer experience for their subscribers.
To do so, service providers need to be clear on what they are bringing to the table and then examine how they can work with Google.
Service providers should focus on their core assets - their network, customer and product data. And they should leverage their core capabilities, such as billing, customer care, and service delivery to create new services they can monetize through partnerships with Google and other over-the-top competitors.
As the Telco 2.0 executive briefing, "Google, Where to Compete, Where to Co-Operate" notes, the service providers' "golden asset underpinning many of their future models" is their wealth of customer data and that "understanding consumers' behavior will be the key to victory in the voice, messaging and advertising brokerage markets."
The exact approach each service provider takes to co-exist with Google depends on its business strategy. Some adopt an experience play, where the service provider is in the front of the customer experience, embedding Google assets to enhance the overall subscriber experience.
An example of this approach is the Vodafone 845 branded device. It's based on the Android 2.1 OS and includes all Google apps such as Maps, Gmail and Android Market but Vodafone is self-branding the phone and has customized it to incorporate Vodafone content and services such as their Vodafone 360 service. Vodafone's goal is to manage the user experience and promote their brand equity.
Other service providers adopt the smart enabler play, using their core assets and capabilities to let their customer reach their desired experience (be it by Google or by any other player) as easily and as quickly as possible. For example, instead of fighting or blocking Google's services, service providers can offer them to the consumer, placing the Google brand upfront with as few steps as possible to reach it. 3 UK and T-Mobile have adopted this enablement approach and let consumers select the Google experience as simply as possible. They provide value to customers by letting consumers choose the experience they want in the most straightforward and intuitive way.
Interests define the level of competition
An all-or-nothing approach is unfeasible. Take the case of AT&T for example. Even though they are publicly fighting Google on net neutrality, Google Voice, and have removed Google search in favor of Yahoo, they are at the same time offering their subscribers Android phones and providing network access for Google's Nexus One.
The question as to whether a service provider should cooperate or compete with Google depends on whether its business interests are aligned or opposed with those of Google - at any particular time and in any particular market.
This means that most service providers will choose to deploy several tactics to serve their overall strategy. In the strategic interest category, both Google and service providers are after the same end goal, increased Internet usage - whether that be mobile Internet or TV - to increase data usage for service providers and to increase the reach to as many eyeballs as possible to raise Google's value for advertisers. Orange and Sprint, therefore, have agreements to run Google search within their mobile environments to promote the customers' use of the Internet, thereby increasing their data revenues.
On the other hand, Google's business model of offering its platform, applications and content to consumers for free is directly opposed to that of the service providers, who charge for services. Hence the dispute between Google and AT&T over net neutrality in the United States, or Telefonica's and others' recent statements suggesting that over-the-top (OTT) players like Google should have to pay service providers for use of their network.
State of co-opetition
Today, most service provider-Google relationships fall somewhere in the middle between cooperation and competition, characterized by a delicate balance of strategic interests on both the service providers' part and Google's, creating a state of co-opetition. However, this balance can easily be disrupted by new market conditions or by either party adapting new strategies. What may be a complementary strategy today may not be tomorrow, creating a highly dynamic environment.
Gmail, Google navigation with its location-based service and Google Voice are all examples of Google services and applications that started off as head-to-head competition with service providers, but have now moved toward a more cooperative relationship. Service providers used to charge their subscribers for offering a mailbox with a fixed limit. Then they increased the size of the mailbox to meet increasing customer demand for "unlimited" mailboxes before realizing they couldn't compete with Google's unlimited and free Gmail. And so they stopped competing on this front, allowing Gmail to become the default email on their phones. Since service provider core assets have not been compromised here, and users receive free and bigger mailboxes with Gmail, service providers are content to take the enabling/hosting part of allowing access.
In terms of navigation and location services, service providers have also come to the conclusion they cannot compete with Google Earth, and are therefore better off embedding it in their phones rather than trying to force their own location-based service on their subscribers.
Voice is different, in that it directly competes with service providers' core service of providing a phone service, but we are still seeing a shift toward cooperation in some cases. While AT&T has blocked the ability to download Google Voice apps on iPhones, Verizon hasn't, because it wants to compete against AT&T's smartphone strategy and offering Google Voice is one way of attracting subscribers.
Google is a tough competitor for service providers when offering consumers its services for free. But when Google alters its strategy and tries to compete with non-free services, it discovers it lacks some of the service providers' core assets and capabilities that are a fundamental requirement when entering the non-free, service provider world. Google's decision to scrap the online sale direct to the consumer of its $595 Nexus One smartphone, due to unresolved support issues and costs, is a prime example of this.
Indeed, the mobile space provides a good example of the dynamic co-opetitive relationship. Service providers have or are launching new phones based on Google's popular Android operating systems in a move to attract more customers. But at the same time, Google is collecting rich customer data that service providers also want to obtain and this clash of interests makes this co-opetition relationship a moving target on the scale between cooperation and competition, with the relationship changing over time, depending on business interests.
Balance of power does not just rest with Google
There is a tendency to see Google as an all-conquering giant, but this is not necessarily the case - Google has competition, too, in its core markets. Microsoft's search engine Bing has slowly been gaining on Google for 10 months in a row. Bing currently boasts an 11.7 percent share of the market (to Google's 65%), gaining 3.4 percent over the last 12 months.
Apple is competing with Google on apps, operating systems and advertising, with their recent announcement of iAd, a specific mobile ad platform, and Amazon is reaching businesses with services such as fulfillment, website building and payment services to compete with Google's apps targeted at businesses.
This competition opens up the door for service providers to find new opportunities and partnerships with alternative players, changing the balance between Google and service providers by empowering the latter in this co-opetition status quo with Google. It will also have the effect of driving Google to become more cooperative with service providers so as to ensure Google's goal of having the upper hand in its own competitive landscape with Microsoft, Facebook Apple and others.
No such thing as a free lunch
Google is also not immune to failure, as seen by its decision to close its online mobile phone shop. Google wins when it competes with service providers over services that it provides for free, such as Gmail, Google Earth and so on. But as there's no such thing as a free lunch in the connected world: When a Gmail account is erased, or a consumer has problems with his Nexus One bought online, the consumer "pays" the price of this free service by not having a customer support team to whom he can turn.
Consumers are prepared to take this risk of no support for free services but the closer we get to the service provider's core competencies: service availability, customer care, payment flexibility, accountability and so on, the more consumers are prepared to pay in order to have somebody there to fix it in cases of need.
In today's connected world, people expect to pay for a better customer experience and are willing to pay for services requiring real-time monitoring, real-time operations and management. It is here that service providers, through monetizing their core assets such as network, customer and product data, will continue to thrive and profit. They have a lot to bring to the table in terms of creating a win-win-win situation: for service providers, for Google and for customers.