There will be more change in the next 10 years than there has been in the previous 100. This paper describes these expected foundational shifts and explains how we can manage them to our advantage.
In their latest discussion presentation "Winning the Game", Geoff Hollingworth, Ericsson North America Evangelist, in collaboration with Jason Hoffman, founder and CTO of Joyent, discuss what these changes will mean for devices, the cloud and the network.
This interactive presentation is supported by 8 videos. It describes the foundational changes that will occur across industries and networks, and attempts to explain how we can manage them to our advantage. The target audience of this paper is those who are involved in planning, building and profitably operating digital networks.
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Winning the Game
1. winning
the game
ericsson discussion paper
Geoff Hollingworth, Ericsson North America,
Ericsson Evangelist, in collaboration with
Jason Hoffman, Founder and CTO Joyent
There will be more change in the next 10 years than there was in
the previous 100.This paper describes the foundational changes and
attempts to explain how we can manage them to our advantage1
.
1
The paper references various online thought-leadership articles and visuals, and links to the original material
wherever possible. Please contact the author if any of these references need updating or removing. We hope
we increase visibility for everyone.
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3. Table of Contents
WINNING THE GAME 3
Introduction ................................................................................... 4
Video: “Setting the stage” ............................................................. 5
Everything Changes ...................................................................... 6
No Guarantees .............................................................................. 8
Mobile +x = Mobile ....................................................................... 10
Speed of Change .......................................................................... 11
Video: “Apps The Unit of Disruption” ............................................. 13
The Unit of Disruption ................................................................... 14
Video: “The Mobile Internet” .......................................................... 16
Moving Compute Into The Network .............................................. 17
Europe Alone-More Cloud Computing ......................................... 18
The Mobile Internet ....................................................................... 19
Video: “Moving Compute” ............................................................. 20
Moving Compute Into The Network .............................................. 21
Video: “End to End Guaranteed” ................................................... 22
Control The Performance .............................................................. 23
Analogous to Shipping ................................................................. 24
Video: “Shipping Analogy” ............................................................. 25
Analogous to Shipping .................................................................. 26
Nature, Machine, People ............................................................... 27
Video: “Machine People”............................................................... 28
Nature, Machine, People .............................................................. 29
In Summary ................................................................................... 30
Video: “Summary Video” ............................................................... 31
The Three Things to Remember ..................................................... 32
Winning The Game ........................................................................ 33
What’s Next ................................................................................... 34
4. The first paper, “Changing the Game Before the Game ChangesYou,” attempted to place the
massive business changes we are currently experiencing into a simple and understandable
framework. This second paper in the series, “Winning the Game,” explains what conclusions
can be drawn and what actions can be taken if these conclusions are to be believed
Today, the leaders of major industries are be-
ing challenged, seemingly overnight, power-
less to control their own destiny despite their
legacy, strength and footprint. Change is
happening at an exponential rate and hu-
mans are not naturally engineered to cope
with such a rapid pace of change. Before the
Industrial Revolution, technological change
over a normal human life span of about 40
years was almost nonexistent. We now live in
a world that is very different from what it was
as recently as five years ago.
This means the impact of the technical revo-
lution starts to impact immediate business
planning cycles. There is a need to embrace
the fantastic as part of the immediate future.
Those who do, will find competitive advan-
tages. Those who do not will be challenged to
maintain their status quo.
The target audience of this paper is those
who are involved in planning, building and
profitably operating digital networks. In North
America alone there is a predicted 80-billion
dollar shortfall top line by 2020, even if the
only goal is to maintain today’s 4.9% CAGR.
Bottom line operational costs are also chal-
lenged due to growing data demand versus
limited associated revenue growth.
This causes the need to re-invent the value
proposition of the network in the future eco-
system of the networked society. In the previ-
ous revolutions, the network first powered the
disruptive unit of the fixed phone, followed by
the disruptive unit of the mobile phone. The
next-generation disruptive unit to society is
the application. The customer of the disrup-
tive application unit is the mobile user, be that
one of the 7 billion people on the planet, or
one the estimated 50 billion devices that will
be used in 2020.
This paper introduces the concept of appli-
cation and associated data generated from
them.
It introduces the powerful concept of com-
bining next-generation networks with next-
generation compute and the beneficial side
effects of improved performance, security
and transparency.
Finally, it introduces the era of guaranteed
end-to-end delivery and the associated new
business models that this entails...
Welcome to winning the game…
introduction
WINNING THE GAME 4
6. Everything you assumed to be a
strength yesterday may become
a weakness tomorrow, and every-
thing you thought was a weakness
today may potentially become a
strength tomorrow.
Everything
changes
WINNING THE GAME 6
7. 33 42 51 64 75 86 97 106 113 118 121 122 121 117
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
160 167 174
186 194
204
230 229 227 220
Forecasted Voice Revenue Forecasted Data Revenue Revenue at Continued 4,9% Growth Rate
GAP
2007-2011
CAGR 4,9%
214 225
236
247
259
272
286
300
212 220 225 228
NA Operator Service Revenue Projections 2007-2020 ($B)
(Projection based on “as-is” revenue sources – Voice, Messaging, Data)
Everything
changes
For the first time since the Industrial Revolu-
tion it is possible to distribute products and
value digitally rather than physically. Once
digital, they can then be further enhanced
or even completely re-invented. It would be
natural to believe that the digital network
provider would reap the most benefits from
such a transition. However, unless they
also change, this may not be the case. The
existing business model of selling phones to
create future revenues generated by voice,
SMS and roaming fees is becoming out-
dated. Data subscriptions and revenues are
growing but once the market is saturated,
they will also decline. In North America alone
it is predicted that there will be an 80-billion
dollar top line gap by 2020 even with modest
a 4.9% CAGR, whereas even simple mobile
application revenues are expected grow at a
67% CAGR.
Service providers must re-think their core
business and refocus on the growing seg-
ment of application delivery.
Download Revenue Advertising Revenue In-App Purchases
3,2
4,7
12,2
5,3
6,7
13,4
8,7
9,5
14,6
0,7
1,4
6,0
2,2
0,4
8,6
2,8
23,2
29,3
36,4
2010 2011 2012 2013 2014 2015
9,9
2,9
1,7
CAGR
120%
CAGR
89%
CAGR
45%
CAGR
67%
16,3
North American Mobile
Applications Revenue
(USD B)
Source:Yankee Group, Pyramid Research, Parks Associates,
Strategy Analytics, inCode Analysis 2011
Sources: Distimo 2011, KPCBTop 10 MobileTrends 2011,Yankee
2010, ABI 2010, Pyramid 2010, Gartner 2011, inCode Analysis.
“While operators continue to make
large infrastructure investments,
others in the value chain are
capturing most of the value”
8. Noguarantees
Camera film was replaced by “Instagram”.
CDs were replaced by “iTunes”.
DVDs were replaced by “Netflix”.
Will our children even know what a phone is?
Do they know what a typewriter is?
How do they pay? What is the value?
Was it possible 5 years ago?
The difference between threat and
opportunity is opinion and attitude.
The difference between winning and losing
is the ability to execute on the fantastic.
WINNING THE GAME 8
9. There is a need to embrace the
fantastic as part of the imme-
diate future. Those who do will
find competitive advantages.
Those who do not will struggle
to maintain the status quo.
Noguarantees
WINNING THE GAME 9
10. mobile+x = mobile
When anything becomes mobile it tends to disappear.
Music players, cameras, credit cards, videos, boarding
cards, tickets and much more. What happens when
your core product disappears?
% of smartphone users who
no longer have…
Alarm Clocks: 54%
Wristwatches: 46%
Stand-alone cameras: 39%
Laptop PCs: 28%
Gaming consoles: 11%
TVs: 6%
Books: 6%
Ref: O2 Survey
“Mobile is the ultimate cannibal”
Ref: Tomi Ahonen
WINNING THE GAME 10
11. The world is changing and the
pace of change is accelerating.
There will be an evolution from
industrial-driven transformation to
information-driven transformation.
This will change individual busi-
nesses and society as a whole.
Speed of
change
WINNING THE GAME 11
12. Speed of
Change
Ray Kurzweil [ref], a well-known inventor who has re-
ceived 17 honorary doctorate degrees, predicts that we
will witness approximately 20,000 years’ worth of tech-
nological advances in the next 100 (when compared to
the rate of change in the year 2000). Or to put another
way, we will see more change in the next 10 years than
we have seen in the previous 100.
By 2011 “the industry had reached a point where it was
realistic to form a start-up and launch an internet tech-
based product for less money and in less time than it
would have taken to simply launch the website for such
a company in 1997.”
According to Kurzweil, a $1,000 computer will have the
computing power of the human brain by 2025. By 2045
it will have the equivalent computing power of the total
human population.
1900 2000 20101920 1940 1960 1980 2020 2040 2060 2080
1060
1055
1050
1045
1040
1035
1030
1025
1020
1015
1010
105
1
10-5
10-10
Year
CalculationsperSecondper$1,000
One Insect Brain
One Mouse Brain
One Human Brain
All Human Brains
Exponential Growth of Computing
“Change will never be
this slow ever again”
HansVestberg, CEO Ericsson – at SIME, September 28, London
WINNING THE GAME 12
13. apps the unit
of disruption
http://youtu.be/6ig01FCowzg
WINNING THE GAME 13
14. The unit of
disruption
Since the 19th century, there have been net-
work-driven units of disruption. The first was
the fixed phone that went into all buildings
and changed people and industries. Then
the mobile phone went into the pockets of 6
billion people, again transforming their lives
and the businesses they work for. Now the
unit of disruption is the app. Whereas the first
two units of network-driven disruption only
focused on communication, the app focuses
on everything. And if we look at consumer
spending (analysis by VisionMobile [ref]), this
provides an overview of not merely commu-
nication spending (less than 10% of average
household spending) but of everything else
as well. According to ABI Research [ref],
revenue from mobile apps stores could reach
$46 billion by 2016 (revenue including paid
downloads, in-app purchases, subscriptions,
and advertising), up from $8.5 billion in 2011.
Insurance & Pensions
Healthcare
Transportation
Apparel & Services
Housing
Food
Entertainment
Other (incl. comms)
11%
6%
10%
6%
13%
34%
4%
16%
Other (incl. comms)
10%
WINNING THE GAME 14
15. Applications and their data have to live on a platform.
Successful platforms all give something away for free,
they have to figure out who pays them and most impor-
tantly how to get people paid.
The challenge is to build an infrastructure platform that
enables people to maximize their share of the $46 billion in
the future and that adequately compensates the infrastruc-
ture provider for the competitive advantages it offers them
from a performance and business point of view.
Performance = real money. As presented by Walmart,
February 2012.
A large eCommerce site extensively A/B tested page
performance and published a study showing that a
100-millisecond delay = a 1% drop in revenue.
Search engines A/B tested performance and found
that a 500-millisecond delay caused a 20% drop in
traffic.
In an experiment across multiple retailers, a 1-second
delay caused a 7% decline in conversion.
Having optimal performance translates into real top-line
growth for any application provider. The infrastructure
platform provides such performance. The end-user of an
infrastructure platform of this type gets better quality of
experience and longer battery life for their device.
The question we have to ask is, How do we build the
best network platform to enable the app to generate
the most money both for the app and for the network.
APP
The unit of
disruption APPS DATA
PLATFORM
FREE
PAY INFRA-
STRUCTURE
PAID
WINNING THE GAME 15
17. moving COMPUTE
into the network
By 2017 there will be 5 times more mobile broadband subscriptions
than fixed ones, generating a substantial increase in mobile access to
applications as opposed to fixed line access.
Why then do all applications reside in fixed broadband? Data centers?
Change the game!
WINNING THE GAME 17
18. The European Commission’s new
strategy for “Unleashing the poten-
tial of cloud computing in Europe”
outlines actions to deliver a net
gain of 2.5 million new European
jobs, and an annual boost of EUR
160 billion to EU GDPs (around 1%),
by 2020.
Key actions include:
Cutting through the jungle of tech-
nical standards so that cloud users
get interoperability, data portability
and reversibility; necessary stand-
ards should be identified by 2013;
support for EU-wide certification
schemes for trustworthy cloud
providers. Development of model
‘safe and fair’ contract terms for
cloud computing contracts includ-
ing Service Level Agreements [ref].
Europe
Alone-More
Cloud Computing
This will mean:
2.5 million new European jobs an
annual boost of EUR 160 billion to
EU GDP (around 1%), by 2020
This will require:
SLAs, certification, interoperability,
data portability and reversibility
WINNING THE GAME 18
19. COMPUTING
DATA
COMPUTING
MOBILE INTERNET
5x
The mobile
internet
By 2017 there will be five times more
mobile broadband subscriptions than
fixed ones [ref]. Everyone developing
applications today is developing mobile
applications first, not fixed ones.
We are in a world where we speak about an internet
that has clouds that has computers. It makes complete
sense from an internet point of view and has worked
fine for years. In reality the mobile internet is a whole
other set of networks and these other networks are
massive ones that are all between the core internet and
the people and machines using it. The massive growth
of the mobile internet is the place where application
developers want to work. What happens when you start
to orchestrate compute, applications and data start to
become resident in the mobile internet?
If applications start to execute inside the mobile inter-
net and traffic only goes to the public internet in excep-
tional cases, the result is an enhanced experience for
both the end-user and application developer, and also
improves the network management experience.
WINNING THE GAME 19
21. moving COMPUTE
into the network
If the objective for mobile carriers is to deliver
a platform that is not just about network ser-
vices but also about compute and data services
combined with the network, what are the oppor-
tunities? The objective is to provide application
developers with the best prerequisites, enabling
them to deliver the best end-user experience to
their customers – both application developers
and the mobile carriers’ customers. There is an
opportunity is to move compute into the network.
The challenge is how to do this considering the
fact that up until now, mobile carriers have been
very network service-centric, not compute-centric.
This is why Ericsson has an ongoing dialogue
with cloud computing experts like Joyent. It is
advisable that all mobile carriers do the same, or
contact Ericsson and Joyent to find out what we
have already learned...
WINNING THE GAME 21
23. control the
performance
The opportunity is to take control of the digital logistics supply chain –
horizontally. Today, very large companies are doing this through vertical
integration. It is expensive, does not scale, time to market is slow, and it
cannot leverage the unique assets that are intrinsic to the private mobile
networks that are enabling the delivery.
The infrastructure platform enables the mobile carrier to control a digital
supply chain. The three important perspectives of this platform are:
Performance and Scale – to keep optimal growth
and service performance costs in line with demand.
Security and Integrity – preventing corruption
(security) and detecting corruption (integrity).
Transparency – real-time answers to questions such as
Why is my application slow, Why is my application down,
or When is it coming back?
When delivery is reliable or even guaranteed, this enables new
potential business models for carriers, such as indemnification.
All businesses today are being compelled to embed both network and
compute inside their core business operations but how do they know
if this is working; who “has their back” if something goes wrong.
If we can begin to answer those questions, we will have the opportunity
to become a preferred business partner to that company.
WINNING THE GAME 23
24. analogous
to shipping
“McLean’s true innovation was to un-
derstand that the core business of the
shipping industry was not operating
ships but delivering cargo and doing
so with the best performance possible.”
WINNING THE GAME 24
26. The digital supply chain business. Infrastructure as a platform; are
there parallels we can draw from other industries? The physical
shipping industry is a good analogy and the digital networks overlay
the exact same trade routes as those used in the Silk Road trading
days. If ports are data centers, networks are shipping routes, and
applications are the packages being transported, then we as a digi-
tal industry are using the same methods as before the introduction
of the shipping container in 1954: best effort, expensive, inefficient
or unreliable.
The shipping container enabled the global economy in the physical
world. Building the same operational model to ship applications in
the digital world will create the same economic transformation.
We ship applications today but without any intelligence. Include
intelligence!!
analogous
to shipping
WINNING THE GAME 26
27. “We’re proud to be able to connect Maersk
Line’s fleet with our technology. We believe in a
Networked Society where connectivity will only
be the starting point for new ways of innovating,
collaborating and socializing. The result will be
automated and simplified processes, higher pro-
ductivity, real-time information allowing quicker,
more informed decision making and problem
solving,” said Hans Vestberg. [ref]
Nature,
machine,
people
WINNING THE GAME 27
29. Nature,
machine,
people
When compute moves into the network, data becomes
resident there too. And when the data becomes resident
in the network, then the network can control access to the
data for the benefit of its users, for the benefit of the net-
work and for the benefit of the data’s’ owners. Facebook
has disrupted Google’s ability crawl information since the
data is hidden behind Facebook’s proprietary interface.
Data in the mobile network can maintain open interfaces
but the owners of such data can sleep at night knowing:
Where the data is stored
Its legal compliance
Its visibility
Its regulatory trust
Data is valuable
Use of data is priceless…
WINNING THE GAME 29
32. THE THREE
THINGS TO
REMEMBER
Apps + Data
Apps are the unit of disruption
and they are merely lenses into
people’s data on the network.1
Guaranteed End-to-End Delivery
Across networks, compute and data combined.This changes why we build networks,
our desired operational model and our potential for new products, new business
models and new revenue streams.3
Compute + Network
We need a truly holistic service
delivery platform that is sitting
there saying let’s run apps well.2
WINNING THE GAME 32
33. winning
the game
It is a paradigm shift,
Your mobile network is not access,
it is distributed compute.
To continue the discussion...
Contact Ericsson
Contact Joyent
Follow us on Twitter:
@geoffworth
@jasonh
WINNING THE GAME 33
34. The next paper in this series will focus on people and businesses that are embracing
the fantastic and are already preparing, planning and adapting to the paradigm shift
ahead. We would therefore love to hear your thoughts on these subjects and descrip-
tions of real case stories about companies that are leading the charge into the era of
the Networked Society.
Please send your feedback, thoughts and ideas to geoff.hollingworth@ericsson.com
for a chance to be featured in the next paper in this series.
What’s
Next
WINNING THE GAME 34