The Recombinant Telephony Ecosystem: Voice Mashups and ...

The Recombinant Telephony Ecosystem: Voice Mashups and the Telco API The idea behind Recombinant Telephony is relatively simple: splice together the basic materials of today’s communication technologies with new software elements to introduce new services that support customer requirements. A fast-growing community of technology providers, application developers and service delivery specialists are helping fuel spending on software, services and “appliances” that fulfill on the Internet’s promise to support a better user experience for commerce, communication and collaboration. November 2009 Dan Miller Sr. Analyst With Thomas Howe Thomas Howe Associates Opus Research, Inc. 300 Brannan St., Suite 305 San Francisco, CA 94107 For sales inquires please e-mail [email protected] or call +1(415)904-7666 This report shall be used solely for internal information purposes. Reproduction of this report without prior written permission is forbidden. Access to this report is limited to the license terms agreed to originally and any changes must be agreed upon in writing. The information contained herein has been obtained from sources believe to be reliable. However, Opus Research, Inc. accepts no responsibility whatsoever for the content or legality of the report. Opus Research, Inc. disclaims all warranties as to the accuracy, completeness or adequacy of such information. Further, Opus Research, Inc. shall have no liability for errors, omissions or inadequacies in the information contained herein or interpretations thereof. The opinions expressed herein may not necessarily coincide with the opinions and viewpoints of Opus Research, Inc. and are subject to change without notice.

Published November 2009 © Opus Research, Inc. All rights reserved.

Foundations of Recombinant Telephony Page ii

© 2009 Opus Research, Inc.

Key Findings: The concept of “Recombinant Telephony” has captured the imagination of a fast-growing community of technology providers, application developers and service delivery specialists. With the global economy poised to come out of its deep freeze, Opus Research expects to see an uptick in spending on software, services and “appliances” that fulfill on the Internet’s promise to support a better user experience for commerce, communications and collaboration:

• The economic downturn fosters disruption – Enterprises, along with their customers and trading partners have to “do more with less” as they design future communications and computing infrastructures.

• Amidst the disruption are the roots of a $44 billion opportunity (by 2014) – There are several areas of opportunity for application developers and integrators that extend the power of the Internet to support communications, collaboration and commerce.

• Solutions result from re-use and re-combination – In this economy, frugality is the mother of invention; companies extend the life of existing information and computing assets by transforming them into “services” offered over the Web.

• Opportunities abound for application developers – A new generation of highly creative application developers use high-level programming languages and visual tools to build “mashups” that include voice, email, instant messaging and Web-based interaction as service delivery mechanisms across channels and modalities.

• A new take on the ecosystem is provided – In the new value chain, Amazon, Google, Microsoft, Salesforce and even Facebook are providers of “cloud-based resources” with potential to compete or partner with incumbent communications carriers.

• Commoditization is the biggest challenge – Users expect services to be both free and abundant; the result is accelerated commoditization of the service delivery network.

• Providing higher quality user experience is key to proving value – Revenues and profits will result from proving value to end-users, retaining them and delivering services that they will gladly pay for.

• Unless the end users are winners, all ecosystem members will be losers – The network is fragile right now. Significant integration must take place in order to provide the services that “delight” end-users and customers.

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• Table of Contents

Key Findings: ..................................................................................... ii Voice Mashups: Product of Technology and Necessity ...............................1

Unlocking a $44 Billion Service Delivery Opportunity .............................1 VoIP Adoption and Adaption Drives Growth..........................................2 Standards and API’s – Key Enablers ...................................................3 UC versus CEBP: A Very Useful Distinction...........................................4

Recombinant Players ...........................................................................5 The Telco API “Cloud” ......................................................................5 Redefining the Telco API Value Chain..................................................6 The Evolution of the Telco.................................................................7

The Players: Roles and Responsibilities...................................................9 A Deeper Dive on Infrastructure Providers...........................................9 Telephone Carriers ........................................................................ 10 System Integrators........................................................................ 11 Management Consulting ................................................................. 12 Application Developers ................................................................... 12 The Important Role(s) of Enterprise Personnel ................................... 12

Changes in the Value Chain ................................................................ 13 Challenges For Carriers .................................................................. 13 Commoditization is the Elephant in the Room..................................... 14 Providing Better User Experience is the Response ............................... 14 Developers Must Learn Functional Requirements ................................ 15 Integrators Also Have Identity Issues ............................................... 15 Solution Vendors Risk Getting “Unhooked” ........................................ 16

The Shape of Things to Come ............................................................. 16

Table of Figures

Figure 1: The Recombinant Telephony Opportunity...................................2 Figure 2: Into the Cloud.......................................................................4 Figure 3: Facebook API Illustrated .........................................................8

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Voice Mashups: Product of Technology and Necessity After almost a decade of toying with delivery of Web pages that include dynamic content, graphics and video, the community of Web application developers has rediscovered that “voice” deserves more attention as a component of a satisfactory (dare we say “delightful”) user experience. Thus, as we approach the end of the first decade in this new millennium, we’re seeing more Web sites that feature IM-like clients that can be used to originate a phone call, transcribe voice messages or play-back a spoken alert of voice message. Developers are not the only ones building new multi-modal solutions. All phone users who download applets, change “status messages,” enter preferences or, in any way, personalize new devices or services are engaged in creating their own “mashups.” They play the role of God in the age of Recombinant Telephony – creating new life forms out of existing, fundamental components. Unlocking a $44 Billion Service Delivery Opportunity There’s a good deal of irony to the idea that network operators (especially wireless carriers) have rediscovered voice as a key element to their data services. In the mid-1990s as “cellular” gave way to “personal communications services” (PCS) and the Internet moved up the stack to become the Web, telephone carriers around the world built their top line to approach $1.5 trillion. Meanwhile, worldwide spending on telecom equipment (including carrier and enterprise spending) was roughly $350 million. Within that $350 billion, spending of Recombinant Telephony solutions (as depicted in Figure 1 on the following page) is an amalgam of enterprise expenditures on “unified communications” (UC) software and infrastructure as well as the tools and platforms that make “communications-enabled business processes” (CEBP) a reality. Those are the major elements of the “Enterprise UC” category depicted in Figure 1. Globally, spending on this category failed to top $3 billion in 2008, but, based on a consensus of analysts, is vectoring to reach $19 billion by 2014. Meanwhile, something on the order of 10% of communications service provider spending for software, systems and integration services will support the features and functions that support Web services, “cloud computing” and other foundational elements of collaboration. Opus Research sees this category of spending starting at about $7 billion (out of something on the order of $70 billion) in global spending in 2008. In five years, it will approach $9 billion.



Figure 1: The Recombinant Telephony Opportunity (Global Spending - $Billion)

Source: Opus Research (2009) Spending on “end-point” devices and appliances is problematic. As Recombinant Telephony succeeds, phones themselves are becoming software “clients” that can initiate voice-based phone calls. Their adoption will cause today’s handsets and desk sets to be replaced by “client software” on PCs. The same is true for wireless handsets as smartphones proliferate. We see spending on such devices declining over time, from roughly $7 billion in 2008 to $6.5 billion in 2014. Yet, one of the most interesting numbers from the point of view of integrators and application developers is the spending by both enterprises and service providers on integration and services. In our model, we see it as a function of spending on other infrastructure elements. But it is this spending that transforms software and infrastructure into the engines for new applications and services in private and public “clouds.” In our model, spending rises from about $3.5 billion in 2008 to about $10 billion in 2014. VoIP Adoption and Adaption Drives Growth The growth of VoIP and IP-based telephony in general, has been a major catalyst. IP-based “clouds” already abound and continue to absorb traditional phone traffic as well as back-end business processes that govern call-routing, billing, record-keeping and user data. All become fair game in the process of constant innovation that produces new phone-based applications, services and diversions. The growth of IP along with the adoption and development of well-understood standards and application programming interfaces for call processing, voice processing and business process management has



transformed stagnant, traditional telephony infrastructure into a dynamic environment for development and deployment of new services. Correspondingly, in the spirit of Web “mashups,” a growing set of end-users are able to tailor their phone-based experience by making entries into simple forms or simply setting up their phones. This is the nature of Recombinant Telephony: Users define their preferences, developers build new applications, and both play an active role in defining new phone-based experiences. Standards and API’s – Key Enablers Broadly speaking, the foundation of Recombinant Telephony consists of mature (and maturing standards) and a well-defined set of routines, data structures, object classes and protocols that reside “in the telephony cloud” as libraries or services that support application development. Together, they comprise the Telco API. The standards in play include HTML and its extensions, as well as XML, with extensions like VoiceXML, ccXML and XMPP. They are augmented by libraries of code, tools and protocols that enable a growing community of applications developers, integrators and network operators to combine existing telecom and computer features and functions to better fulfill on the principles and promise of Web 2.0, including collaboration, unified communications, personalization, and general user empowerment. The development of the Telco API coincides with major change in both the communications and computing infrastructures. For the former, a move from the old-guard public switched telephone network (PSTN) onto the broadband Internet is accelerating. Within business enterprises, it’s the IP-based backbone or “enterprise services bus” that provides the big, fat pipe for voice, data, and video simultaneously and cries out for rules and routines to manage business processes. For the latter, the unifying principle has been the adoption of “service-oriented architectures” (SOAs) as an overlay to existing client/server computing environments to provide for the orderly development, deployment and introduction of new features and services. A recent industry assessment by Infonetics calculated that VoIP services brought in $21 billion for service providers in just the first half of 2009. Given its growth trajectory, annual revenues will exceed $50 billion during the calendar year. According to their report, the number of residential/SOHO (Small Office/Home Office) VoIP subscribers is forecast to top 225 million by 2013. That’s nearly one quarter of the number of wireless subscribers in 2009.



Figure 2: Into the Cloud

Nearly every communications and computing infrastructure provider has given a name to the software suites, hardware platforms or services that fulfill on the promise of broadband IP-based communications and computing. Cisco rebranded its entire line of switches, routers and application servers “Unified Communications;” IBM’s Lotus brand has largely been supplanted by UC-squared (referring to unified communications and collaboration); and Microsoft’s now places a broad line of office productivity “servers” including Office Communications Server and Exchange Server under its “Unified Communications” umbrella. UC versus CEBP: A Very Useful Distinction While UC has become a powerful marketing tool for its proponents, its vendor focus dampens the impact of an “open” ecosystem built around the Telco API and Recombinant Telephony. Instead of unifying communications and spicing it with collaboration, the Recombinant approach is decidedly developer- and integrator-driven. It creates areas of opportunity for third parties to augment an installed base of network elements and computing components with resources that reside in a “services cloud” to deliver valuable new services to both enterprises and end-users. In addition, as practice areas like communications-enabled business processes (CEBP) have shown, the majority of design wins for Recombinant Telephony are outside of traditional communications vendor offerings. Thus, the existing UC ecosystem focuses on a smaller set of applications and solutions than the ecosystem serving the Telco API market.



CEBP refers to the techniques and approaches of enhancing business processes and existing business applications with communications technology. Unlike UC, which focuses on improving the communications experience for the users, CEBP focuses on transforming how businesses operate by extending applications using communications to stakeholders such as mobile workers, customers and partners. The main focus of UC offerings includes extensions and improvements of voicemail, PBXs, presence and chat applications. The main focus of CEBP offerings includes extensions to enterprise software offerings like CRM, logistics, healthcare and debt collection. In short, UC applications are, at base, communications applications; whereas CEBP extends other applications that otherwise would not communicate. This accounts for the much larger reach of CEBP possibilities, but also for the difficulties surrounding measuring and predicting future ecosystems. For illustration, a classic CEBP example is the extension of logistics applications using voice. The typical logistics framework, used by every large company to manage extended supply chains, runs on a middleware offering from companies such as IBM or Oracle. Access to these applications is strictly limited to employees, and typically through a web page, although clients exist for popular smartphones. Given these security concerns, and access issues, stakeholders such as supply partners or end customers are locked out of the application, effectively eliminating whatever incremental benefits they might enjoy. In some cases, significant efficiencies can be found by granting them access, but because of capital budgets, or proprietary vendor mechanisms, these efficiencies are lost. However, using Telco APIs and CEBP, third-party developers or IT staff can extend solutions that might notify end-customers of delivery times, or allow supply partners to predict inventory needs, typically with open approaches and pay-as-you-go pricing.

Recombinant Players The API resides near the top and provides a platform and point of ingress that enables application developers, as one set of Recombinant Telephony players, to assemble services from a library of time-tested instructions and routines that mask many of the complexities in the lower layers and enable application developers to concentrate on providing the optimal user experience. In the ISO model, the physical network is the foundation over which electrical impulses are carried. Value (or at least functionality) was added at each layer as software and protocols promoted more connections, faster connections, more robust interconnection, and, ultimately, applications to a broad set of terminals. The Telco API “Cloud” The Telco API Ecosystem is built around “The Cloud.” The cumulonimbus image owes its genesis to the way that the lower layers of the ISO model have been rendered in schematic drawings from time immemorial. They are



puffy clouds whose soft edges indicate “openness” and various lines or lightening bolts indicate “connections,” “lines,” “channels” or “links” to interface devices, terminals, displays and, most importantly, a wide range of wireless devices from handsets through smartphones to netbooks, laptops, ebook readers and tablets. In the past year, coinciding with the rise of “cloud computing,” the software and switches that accommodated low-level transport and routing functions, have been inextricably integrated with higher level session management, call flow, workflow, media processing and application processing. That has made this a defining moment for the Telco API ecosystem and its accompanying value chain. As it was in the days of “value added networks” and timesharing systems, moving into the cloud carried with it a price sheet based on a network unit of measure that is only loosely tied to its economic value. Networks like to charge by things that are metered: per-packet, per-minute, per-gigabyte or GigaFlop. Thus network services fairly quickly turn into commodities. On the positive side, it introduces pricing certainty and a base of capabilities to a growing community of application developers, system integrators and enterprise personnel responsible for delivering reliable services (or results) to their end users. On the negative side, the process of moving services and resources into the cloud is the very definition of commoditization. Service providers are victims of constant pressure to keep prices low while, at the same time, they have to promise high levels of uptime (5 nines, right?) and incorporate the latest technologies, features and functions. Capacity management and quality control is a never-ending pursuit. Redefining the Telco API Value Chain When the telephony world entered the 21st Century, great changes were anticipated, but the range of APIs was still rather limited and centered around very mature network elements, like PBXs and IVRs. On its Web site, telco cloud operator Voxeo lists the old guard Telco APIs as:

• Dialogic R4 and GlobalCall - two popular, C-centric APIs that work with Dialogic/Intel telephony cards.

• TAPI and JTAPI - two abstract telephony APIs for Windows and Java, currently supported by around 20% of the telephony market.

• ECTF S.100 - a complex but comprehensive telephony API supported by around 10% of the telephony market.

• ActiveX Controls - such as Visual Voice and VBVoice that simplify Dialogic and TAPI API development complexity.

• Proprietary IVR languages - each unique to the IVR platform they run on.



Voxeo initially turned to XML-based standards, especially VoiceXML (for managing voice processing) and ccXML (for call control), to establish a programming environment that benefited from standardization, meaning that it had the potential to appeal to a broader community of application developers. Applications would port better from one standard-conformant environment to another and could be designed, developed and deployed quickly using Eclipse-based toolkits and libraries of reusable code. Today, Voxeo continues to run its standards-based environment for hosted voice applications, but it has added support for two more approaches to phone-based service delivery. “Tropo” is Voxeo’s service cloud, designed to support API-based telephony and takes a Web Services approach to application generation. It reflects the emerging Telco API ecosystem which creates opportunities for a new generation of multi-modal application developers with proficiency in high-level scripting languages like Groovy, JavaScript, Ruby or Python to ply their wares and create multimedia and multi-modal mashups. The Evolution of the Telco In the old days of switched telephony the API was pretty simple. Phone functions could be supported by a limited number of verbs and descriptions. The network detected when a phone went off hook (ask an engineer about the difference between a “hook start,” “ground start” or “wink start”). Then it proceeded to collect dialed digits (which amounted to routing instructions) and monitor the “session” to detect when the receiving party hung up, and thus tore down the circuit. Innovation came in the form of novel billing arrangements. Automating the process of handling “toll-free” numbers, collect calls and the like were a triumph of the “advanced intelligent network” and its accompanying common channel signaling systems, culminating in Signaling System 7 (SS7) which, in many ways was the precursor to SIP. Things like Caller ID, call forwarding, call waiting and all those “advanced features” were conceived during this period. The Telco API supported dialtone, name look up, call completion, cutting billing records, and not much else. In no way could such a system, even given the billions of dollars in investment, support today’s range of communications and computing functions which support location awareness, social networking, user profiles, search histories, and the like. Facebook, for instance, is one of the largest social networks on the planet. It supports peer-to-peer communications across multiple modalities, in near real-time. It is very much a next-gen telco and even has third-party voice service providers, like Yellix, which merge (recombine) elements of the a Facebook member’s status and user profile to deliver like a “caller ID” indicator in advance of a mobile phone call. Allowing wireless subscribers to decide how to treat each incoming call based on a significant amount of caller-supplied metadata.



To build such a service, Yellix relied on Facebook Connect, the social media giant’s version of an API. Figure 3: Facebook API Illustrated

One of the things we learned in the past five years is that the Telco API need not reside in the so-called ‘public cloud’, owned and operated by incumbent telephone companies. When Microsoft launched the rudiments of its Unified Communications strategy in 2004 with the first versions of the Office Communicator clients linked to Office Communications Server inside enterprise data centers, it fueled a good deal of speculation about Microsoft becoming the prototype for the telephone carriers of the future. In the world of SIP and Voice over IP, the Communicator client cold be used to initiate chats, transform chats into voice conversations, invite multiple employees to join a de facto conference and eventually add screen sharing and ultimately video. Not only would it render existing switches (PBXs and ACDs) obsolete, it would introduce capabilities “for free” that were very expensive features or functions on legacy systems. By now it is a cliché to observe that application software on generic servers “in the cloud” have replaced those legacy pieces of hardware in a process called “virtualization.” In addition to switches and conference bridges, media processors – especially voicemail, interactive voice response and auto-attendant systems – have been virtualized. Once they are rendered as software, they can be reconfigured and combined with new software elements, components and features in ways that support new customer requirements. That’s why the concept of Recombinant Telephony is so powerful. Imaginative developers are in effect splicing the basic materials from a multitude of technologies to introduce new services. An excellent example is the launching of IM “bots” that use logic and scripts that is identical to that which supports a “natural language” IVR system (can use a Voxeo/Adhearsion/IMified example).



The Players: Roles and Responsibilities The Telco API ecosystem encompasses the collection of usual suspects in the world of Internet-based communications. The quick overview includes: Infrastructure Providers - whose software and gear resides in central offices, switch closets, cell towers and the like. Leaders include Global IP Solutions, Dialogic, Digium/Asterisk, Cisco, ALU, Avaya, Microsoft, IBM and even Oracle. Innovators in terms of introducing multimodal, e-commerce functions “in the cloud” include Amazon, eBay, Facebook, Google, Salesforce.com, Voxeo. Telephone Carriers - AT&T, BT, Orange, Skype, Verizon Business, EchoPass, Level3 System Integrators - The old-guard providers of “Big Code” and “Big Integration” include IBM Global Services, Accenture, Cap Gemini, Dimension Data, Logica and many others. However, the advent of cloud computing and the Telco API has transformed integration into mashup efforts, making it into something of a cottage industry with thousands of providers. Application developers and solutions providers – This category can span classic CRM in the cloud companies but also add some cool mashup providers like Phweet, RightNow, NewVoiceMedia, Jaduka, and RebelVox. A subcategory of the integrator group includes enterprise personnel across the IT department, line of business staff and workgroups in large companies. In small- and medium-sized enterprises, it is not unusual to have just one employee or even the owner perform the integration tasks with the help of tools and third-party platforms. A Deeper Dive on Infrastructure Providers In this document, “infrastructure providers” reside for the most part inside the cloud or at the lower layers of the ISO model. That said, a fundamental transition is taking place, best exemplified by the journey of Dialogic from dominant provider of board-level digital signal processors to a self-described “catalyst for innovation”— based on a product line that spans board-level DSP, media servers and host media processing (HMP). Contrast Dialogic (which through acquisition has integrated the telephony and media processing product lines of Intel, Brooktrout, Eicon, Excel Switching, NMS, EAS and others) with competitor Digium, whose technical staff originated the Asterisk “open source PBX.” Both support the ecosystem’s inexorable move to broadband speeds, multiple media (culminating in full-motion video) and fixed/mobile convergence. The three goals of speed, multiple media and multiple modes are supported by both large and small ecosystem members. The big boys, exemplified by



Cisco, Huawei, Broadsoft and others, provide rock-solid, secure, high-speed IP-based transport and routing resources. Recent activities, however, show that they are not content at the lower levels of the value chain. Cisco, for one, has moved “up the stack” to offer out-of-the-box support of communications-based applications. For example, Cisco’s acquisition of Geotel, and its ICM product line, pulled the company into the formal contact center applications market several years ago. More recently, the acquisition of WebEx added desktop-based conferencing and, through internal development, Cisco was able to leverage further into video-based conferencing and ancillary services that it will organize into a line of products and services that support collaboration. Likewise, Broadsoft has over the years added message management and ultimately unified communications. Opportunities are also created as the IP-telephony eradicates the bright line between ‘public’ networks and ‘enterprise’ networks. This is only an issue in the U.S. where the separation of AT&T’s manufacturing wings into Lucent (carrier) and Avaya (enterprise) created an increasingly artificial schism. Telephone Carriers Incumbent telecommunications carriers have performed major roles in the value chain over the years. At the lower layers, they provided the most reliable platforms for data transport and sessions management. They backup their network with the operations support systems (OSS) that promised high levels and reliability. Most importantly, they invested in billing support systems (BSS) that are the rudiments of both customer relationship management and revenue generation. Still, the public “free” Internet is something that they did not necessarily see coming. As well, the carriers couldn’t anticipate the near geometric growth in wireless subscribers as wireless handsets and other devices become the platforms for personal communications which has contributed to an accelerating decline in the number of subscribers to fixed-line service (primarily residential). The migration of voice traffic to the Internet is the other radical shift that transpired during our study period. Skype and Vonage are the first and most recognizable providers of IP-telephony services, but the community of IP-based telecommunications carriers has grown as software platform providers like Digium/Asterisk, Broadsoft and Sonus act as IP-telephony servers and platforms. Incumbent carriers are engaged in a constant battle against operating “fat, dumb pipes” for commodity transport services. They regard BSS and OSS as their primary assets and fundamental to maintaining the “billing relationship” with hundreds of millions of customers. Insurgent carriers, likewise, fight a constant battle against commoditization. However, their countermeasures largely involve moving “up the value chain” to add new applications – either homegrown or through promoting third-party activity, to attract new customers and retain old ones.



Of course, telephone carriers are the main source of Telecom APIs, the fundamental channel by which carrier functionality and data is monetized. These APIs provide the front door for developers and partners to integrate applications and services based on a particular carrier. First and foremost, the existence of the API enables low-friction relationships between innovators and carriers. The functionality and data has always been available inside the carrier walls, but business cases and partnerships had to be of such an extent to justify the efforts that smaller projects died before they were born. The telecom APIs also provide a useful mechanism for packaging, charging and selling the service in a way closely related to the carrier’s existing business: instead of selling minutes, they can sell API calls. Finally, the APIs provide developers currently outside the telephone ecosystem a familiar and easy to use method for integration. These APIs are consumed by a number of entities in the ecosystem. Existing carrier customers can take these APIs and integrate them into existing enterprise software. Over the top service providers use APIs from carriers to provide basic connection support, messaging, etc, to their end customers. CEBP firms use APIs to enhance business processes using communications. System Integrators Development and evolution at the lower layers has been piecemeal and almost chaotic. Yet most customers for phone services – both fixed line and wireless – might consider this an era of high levels of innovation. System integrators and third-party application developers can take a large amount of credit for cobbling together solutions that leverage assets in the existing installed base while largely papering over the gaps that result from differences in vendor implementations, software versions and variations in standards. The largest of the system integrators – exemplified by IBM Global Services, Accenture, Cap Gemini, Dimension Data, Logica and others –customarily work on a time-and-materials basis to keep networks operating and bring new applications to market. The era of the Telco API has brought with it a new category of integrators. Instead of relying on highly-paid consultants that charge hefty sums for time-and-material based engagements, integration (as well as application and solution development) is carried out by imaginative developers in labs or “sandboxes.” They increasingly use higher-level programming languages like Ruby or Groovy to create or assemble new applications and workflows quickly. Adherence to a RESTful architecture (an abbreviation for “REpresentational State Transfer) is often a pre-requesite. It enables developers from a number of disciplines to use tools that strongly resemble the flowchart generator (Visio) to build full-fledged applications and workflows. The tools generate the programs, scripts and code required to carry out transactions, display information and execute instructions. Voxeo and peer “cloud communications” providers play a dual role of hosting and integrating. They are direct beneficiary of the new developmental movement. The company has already cultivated a community of some 33,000 thousand



people who have downloaded or used its free tools to build trial applications. With the introduction of Tropo, Voxeo has heightened its appeal, and will be fostering the growth of the API-oriented members of this august community. Management Consulting As a special case of system integrators, Recombinant Telephony provides management consultants two new areas of expertise. The first, called communications-enabled business processes (CEBP) refers to efforts to optimize performance using communications technology (as described above). This presents what might be a golden opportunity for these sorts of businesses: pricing on CEBP work tends to be value-based, not time-and-materials based. The second attempts to increase management visibility by deriving operational metrics through communications techniques. A great example of this comes from advertising: by applying unique phone numbers to an ad campaign, one each for every mode (radio, print, TV) or geographic location, effectiveness can be measured by relative usage of each channel. Application Developers The era of Recombinant Telephony should be a windfall for application developers. There has never before been so rich a mix of toolkits, APIs, real-time data, metadata and other resources “in the cloud” from which new applications can be constructed. What’s especially noteworthy is the attraction of “non-telco” developers into the mix of application suppliers. In the monolithic days, telco application developers were a special breed with some fairly arcane areas of specialization. Mostly they specialized in call routing and scripting sessions that defined the workflow between IVRs and live agents. The growth of the Web and the extension of Web-based logic to mobile devices has led to dramatic changes. Phone-oriented applications are more like Web “mashups” and, in that respect, all developers are integrating workflows and “business processes” from back-end systems that have been largely Web-ified to support improving levels of self-service. The Important Role(s) of Enterprise Personnel The telecommunications a computing fabric of large enterprises has long been the venue of the IT department. Both voice processing, call processing and business application software all tend to run on generic servers that under the auspices of IT. The ultimate “win/win” outcome – which is growing more and more common – is when end-users act as their own integrators by creating their own mashups. Adopting the so-called CRUD model (Create, Read, Update, Delete), end-users build their own portals out of objects, information and programs that they discover on the Web and import into their personalized home page or mobile phone. These end-users can be any frequent user of Web sites, but in enterprise settings, they are “functional” rather than IT executives who may start by building the page that greets them when they turn on their PC, Blackberry or smartphone each morning and then grow comfortable using drag-and-drop conventions to add new components to their personal home screen.



As an interesting consequence of Recombinant Telephony, developers outside of the IT department have opportunities to deploy effective applications. Most IT departments have long lists of to-dos from the respective lines of business. Unfortunately for the managers of a particular line of business, the prioritization of their particular project may not match the priorities of the IT manager. In this situation, mashups are the perfect solution – they are relatively inexpensive to implement and do not require the participation of the IT department. To date, companies like IfByPhone have fueled their growth not from the IT department, but from the underserved lines of business.

Changes in the Value Chain The move to cloud computing, mashups and the Telco API has created revenue opportunities up and down the value chain. It has coincided with dramatic changes in the channel structure for delivering solutions. Apple’s approach to delivering apps to iPhone users, circumnavigating carriers, served as a major disruption. It presented application and solutions developers with a clear channel to mobile subscribers. But the radical change was the use of an existing payment platform, in this case the iTunes “store” as a well-accepted billing service provider and platform for customer relationship. Even though the wealth creation opportunities are large for recombinant telephony, significant challenges exist for each member of the value chain. Challenges For Carriers For carriers, business model and political challenges exist. Providing core network functionality over an API requires business models that are unproven and potentially risky to the integrity of core network functionality. The pursuit of this path will result in the movement of today’s carriers into a position where they are no longer completely in control of a service offering (which should be enough to scare the most experienced line manager in any service provider). Instead of taking responsibility of selecting services based on perceived market opportunities, this is abandoned in favor of a platform approach where external solutions providers and application partners are trusted with identifying and monetizing opportunities. In this role, the carriers must concentrate on providing those tools and functionalities which best support third party developers, a community with which carriers have little connection or affinity. From a political perspective, this may be a Gordian knot from which there is little hope of escape. Imagine the plight of the manager responsible for a line of business in a carrier, trying to provide forward-looking guidance on revenue and traffic without control or history. Given the nature of most



people and organizations, it will take a brave employee to risk their reputation and the bottom line. To exacerbate the problem, external politics may also put a damper on innovation, especially as it relates to services that depend on data collected from users and their behavior. Understanding a person’s location, address book, credit rating and buying behavior are critical and foundational to unlocking huge value. However, persistent and pervasive worries about privacy concerns are not baseless. For as much as application designers and their customers may love an application based on user data, surely some consumer advocate will raise an alarm at potential breaches of privacy. Carriers must be willing to champion the use of user data, and be prepared to deal with the legal and regulatory issues that will inevitably arise. Commoditization is the Elephant in the Room In a movement that might vaguely remind one of the current situation for basic voice services, an API commoditization may occur. Carrier business models have long been dominated by a common business model and go-to-market approach. Carriers invest in large capital expenditures, in both facilities, wiring and termination equipment, which are paid for by downstream consumers of the service. This model depends on certain fundamentals such as rarity of access to networks, the ability to provide functionality to users such as creating communications channels and sending text messages, and taking responsibility for providing the complete application or solution to the end user. In the era of Recombinant Telephony, every one of these major fundamentals is under pressure. The list includes network interfaces that provide the platform for recombinant efforts. You must ask yourself “why would Orange’s click-to-call be particularly advantaged over British Telecom’s?” It is likely that the basic level of telecom API, click-to-call and voice messaging for instance, will become commoditized over time. Providing Better User Experience is the Response A reasonable response to commoditization, in an effort to improve the user experience, will be an effort towards agent-based services such as APIs that take a phone number and a pointer to a calendar, and coordinate scheduling with an arbitrary person. Success with basic APIs will surely encourage development of agent services. Outsized profits may fall on the carrier that pushes forward on agent based APIs, especially if the initial offering of basic APIs meets with a tepid response. Application designers have their own set of challenges. The blessing of API-based development is that it provides a wide range of functionality to designers, in stable, scalable and affordable packaging. This is easily seen when you consider what an designer would have had to do to include text messaging functionality just a few years ago. The advent of API-based development has transformed what would have required SS7 links, packet



data and SMS gateways, a team of high-level technicians and engineers and long-term contracts to a project requiring a credit card, an Internet connection and a day’s worth of coding. Developers Must Learn Functional Requirements All of this goodness has a price, though. The most pernicious problem for designers plagues the legions of traditional communications engineers. Instead of value creation based on enabling communications behavior, they will find the greater value in communication-enabling existing applications. This, in turn, requires communications engineers to work on problems far from their core competency: debt collection, healthcare and financial services, for instance. Designers who are far from the communications community have it no better, as they have the opposite issue: communications-enabling applications still requires some basic understanding of communications techniques and approaches. Even though API-based offerings do third-party developers a great service by hiding complexity, the immense pile of arcane knowledge required for communications work is unlikely to remain completely behind a REST interface. The first time your notification application gets a call from a regulator requesting DNC compliance will be a shock for some. In all aspects, the challenge of Recombinant Telephony is the challenge of thinking differently about how applications are delivered and used; those designers that maximize agility of thought and execution will prevail. Integrators Also Have Identity Issues System integrators, especially those that provide outsourced business process services to others, will face a future where the very name of the industry becomes ironic. In today’s economy, they integrated very little. Instead of providing services that making disparate systems interoperate, a more typical service offering includes the installation and provisioning of equipment of services, troubleshooting and training. In general, the actual heavy lifting of solving business problems has been delegated to vendors, not system integrators. In the future of Recombinant Telephony, system integrators have an enlarged role of creating custom solutions by combining available elements in the enterprise. This is a rather exciting development, as this is the path for much higher levels of profitability and value. However, the staff of a typical system integrator has a different, and probably less technically adept, skill-set than the typical vendor. This change in culture and skill-set will reward those system integrators that follow it, and greatly punish those that don’t.



Solution Vendors Risk Getting “Unhooked” The vendor challenge is quite similar to the carrier’s challenge. Instead of providing complete solutions to providers, they will be required to provide solutions built to integrate and built to listen as much as they talk. A natural tension in design is the between elasticity and plasticity; designs need to be elastic enough to be flexible enough for real-world deployments, and plastic enough to be reliable. Traditionally, vendors err on the side of plasticity, as the bulk of the value is delivered in the product itself, not in the combination of functionality. In the future of mashups and over-the-top solutions, as much value is created between the boxes as the boxes might contain. In addition to the value-packaging problem, the essential nature of what vendors provide is changing. With software-based solutions, fueled by open-source efforts, delivering basic functionality becomes increasingly trivial. Imagine the reaction of a Nortel product manager ten years ago if he could see the monthly download metrics of Asterisk. Instead of concentrating on providing functionality, vendors will increasingly concentrate on collecting data about usage and behavior. This necessitates the establishment of interfaces and relationships with non-traditional partners and technologies. Middleware partnerships were not important to most telephony equipment providers; they may become completely strategic soon.

The Shape of Things to Come So here we are. The proverbial cloud now contains the ability to store immeasurable amounts of data, has the ability to process billions of calls or customer conversations each month and does so at commodity prices. This has created an “innovation layer” atop the traditional ISO model. As the price for resources inside the cloud are driven down, it creates profit opportunities for the businesses that build applications and services that leverage those resources. It has also led to constant refinement and augmentation of the tools, features and functions of the API. That makes this time an era of accelerating development and constantly expanding opportunities. This, in turn, attracts more developers to enter the market just as the economy is picking itself off of the mat.

The Recombinant Telephony Ecosystem: Voice Mashups and ...

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