When I first learned of the word FinTech, I thought, “Oh! A group noun for digital banking, finance, insurance, and crypto currencies. A handy moniker for a collection of related services, and at least it avoids using the dumbass term digital.” That handle has stuck and driven broad recognition of the category for investors, press, analysts, and related industries. That’s the power of a good handle. And why we’re searching for a better handle for Programmable Telecoms. See the State of the Union (Programmable Telecoms) Address for definitions and some conservative market sizing.
Programmable Telecoms is not a good handle. It’s technically correct. Works for the choir, those who self-identify with the term. But a handle needs much broader appeal and Programmable Telecoms has several shortcomings.
- It uses the T-word, Telecoms. I’ve pointed out for years Telecoms and Telco are different. Unfortunately, they sound similar, so most assume they must be alike. Karel (Voxist) pointed out the category he positions his start-up in is AI, it’s your intelligent assistant. If he used the Telecom category no one would give him the time of day.
- Some use the word communications to avoid the T-word. Communications is what PR people do, check Google. Worse still, some use Cloud Communications, the hosted VoIP crowd realized most people couldn’t tell the difference between hosted and cloud VoIP / PBX services. So it was a great way to spin a tired old category. Cloud-washing has been around the over a decade. Today cloud has reach a point of commoditization with Google, Amazon and Microsoft being the main flavors to choose until you get big enough that the economics make sense to migrate workloads in some regions onto your own infrastructure.
- Programmable sounds like Programming which scares people. Reminding them of those unintelligible University lectures filled with CompScis (pronounced compski – Computer Science students), think poor fashion sense and even poorer personal hygiene 😉
So we’re off to a looser with mass market appeal for Programmable Telecoms. Hence the search for a mass-market handle. We had a great drains-up review at the end of TADSummit, which you can see here. I summarize some of the points in the discussion here to save you reviewing the 50 min video.
Points raised in the drains-up review.
Adam (BT) succinctly explained the category is voice / messaging / video / conversations; the challenge is they are seen as being provided for free by web companies. He suggested relationship technology, RelTech. And recommended moving from technical explanations to the outcome side of discussion. Investors must understand how the technology builds trust and valued outcomes and how that translates to $$$.
Programmable telecoms also impacts the network, it’s all becoming software. Enabling enterprises to become xVNOs and in some locations even network operators (MONeH). The network is now a service, like voice, messaging, and video. The data contained in those networks can be used not just for operational improvement, but customer security and improving experiences.
ConversationTech (a handle we were kicking around before TADSummit) is already taken by a group known as ConvComm (Conversational Commerce – e.g. Amazon Alexa). This handle was seen as too narrow to limit the category to conversations, which people assume means voice.
TAD (Telecom App Development) is too developer focused. It made sense in 2013, but 6 years later it is dated as fashion moves away from hackathons and developers.
Dean (Disruptive Analysis) suggested open telecoms or democratized telecoms.
Luis (ottspott) pointed out we’ve removed telecom complexity. We’ve democratized telecoms and industrialized programmable telecoms. It’s now mainstream. The focus is now on sales improvement and customer experience improvement. The focus is on improving relationships, customer experiences, and employee performance.
Rob (ipcortex) – democratization is done, programmable telecoms is now a central thread (an enabler), adding value and enhancing communications.
Paul (webio) – AI drives improvement in experiences. Wideband voice improves trust / intimacy. We must focus on experiences that make a quantifiable difference. FinTech makes it easy to see the money. Telecoms is more difficult, we need to point to what the difference in experience means in $$.
Bernando Flood raised an important point on the category needs to be clear from a EBITDA / multiplier perspective.
Telcos generally have low growth with EBITDA in the 30-35% range, with an EV/EBITDA (multiplier) of 2-5. Emerging markets are trending down to these numbers. The word Telecoms presupposed this financial performance in the mind of investors. Hence Karel’s category positioning in AI not Telecoms.
The new cadre of web-centric telecom / enterprise telecoms players (e.g. Twilio / RingCentral) generally have 50%+ revenue growth and are positioned as either disrupting the $33B UC (Unified Communications) market, or creating a new category in CPaaS of $8B + substituting SIP trunking, CCaaS, legacy messaging revenues, MFA (Multi-Factor Authentication) security, etc. EV/EBITDA is difficult to calculate as they are still heavily investing, investors are anticipating EV/EBITDA in the range of enterprise / web services companies (15-30 range).
Another issue with the programmable telecoms category is what revenue is being substituted (or using a more fashionable term: disrupted): is the the total $2.2T of telecom, $1.4T in telecom services, or $250B enterprise telecom services. Regardless these are BIG numbers. However, the shift away from usage based voice and messaging, has been absorbed into subscription fees across both consumer and business in some countries. So we need to be clearer on what revenue is specifically being targeted by programmable telecoms.
Howard (Joyent) raised the point that some investors consider the category commoditized by Twilio, “Twilio does that.” Clearly the view of the room is it is not the case, but given Howard recently sold his company and was dealing with Private Equity folks, this point must be addressed. Also there is the longer term strategic issue, will Amazon or Google commoditize this segment? We’re hearing rumors of Amazon becoming an MVNO, Google already is.
Jerome (Wazo) highlighted we need to talk $$$ to make this segment more attractive. The market size of $100B I showed in the State of the Union Address he considered conservative. Rather, what is at stake is the $1.4T communications market. This segment is transforming how companies interact. We’re providing tools to enable better conversations / communications / engagement.
Jerome’s last point got me thinking on a possible-long form category definition: web-centric multi-network engagement technology. The issue with this definition is an assumption that web-centric means WebRTC exclusively, which is not the case. BUT the bias is towards web-centric services model over multiple networks (voice, messaging, video across IP (open and closed) and the PSTN, private networks, virtual networks, and the data contained in them) to improve engagement with customers, employees and things. But how do we find a handle for that!
All companies in this space are struggling with defining themselves. Review their websites, I’m not going to pick on any one company. But you see a common thread, they end up with simply giving a long list of what they offer including: voice, video, chat, IM, SMS, Cloud Contact Centre, Compliant Recording, Encryption & Archiving, WebRTC Meeting & Collab, CRM & IT System Integration, Speech Analytics, Reporting & Statistics, Global Carrier & Local Numbers, …. Technically they are correct, it’s what they do, but it’s not a handle.
The search for a better handle for Programmable Telecoms
Let’s get our thinking hats on. This weblog is just the beginning of the search for a better handle for Programmable Telecoms. What do you think? Add your comments, contact me, I’m talking with people across industries. We’re going boldly where no one has gone before, to find a better handle for programmable telecoms 😉