2001
Will consumers be left to their own devices?
By
Andrew Fisher
The Financial Times,
18 June 2001
Imagine a world where consumers are in the driving seat and companies constantly struggle to keep up with their demands. That is the world of convergence, in which people can communicate in whatever way they want with anyone they want at any time and in any place.
If it sounds too good to be true, it is - at least, for the time being. IT and telecoms experts, after all, have been talking about it for years. But it is now on the horizon and alarm bells are ringing in businesses of all types and sizes.
Already, the Internet has put previously unimaginable amounts of information at the disposal of anybody who can use a personal computer. They can also tap the power of the worldwide Web through mobile devices, though in a much more limited way.
As wireless and network technologies advance, access speeds are growing rapidly. People will soon become used to sending and receiving all kinds of digital information - text, voice, pictures (still and moving) and sound - on a multiplicity of fixed and mobile devices.
They will expect the companies they deal with to do the same. Thus, convergence, no longer seen as simply the coming together of the computer and telecoms industries, will fundamentally change the relationship between companies and customers.
'We foresee the proliferation of broadband networks facilitating the provision of fast, always on, cost efficient internet access to both the corporate and consumer mass markets,' says J.P. Morgan Securities in a report called European B2C Internet Industry - The Next Big Thing.
Convergence will change the rules of the game for all competitors, says PA Consulting Group in a study called Technology-driven convergence. 'The winners will be those who are most agile, most pro-active, and most willing to take calculated risks.'
Since PA produced its study last summer, however, stock markets have dived, dotcoms have faded and consumers have become disillusioned about the constant promises of new technologies. The return of reality, and a belief in profits, to the business scene has given established companies more time to consider their business strategies.
But the changed technological environment is also putting more power in the hands of consumers. It is now clear that companies ignore people's real wishes at their peril. 'Consumers' views have not been taken into account,' says Ian Foster of PA's global systems integration and solutions group.
Instead, they have had technology pushed at them until their interest has dwindled almost to indifference. The over-hyping of Wireless application protocol (Wap) services for mobile users is the most obvious example. Constant talk of broadband, third-generation (3G) mobile technology and interactive television (iTV) has also tended to dull appetites.
In time, all of these will have a strong impact on the way businesses and individuals use the Internet and other digital channels. But it is the applications they will be interested in, not the technologies.
'For the first time since telecommunications services were provided, the momentum lies with the customer, not with the service provider,' says Cap Gemini Ernst & Young, the IT consultancy, which has surveyed what end users really want. Companies must not assume that people will accept whatever they are offered.
'There is a fantastic kind of visionary world being painted,' says Helen Martin, head of Cap Gemini's research and development lab for telecom media networks. 'But this is hype. Let's look at the consumers and find out what they want.'
Apart from a small percentage of early adopters, Cap Gemini found that most people do not want much more than e-mail. Businesses are also interested in videoconferencing and e-learning, but neither corporate nor individual users are, as yet, much interested in accessing information over a variety of channels.
'Consumers don't have a burning desire for new products in the way some people think,' she adds. They've got to be easy to use.' Simplicity, speed, low cost and availability are the main attributes sought by business and individual users of online communications services.
At this stage, personalised, location-based services - which mobile operators will be uniquely able to deliver - are not regarded as being of much importance by consumers. Nor is multi-platform access. These findings are worrying, says Cap Gemini, since 'many analysts and service providers are betting that the killer attributes will be precisely those that respondents valued least'.
That does not mean that companies providing telecoms, retail, content, entertainment and other services need throw up their hands in despair. After all, it took some years before the ubiquitous PC became a mass market product.
Despite the reservations expressed by consumers, the mobile market is expected to receive a stimulus from developments such as general packet radio service (GPRS) and 3G. These will enable services to be provided more quickly and reliably - without the need to constantly switch devices on and off - and contain a much wider range of content.
Many companies have been too optimistic about the rapidity with which these changes will occur, believes Johan Montelius, a wireless analyst at Jupiter MMXI, the media research group. 'They have over-estimated the speed at which the market will reach critical mass and how much money is out there.' In Jupiter's view, the turning point will come in 2003. Enough of the new advanced mobile phones and other devices, incorporating the latest technology, will then be on the market. This will enable consumer markets for mobile advertising, shopping and services to take off.
But the jury is still out on what type of devices people will prefer to use. Some experts expect mobile phones and personal digital assistants (PDAs), with bigger screens, to merge into some form of hybrid device.
Others believe people will use different devices for different purposes - advanced phones for private and social use, as well as voice communication, and other devices for work-related and other activities needing larger screens.
'There is a market for a very integrated solution, but this will not satisfy the whole market requirement,' says Steve Walker, UK marketing director for consumer products at Ericsson, the Swedish mobile equipment manufacturer. 'We will absolutely have a segmented market.'
Ericsson has teamed up with Sony of Japan to develop new products and services. Sony's marketing and multimedia expertise will be joined with Ericsson's knowledge of the mobile telecoms businesses.
Other such alliances and partnerships are also being formed; the biggest of all is the merger already concluded between America Online (AOL) and Time Warner. 'There is not just technology convergence, there is also industry and market convergence,' Mr Walker says.
He also talks of 'potential convergence', since not all of the scenarios being sketched out will become reality. Some products and services will take the market by storm while others will fail. 'We've got to create solutions that take the best from potential convergence and benefit the end user.'
Away from the consumer end of the business spectrum, convergence also involves considerable change within companies. They need to reshape their networks so that voice and data of all types can be communicated seamlessly across the business and beyond to customers, suppliers and partners.
But like consumers, companies do not want to be bogged down in all the technology. It is solutions they are seeking. 'You've got to understand what the client wants to get out of converged technology,' says Mark Brooks Wadham, managing director of Charterhouse Voice and Data, a UK convergence specialist. Thus, businesses need to look beyond the technology and consider how it can reinforce their real competencies. This is somewhat easier now they do not have to look over their shoulders in fear of upstart dotcom rivals.
'The e-businesses that succeed are the ones that use sets of enabling technologies and business processes to continue to do what they are good at,' says Simon Bunegar, strategy director for Europe at Avaya, the US communications equipment maker which was spun out of Lucent last year.
In another slant on convergence, he talks of 'converged businesses' with unified infrastructures, combining fixed and wireless links, based on Internet protocol (IP). Building these does not mean throwing out existing systems, but it does require intelligent use of technology.
When communications become seamless, or nearly so, in the age of convergence, business strategies have to adapt to customers' demands. Customers may not always know what they want, but when they make up their minds, the consequences can be devastating for companies which are ill prepared.
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