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The rise of platform services: application vendors need a new strategyThe rise of platform services:application vendors need anew strategyAdaora Okeleke
The rise of platform services: application vendors need a new strategy2About this reportThis report explores the impact that communications serviceproviders’ (CSPs’) increasing use of data and AI platforms asplatform services is having on telecoms application vendors,including application platform providers and point applicationproviders. We consider the new roles that these vendors will needto play as CSPs transform their software architecture usingplatform services. These roles include platform service providersand platform service consumers.KEY QUESTIONS ANSWERED IN THIS REPORT What are platform services and why they are important to CSPs? How can vendors benefit from platform services? What new roles can vendors adopt to address CSPs’ demand forplatform services? How can vendors best position themselves in these new roles?The report also provides recommendations to vendors on how tobest position themselves as they consider which role to adopt.It is based on information gained from several sources including: Analysys Mason’s desk research and observations frompublicly available data, vendor announcements andinterviews with CSPsWHO SHOULD READ THIS REPORT interviews with vendors (telecoms ISVs, software technologyproviders and public cloud providers) Vendors that want to reposition themselves and their solutions tobenefit from CSPs’ use of platform services. surveys of CSPs. Product marketing staff who want to position their solutions amongthose that can be used as platform services. CSPs that are looking to adopt platform services to support theirinternal development needs.This document is for Analysys Mason’s subscription service customers only. Usage is subject to the terms and conditions in ourcopyright notice.
The rise of platform services: application vendors need a new strategy4Executive summaryCSPs’ use of platform services (that is, common middlewareservices including data management and AI/analytics tools,delivered from the cloud) means that telecoms applicationvendors’ products may no longer align with CSPs’ softwarearchitecture. These vendors should therefore quickly decidewhich role they want to play in the platform services era beforeplatform service usage matures too much.Telecoms application vendors must choose between becoming: application platform providers that offer platform services tounderpin their application ecosystem platform service consumers that offer applications withmiddleware components that have been disaggregated fromthe application logic and are consumed as a platformservice.KEY RECOMMENDATIONS Vendors must assess how CSPs’ use of platform services affects thepositioning of their current offerings. Vendors should use CSPs’ demand for platform services to determinea strategy for the platform services era. Vendors should consider combining the role of a application platformprovider with that of a platform service consumer to maximise theirmarket opportunity.Figure 1: Challenges that telecoms applications vendors mustovercome in the platform services era, and the benefits ofdoing soKEY CHALLENGESApplications aremonolithic andcomplex to manageMonolithic appscreate data silosCurrent applicationsdo not maximiseCSPs’ investmentsROLES TO ADOPTApplication providers can adopt one of two key roles (or both)Application platform providerPlatform service consumerBENEFITSDeliver consistentservices to applicationecosystemsAccelerate the time tomarket for applicationswith reduced costsNo lock-in to IaaSproviderSource: Analysys Mason
The rise of platform services: application vendors need a new strategy6Challenge: CSPs’ adoption of platform services means that application vendors’products and market strategies may no longer be appropriateVendors will need to realign their applications to fit CSPs’changing software architecture as CSPs adopt data and AIplatform services as common reusable assets to supportapplication lifecycles across cloud platforms.CSPs’ increasing investment in platform services will affect howvendors bring their applications to market. A growing list of CSPsare setting up strategic deals with public cloud providers (PCPs) touse application-agnostic data management and AI/analyticsplatform services with a view to accelerate new servicedevelopment and delivery and simplify software architecture andoperations. The agility, scalability and geographical availability ofthese platform services appeals to CSPs that are transformingtheir operations using de-siloed data, which then forms large datasets that are used to train AI algorithms. Vendors will increasinglybe expected to use these platforms services as part of theirruntime environments as CSPs buy into them.This will not be an easy transition because CSPs’ currentapplications are monolithic with embedded middleware. Manyvendors have taken a ‘lift and shift’ approach to cloud migration,which creates more challenges for CSPs. It adds cost, createsmore complexity and retains data silos. CSPs that have investedin a common platform services strategy are also unlikely to wantto deploy applications that duplicate these platform services.CSPs will therefore increasingly look for application vendors thatalign their strategies to match CSPs’ investments.Figure 2: Number of publicly announced contracts for platformservices for data and AI, worldwide, 2018–1Q 2022The number of contractsannounced in 1Q 2022 is higherthan that for the whole of 2019
The rise of platform services: application vendors need a new strategy7Solution: telecoms applications vendors should quickly decide which role they wantto play in the platform services eraApplication vendors can choose to offer their own platformservices to third parties in order to create a broader applicationecosystem or they can offer only business logic that consumesplatform services from third-party providers.Application vendors should reposition and rearchitect theirsoftware applications to accommodate platform services becausethe scalability, availability and flexibility that such services offer isdriving increased CSP adoption. Vendors will need to develop aclear platform services strategy in order to succeed in thetelecoms market. Our research highlights two key roles thatvendors are adopting in the platform services era. Application platform providers offer applications that runon their own platform services in the cloud (such asSalesforce). Vendors do not need to align their applicationsto third-party platform services, but should focus ondeveloping services that meet CSPs’ needs. However,vendors must evolve their platform services with theunderlying cloud infrastructure and open them up to thirdparties to create a broader application ecosystem. Platform service consumers build application businesslogic on top of platform services from PCPs, cloud-agnosticplatform providers or both. They reduce the cost associatedwith operating platform services and increase the time tomarket for new applications. Vendors must refactor theirapplications to run on multiple third-party platform services.Figure 3: Overview of the transformation of applicationvendors’ role in the platform services eraPreviouslyPlatform services eraMonolithic, onpremises applicationApplication platform providerApplications and data and AIplatform services (embeddedmiddleware)Presentation tierCloud infrastructurePlatform service consumerApplication logicMiddleware (dataand AI)ApplicationsData and AIplatformservices(disaggregated)middlewareData and AIplatformservices(disaggregated)middlewareCloud infrastructureKey:Provided byapplication vendorProvided by cloudproviderProvided by cloudagnostic playerSource: Analysys Mason
The rise of platform services: application vendors need a new strategyRecommendations123Vendors must assess how CSPs’ use of platform services affects the positioning of their current offerings.CSPs recognise the need to use platform services for data and AI use cases in order to simplify softwareenvironments and accelerate development. Application vendors must therefore decide how to ensure that theirproducts align with CSPs’ investment in platform services. Vendors have the opportunity to use platform servicesto support their applications, but there is also the possibility to offer differentiated services of their own thatunderpin their application platforms.Vendors should use CSPs’ demand for platform services to determine a strategy for the platform services era.Playing the right role will be critical to determining how successful telecoms application vendors will be in theforeseeable future. Consequently, vendors need to be aware of the scope of offerings that each role provides, aswell as the benefits, challenges and requirements that are associated with each. Application platform providersmust have the size and market presence to convince third-party developers to join their ecosystem, while platformservice consumers must participate in as many application ecosystems as possible.Vendors should consider combining the role of a application platform provider with that of a platform serviceconsumer to maximise their market opportunity.Leading telecoms application vendors are becoming application platform providers while remaining open to theidea of also consuming platform services from third parties. A dual strategy offers vendors the chance to workclosely with partners to develop applications that align with CSPs’ requirements. As platform service consumers,they can reuse non-differentiated platform services, thereby reducing the cost of development and management.8
The rise of platform services: application vendors need a new strategyContentsExecutive summaryResearch overviewMarket contextNew roles for application vendors in the platform services eraAnalysis of the current state of the marketAppendixAbout the author and Analysys Mason
The rise of platform services: application vendors need a new strategy31About the authorAdaora Okeleke (Principal Analyst) leads Analysys Mason’s Data, AI and Development Platforms research programme. Her research focuses onservice providers' adoption and use of data management, artificial intelligence, analytics and development tools to support the digitaltransformation of network, customer and other business operations. Adaora tracks vendor strategies for the telecoms industry to understandhow they are evolving their product portfolios to include data, AI and development capabilities. She also provides key industry insights tooperators and vendors on strategies for adopting these technologies
The rise of platform services: application vendors need a new strategy32Global leaders in TMT management consultingAnalysys Mason is the world’s leading managementconsultancy focused on TMT, a critical enabler ofeconomic, environmental and social transformation.We bring together unparalleled commercial andtechnical understanding to deliver bespoke consultancyon strategy, transaction support, transformation,regulation and policy, further strengthened by globallyrespected research.Our clients value our advice which combines deepdomain knowledge with global reach and local insightinto markets to help them achieve meaningful businessresults.We are committed to our clients, employees andcommunities – contributing to a world where technologydelivers for all.analysysmason.com/what-we-do
The rise of platform services: application vendors need a new strategyOur research programmes33
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The rise of platform services: application vendors need a new strategyPUBLISHED BY ANALYSYS MASON LIMITED IN JUNE 2022Analysys Mason Limited. Registered in England and Wales with company number 05177472. Registered office: North West Wing Bush House, Aldwych, London, England, WC2B 4PJ.We have used reasonable care and skill to prepare this publication and are not responsible for any errors or omissions, or for the results obtained from the use of this publication. The opinionsexpressed are those of the authors only. All information is provided “as is”, with no guarantee of completeness or accuracy, and without warranty of any kind, express or implied, including, butnot limited to warranties of performance, merchantability and fitness for a particular purpose. In no event will we be liable to you or any third party for any decision made or action taken inreliance on the information, including but not limited to investment decisions, or for any loss (including consequential, special or similar losses), even if advised of the possibility of such losses.We reserve the rights to all intellectual property in this publication. This publication, or any part of it, may not be reproduced, redistributed or republished without our prior written consent, normay any reference be made to Analysys Mason in a regulatory statement or prospectus on the basis of this publication without our prior written consent. Analysys Mason Limited and/or its group companies 2022.
2 Vendors should use CSPs' demand for platform services to determine a strategy for the platform services era.Playing the right role will be critical to determining how successful telecoms application vendors will be in the foreseeable future. Consequently, vendors need to be aware of the scope of offerings that each role provides, as
