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Proceedings of MoMM2008
A Mobile Data Service Framework and its Business Models Katharina Issel
Joanna Mrozik
Institute AIFB University of Karlsruhe (TH), Bldg. 05.20 76128 Karlsruhe, Germany +49 (721) 608 7364
Institute AIFB University of Karlsruhe (TH), Bldg. 05.20 76128 Karlsruhe, Germany +49 (721) 608 7364
[email protected]
[email protected]
ABSTRACT The usage of value added mobile data services (MDS) is not as successful as expected. The article claims that this situation is not only caused by technical (e.g. heterogeneity of mobile devices, display size) or economical obstacles (e.g. costs of data traffic), but mainly by the lack of involvement of small and medium size enterprises (SME) in mobile business. In order to overcome barriers and help SME to enter the market the framework MODIFRAME is created to support SME in realization of MDS, namely development, implementation, testing and market-launch. To carry out these support services, adequate business models are needed. Not only those which are established in electronic and mobile business (e.g. revenue sharing, hosting or advertising), but also innovative ones like an open accessible base of technical and economical standards, know-how or free of charge testing environment. Furthermore, to encourage SME to offer their first mobile service a lump sum as revenue could be offered. Finally, at a maturity level of the framework, a fee required business partner platform can be installed.
General Terms Management, Performance, Design, Economics.
Keywords Business models, framework, value added mobile data services, small and medium size enterprises.
1. INTRODUCTION 1.1 SME and mobile business Mobile business is a market which is at an earlier stage of development in relation to mobile date services (MDS) which add (really) a value. Only about 19 per cent of mobile network operators’ (MNO) revenue comes from data services including messaging [6]. There is a paradox situation, although mobile devices are
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widespread, efficient and easy data services (e.g. SMS, ring tones, logos) are successful [3] the MDS market is not expanding as expected. Especially in Germany, on the one hand MNO still suffer from high expenditures for licences of UMTS and the lacking data traffic through the UMTS network. On the other hand, the potential lies idle like employment or economical growth. Commonly, small and medium size enterprises (SME) are more likely to create jobs than big companies [11]. At the same time, SME represent 99 per cent of enterprises in European Union [9]. To encourage the competitiveness, improve business processes and economical growth SME should increase mobile workforce supported by MDS. So far, SME are only weakly involved in mobile business because of the so called chicken-egg-problem [7]. In analogy to the World Wide Web, no one could determine if SME affect more the expansion of the Internet or the Internet creates a productive environment for SME. On mobile market (MM) on one side, SME are not willing to realize MDS because of a lacking customer base. On the other side, only few consumers are interested in MDS due to a minor supply. Additionally, high fees for data traffic and weak usability hinder them from using MDS. In the World Wide Web, simple and open standards (e.g. HTTP, HTML) allow to keep service creation at a bearable level of risk. This profitable situation should be transferred to the market of mobile business. Therefore, the support for SME by their undertaking of realizing a MDS is needed due to many technical problems like heterogeneity of mobile devices, networks or operating systems and hurdles in cooperation with MNO [2]. So, a framework named MODIFRAME [7] was developed with the intention to enable a facilitating and SME-friendly environment for developing and implementing MDS and mediate between all involved stakeholders.
1.2 Definitions Depending on the research field or institutions various definitions of SME are quoted. An established definition is given by the European Union and used for that work [9]: “The category of micro, small and medium-sized enterprises (SMEs) is made up of enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding 50 million Euro, and/or an annual balance sheet total not exceeding 43 million Euro”.
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A plethora of definitions exists also for the term “mobile business”. Most of them focus on business transaction through wireless devices but confuse mobile business with mobile commerce. An example of a well-known definition of mobile commerce is quoted by an author of “Mobile Commerce Report” by Durlacher Research: ”any transaction with a monetary value that is conducted via mobile telecommunication network” [13]. Like in electronic commerce, the concentration lies in the exchange of products and services without the restriction of a stationary user using wired infrastructure. A definition of mobile business accepted for this paper includes “all activities related to a (potential) commercial transaction through communications networks that interface with mobile devices” [18]. Mobile data services are used over a telecommunication network with mobile devices like smartphones or cellular phones. The range of MDS goes from simple services, like messaging or downloading static content (e.g. ringtones), to advanced value added services. Latter are e.g. querying the nearest restaurant that is in the proximity to user’s position (location based services) or a push message that depends on a specific context (notification services). To categorize MDS, the approach of Steinert and Teufel [16] is selected. In particular, there are two types: Type I: services for corporate internal use (Business-To-Employee B2E). Type II: services that are offered to external users (Business-ToBusiness (B2B) and Business-To-Customer (B2C). Further differentiation is the generation of direct (e.g. a fee) or indirect revenue (e.g. through advertising). In order to identify connections between all actors of the framework, business models should be developed. This term appeared already in 1950s, but it became popular in 1990s. Researchers express the unanimous opinion that business models are relatively poorly understood and most discussed subject of electronic business [12], [1]. Results of a survey conducted on members of the IS community on the ISWORLD mailing list demonstrate that there is a discrepancy of defining business model between business-oriented and technology-oriented experts. 62 respondents have given 54 different definitions [14]. A very frequently quoted definition of a business model belongs to Timmers [19]. In this article, a comparable definition has been taken over: “a business model provides a description of the roles and relationships of a company, its customers, partners and suppliers, as well as the flows of goods, information and money between these parties and the main benefits for those involved, in particular, but not exclusively the customer” [4].
2. THE BUSINESS IDEA: A FRAMEWORK NAMED MODIFRAME To support the realization of MDS by SME, MODIFRAME integrates all technical and economical aspects that are needed to develop and implement services. Existing technologies concerning the adaptation of services on mobile devices or push communication are provided. Furthermore the framework supplies services like coordination between actors or consulting. If no adequate components for SME services are available ModiFrame could develop them. Examples of the framework’s functionalities are: Transcoding which adjusts the MDS to the capabilities of the calling device (e.g. reducing size, bitmap encoding). Transformation converse e.g. control information or data formats.
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Querying of Point-of-Interests (POI) is a search of information which nearest facilities corresponds to user’s position in order to defined interests (e.g. hotel, ATM). Locating of the mobile device can be provided by the MNO or GPS-respectively Galileoreceiver. Service routing directs the requests to the right provider (SME) and when necessary invokes other modules and external services in the right order (choreography). Further functionalities are data protection, user authentication or push services.
3. USE OF STATE-OF-THE-ART BUSINESS MODELS In order to act on the mobile marketplace, it is necessary to adapt existing business models from electronic commerce or create new ones. So far, there are few examples of established models existing in mobile commerce. In this article the models are categorised into Type II (offered to external users) and Type I (for own use).
3.1 Revenue Sharing (Type II) Revenue sharing means that every part which takes stake on a service obtains a share of a service fee [20]. The value of this share depends on partners’ agreement. As this model already exists and is successful it is necessary for MODIFRAME to adopt it. For the presented framework it means that SME create their service by using any service parts of third-party provider. Customers access this MDS over MODIFRAME. A mobile payment provider transacts the payment of used services. Therefore, he or she receives information from the framework how often and which MDS has been called. According to this information a bill is generated and the due amount collected. A share of this amount is given to ModiFrame that prorates to SME and other involved third-party provider. Or the mobile payment provider hands out the total amount minus his percentage and ModiFrame shares the rest with the other two parties. As already many established payment providers exist on the market [10], MODIFRAME can buy this service. In this and also in other business models telcos as network providers have only a relationship with customers over the invoice and bill for the used data transfer. Consequently, in the following business models this is not mentioned.
3.2 Hosting (Type II) In the following model the framework plays the role of a hosting service provider for SME that obtain a definite amount of money for the hosting service. Hence, the framework provides infrastructure, management of operating system and applications. It takes over the coordination, maintenance, initialization and providing of SME’ services. The compensation of hosting can be variously dispatched, e.g. monthly flat rate for hosting or calculation with revenue sharing. In the first case the hosting fee does not depend on frequency of MDS use. For the other case see revenue sharing above.
3.3 Advertising (Type II) Heretofore, advertising in mobile business is not as established as in the Internet. The reason for that are - amongst other things – the prices of data traffic, so users had to pay a considerable amount of money for the data volume generated by the submission of adverts (e.g. banners that are embedded in a WML-page).
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Additionally, mobile devices have an essentially limited display compared to desktop PC, so that valuable content has to share place with advertising. Because of those obstacles mobile advertising can only be used in limited way [8]. But it has to be taken under consideration, that specific advertising can positively influence the familiarity or brand awareness of SME, their products or services. In this business model SME develop a MDS in order to advertise their additional services and to bind customers. For example SME can offer a “nearest store finder” to locate a closest store of SME dependent on actual mobile device position. Eventually, that service can also include coupons or information about a store’s current offers. In another case, advertising is integrated into a SME’s service and originates from the third-party provider. Advantage of that model is free of charge MDS for a customer and positive cash flow generated for SME.
3.4 Type I: B2E Nowadays, it is relevant for SME to support mobile workers in order to improve company’s processes. The amount of mobile employees is growing. This trend is pointed out in unanimous prognoses. “As mobility continues to play a key role in enabling companies to achieve greater productivity worldwide, IDC expects the global mobile worker population to increase from 758.6 million in 2006 to more than 1.0 billion in 2011, representing just over 30 per cent of the worldwide workforce” [17]. An authorized access to company’s data for mobile outdoor staff is necessary for saving time and reducing media disruptions. Software solutions offered in this field are directed to big companies and often not affordable for SME. The requirements of different SME are very diverse, wherefore the solutions have to be customizable [5]. For many providers of software solutions it would be too tedious to customize their software for many SME. But some of them discover the opportunities to enter a new promising market place. MODIFRAME comes into this market not as a pioneer but as an earlier follower. In this model SME implement services e.g. support for mobile workers, as an authorized access to company’s databases. The main role of the framework in this model is to coordinate service parts, to enrich them with additional elements from the third-party provider and to deliver them as a complete MDS to final users.
4. NOVEL BUSINESS MODELS The presented framework will implement new business models to attract stakeholders and in particularly SME to engange in mobile business. It is important that the risk of entering the market for service providers is reduced. As already claimed in the introduction, the future of MDS is tightly connected with SME, so they need assistance in developing and implementing services. The framework allows SME to test new MDS, to share know-how and take over the risk of entering the mobile business.
5. Lump-sum at the Beginning As already indicated, SME have many problems with realization of MDS. Beside technical obstacles, which can be overcome in cooperation with MODIFRAME, the risk of being not successful hinders often SME to develop a MDS. SME also cannot estimate if, how and under which constraints a MDS could be successful. One way of reducing uncertainty is that MODIFRAME pays a
monthly lump sum on SME for over the framework released service in spite of a fee per use. Due to the fact that MODIFRAME takes over the economical risk at the earlier stage of activities on MM from SME, it can better calculate costs and revenues of such project. Additionally, they can attract customers, strengthen their market position and adjust their MDS. All these steps can happen during the first two years of service release. After this, SME are able to bear the entrepreneurial risk of playing on the MM. Thus, new contracts should be signed, which define how the revenue has to be shared. Indeed, in case of new launched MDS the framework has more costs than revenue because few people use it and the lump sum has to be paid anyhow. Only early user and potential advertisers generate revenue. Thus, at the beginning of a SME service, MODIFRAME invests in an unclear project. But, because of the plethora of MDS and SME, the framework can diverse the risk of one’s failure. Other, not direct monetary effect is the building and expansion of the network. From the authors’ point of view, this business model could establish the base for MODIFRAME’s pioneering and then leading position on the MM. There is also an opportunity to establish a high quality brand as mobile business integrator and an enabler.
5.1 Open Know-How and Testing for free A new business model is the free of charge testing of developed services as usually it is an expensive issue for SME. In detail, MODIFRAME provides a test environment, which includes various types of mobile handhelds, operating systems and other technical functionalities. After the test time the release of MDS should happen. If the service will be implemented on another platform or directly by SME (without MODIFRAME), it has to pay for engaged testing. On the one hand the payment serves as a contractual penalty and on the other hand a utilized service - like the use of a test environment - has to be rewarded in an adequate way. Free testing acts also as an opportunity for MODIFRAME to learn which and how MDS works. It also helps to identify technical obstacles (learning by supporting). Thus, the framework’s experiences grow and this intangible asset allows a better and solidified market position. As a result, MODIFRAME can build barriers of entrance for potential competitors. Analogically, MODIFRAME as consultant provides a profound knowledge about service creation, implementation and market entrance to SME. In return, it can obtain sensitiveness about MM, which MDS or service parts are popular or needed (insider knowledge). Consequently, MODIFRAME can adjust its own services or provide a wider range of functionalities or features. Another interesting point is an open knowledge base (open knowhow) which contains (partly) open source code, standards, developer guides, and others alike. If a SME is able to create MDS by looking in this open knowledge base, it has to test the service before launch. So, MODIFRAME attracts SME that use only the testing environment or additionally provision over this framework.
5.2 Business Partner Platform MODIFRAME can act as a business partner platform on condition that it is a known favourable brand. The establishment of a monopolist-like market position could be another precondition or
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factor of success of this business model. Uniqueness represented by the linked-up environment of MODIFRAME and it rages, stimulates third-party providers to be a part of that framework. Consequently, they would be willing to pay a fee for a membership of MODIFRAME related with the access to a wide customer base (e.g. SME).
[5] Büllingen, F. 2006. Mobile Enterprise-Solutions - Stand und Perspektiven mobiler Kommunikationslösungen in KMU. Bad Honnef: WIK Consult GmbH.
For example, a mobile payment provider (third-party provider) signs in and pays the charges. In return, his offer will be checked, ranked and listed by MODIFRAME with respect on quality, price and other criteria. Now, a SME, which needs mobile payment as a component of its service, can search for an adequate provider. Then, a contract between the SME and the chosen provider will be signed, which comprises an agreement about the service level of mobile payment in addition to the monetary compensation for the provider.
[7] Decker M., Issel K., Mrozik J., and Schiefer G. 2007. The Role of Small and Medium-Sized Enterprises in Repeating the Success of the Internet in the Wireless World. In Proceedings of eChallenges 2007 (Den Haag, Netherlands, October 24 - 26, 2008). eChallenges´07. IOS Press, Amsterdam, Netherlands, 1442-1449.
When the framework becomes established on the market it will allow providers to approach wide pool of customers and will stand for prime quality.
[9] European Union. 2003. Article 2 number 1 of the Annex of Recommendation 2003/361/EC. [Online]. Available at: http://ec.europa.eu/enterprise/enterprise_policy/sme_definiti on/index_en.htm
6. SUMMARY It is worth to keep in mind that “[…] in 2007, worldwide, nonvoice services accounted for 18.9 per cent of total mobile services revenues, and this figure looks set to keep growing, reaching more than 25.5 per cent by the end of 2012” [15]. In order to achieve that level of market penetration of mobile services it is necessary to enable SME on MDS market. To overcome the unbearable situation of lacking a profound diffusion of value added mobile data services an enabling framework for MDS provisioning by SME is developed. For all business models and its success, the development of the market for MDS plays a significant role. Accordingly, parameters are shaping well in favour of the framework. So, future works have to continue the analysis of business models and economical and technical environment of MODIFRAME to realize opportunities and risks in mobile business market.
7. ACKNOWLEDGMENTS
[6] Cellular news. 2008. Mobile Data Revenue to Double by 2012. [Online]. Report published by Pyramid Research. Available at: http://www.cellular-news.com/story/30531.php
[8] Decker, M. 2007. M-Advertising. In Encyclopedia of Mobile Computing and Commerce, D. Taniar, Ed. Monash University, Australia, IGI Global, 398-402.
[10] Hinrichs, J. and Stroborn. 2004. (Mobiles) Bezahlen aus der Sicht des Online-Händlers. In Proceedings of 4. Workshop Mobile Commerce (2004) Mobile Economy (Augsburg, Germany, 2 - 3 February 2004), Pousttchi, K. and Turowski, K, Eds. Köllen Druck+Verlag GmbH, Bonn, 63-78. [11] Institut der deutschen Wirtschaft. 2008. Mittelstand von A bis Z, IW-Dossier 34. Deutscher Instituts-Verlag, Germany. [12] Linder, J. and Cantrell, S. 2000. Changing Business Models: Surveying the Landscape. Accenture Institute for Strategic Change. Accenture: Cambridge, MA, USA. [13] Müller-Veerse, F. 1999. Mobile Commerce Report. Durlacher Research Ltd. [14] Osterwalder, A. and Pigneur, Y. 2005. Clarifying Business Models: Origins, Present, and Future of the Concept. Communication of the Association for Information Systems 15, 751-775.
This work has been funded by the Federal Ministry of Economics and Technology of Germany (BMWi, Contract No. 01MD06012, Project “MODIFRAME”). The responsibility for the content of this article lies solely with the author.
[15] Portio Research. 2008. Slicing up the Mobile Services Revenue Pie. [Online]. Portio Research Limited, Published 28th January 2008. Available at: http://www.portioresearch.com/Slicing_Pie.html16
8. REFERENCES
[16] Steinert, M. and Teufel, S. 2005. The European Mobile Data Service Dilemma. An empirical analysis of the barriers of implementing mobile data services. In Mobile Information Systems II. Springer, Boston, 63-78.
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