A Collaborative Model
The entire gamut of VAS is based on the innovation of basic ideas, which then translate into services that engage the subscriber. The investment is on human capital, hardware and software which can be better utilized by better revenue returns in terms of better revenue shares from operators. Also, ISVs look forward to support in terms of coming down with the walled garden approach at the operator level so as to have better utilization of the existing infrastructure.

“We mostly require advance information from service providers related to new products and service launches, and sometimes access to prototypes,” said DP Samantarai, MD, Softtrends.

The strength of any ISV is customer focus and constant innovation in enhancing customer experience, capability and improving efficacy.  Many of the existing services are new concepts like missed call alerts, voice SMS, ring back tone etc and the key support that the ISV community needs is for operators to commit sufficient marketing dollars and management time to drive adoptions and mass consumer uptake.

It is repeatedly proven that the success of a service is a function of consumer education and marketing.  With the emerging managed service model, the success is win-win for both the wireless operator and the ISV resulting in improved service, customer satisfaction and new revenue streams.

ISVs are looking for opportunities to test new offerings with the existing equipment of service providers, and in large network deployments. Vendor support is required in providing open interfaces. For instance, Infozech has already integrated its solution with Motorola's GAMA service delivery platform (SDP).

From vendors, ISVs are looking for open standards that can accelerate the deployment of next-generation network solutions. They want interoperable, best-of-breed components with global support and service infrastructure, enabling them to design and deploy carrier-class next-generation services for providers. One example is of softswitches, which provide this flexibility and form a great complementary solution to billing solutions, replacing proprietary IN platforms in critical functionalities like rating and charging that can deliver convergence via a common platform.

Therefore, the collaboration of ISVs, service providers and vendors is imperative for a successful roll-out of killer applications.

Revenue Sharing
One of the emerging trends is that ISVs are offering to take up marketing and promotional responsibilities on behalf of carriers in lieu of a larger revenue share component, which demonstrates the commitment and confidence of the ISV community.

In India, service providers keep 60-80% share of the revenue, the rest of it getting shared between ISVs and content providers. This is not a very conducive environment for either. The global average of revenue sharing is 50:50, however there are regional variations which could be dramatically different. In the Americas and Western Europe the revenue share is usually 60:40 between ISV and carrier respectively. However, in the Middle East and Asian markets the ISV share varies between 30-40%, considerably lower than the European markets. One of the reasons for this is that the vast majority of new ISV applications are being rolled in the Asian and Middle Eastern markets and the supply and availability of ISV applications are far more than the actual demand.

Mostly, the Capex and Opex related to hardware, software, content, royalty and others are put in by the vendor. Then, as per the contract, the revenue on the end user price is shared between the vendor and the operator, with the major share going to the operator.

In the Indian market the margins are even more fragmented with revenue share components varying from 15% to 35%. It is very difficult to predict the final uptake and revenue streams for new services as it needs a committed and consistent marketing spend and focus in ensuring success.

Going Global
There is huge potential for Indian VAS companies to exist abroad since the services and content is very much in demand. For instance, if we were to take the case of Bollywood content, that itself is creating more returns per content piece in Europe, Gulf, America etc, than the content sold in India, due to the huge network data and voice capacities.

India is serving as a ground for ISVs to prove their expertise, serving the complex requirements of tier-1 service providers who are racing to build scale with margins. At the same time, these ISVs compete against international billing players who are functioning in the Indian market. So their ability to offer strong, highly competitive, innovative products, their cost-effectiveness, speed in product delivery as well as their proximity allows them to establish their credentials as tier-1 players.

In the current global scenario, Asia, Africa, and Russia are the markets experiencing rapid growth. Indian players are primarily tapping the Asian and African markets. In fact, large global ISVs too are targeting these rapid growth regions.

“We are currently working with almost all the major service providers in India and with some big operators outside the country. There is immense opportunity for ISVs across the globe,” said Arvind Rao, CEO, Onmobile.

The key to successful global penetration is to focus on the rapid growth markets-since these carry similar challenges that the growing Indian market offers, allowing ISVs to take advantage of their experience in handling the complexities of these regions. In addition, it offers them a ready platform for high growth.

The Indian market presents a significant opportunity for ISVs and the high uptake of a host of services demonstrates the growing appetite of the Indian mobile user and the carrier mindset. Indians have demonstrated their ability in the wireless space globally, and today Indian ISVs are leading the way in creating new solutions globally.

While India has a very rich pool of talent for this space, with the increasing number of development centers being set up here there is a growing shortage and a steep hike in cost. For India to maintain the preferred development center advantage, it is critical that we take radical measures to augment the supply to this resource pool via focused training and education for this domain. Given the business and social advantages that this opportunity presents, a pan-India collaborative and cohesive initiative among industries, educational institutions and government would be the best methodology to create a consistent supply of the required skill sets for this industry.

India provides the best opportunity for ISVs. As a matter of fact, global ISVs are swarming in big numbers to India everyday. There is an enormous need for applications, as mobility gets into the first phase of penetration and people just beginning to move beyond voice. There is a huge potential to build and deploy business applications.

Rahul Gupta
rahulg@cybermedia.co.in