Considering The Path Less Taken IBM recommends the investment in and development of infrastructures over betting on Business Models Michael E. Dillon Director, Digital Communities Integrated Communications Service Product Line IBM Global Technology Services Americas February 13, 2007 – W2i Tempe, AZ
Rationalization (1) in psychology is the process of constructing a logical justification for a decision that was originally arrived at through a different mental process. Source: Wikipedia.com
Mental Process 1: Get The Vendor To Foot The Bill • Trendy approach • Other cities doing it • No financial burden to citizens • Positive impact on Digital Divide and Economic Development • Elected officials make a difference Realities • Community gets increasingly involved in business model with vendor • Greater understanding of subscriptions and other revenues required for success transfers • Concerns for long-term sustainability arise • New compromise posture begins making concessions • Workable model emerges, differently than originally planned.
Mental Process 2: Get A Good Vendor And Model To Foot The Bill, But Participate In The Success Meaningfully • Pre-planned enablement and replacement strategy • Well-understood efficiencies and benefits • Financial commitment is offset by financial relief from more costly services • Positive impact on Digital Divide and Economic Development spurred • Elected officials make a difference Realities • Community is key to the business model with vendor • Community can leverage its financial strength to use vendors financing • Deployment is sure and predictable due to available funds for build out • Long-term sustainability ensured by community Anchor Tenancy • New compromise posture begins making concessions • Workable model emerges, differently than originally planned.
Philadelphia PA – U.S. Department of Labor Statistics Yes I know we’re in Tempe . . . . Broken Laptop Screen . . . . FEDEX here by 10 a.m.
U.N. Conference On Trade And Development • Governments have an important role to play in improving access to broadband through infrastructure and policy. • Wireless technology and satellites can help circumvent the cost of infrastructure for sparsely populated, remote or rural areas. • Policies can either encourage or be a disincentive to competition, and thus have an impact on availability and prices. • Broadband is becoming vital for businesses, offering competitive advantages being compared to water and electricity. • Broadband enables companies to engage in more sophisticated e-business processes . . . • Use of Broadband directly increases competitiveness and productivity
Digital Video Surveillance Fixed and Mobile Emergency Response Interoperability Public Utilities (e.g. Automatic Meter Reading) Two Models for One Community? DIGITAL COMMUNITY Community Broadband Networks PUBLIC USAGE MODEL Community Broadband Networks GOVERNMENT USAGE MODEL Public Broadband Access • Close the Digital Divide, bringing broadband access to the masses • “For the People” Intelligent Transportation Systems Economic Development • Attract / retain businesses & citizens • Promote healthy tax base through increasing property values Workforce Mobility (e.g. Building Inspections, Case Management)
IBM’s Focus On Business Drivers For Digital Communities • Safety, Security & Service Improvements • Alternate Communications capability • Leased Line Replacement • Operational Efficiencies & Process Improvements • Delivery of existing web-based apps and data to constituents • Neighboring Agencies/Mutual Aid • Common Focus or Joint Initiatives • Situational Networks • Special needs (Public Safety & Emergency Response) • Cross Agency Sharing • Limited duration or permanent use • Mobilization of employees and contractors • Innovative Delivery Venues • Connectivity and Equal Access • Delivery of web-based services to disadvantaged citizens • Accessibility • Regional Initiatives Cost Savings G2G G2E G2C Digital Divide Offerings & Capabilities Attractiveness Economic Development • Fee-based access for convenience • Community Competitiveness (Brain Drain) • Economic Development Imperatives • ISP Ownership/Involvement Public Access Get A Service Provider To Build It And Wholesale It Retailers Build It And They Will Come
Assessing Appetites For Using Public Access Networks Effectiveness Public Safety Public Trust Other Government Entities Economic Development (Public Access) Money Politics Service Provider Or Other Network Owner Community Interests Profit Shareholder Value
In The News: Washington Post Sunday 10/22/06 1 $ Yahoo Shortcut 2 Sponsor Results $ 3 4 $
Citizens As Assets In The Models Advertising Revenue Models can result in: Targeting unwitting users so they will make spontaneous purchases • Information is filtered to entice spending rather than delivered to answer questions or to provide information. • Unplanned purchases can drive household debt. Advertisers pay more for as users are brought closer to content at the point of buying decision-making. Free enticements exert additional pressure on users to click again, identifying users with higher levels of interest. Users are placed in a position to begin giving up information about themselves. Is advertising success as reported by Search Engines reliable as to validity and what impact does it have on business model attainment? 1 2 3 4 5
Considerations • Avoid getting hooked on Business Models • Weigh the price of Free as well as its viability • Remember what you’ve learned over the years: • If its true, it isn’t new, and if its new, it isn’t true. • There’s no free lunch. • Beware of stranger bearing gifts. • Decide a level of commitment for your initiatives commensurate with the goals and objectives. • Remember that form follows function: • If the network is intended to be free, then the business model rules • If the network is intended to solve problems and present opportunities, then purpose rules. There’s a point when the communities and the vendors get on the same side of the table . . .
Tactic: Leverages Content and Access to Services Tactic: Leverages Network and Device Capabilities Traditional Business Plan vs. Digital Communities Plan
How Does The DC Service Provider Make Money? Subscriber Revenues CAPEX Advertising Revenues (-c) a d e OPEX * d − Anchor Tenants X = Profit X Philanthropy Other Costs * d Community Contributions Other Income Wholesale Rents a = Incomesc = Churn d = Duration (years) e = Expenses
Q&A Innovation that matters . . . .