Update: Twilio’s Deal with Ma Bell – Creative Disruption in Action
(Updated: Oct 2, 2012)
Please note that, in short order, AT&T has removed links to this development both from its landing page and from its “press room.” Thus the era of creative disruption was short-lived, and you can expect a larger, different story on the topic of deep integrations with AT&T’s mobile application infrastructure prior to this year’s end.
You know that Joseph Schumpeter’s “creative destruction” has begun in earnest when a prototypical disruptor, like Twilio, transforms one of the largest mobile carriers, AT&T Mobility, into a reseller of its services. The result is a variation on the theme of BYOC (Be Your Own Cannibal) when it comes to strategies for long-term preservation of one’s core telecom business. AT&T knows that circumnavigation of its pay gates (billing systems) through “over-the-top” (OTT) services is inevitable. Microsoft’s Skype is a prime example of peer-to-peer voice and video communications service that can be carried over the Internet.
To date, the tactic of global behemoths have taken could be called “if you can’t beat ‘em, buy em.” Think of BT’s Ribbit or Telefonica Digital’s Jajah purchases. At the very least, large telcos have formed special subsidiaries to flesh out a digital strategy and navigate the world VoIP- and cloud-based opportunities. At a minimum, both Web-browsers and mobile subscribers should expect to see a flurry of “click-to-call” buttons embedded in their favorite apps and Web sites. When user’s or enterprise apps initiate an IP-based phone call or video session, the incumbent carrier wants to make sure not to be left by the side of the highway.
The genius of the Twilio/AT&T reseller deal is that it is consistent with both firms’ strategies, tactics and long-term objectives. At the last Twilio Developer Conference (almost a year ago) Jeff Lawson was joined by mega-VC Ron Conway in citing a $1.4 trillion figure to characterize enterprise spending on information and communications technologies. In other words, it plans to succeed at the expense of incumbent telcos and enterprise software and information infrastructure providers.
The $1.4 trillion is the gold at the end of the rainbow that Web and mobile application developers are destined to share as they carve out ever-growing niches in existing telecommunications and computing infrastructures. Twilio makes it possible by packaging as set of development tools and application programming interfaces (APIs) that enable developers to incorporate a defined set of call processing, voice processing and messaging services into their services offerings. Meanwhile, AT&T has been systematically introducing its own APIs to help expose developers to long-standing resources in its network, like speech recognition, transcription and voice control.
Both Twilio and the incumbent telcos see the same group of developers as the key to their future. It may be a form of self-deception, but they believe that they can lock in a certain amount of revenue by supporting communities of application developers who agree to split revenue with them (60/40 if it follows the old BREW formula) in exchange for using their tools, marketing/promotion and distribution infrastructure. Transport is table stakes, and not very lucrative. Connectivity, cloud-based resources and billing relationships are the assets that telcos bring into the new marketplace.
Twilio and AT&T are on opposite sides of history here, with Twilio in ascension at AT&T’s expense. Yet they share the desire to help developers succeed in their efforts to bring new applications and services to market. Twilio would love there to be a no-holds-barred approach to the marketplace. Adding new services and features in direct response to user demands. AT&T will insure that there are a limited number of functions supported by APIs. As Dave Michels points out in this post on NoJitter, the capabilities include surveys, package tracking and conference calling services that merge SMS, call processing and IVR.
Astute readers will also see the components of a pretty formidable cloud-based contact center complete with predictive dialing, bill collection and voice messaging applications. But we’ll leave discussion of the commoditization of contact center services for another day. For the moment, we’ll be monitoring the effectiveness of the new “reseller’s strategy” to counteract the disintermediation of telecommunications services providers. It seems like the latest version of the well-known strategic directive attributable either to Chinese military strategist Sun Tsu (in “Art of War”) or to fictional character Michael Corleone (in the movie “Godfather II”): “Keep your friends close and your enemies closer.”