INNOVATION IN MOBILE CLOUDS

Analysis of an Open Telco Application

Antero Juntunen, Vesa Suikkola, Yrjo Raivio and Sakari Luukkainen

Department of Computer Science and Engineering, Aalto University School of Science, Konemiehentie 2, Espoo, Finland

Keywords: Mobile cloud computing, Open telco, Business model, Application, STOF.

Abstract: Cloud computing is emerging in several ICT areas, including the mobile services industry. This

development is known as mobile cloud computing (MCC). MCC may save mobile energy consumption and

be utilized to overcome the fragmentation challenges of application developers, who must take into account

various mobile operating systems. This paper introduces a novel mobile-device-independent development

approach. Mobile applications will be placed into a cloud and will utilize open application programming

interfaces from the telecom infrastructure. This approach, called Open Telco, enables application

deployment that is fully based on cloud-computing principles. In this study, we present a business model

analysis of an application case called Event Experience, using the Service, Technology, Organization, and

Finance (STOF) framework.

1 INTRODUCTION

Cloud computing refers to utilizing a virtualized, on-

demand server environment that hides the true

technical architecture of computing resources such

as storage and servers The main benefit of cloud

computing is to free the application developer from

hardware-management concerns and some of the

financial issues involved in having to own the

servers, the full capacity of which is rarely used.

Mobile cloud computing (MCC) can be defined

as using cloud-computing principles to deliver

applications and services for mobile devices. An

additional benefit of cloud computing in the mobile

environment is that it enables delivering advanced

applications to mobile devices with limited data

processing and storage capabilities by utilizing cloud

resources such as processing power and storage. By

offloading intensive data-processing tasks to the

cloud, MCC applications can offer features such as

image and voice recognition that would not be

otherwise possible considering the limited

computing power, memory, and data storage

available on mobile devices. In addition, MCC may

help reduce the energy consumption and save the

battery of mobile devices by utilizing cloud

resources, even if the device had sufficient

processing power to complete the tasks locally.

One of the most significant problems facing

mobile application developers is the fragmentation

of mobile space. As a result, a mobile developer

targeting a large user base has to create applications

for many different operating systems (OSes),

significantly increasing the effort and time required

in application development. Moreover,

fragmentation is an issue even within a single OS, as

new versions of an OS may not support old

applications.

The MCC concept offers a reasonable solution to

OS fragmentation by allowing developers to create

web-based applications that are stored on the cloud

and used through mobile browsers. Because no

application needs to be installed on the handset,

every mobile phone with a capable browser can

utilize services using this MCC approach. Although

this solution is dependent on the standardization of

mobile browsers on different OSes, these

standardization issues are much less significant than

the general problem of mobile OS fragmentation.

In our study, we extend these kinds of MCC

applications with application programming

interfaces (APIs) offered by mobile operators. These

APIs provide developers with additional capabilities

– such as user location – in a device-independent

manner, further decreasing the effect of

fragmentation. In addition, the messaging capability

provided by the APIs enables designing applications

268

Juntunen A., Suikkola V., Raivio Y. and Luukkainen S..

INNOVATION IN MOBILE CLOUDS - Analysis of an Open Telco Application.

DOI: 10.5220/0003385702680275

In Proceedings of the 1st International Conference on Cloud Computing and Services Science (CLOSER-2011), pages 268-275

ISBN: 978-989-8425-52-2

 2011 SCITEPRESS (Science and Technology Publications, Lda.)

that can reside wholly in the cloud and communicate

with the user device through SMS/MMS messages.

Thus, the basic functionality of these applications

may be available to all users, regardless of the

capabilities or OS of their mobile phones. This

concept of open operator APIs – called Open Telco

(OT), originally presented by Raivio, Luukkainen,

and Juntunen (2009) – describes a framework for

open telecommunications-operator network

interfaces, or OT APIs, that connect the operators

and external service developers together to form an

environment for telco mash-up services. The GSM

Association (GSMA) has been leading the OT API

standardization effort with their OneAPI

specification (GSMA, 2010a), which has initially

focused on text and multimedia messaging,

positioning, and payment capabilities. The pilot of

OneAPI in Canada provides a valuable foundation

for the progress of OT. Standardization will drive

OT as a key enabler for the success of mobile cloud

applications. However, the adoption of OT will

require new, revolutionary applications which

showcase the value of the system and drive the

ecosystem towards critical mass.

This paper presents a business model analysis of

what we have identified as a potential revolutionary

application for the mobile cloud: Event Experience

(EE) is a service which combines mobile event

tickets to socially-engaging complementary services

that enhance the experience of the event. The service

provides a unified event experience by utilizing a

combination of mobility and social networks

through the use of Open Telco (OT) APIs. The

service utilizes all of the mobile capabilities offered

by the GSMA OneAPI v.1.0 standard (GSMA,

2010a); that is, text and multimedia messaging,

positioning, and payment capabilities.

2 METHODOLOGY

This paper utilizes case study methodology, which is

defined by Yin (2003) as an empirical inquiry

focusing on a contemporary phenomenon along with

its real-life context, which may not be clearly

separated from the phenomenon itself. The single

case study used in this paper is also known as an

intrinsic case study (Stake, 1995), which examines

one specific case in depth. In contrast, instrumental

studies examine multiple cases and try to generalize

the phenomena observed in the cases into theories.

An intrinsic case study is well suited to examining a

service case that is under development and not yet

on the consumer market.

In this case, the focus is not on generalizing the

findings of the case into theory, but on

demonstrating the potential of the Open Telco (OT)

concept in promoting service innovation by utilizing

a specific service as an example. We implemented

an internal prototype of the Event Experience

application in order to gain practical knowledge of

the OT service development environment. We

analyze the business model of the service and

include the lessons learned from developing the

application as part of the analysis. We apply a

service-science perspective in the analysis of the

application by utilizing the Service, Technology,

Organization, Finance (STOF) framework that was

specifically developed for analyzing business

models of mobile services (Bouwman, De Vos, and

Haaker, 2008). The model provides a holistic view

on business models: the service domain concentrates

on the value proposition of the service, the

technology domain on the technologies required to

deliver the service, the organization domain on the

value network, the roles, and value activities of the

different actors within the network, and the finance

domain on the income and cost models of the

service. This study highlights issues critical in

launching a developer and service ecosystem

utilizing OT.

3 THEORETICAL

BACKGROUND

3.1 Service Innovation Diffusion

The diffusion of innovations typically follows an S-

curve, which plots the number of adopters of an

innovation against time. The S-curve illustrates the

slow initial adoption of an innovation when

awareness of the innovation is being built, a more

rapid increase of adopters as the innovation becomes

more popular, and a decreasing rate of adoption as

the innovation saturates the market.

A key element in the S-curve is the critical mass

of adopters. When the critical mass is reached, the

innovation reaches the takeoff stage, the number of

adopters rapidly increases, and the diffusion of the

innovation becomes self-sustaining. For many

innovations, this phenomenon can be due to supply-

side economies of scale and/or network effects. If an

innovation exhibits positive network effects, the

innovation becomes more valuable the more users

adopt it. This phenomenon is often known as

Metcalfe’s Law, which states that the value of a

INNOVATION IN MOBILE CLOUDS - Analysis of an Open Telco Application

269

network is directly proportional to the square of its

users (Shapiro and Varian, 1999).

Our focus is on the early stage of innovation

diffusion, when the service in question has not yet

reached critical mass. Rogers (2003) highlights

several characteristics of an innovation that

influence its adoption: the relevant advantages of an

innovation over existing systems, the compatibility

of an innovation with the adopters, the complexity of

an innovation, as well as the trialability and

observability of an innovation.

3.2 Value of Service Experimentation

In incremental service evolution, it is possible to

assess the market and make financial analyses before

the beginning of service development, whereas in

the case of radical service innovation, the market

analysis contains considerable uncertainty. The

problem is often that in the latter case, more

attention is focused on the differential technological

advantage the new service will offer over the

existing solutions rather than on customer benefits

and commercial opportunities (Veryzer, 1998).

Successful new service innovations are

influenced by the renewal of the related technology

platforms. The use of modular system architecture in

the introductory phase of a new communications

platform, when the market uncertainty is high,

provides a larger field of options from which to

select according to later market development and

emerging customer needs (Gaynor, 2003). The

modular structure – such as the one used in the Open

Telco service platform – enables cost-effective

experimentation of suitable new services, especially

when they are targeted at latent needs of end users.

These needs tend to develop from basic features into

more advanced ones during such an experimentation

process (Clark, 1985; Thomke, 2003).

New services should be developed by phased

approximations and finally approach the market on

the basis of better information in circumstances of

lower uncertainty. Identifying critical success factors

in an early phase makes it easier and cheaper to react

to any problems and to approach the right market

segments by correct timing, differentiation, and

pricing.

4 ANALYSIS OF EVENT

EXPERIENCE APPLICATION

4.1 Service Domain

The essence of the service is described by the

following use scenario:

Alice and Bob find an interesting event on their

favorite social networking site. They click to attend

the event and notice the EE service is available for

this event. They order the service by specifying their

mobile subscriptions to the application and receive

admittance and complementary bus tickets by MMS

and/or SMS. On the event day, Alice and Bob are

heading to the venue well in advance as the service

informs them a rush is expected. Their phones alert

both at the same time – the organizer is guiding

them to use Gate B as Gate A is crowded. They get

in and find their seats in no time with the area map

included in the service. Now it is time to read the

latest comments by other visitors on the event wall

and see if any of their friends are located at the

venue. The organizer also invites Alice and Bob to

take part in polls. After the event, Bob orders some

merchandise through the EE page; he can

conveniently pay for the order by mobile phone.

The value proposition of EE is to reduce the

effort and enhance the experience related to events

by offering a unified service bundle to event

attendees. The value proposition is achieved through

service integration, or bundling, which can increase

the user value of the service bundle to more than the

sum of its parts (Bouwman et al., 2008). The bundle

includes end-user services such as:

• Event information service providing the event

program, schedule, and seating chart.

• Proactive crowding avoidance at the venue

• An event-specific blog and media feed, through

which the attendees can receive and send

messages to each other.

• Polling and voting system, for example, for

voting the encore song or rating the previous

song at concerts.

• Friend-presence service for checking if a friend

is attending the event.

• Public transportation ticket or a navigation

service to the venue.

• An event store that can offer video recordings

of the event, song downloads, or other event-

related merchandise available for purchase

through the event-store system by download or

delivery.

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In addition, EE includes an organizer service,

which offers the event organizers an easy way to

interact with their audience as well as the benefits of

mobile ticketing. A key element in the service is that

it allows practically any user to act as an event

organizer with relatively low effort. Benefits for the

event organizer include decreased ticket distribution

and processing costs, increased sales through the

Internet, ticket validation to prevent ticket misuse,

and effortless reach of audience through organizer

web client. For example, the event organizer can

send SMS messages, issue SMS polls, moderate the

event blog, and issue crowding alerts to event

attendees.

In the EE service, the target customers and end

users for the ticket service are event attendees,

whereas the target customers and end users for the

organizer service are event organizers. Thus, for the

sake of simplicity, event-attending customers are

referred to as the user and the event-organizing

customers as the organizer. The core service for

these users is formed from the ticketing and event-

specific information and social-networking features.

There are some existing services in the event-

ticketing industry to which EE can be compared to.

For example, in Finland, Steam Communications

provides electronic-ticketing solutions for mobile

and e-mail delivery (Steam Communications, 2010);

however, the service has focused only on the actual

ticketing and admittance service, aiming to realize

the benefits of mobile ticketing. The system is

realized by machine readable matrix barcodes, that

is, 2D barcodes and numeric codes. A case example

utilizing the Steam Communication ticketing system

is Tiketti ticket office (Tiketti, 2010). Tiketti

provides electronic tickets via e-mail, SMS, and

MMS at the same price and lower service fees than

regular tickets. In addition, Twitter could also be

considered as an alternate service to the event blog

and media feed service component, which offers

similar benefits for connecting event-specific

comments to an event through tagging (Twitter,

2010). However, Twitter does not directly enable

posting media, such as pictures, video, and audio, to

the blog feed and it is up to the users to tag the

messages to some specific event, while in Event

Experience tagging is done automatically. Another

comparable case, in terms of the event-blogging

service, is the experiment of the Finnish national

public service broadcasting company, Yleisradio,

displaying Twitter tweets on television screens

during Eurovision Song Contest 2010 via Teksti-TV

teletext system (Yleisradio, 2010). Feedback for the

experiment was largely positive (Silvast, 2010),

which would imply that similar services could be

successful in the Event Experience context as well.

The feedback also requested integration of voting

element to the service, which would imply that the

voting and polling service in Event Experience is a

compatible part of the service bundle. Estonia based

company Mobi Solutions has also developed an

SMS-based mobile voting system called SMS-voting

for arranging polls during events (Mobi Solutions,

2010). Table 1 presents a comparison of the features

and benefits between the EE core-service to the

presented existing services.

Even though many of the service components

present in EE are available as separate services

through separate service providers, similar services

taking advantage of service integration to the degree

of EE are not presently available. Thus, the main

benefit of EE over the alternate services is service

integration. In addition, EE provides some unique

benefits presently not available in other services,

such as a system to interact with the event organizer

during the event; for example, through the voting

and polling system. Furthermore, telco billing and

charging capabilities can reduce the effort of

purchase, since the transaction can be charged

directly to the mobile subscription whereas the

current charging systems provided by ticketing

offices usually require manual per-purchase

payments, for example, via online banking. The

effort of using different service components in EE

can be minimized by integrating the user interface

Table 1: Comparison of Event Experience core service to alternate services.

Feature / Benefit

Event

Experience Tiketti

YLE-

Twitter

SMS-

voting Facebook

Mobile ticket-distribution

X X

Mobile ticket-purchase

X X

Ticket validation

X X

Context-specific messaging

X X X

Sharing context-specific media

X X X

Polling and voting

X X

Audience - organizer interaction

X X X X

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for all of the components in a single, browser-based

application.

To summarize, the value proposition of EE for

the user forms through a tightly integrated,

experience-enhancing, socially engaging, and in part

unique service bundle for event attendees, providing

a unified event experience before, during, and after

the event. For the organizer, the value is created

through providing a low-weight, mobile interaction

channel to the users as well as through the benefits

of mobile ticketing. The final quality of the value

proposition will depend on the degree of integration

in the bundled services. Integration to existing social

networking services is crucial in order to take

advantage of existing online social communities.

4.2 Technology Domain

As per our definition of the mobile cloud paradigm

presented in Section 1, the whole EE application is

placed on cloud infrastructure, such as the public-

cloud service Amazon EC2 (Amazon Web Services

LLC, 2010). Thus, the processing requirements on

the end-user device are decreased. Moreover,

services using this approach are not as reliant on the

capabilities of end-user devices and can be targeted

to a wider range of mobile phones. Furthermore, if

no application is required on the handset, adopting

the service will be easier for the user, and the service

deployment process becomes much simpler for the

service provider. Another substantial benefit of

placing the EE application in the cloud is the

capability to overcome the fragmentation problem of

mobile operating systems.

A prototype version of the EE service was

developed during September-October 2010, which

included a subset of the features described in Section

4.1. The main focus of the prototype implementation

was to build a proof-of-concept application. For this

version of the service, we had to implement mock-

up versions of the functionality because some of the

technical capabilities of GSMA OneAPI standard

were not available; instead, we utilized the

proprietary open APIs provided by a single operator.

We do not see this as an issue as the goal for this

version was to build a prototype, which is to be used

to showcase the value proposition. More

specifically, mock-up functionality was done in

context of the payment capabilities.

The prototype project was carried out in

cooperation with University of Helsinki Department

of Computer Science as part of the Software Factory

program (Software Factory, 2010). The prototype

was developed during a seven-week period at the

Software Factory. The total development effort

accounted to about 500 hours.

The primary features of the prototype included

preliminary versions of the user and organizer

applications and integration to the Facebook social-

networking platform (Facebook, 2010). The

Facebook platform was chosen because it is

widespread and the de facto event publication site

and because it connects visitors, friends, and events

In addition, Facebook enables content sharing and

provides open interfaces for additional applications.

The usable functionality of the prototype was

limited to the event-wall feature, SMS/MMS-based

mobile ticketing and payment mock-ups, as well as

messaging. The system architecture was based on

the Model-View-Controller model, which allows

extending the functionality: new features can be

added later; for example, based on user or other

stakeholder feedback for the service prototype.

The most significant challenges for the

implementation were created by the actual

integration to external systems – more specifically,

the Facebook social-networking platform integration

proved to be problematic. Thus, even though Open

APIs are a key enabler for the new cloud-based

applications, they can also create significant hurdles

for the external service-developer. One example of

such hurdles is poor documentation of external

APIs, which will in effect destroy the low barriers of

experimentation and entry. Thus, the external APIs

impose both technical and business restrictions and

dependencies for the developer. The technical issues

are already being addressed by the GSMA OneAPI

standard, which facilitates an experimentation-

friendly environment in the context of OT APIs.

4.3 Organization Domain

As the organizational model of OT, this study

assumes the so-called virtual-broker model, in which

the operators act as a single access point to the

common network capabilities of a cross-network

environment (Raivio, Luukkainen, and Seppälä,

2011; Suikkola, 2011). A similar multi-operator

value network exists also in the recently launched

Finnish mobile certificate service, in which the

operators have co-operated exceptionally closely

(Mobiilivarmenne, 2010).

Figure 1 shows an example of the value network

for EE. The most central role in the value network is

naturally dedicated for the service provider who

manages the service integration and is responsible

for the operation of the service as a whole. Different

service components can be implemented by

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leveraging existing external systems through Open

APIs; for example, in case of public transportation

tickets, cooperation is required with local public

transportation companies. The service may also

benefit from using external providers for other

components as well; for example, it is possible to

integrate with social networking platforms for the

event wall and cooperate with existing online stores

for the event store.

Figure 1: Event Experience Value Network.

The role labeled service component providers

also includes hosting and cloud infrastructure, which

allow the service application to run on the cloud.

The role of the operators and the virtual broker is

providing the required mobile capabilities, such as

positioning and payment capabilities. The operators

also provide accessibility to the end users,

advertisers, and other possible partners through the

virtual broker. The role of the ticketing office is not

mandatory: if the EE service is targeted for the

existing event-ticketing market, competition with the

existing ticketing offices will be fierce. Thus,

targeting this market would most likely require

cooperation with the existing ticket offices.

However, the EE service would be more suited to

serve the event organizers who currently do not

utilize tickets because of the lack of a service such

as EE, thus creating a completely new market of

ticketing.

4.4 Finance Domain

The service provider will benefit from the OT

approach by taking advantage of cloud infrastructure

and external open APIs, which allow entry to the OT

ecosystem with minimal upfront capital investment.

Furthermore, the use of cloud infrastructure allows

rapidly scaling up the service in case it becomes

popular with the end users.

The most important investment in this case is the

application development and service-component

integration work. Integration of ticketing, social

networking, location-based services, and online

stores to one application is a substantial task and

presents considerable risks. The risks can be

mitigated by modularizing the system; for example,

a critical end-user mass could be built by a socially

engaging, context-aware event service and later

capitalized on by including the other components.

Our prototype implementation efforts provide

insight to the costs of such an investment. About 500

hours were spent on the implementation of the

SMS/MMS messaging functionalities and on

integrating to the event and social-networking

features of Facebook. We estimate that another 250

hours of development would be required before the

implementation would be able to fulfill the core

value proposition of the service. Assuming a

development effort cost of 20€ per hour, the

implementation investment would account to

15 000€. However, this figure can only be

considered a rough estimate.

Operational costs sources for EE include the

telco capability costs, cloud infrastructure costs, and

service operation and marketing costs. The most

important of the OT capabilities is the payment

capability; without affordable telco payment

capabilities, EE will most likely fail. For example,

70/30 revenue share (GSMA, 2010b) of the

capability is unacceptable from the EE provider

point of view, since the service provider will likely

be unable to add a 30 percent margin in the ticket

price just for the payment-capability provider.

Moreover, ticketing offices and online stores already

have their existing billing and charging capabilities

in place, which are usually implemented using credit

card or electronic-banking based methods of

payment. Operator billing and charging capabilities

do offer the advantage of decreased end-user effort

but suffer from the disadvantage of increased credit

risk and working capital for the ticketing office. This

credit risk is due to service consumption preceding

payment of the service. As mobile subscriptions are

often post-paid, this becomes a very real risk for the

service providers, who may be required to wait up to

90 days to receive the payment from the operators

(GSMA, 2010b).

The feasibility of the location-based features will

depend on the pricing of the positioning capabilities.

It is unclear whether the location-based

functionalities add enough value for the end users to

be willing to pay extra for them. Thus, the costs

would have to be covered by other means, such as

through advertising revenues. Operation costs are

also significant in EE. For example, labor may be

required in handling the voting and polling results.

Virtual Broker

Operator

User

Developer

Service provider

Advertiser

Ticketing office

Event organizer

Service component

providers

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273

The most important revenue streams for the

service provider come from the users, organizers,

and advertisers. In addition, the service provider and

the external service component providers can share

revenues generated through the use of these service

components – assuming the service component is

not free for the user. However, the model does allow

free-for-user service model.

5 DISCUSSION

We have identified several factors that contribute to

the potential success of the Event Experience (EE)

service. First, EE provides a bundle of numerous

related services, which increases the value of the

whole service for the end user to more than the sum

of its parts by enhancing the user experience and

reducing the effort required to use the service

(Bouwman et al., 2008). This kind of service

integration is currently lacking on the market, which

is why EE enjoys a relative advantage over existing

solutions (Rogers, 2003). Second, event organizers

benefit from the service through increased

interaction with the users as well as through the

advantages provided by mobile ticketing. Third, EE

allows any end user to conveniently arrange ticketed

events. In addition, EE is particularly suitable for

smaller events, where ticketing is currently

underutilized. Fourth, the virtual-broker model helps

simplify the value network and maximize the

potential user base.

In addition, mobile cloud computing (MCC) and

Open Telco (OT) provide numerous benefits for

service developers in general and for the EE service

in specific. First, EE benefits from the general cloud

computing advantages that hold in the mobile space

as well: reduced need for investments in computing

infrastructure, better overall utilization of computing

resources, and the option to rapidly scale up the

service as needed. Second, MCC benefits the EE

service by reducing OS fragmentation, energy

consumption in mobile devices, and dependence on

end-user handset capabilities. In addition, the EE

application is easier to deploy and it can be used

with essentially any mobile phone as well as by any

subscriber of an operator offering standardized APIs.

On the other hand, the EE service is dependent

on the APIs on which the service is built, which

imposes both technical and business restrictions.

From the developer point of view, it is essential that

open APIs are stable and backwards compatible.

Furthermore, alternative sources for the open API

information are required in order to avoid vendor

lock-in risks. Alternatives are available for the

telecom APIs, such as messaging, location, and

payment methods, but replacing a dominant market

player such as Facebook is difficult, at least within a

short time period.

In general, OT can enable service developers to

create services quickly and cost-effectively. Using

this approach, it may be possible to target niche

customer segments and create profitable services in

the long tail because the costs of the services remain

low. This type of easy service experimentation,

supported by the modularity of the OT system

architecture, may also allow creating new iterations

of services that better correspond to latent customer

needs (Gaynor, 2003). In addition, because these

services are not tied to any one device, operating

system, or application store, the potential market of

OT services is very large. The EE application

demonstrates the possibilities of the OT approach

and hopefully motivates the development of similar

services. By utilizing open APIs, EE and other OT

services may leverage existing external assets both

in the Internet and in the mobile space, thus

increasing the chances of success in the early phase

of service diffusion.

6 CONCLUSIONS

We have presented a mobile cloud computing

approach called Open Telco (OT) that utilizes the

opportunities offered by open APIs. We

implemented an example OT application, Event

Experience (EE), and analyzed it using the STOF

framework. The preliminary results indicate that the

OT approach has clear benefits compared to

traditional applications installed in mobile devices

and is well-suited for start-up companies, potentially

fostering new ICT entrepreneurship.

Although we have highlighted some key benefits

of the OT approach by analyzing the EE service, the

study has some limitations. The study focuses on

only one service, which limits how far we can

generalize our findings of the OT ecosystem and

service bundling. Facebook provides an attractive

platform for service bundles, but platform

limitations restrict its usage at the moment.

Moreover, the service in question is still a prototype

and not in consumer use, and the APIs used were

proprietary and provided by a single operator.

Thus, we would like to analyze other OT

services in the future and use multiple-case-study

methodology to present conclusions about the

service development ecosystem in question. In

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addition, we would like to implement a true pilot

with live users in a multi-operator environment.

ACKNOWLEDGEMENTS

The work is supported by Tekes (the Finnish

Funding Agency for Technology and Innovation,

www.tekes.fi) as a part of Cloud Software Program

(www.cloudsoftwareprogram.org) of Tivit (Strategic

Centre for Science, Technology and Innovation in

the Field of ICT, www.tivit.fi).

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