There will be more change in the next 10 years than there has been in the previous 100. This paper describes these expected foundational shifts and explains how we can manage them to our advantage. In their latest discussion presentation "Winning the Game", Geoff Hollingworth, Ericsson North America Evangelist, in collaboration with Jason Hoffman, founder and CTO of Joyent, discuss what these changes will mean for devices, the cloud and the network. This interactive presentation is supported by 8 videos. It describes the foundational changes that will occur across industries and networks, and attempts to explain how we can manage them to our advantage. The target audience of this paper is those who are involved in planning, building and profitably operating digital networks.

1. ericsson discussion paper
Geoff Hollingworth, Ericsson North America,
Ericsson Evangelist, in collaboration with
Jason Hoffman, Founder and CTO Joyent
winning
the game
There will be more change in the next 10 years than there was in
the previous 100. This paper describes the foundational changes and
attempts to explain how we can manage them to our advantage1.
The paper references various online thought-leadership articles and visuals, and links to the original material
1
wherever possible. Please contact the author if any of these references need updating or removing. We hope
we increase visibility for everyone.

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3. Table of Contents
Introduction ................................................................................... 4 Video: “End to End Guaranteed” ................................................... 2
2
Video: “Setting the stage” ............................................................. 5 Control The Performance .............................................................. 3
2
Everything Changes ...................................................................... 6 Analogous to Shipping ................................................................. 4
2
No Guarantees .............................................................................. 8 Video: “Shipping Analogy” ............................................................ 5
. 2
Mobile +x = Mobile ....................................................................... 0
1 Analogous to Shipping .................................................................. 6
2
Speed of Change .......................................................................... 1
1 Nature, Machine, People ............................................................... 7
2
Video: “Apps The Unit of Disruption” ............................................ 3
. 1 Video: “Machine People”............................................................... 8
2
The Unit of Disruption ................................................................... 4
1 Nature, Machine, People .............................................................. 9
2
Video: “The Mobile Internet” ......................................................... 6
. 1 In Summary ................................................................................... 0
3
Moving Compute Into The Network .............................................. 7
1 Video: “Summary Video” ............................................................... 1
3
Europe Alone-More Cloud Computing ......................................... 8
1 The Three Things to Remember ..................................................... 2
3
The Mobile Internet ....................................................................... 9
1 Winning The Game ........................................................................ 3
3
Video: “Moving Compute” ............................................................. 0
2 What’s Next ................................................................................... 4
3
Moving Compute Into The Network .............................................. 1
2
WINNING THE GAME 3

4. introduction
The first paper, “Changing the Game Before the Game Changes You,” attempted to place the
massive business changes we are currently experiencing into a simple and understandable
framework. This second paper in the series, “Winning the Game,” explains what conclusions
can be drawn and what actions can be taken if these conclusions are to be believed
Today, the leaders of major industries are be- The target audience of this paper is those one the estimated 50 billion devices that will
ing challenged, seemingly overnight, power- who are involved in planning, building and be used in 2020.
less to control their own destiny despite their profitably operating digital networks. In North
legacy, strength and footprint. Change is America alone there is a predicted 80-billion This paper introduces the concept of appli-
happening at an exponential rate and hu- dollar shortfall top line by 2020, even if the cation and associated data generated from
mans are not naturally engineered to cope only goal is to maintain today’s 4.9% CAGR. them.
with such a rapid pace of change. Before the Bottom line operational costs are also chal-
Industrial Revolution, technological change lenged due to growing data demand versus It introduces the powerful concept of com-
over a normal human life span of about 40 limited associated revenue growth. bining next-generation networks with next-
years was almost nonexistent. We now live in generation compute and the beneficial side
a world that is very different from what it was This causes the need to re-invent the value effects of improved performance, security
as recently as five years ago. proposition of the network in the future eco- and transparency.
system of the networked society. In the previ-
This means the impact of the technical revo- ous revolutions, the network first powered the Finally, it introduces the era of guaranteed
lution starts to impact immediate business disruptive unit of the fixed phone, followed by end-to-end delivery and the associated new
planning cycles. There is a need to embrace the disruptive unit of the mobile phone. The business models that this entails...
the fantastic as part of the immediate future. next-generation disruptive unit to society is
Those who do, will find competitive advan- the application. The customer of the disrup- Welcome to winning the game…
tages. Those who do not will be challenged to tive application unit is the mobile user, be that
maintain their status quo. one of the 7 billion people on the planet, or
WINNING THE GAME 4

5. setting
the stage
http://youtu.be/q-GY6TVttu0
WINNING THE GAME 5

6. Everything
changes
Everything you assumed to be a
strength yesterday may become
a weakness tomorrow, and every-
thing you thought was a weakness
today may potentially become a
strength tomorrow.
WINNING THE GAME 6

7. Everything
changes
For the first time since the Industrial Revolu- dated. Data subscriptions and revenues are
tion it is possible to distribute products and growing but once the market is saturated,
value digitally rather than physically. Once they will also decline. In North America alone
“While operators continue to make
digital, they can then be further enhanced it is predicted that there will be an 80-billion large infrastructure investments,
or even completely re-invented. It would be dollar top line gap by 2020 even with modest others in the value chain are
natural to believe that the digital network a 4.9% CAGR, whereas even simple mobile
provider would reap the most benefits from application revenues are expected grow at a
capturing most of the value”
such a transition. However, unless they 67% CAGR.
also change, this may not be the case. The
existing business model of selling phones to Service providers must re-think their core
create future revenues generated by voice, business and refocus on the growing seg-
SMS and roaming fees is becoming out- ment of application delivery.
NA Operator Service Revenue Projections 2007-2020 ($B) North American Mobile
(Projection based on “as-is” revenue sources – Voice, Messaging, Data) Applications Revenue
300
272
286 (USD B)
259 36,4
247
225
236 GAP
2007-2011 214
220 225 228 230 229 227 220 CAGR CAGR
CAGR 4,9% 204 212 67%
29,3
8,7 120%
186 194
167 174 5,3
160 97 106 113 118 121 122 121 117 23,2
64 75 86 CAGR
33 42 51 3,2 9,5 89%
6,7
16,3
4,7
1,7
2,9
8,6
0,7 CAGR
1,4 12,2 13,4 14,6 45%
2,8 9,9
0,4 6,0
2,2
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2010 2011 2012 2013 2014 2015
Forecasted Voice Revenue Forecasted Data Revenue Revenue at Continued 4,9% Growth Rate Download Revenue Advertising Revenue In-App Purchases
Source: Yankee Group, Pyramid Research, Parks Associates, Sources: Distimo 2011, KPCB Top 10 Mobile Trends 2011, Yankee
Strategy Analytics, inCode Analysis 2011 2010, ABI 2010, Pyramid 2010, Gartner 2011, inCode Analysis.

8. No
guarantees
Camera film was replaced by “Instagram”.
CDs were replaced by “iTunes”.
DVDs were replaced by “Netflix”.
Will our children even know what a phone is?
Do they know what a typewriter is?
How do they pay? What is the value?
Was it possible 5 years ago?
The difference between threat and
opportunity is opinion and attitude.
The difference between winning and losing
is the ability to execute on the fantastic.
WINNING THE GAME 8

9. No
guarantees
There is a need to embrace the
fantastic as part of the imme-
diate future. Those who do will
find competitive advantages.
Those who do not will struggle
to maintain the status quo.
WINNING THE GAME 9

10. mobile+x = mobile
When anything becomes mobile it tends to disappear.
Music players, cameras, credit cards, videos, boarding
cards, tickets and much more. What happens when
your core product disappears?
% of smartphone users who
no longer have…
Alarm Clocks: 54%
Wristwatches: 46%
Stand-alone cameras: 39%
Laptop PCs: 28%
Gaming consoles: 11%
TVs: 6%
Books: 6%
Ref: O2 Survey
“Mobile is the ultimate cannibal”
Ref: Tomi Ahonen
WINNING THE GAME 10

11. Speed of
change
The world is changing and the
pace of change is accelerating.
There will be an evolution from
industrial-driven transformation to
information-driven transformation.
This will change individual busi-
nesses and society as a whole.
WINNING THE GAME 11

12. Ray Kurzweil [ref], a well-known inventor who has re-
ceived 17 honorary doctorate degrees, predicts that we
Speed of will witness approximately 20,000 years’ worth of tech-
nological advances in the next 100 (when compared to
Change
the rate of change in the year 2000). Or to put another
way, we will see more change in the next 10 years than
we have seen in the previous 100.
By 2011 “the industry had reached a point where it was
realistic to form a start-up and launch an internet tech-
Exponential Growth of Computing based product for less money and in less time than it
would have taken to simply launch the website for such
1060
a company in 1997.”
1055
According to Kurzweil, a $1,000 computer will have the
Calculations per Second per $1,000
1050
computing power of the human brain by 2025. By 2045
1045
it will have the equivalent computing power of the total
1040
1035
human population.
1030
1025 All Human Brains
1020
1015 One Human Brain
1010 One Mouse Brain
105
1
One Insect Brain
“Change will never be
10-5
10-10 this slow ever again”
1900 1920 1940 1960 1980 2000 2020 2040 2060 2080 2010
Year Hans Vestberg, CEO Ericsson – at SIME, September 28, London
WINNING THE GAME 12

13. apps the unit
of disruption
http://youtu.be/6ig01FCowzg
WINNING THE GAME 13

14. The unit of
disruption
Since the 19th century, there have been net- unit of disruption is the app. Whereas the first household spending) but of everything else
work-driven units of disruption. The first was two units of network-driven disruption only as well. According to ABI Research [ref],
the fixed phone that went into all buildings focused on communication, the app focuses revenue from mobile apps stores could reach
and changed people and industries. Then on everything. And if we look at consumer $46 billion by 2016 (revenue including paid
the mobile phone went into the pockets of 6 spending (analysis by VisionMobile [ref]), this downloads, in-app purchases, subscriptions,
billion people, again transforming their lives provides an overview of not merely commu- and advertising), up from $8.5 billion in 2011.
and the businesses they work for. Now the nication spending (less than 10% of average
10% 10% 11%
Other (incl. comms) Insurance & Pensions
6% 6%
Healthcare
Transportation
13%
16% Apparel & Services
Housing
Food
4%
Entertainment
34% Other (incl. comms)
WINNING THE GAME 14

15. Applications and their data have to live on a platform.
The unit of
Successful platforms all give something away for free,
they have to figure out who pays them and most impor-
tantly how to get people paid.
disruption APPS DATA
FREE
INFRA-
PLATFORM PAY STRUCTURE
PAID
The challenge is to build an infrastructure platform that
enables people to maximize their share of the $46 billion in
the future and that adequately compensates the infrastruc-
ture provider for the competitive advantages it offers them
from a performance and business point of view.
Performance = real money. As presented by Walmart,
February 2012.
A large eCommerce site extensively A/B tested page
performance and published a study showing that a
100-millisecond delay = a 1% drop in revenue.
Search engines A/B tested performance and found
APP that a 500-millisecond delay caused a 20% drop in
traffic.
In an experiment across multiple retailers, a 1-second
delay caused a 7% decline in conversion.
Having optimal performance translates into real top-line
The question we have to ask is, How do we build the growth for any application provider. The infrastructure
platform provides such performance. The end-user of an
best network platform to enable the app to generate infrastructure platform of this type gets better quality of
the most money both for the app and for the network. experience and longer battery life for their device.
WINNING THE GAME 15

16. The mobile
internet
http://youtu.be/94FPVfmSh_4
WINNING THE GAME 16

17. moving COMPUTE
into the network
By 2017 there will be 5 times more mobile broadband subscriptions
than fixed ones, generating a substantial increase in mobile access to
applications as opposed to fixed line access.
Why then do all applications reside in fixed broadband? Data centers?
Change the game!
WINNING THE GAME 17

18. Europe The European Commission’s new
strategy for “Unleashing the poten-
Alone-More tial of cloud computing in Europe”
outlines actions to deliver a net
Cloud Computing gain of 2.5 million new European
jobs, and an annual boost of EUR
160 billion to EU GDPs (around 1%),
by 2020.
Key actions include:
Cutting through the jungle of tech-
nical standards so that cloud users
This will mean: get interoperability, data portability
and reversibility; necessary stand-
2.5 million new European jobs an ards should be identified by 2013;
annual boost of EUR 160 billion to support for EU-wide certification
EU GDP (around 1%), by 2020 schemes for trustworthy cloud
providers. Development of model
This will require: ‘safe and fair’ contract terms for
SLAs, certification, interoperability, cloud computing contracts includ-
data portability and reversibility ing Service Level Agreements [ref].
WINNING THE GAME 18

19. The mobile
internet
By 2017 there will be five times more
mobile broadband subscriptions than
fixed ones [ref]. Everyone developing
applications today is developing mobile
applications first, not fixed ones.
5x
We are in a world where we speak about an internet
that has clouds that has computers. It makes complete
sense from an internet point of view and has worked
fine for years. In reality the mobile internet is a whole
COMPUTING other set of networks and these other networks are
COMPUTING massive ones that are all between the core internet and
MOBILE INTERNET
the people and machines using it. The massive growth
DATA of the mobile internet is the place where application
developers want to work. What happens when you start
to orchestrate compute, applications and data start to
become resident in the mobile internet?
If applications start to execute inside the mobile inter-
net and traffic only goes to the public internet in excep-
tional cases, the result is an enhanced experience for
both the end-user and application developer, and also
improves the network management experience.
WINNING THE GAME 19

20. moving
compute
http://youtu.be/JNnuGrvsVRg
WINNING THE GAME 20

21. moving COMPUTE
into the network
If the objective for mobile carriers is to deliver opportunity is to move compute into the network.
a platform that is not just about network ser- The challenge is how to do this considering the
vices but also about compute and data services fact that up until now, mobile carriers have been
combined with the network, what are the oppor- very network service-centric, not compute-centric.
tunities? The objective is to provide application This is why Ericsson has an ongoing dialogue
developers with the best prerequisites, enabling with cloud computing experts like Joyent. It is
them to deliver the best end-user experience to advisable that all mobile carriers do the same, or
their customers – both application developers contact Ericsson and Joyent to find out what we
and the mobile carriers’ customers. There is an have already learned...
WINNING THE GAME 21

22. END TO END
GUARANTEED
http://youtu.be/125U-4jSVts
WINNING THE GAME 22

23. control the
performance
The opportunity is to take control of the digital logistics supply chain –
horizontally. Today, very large companies are doing this through vertical
integration. It is expensive, does not scale, time to market is slow, and it
cannot leverage the unique assets that are intrinsic to the private mobile
networks that are enabling the delivery.
The infrastructure platform enables the mobile carrier to control a digital
supply chain. The three important perspectives of this platform are:
Performance and Scale – to keep optimal growth
and service performance costs in line with demand.
Security and Integrity – preventing corruption
(security) and detecting corruption (integrity).
Transparency – real-time answers to questions such as
Why is my application slow, Why is my application down,
or When is it coming back?
When delivery is reliable or even guaranteed, this enables new
potential business models for carriers, such as indemnification.
All businesses today are being compelled to embed both network and
compute inside their core business operations but how do they know
if this is working; who “has their back” if something goes wrong.
If we can begin to answer those questions, we will have the opportunity
to become a preferred business partner to that company.
WINNING THE GAME 23

24. analogous
to shipping
“McLean’s true innovation was to un-
derstand that the core business of the
shipping industry was not operating
ships but delivering cargo and doing
so with the best performance possible.”
WINNING THE GAME 24

25. shipping
analogy
http://youtu.be/zBmRTul4U7I
WINNING THE GAME 25

26. analogous
to shipping
The digital supply chain business. Infrastructure as a platform; are
there parallels we can draw from other industries? The physical
shipping industry is a good analogy and the digital networks overlay
the exact same trade routes as those used in the Silk Road trading
days. If ports are data centers, networks are shipping routes, and
applications are the packages being transported, then we as a digi-
tal industry are using the same methods as before the introduction
of the shipping container in 1954: best effort, expensive, inefficient
or unreliable.
The shipping container enabled the global economy in the physical
world. Building the same operational model to ship applications in
the digital world will create the same economic transformation.
We ship applications today but without any intelligence. Include
intelligence!!
WINNING THE GAME 26

27. Nature,
machine,
people
“We’re proud to be able to connect Maersk
Line’s fleet with our technology. We believe in a
Networked Society where connectivity will only
be the starting point for new ways of innovating,
collaborating and socializing. The result will be
automated and simplified processes, higher pro-
ductivity, real-time information allowing quicker,
more informed decision making and problem
solving,” said Hans Vestberg. [ref]
WINNING THE GAME 27

28. Machine
people
http://youtu.be/JzVEUCMUvek
WINNING THE GAME 28

29. Nature,
machine,
people
When compute moves into the network, data becomes Where the data is stored
resident there too. And when the data becomes resident
in the network, then the network can control access to the Its legal compliance
data for the benefit of its users, for the benefit of the net- Its visibility
work and for the benefit of the data’s’ owners. Facebook
has disrupted Google’s ability crawl information since the Its regulatory trust
data is hidden behind Facebook’s proprietary interface. Data is valuable
Data in the mobile network can maintain open interfaces
but the owners of such data can sleep at night knowing: Use of data is priceless…
WINNING THE GAME 29

30. IN SUMMARY
WINNING THE GAME 30

31. summary
video
http://youtu.be/Mkth-zqiKwg
WINNING THE GAME 31

32. THE THREE
THINGS TO
REMEMBER
1 2
Apps + Data Compute + Network
Apps are the unit of disruption We need a truly holistic service
and they are merely lenses into delivery platform that is sitting
people’s data on the network. there saying let’s run apps well.
3
Guaranteed End-to-End Delivery
Across networks, compute and data combined. This changes why we build networks,
our desired operational model and our potential for new products, new business
models and new revenue streams.
WINNING THE GAME 32

33. winning
the game
It is a paradigm shift,
Your mobile network is not access,
it is distributed compute.
To continue the discussion...
Contact Ericsson
Contact Joyent
Follow us on Twitter:
@geoffworth
@jasonh
WINNING THE GAME 33

34. What’s
Next
The next paper in this series will focus on people and businesses that are embracing
the fantastic and are already preparing, planning and adapting to the paradigm shift
ahead. We would therefore love to hear your thoughts on these subjects and descrip-
tions of real case stories about companies that are leading the charge into the era of
the Networked Society.
Please send your feedback, thoughts and ideas to geoff.hollingworth@ericsson.com
for a chance to be featured in the next paper in this series.
WINNING THE GAME 34

35. references
1. Yankee Group, www.yankeegroup.com 10. Kurzweil, R.,
www.kurzweilai.net
2. Pyramid Research, www.pyr.com
11. VisionMobile (2012)
3. Parks Associates, www.parksassociates.com www.visionmobile.com
4. Strategy Analytics, www.strategyanalytics.com 12. ABIresearch (2012)
“In-App Purchases to Outpace Pay-Per-Download Revenues in 2012”
5. inCode Analysis (2011), www.incodeconsulting.com www.abiresearch.com/press/in-app-purchases-to-outpace-
pay-per-download-reven
6. Distimo (2011)
“Distimo Releases Full Year 2011 Publication” 13. European Commission (2012)
www.distimo.com/blog/2011_12_distimo-releases-full-year- Unleashing the Potential of Cloud Computing in Europe
2011-publication/ ec.europa.eu/information_society/activities/cloudcomputing/
docs/com/com_cloud.pdf
7. KPCB (2011)
“KPCB Top 10 Mobile Trends” 14. Ericsson, (2012)
www.kpcb.com/insights/top-10-mobile-internet-trends “Traffic and Market report, On the pulse of the Networked Society”
www.ericsson.com/res/docs/2012/traffic_and_market_report_
8. O2 Survey, (2012) june_2012.pdf
“Making calls has become fifth most frequent use for a Smart -
phone for newly-networked generation of users” 15. Ericsson, (2012)
news.o2.co.uk/?press-release=making-calls-has-become-fifth- “Maersk Line and Ericsson bring mobile connectivity to the oceans”
most-frequent-use-for-a-smartphone-for-newly-networked-gen www.ericsson.com/news/1576938
eration-of-users
9. Tomi Ahonen, (2012)
www.communities-dominate.blogs.com/brands/
284 24-0002 Uen, Rev A
© Telefonaktiebolaget LM Ericsson 2012