Swisscom’s architecture leads discuss how the changing telecom industry must think twice before opening hugely profitable data assets to external developers.
The telecoms firm is using APIs to boost new revenue streams across Internet of Things (IoT) and M2M businesses to deflect dropping voice revenues.
As the leading provider in Switzerland and with international reach, Swisscom has over 20,000 employees and generated CHF 2.82 billion (£1.9 billion) in the first quarter of 2014. It offers mobile communications, fixed networks, internet and digital TV to enterprise and residential customers. It is one of Switzerland’s largest IT providers.
But like many enterprises, Swisscom is in a state of flux. Not only is it currently migrating legacy IT systems to the cloud, while offering its own customers cloud services, but its entire business focus is shifting.
“From a strategic and technology point of view we are moving from old legacy structures," said Frank Fitzlaff, head of Swisscom’s API programme.
The company is “cloud-enabled” but Fitzlaff estimates it will be between five and eight years until it has finished migrating from legacy telecom systems to software based networks.
“We are following that migration all the way through to become a completely cloud enabled business but we also need certain technologies like Application Programmable Interfaces (APIs) as they are an important foundation,” Fitzlaff adds.
APIs merge the data silos
APIs allow companies to stream data assets between backend systems so they can be used to pool data and combine silos. They can be opened internally or externally so that developers can use the data to create applications of their choice.
Some of Swisscom’s APIs make its cloud possible and provide a way to easily access its 120 other ports from virtual machines (VMs).
These APIs have become a key part of Swisscom’s reinvention; a necessary move to keep afloat in the changing communications market.
“Revenue streams are declining in core areas like voice and messaging,” Fitzlaff admitted.
“We need to find new fields of expertise to do this and we will not find big areas like voice and messaging anymore, but a lot of smaller items in the healthcare or energy solutions.
“In all of these small areas we will compete with lots of internet companies and that means that we have to be capable to be competitive with them - not only in terms of the offering but in terms of speed, trialling and incorporating feedback and being faster. And that is why we needed APIs."
APIs as new revenue streams
Companies are opening API programmes for different reasons. Some are purely for charging developers for data assets so they can build their own apps, some are to get developers to create apps the company can use itself, and some are for branding, like in Coca-Cola’s case.
But since opening its API programme in 2012, Swisscom has started to realise that sometimes APIs give back data too good to give away.
“Our current revenue streams don’t currently come from APIs”, says John de Keijzer, Swisscom's head of enterprise architecture & technical strategy.
“We just released an API that converts your IP address into your zip [post] code which is a very useful API for target marketing.
“The departments that are responsible for revenue in marketing saw a great opportunity, however we are just launching some new key services for residential customers and actually in that context we see more value to keep it to ourselves than actually giving it away.
“It’s a new paradigm where you have to make a trade-off between where does the API give you a better return on investment? Is this for new or existing services you provide yourselves or is it something that you provide as an enabling technology to market?”
The latter will form Swisscom’s armour in the battle of the M2M, TV and healthcare race that will consume all telecom providers. Swisscom will hold onto any API that will help them to become market leaders in those fields.
Telcos take the upper-hand in the big data stakes
“You need real industry knowledge for the healthcare field, but it needs secure channels to transfer customer, or patient, information. It needs secure stores to secure this data and it needs identity checks to make sure that someone cannot access this data. These are examples of capabilities that we have that we want to offer the market as APIs” de Keijzer tells ComputerworldUK excitedly.
But another trade-off needs to be taken into account – the customer. Public perception and treatment of sensitive information is intrinsic to how Swisscom operates, de Keizjer adds.
“In our case we care about our customers. We will probably never provide some [identity] APIs [externally] even though it could be very profitable."
We can't compromise trust
“We are more on the cautious side because of the brand. It [Swisscom] is a company associated with a lot of trust. That is something we should not compromise in any way."
Like many companies who are just realising the importance of their big data, but set against the backdrop of Snowden’s disclosures and Wikileaks’ cables, de Keijzer admits that, “there is a real opportunity but that balance is something that we have to learn.”
He says: “API technology is pretty simple but the whole mindset and cultural change is what makes it so exciting.”
Some of Swisscom’s APIs to be available by 2015 include:
Each developer gets 100 SMS per month for free, after that there will be a usage charge. Swisscom said that SMS is hugely important for developers still, with barely any apps being created without it.
Carrier billing API:
Developers can create cross-operator apps. Every transaction requires the explicit consent of the end-user with an authentication/authorisation feature.
All customer and partner records will be put on a meta-identity system for six million customers “very soon”.
This will ensure external partners' customers are older than sixteen or eighteen years old to sell them specific products. This will allow developers to create apps for alcoholic beverage purchases, for example.
This API will use end-user authentication to see all of its information across Swisscom and its partners in one place.