Included in the GSM standard almost as an engineering afterthought, there are now so many billions of SMS messages being sent around the world that even if the cost per message were to drop to fractions of a pence per message, there would still be enough of a revenue stream there to put a bounce in any network operator’s stride.
Gary Franklin, engagement manager for telecoms and utilities, Scient
“One of the absolutely key features about SMS is that customers discovered it for themselves. The service was written into the GSM standard by engineers, not by marketing people, and there was no telco, in the early days, who knew anything about selling SMS in volume. They were all taken by surprise as self-defining SMS communities of users sprang up everywhere.
The take up in Asia has been phenomenal. In the Philippines, for example, the campaign to impeach the president was massively SMS-based.
Today as far as business is concerned, the challenge is to develop true interactivity. Operators today need to begin with customer needs instead of starting with a technology and then hoping that customers will show up.
Our message to telcos is that they should create an environment and a platform for managed innovation, so that third party services can feed an emerging market demand. DoCoMo in Japan, for example, has done extremely well by creating an environment in which third parties are responsible for deploying applications.
Another important point about SMS is that it is a sign that services do not necessarily need high bandwidth in order to be efficient or to have a universal appeal. SMS-based alerts which point users to key chunks of Internet-based information, which the user then downloads later at a PC, look to us to be a very good way to go. Telcos need to examine their business models to find ways of growing this service in the corporate space.”
Tony Cooper, m-business director, and Tim Willey, m-business specialist, Arthur Andersen
“We have seen the most tremendous uptake for SMS. In the UK alone in August 2000, there were over 566 million SMS messages sent. It may have begun with the youth culture but today France Telecom is using SMS as a payment vehicle; in Italy, domestic electrical appliances can send SMS messages to the supplier’s maintenance section to say that they are running at less than optimum levels.
SMS is already a business platform. We reckon that where two years ago SMS was almost wholly a vehicle for chat in youth culture, today at least 10% of it carries business information and/or is integrated into business applications.
Initially everyone believed that SMS was just going to be a stepping stone until GPRS appeared. However Arthur Andersen and JP Morgan have just done a forecast on SMS which sees the revenue to the operator increasing from the £21 per user per annum reported in 2000, to over £35 by 2005, after which we see the service peaking, then slowly declining around 2010.
We also see an evolution in SMS through to full multimedia messaging. People are already looking way beyond short text messages. In combination with a personal area networking technology like Bluetooth, there is a tremendous range of activities and applications that could be developed.
Given the sheer volume of SMS messages, some of the UK and European operators are already facing some interesting load balancing and architecture challenges in terms of how they handle this flood of messages.
We have seen some tremendous revenue numbers for operators. Many had fixed the charge for an SMS message at around 50 cents, but if you total this across 20 billion e-mail messages, it dwarfs the income of, say, Microsoft’s global network in Europe. There was talk about operators charging each other an interconnect fee of as much as three pence per message.
It is hard to see how this could just be absorbed by the operators, so we may see a rise in SMS cost per message in coming months.”
Nigel Deighton, vice president, Gartner Group
“SMS is very exciting, and there will definitely be a next-generation equivalent once the mobile networks move to UMTS third generation services sometime in the next two years. The fact that the network stores the SMS message until the recipient is in range of the network makes it a very valuable addition to GPRS services.
SMS pretty well guarantees to get the message through, and this is one of its most important characteristics. However, I would not want to build a stock trading or auctioning system on it, since there is no guarantee as to time of arrival. It might be near instantaneous, or it may take an hour or two.
It is important to realise that SMS is a bearer service, not a protocol, like WAP. As with any bearer service you need to think what applications you want to put in place and then you need to identify the best adapted bearer service for that application. A company, such as a drug manufacturer or food processing operation, which needs to recall and replace stock, would find SMS a great bearer service. It is a broadcast service, which ensures wide distribution of the alert, and the sender can be pretty sure that all the recipients will get the message over the next few hours.
On a hierarchy of reliability, we see SMS as being at the top of the list, followed by a voice call, with a data call being the least reliable method.
One of the immediate practical uses corporates are discovering for SMS is as a replacement for mundane short duration telephone calls. If a meeting time changes, for example, it is much easier to send an SMS message with the fact of the change and the new appointment time, than it is to telephone the information through. The same goes for flight cancellations or delays and all similar ‘change of plan’ alerts.
We see SMS used in certain circumstances as a gateway service, allowing non-WAP mobile phone users to have access to WAP like services. One has to ask why the industry as a whole screwed up so badly with WAP, while SMS has taken off so well. The answer seems to lie in the importance of ubiquity and utility. WAP does not have a roaming potential abroad, since it relies on 0800 national numbers. SMS is truly ubiquitous. Less than 5% of the WAP sites out there do anything useful, and the vast majority of services deliver so slowly that they are, to all intents and purposes, broken. You cannot just take a WAP server and stick it in front of a normal website. Transcoding content as it leaves the website does not work, since it produces a very uninspired user experience. Moreover, the network operators who try to go down this route end up making people pay for dead time – for the delay until the service starts. Under these conditions the only control the user has is to switch off the phone, and it is no wonder that so many of them are switching off WAP altogether. SMS does not suffer from these drawbacks.”
Chris Bray, mobile e-business executive, IBM
“As IBM, our interest is in providing applications to operators, corporates and consumers, rather than in the SMS standard itself. However, we have spent a lot of time proving that our SMS applications offerings work.
We are getting a very interested response from mobile network operators who all want to know how they can drive new revenue streams before GPRS really takes off. Obviously, one of the ways that they can do this is to drive up minutes and services using SMS.
Right now our offerings include a mixture of off the shelf applications and bespoke work. Some of the solutions are generic, such as using SMS mobile services to draw down data from back office systems. Demand for this right now tends to be vertical market specific, such as claims browsing for the financial sector. Our Lotus Notes customer base has been a fruitful source of demand for SMS instant messaging extensions to core systems for field staff. The early take up so far has been in banking, broking, transport and distribution.
What we are finding is that whereas many companies initially looked to WAP to develop mobile communications, they are now moving away from WAP, because of service delays and other difficulties. Instead they are turning to SMS to provide them with a robust, simple solution.
From a mobile network operator’s point of view, SMS has been and is a phenomenally successful driver of revenue. The cost of one megabyte of SMS messaging totals to some £5,000. (Of course, this one megabyte includes a large number of 160 character SMS messages). By contrast, a megabyte of data transferred under GPRS will probably net the operator just eight pence. This comparison makes it very clear that SMS is wonderful from the telco’s standpoint.
One of the things we think will develop massively through 2001 is the use of instant messaging services on mobile phones. These services are migrating from the Internet, and the big advantage for field engineers and the like is that they can use the service to see which of their colleagues is currently logged on to the corporate LAN. This enables them to target a particular colleague and fire off an SMS query on a problem or issue directly to that person. You will get a good many systems utilising this capability as we go through this year.
Most of the money that will be made through 2001 in this space will be from enabling corporates to reach out more effectively to their field workers.”
Sean Collins, head of ICE (Information communications and entertainment), KPMG
“The popularity of SMS has a great deal of relevance for understanding other data modes, such as the failure of WAP in Western Europe. Keeping things simple and quick has obviously proved highly successful. For example, i-Mode in Japan meets these criteria and its success has been phenomenal.
Of course, adults tend to find typing SMS messages with a numeric keypad anything but simple. However, we now have innovations such as the Motorola V-box, which opens up to give the user access to a full, if miniturised Qwerty keyboard, so simplicity is back in the frame.
Almost no one predicted the huge uptake in SMS messaging and we are all evaluating it. My belief is that the 160 character limitation in the current version of SMS is a severe one. A second major reservation is the fact that it is store and forward, rather than genuinely interactive. These two limitations give me grave reservations about its ultimate success and longevity in the business market. If we look at e-mails and PCs, what we see is that this is about phenomenal amounts of information being transferred between users. I do not see SMS getting away with just 160 characters.
Even in the Far East, where it has been phenomenally successful, it has been limited to a consumer product, rather than a widely adopted business solution. We don’t see a new tide of business applications coming out of this, except perhaps as a bridging techology. That said, the great thing about SMS is its universality, and its strong base in the GSM world.
Today SMS is not a financial transaction carrier, and there are security issues to trying to make it into a mobile e-commerce tool. However, if you gave SMS more of a pipe than the current 9.6Kbps GSM data channel, there is no reason, in principle, why you could not send encrypted credit card details or some form of personal identity. Increasingly companies trading with the consumer on line will simply use the number to link to the same credit card details they used the time before.”
Gidi Beery, vice president of marketing, Converse
“When we look at what is happening in the cellular market, it is clear that operators are shifting their focus from the aggressive acquisition of market share, to revenue generation. The corporate user is far and away the best source of revenue and if the ISV community can help to transform the mobile phone into a mobile workforce terminal, this promises significant additional revenues for the operator.
There are two ways to accomplish this. One is to use WAP, the other, SMS. It is very clear that until GPRS arrives, and possibly even then, WAP is too slow to act as a useful mobile terminal data channel. It takes 10 to 15 seconds to connect with WAP and much longer for whole message downloads. In the 15 seconds that it takes to make a WAP connection the user could have downloaded 10 or more SMS messages. This makes SMS a much better tool for the mobile corporate user, in our view.
On top of this, SMS is also the most suitable media for pushing information from the corporate centre to a dispersed workforce. The kind of information we might see could involve changes to scheduling and alerts to sales staff about changed order dates (enabling them to take pro-active steps to manage this news to the client). We are already seeing SMS being connected to Microsoft Exchange, or Outlook, or Lotus Notes. There is no end to the number of potential applications in this area.
We are also going to see connectivity to ERP systems, which will allow line managers to push notifications out via SMS to the work force. This becomes even more powerful when you can open an interactive session, which allows two way communication. Right now our Open SMS protocol can manage a session over SMS, which allows the user to ask questions and which enables the corporate to respond. This is not a standard feature of SMS today, but it is a very powerful addition.
It has been said that the 160 character limitation of SMS will be a stumbling block for corporate applications. However, used correctly it is very rare that a corporate will need a messaging platform to send an alert that is longer than this. Of course, large messages can be sent in pieces (160 character chunks), known as concatenated messaging. You can even send pictures using SMS. If the display was good enough a corporate could forward a wiring diagram to a field engineer, for example.”
THE BUTLER GROUP: SPECIAL REPORT ON SMS
The Short Message Service (SMS), available with Global System for Mobile Communications (GSM) mobile phones, which started from very humble beginnings, has recently seen a rash of innovative applications announced utilising this simple technology. A number of technology solution providers have developed the SMS infrastructure to allow organisations to send information to their customers’ mobile phones.
This enables the many millions of mobile users to avail themselves of this functionality, as it does not matter what type of phone, or mobile operator, they currently use. A number of content providers have recently announced new SMS initiatives. This includes a live auction service via SMS in Switzerland and a new service in the UK which allows web content to be accessed on a GSM mobile phone by sending an SMS keyword.
A number of portals will also now permit a user to send a binary SMS message to a mobile phone updating various parameters and icons selected by the user.
The big picture
A record nine billion SMS messages are estimated to have been sent worldwide in August 2000, growing to 15 billion by the end of the year. SMS is fast becoming the killer application in the GSM mobile phone market.
The teenagers of today are beginning to see their mobile phones as a device for sending text from one to another, with a large percentage of them using the mobile phone just for text messaging.
Businesses are also starting to see the benefits of using this particular communication channel to connect with their customers, and to send targeted marketing. The slow take up of Wireless Application Protocol (WAP) mobile phones has prompted many content providers to re-think their wireless strategy, and ways of communicating with their existing customer base and their GSM mobile phones. Now that the technology is available, SMS provides a very cost-effective mechanism of pushing messages via the mobile channel.
Butler Group opinion
The use of SMS for more and more innovative applications is causing a subtle shift in mobile communications from voice to data, even though wireless technology is still in its infancy, and as yet does not adequately support data transmission. The popularity of SMS, especially among the young, should be seen as an optimistic pointer for the take up of emerging wireless technologies, such as General Packet Radio Service (GPRS), and Universal Mobile Telecommunications System (UMTS).
SMS should not be seen purely as an interim messaging solution, providing a welcome revenue stream, but as a useful loss leader, which can be used to attract consumers to services, and also as a means for holding onto customers that companies have spent time and money acquiring.
The operators and content providers who are planning to tap into this large potential market for SMS applications need to act quickly as the window of opportunity could well be very short. In the short term, SMS, which is uncomplicated and dependable, should endure through the implementation of broadband technologies. Successful companies will be able to evolve their tried and tested services from SMS, to WAP, based on GPRS and beyond, as and when the market demands more complex functionality and multimedia, and the bandwidth becomes widely available to support them.
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