Cannibalisation intrigues me

We’ve all heard the Kodak story. They invented digital cameras but stuck them in a drawer because it was going to cannibalise their dominant position in the photographic film revenue stream… eventually leading to bankruptcy.

Swisscom invented an equivalent of WhatsApp years before WhatsApp came onto the market. It allowed users (only Swisscom users, not external / global customers BTW) to communicate via a single app – calls, chat, pictures, videos, etc. Swisscom parked it because it was going to cannibalise their voice and SMS revenue streams. That product, iO, is now discontinued. Meanwhile, WhatsApp achieved an exit of nearly $22B by selling to Facebook.

Some network operators are baulking at offering SD-WAN as it may cannibalise their MPLS service offerings. It will be interesting to see how this story plays out.

What also intrigues me is where cannibalisation is going to come for the OSS industry. What is the format of network operationalisation that’s simpler, more desirable to customers, probably cheaper, but completely destroys current revenue models? Do any of the vendors already have such capability but have parked it in a drawer because of revenue destruction?

History seems to have proven that it’s better to cannibalise your own revenues than allow your competitors to do so.

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4 thoughts on “Cannibalisation intrigues me

  1. Ryan exactly! Relayed this Swisscom example internally at Telstra this week encouraging a development teams which has ‘accidentally’ created a technology with far greater potential to fork from their current mission and go global by exposing this through TMF APIs and a service marketplace.

  2. Sounds exciting! I look forward to seeing how that develops Matt!
    Good luck!

  3. “Some network operators are baulking at offering SD-WAN as it may cannibalise their MPLS service offerings. It will be interesting to see how this story plays out.”
    Is it just because SD-WAN has a poor ROI compared to replacing MPLS services or that SD-WAN is not up to task vs. MPLS?

  4. Fine question Sean!
    I’m going to completely sit on the fence on this one – mainly around the words “task” and “ROI” in your comment.

    In terms of task, each technology has its pros and cons, making each potentially suitable depending on the task the customer wants it to do (the cost/flexibility/scalability argument vs private/dedicated/custom networking).

    In terms of financials, I’m thinking more in terms of the reduced ARPU of SD-WAN rather than ROI mainly because I don’t have any data to show a trend in relative profitability / efficiency between the technologies across different carriers / markets. Have you seen any data relating to the ROIs of each?

    I’m intrigued to see whether one or the other wins out as a customer offering (analogous to IP vs ATM), or whether they will each carve out their own niche. ATM had a number of benefits, but ultimately lost out. Will MPLS do so too?

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