Dataquest Insight: How Google May Influence the Future...

DataquestPublication Date: 30 September 2008 ID Number: G00160974

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Dataquest Insight: How Google May Influence the Future Direction of Telecom Alex Winogradoff

Google's influence and market power with key communications industry stakeholders — regulators, ISPs, advertising, media customers and service providers — is significantly greater than its annual turnover of $17 billion. In this document we explore how and where Google has been able to exert influence over an industry with a 100-fold greater turnover ratio, as well as where Google is likely to exercise this influence in the future. We provide recommendations on carrier positioning options vis-a-vis Google.

Key Findings

• Google sees itself as becoming the information gateway to the world to fulfill its mission: "to organize the world's information and make it universally accessible and useful." This will require broadband access either by partnering with carriers or bypassing them.

• Google will do nearly anything to "change the game" in mobility by stimulating the pace of mobile innovation in devices and applications. It will focus on encouraging device vendors to develop "smarter" edge devices, including spectrum-sensing technologies.

• Google still considers carriers primarily as foes rather than partners, thus it has chosen a path of disintermediation to disrupt traditional carrier ecosystems. Its Linux-based Android platform and activities within WiMAX, White Spaces (Interlaced) Spectrum and over-the-top voice and video services have already caused carriers to shift strategies.

• Google uses a "Trojan horse" strategy to gain prime device real-estate. It encourages loading its Toolbar, personalized Web page, Chrome browser and free Google Apps (for example, GrandCentral, a unified voice communications platform). However, the recent outage of the Gmail service highlights a design weakness in its apps and cloud architecture.

• During the next five years, Google and other Web companies with their "free" telecom service offerings could lower consumer voice revenue in mature markets by 1% to 3%.

Recommendations

• Google has skills and capabilities that would benefit carriers. In turn, carriers have valuable assets that would benefit Google. Thus, partnering is the most effective way for carriers to bring innovation and differentiated services into their portfolio:

• Carriers should identify where they can partner with Google (for example, mobile payments, location-based services (LBS), on a software as a service (SaaS) portal for Google and other third-party vendors apps) and develop combined offerings. In particular, carriers in Asia/Pacific might be in the best position to create unique

Publication Date: 30 September 2008/ID Number: G00160974 of 27

© 2008 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

relationships with Google and device/content/application developers, especially when it comes to the mobility market.

• Within the consumer market carriers should encourage device manufacturers to support the two major mobile open-source platforms (Android and Symbian Foundation) and Apple to reduce costs, time to market, improve innovation (through software development kits [SDKs] and application programming interfaces [APIs]) and develop true market differentiation.

• Carriers should make the development of a unified/federated customer intelligence database their No. 1 priority to position the value of the database both with Google and advertisers as more personalized than Google can deliver.

• Carriers and Google must seek an equitable accommodation on "break-the-carrier" business issues like net neutrality, otherwise broadband investment and innovation will suffer as regulatory and legal challenges will likely tie up the industry for years.

• Carriers must also aggressively respond to the Google and Apple threats by opening their networks to additional devices, content and applications, and effectively communicate their efforts to change market perception. In addition to opening their networks, carriers should develop policies and programs that specifically protect information, content and identities, and effectively market these benefits to customers and key industry stakeholders (for example, regulators, legislators and vendors).

• Carriers should pursue investments and partnerships that Google cannot duplicate, for example: implement unified CRM systems and federated customer databases that capture all customer touch-point data across the carrier enterprise; partner with cable companies and media/content companies to develop a common digital rights management (DRM) and CRM platform for entertainment services; position the value of the customer database with the advertising industry and with businesses as more personalized and consumer-friendly than Google.



TABLE OF CONTENTS

Analysis ............................................................................................................................................. 5 The Google Factor................................................................................................................ 5

Google's Trojan Horse Strategy .............................................................................. 5 Google Also Wants "To Be Your Everything" on Mobile Platforms......................... 6 Up Next — Trojan Horse Within the Business Market ............................................ 6 Google's Strategic Threat to Carrier Margins for New Services ............................. 7

Google's Actions Disrupt Telecom Service Provider Plans.................................................. 8 (1) 700MHz Auctions ............................................................................................... 8 (2) Formation of OHA and the 'Android' Open Mobile Device Platform .................. 8 (3) Fueling the Network Neutrality Debate .............................................................. 9 (4) Looking to Own Both Static and Dynamic Location Information...................... 10 (5) Promoting 'White Space' Spectrum Development ........................................... 11 (6) Engaging Businesses via Google's "Cloud" and SaaS Offerings .................... 12

Other Google Activities Likely to Impact Carriers............................................................... 14 Communications Services ..................................................................................... 14 Advertising............................................................................................................. 15 Mobile Payment..................................................................................................... 15 Video Distribution .................................................................................................. 16

Background and Context ................................................................................................................. 16 The Impact....................................................................................................................................... 17

Should Carriers Compete With Google? ............................................................................ 17 Scenarios 1 and 2 — Partner With Google ........................................................... 17 Scenario 3 — Where Accommodation Is Not Possible, Strongly Challenge Google on Break-the-Carrier Business Issues...................................................... 20 Bottom Line Impact................................................................................................ 20

Conclusion ....................................................................................................................................... 21 Appendix 1 — Google Competencies, Challenges and DNA ............................................ 21

Google Core Competencies and Web Dominance = Influence ............................ 21 Google Not Without Challenges ............................................................................ 22 Goggle DNA — What Google Will or Will Not Do.................................................. 23

Appendix 2 — Android Tutorial........................................................................................... 24 What Is Android? ................................................................................................... 24

Features ................................................................................................... 24 Android Architecture .............................................................................................. 24 Applications ........................................................................................................... 25 Application Framework .......................................................................................... 25 Libraries................................................................................................................. 26 Android Runtime.................................................................................................... 26 Linux Kernel........................................................................................................... 26

Recommended Reading.................................................................................................................. 27

LIST OF FIGURES

Figure 1. Google Trojan Horses ........................................................................................................ 5 Figure 2. Mobile Google Applications................................................................................................ 6



Figure 3. Current Google Productivity Applications......................................................................... 12 Figure 4. Google Business Tools .................................................................................................... 13 Figure 5. Business Model Differences............................................................................................. 17 Figure 6. Google Partnership Model Scenario ................................................................................ 18 Figure 7. Android Components........................................................................................................ 25



ANALYSIS

The Google Factor Software and Web 2.0 companies like Google are challenging traditional vertical and horizontal industry value chains and market concepts. The communications industry ecosystem is just one of those that finds itself in Google's cross hairs, not because Google necessarily wants to compete with telecom service providers or content developers, but primarily because it finds their business process to be an impediment to innovation and change. The actions of companies such as Google, Apple, Microsoft, Yahoo and social networking brand names like Facebook and MySpace, are directly or indirectly diluting the value propositions of the service providers' communications core products and services with new business models and marketing strategies.

To assess the impact of Google on telecom carriers requires an understanding of Google's strategy. Google declined interview requests for this research. Therefore Gartner deduced Google's strategy based on an exhaustive analysis of public statements by Google's senior management team, filings with various governmental and regulatory bodies, insight from a large body of Gartner Google watchers and most importantly Google's marketplace activities.

Google's Trojan Horse Strategy Google is looking to emulate Intel's "Intel inside" strategy with its free Google Toolbar, personalized Google Web page, Desktop, and so on (see Figure 1), and now its own browser (Chrome). These are Trojan horses which give customers convenient point and click access to Google search and other Google applications — achieving traction primarily on consumer PCs.

Figure 1. Google Trojan Horses

“Take the power of Google with you anywhere on the Web”Google Toolbar

Google Labs

Google Apps Engine

Personalized Web Page

“Leave it on Google’s Cloud”

“Let us organize and manage your PC better”

“Try it and give us your feedback”

“Try it You’ll Like it”

Google Desktop

Google Apps

“Take the power of Google with you anywhere on the Web”Google Toolbar

Google Labs

Google Apps Engine

Personalized Web Page

“Leave it on Google’s Cloud”

“Let us organize and manage your PC better”

“Try it and give us your feedback”

“Try it You’ll Like it”

Google Desktop

Google Apps

Source: Gartner (September 2008) (Google and the Google logos are trademarks of Google Inc. Used with permission)



Google Also Wants "To Be Your Everything" on Mobile Platforms Google has been looking to develop similar traction on the leading wireless platforms, including WAP and i-mode phones. Coming to the OS and mobile party late has not been a problem for Google; in fact, its Android and Open Handset Alliance (OHA) activities have already had a profound effects on the mobile industry.

Android has effectively changed the mobile landscape already. Google will continue to embellish and tailor its applications for Android and other leading mobile platforms with the goal "to be your everything" on all leading mobile, but especially open, platforms (see Figure 2).

Figure 2. Mobile Google Applications

Search

Maps

Gmail

YouTube

Google SMS Picasa Web Albums

Google News

iGoogle

Google Notebook

Google Calendar

Blogger

Google Reader

GOOG-411l Google Docs

SearchSearch

MapsMaps

GmailGmail

YouTubeYouTube

Google SMSGoogle SMS Picasa Web AlbumsPicasa Web Albums

Google NewsGoogle News

iGoogleiGoogle

Google NotebookGoogle Notebook

Google CalendarGoogle Calendar

BloggerBlogger

Google ReaderGoogle Reader

GOOG-411l GOOG-411l Google Docs Google Docs


Up Next — Trojan Horse Within the Business Market Google is looking to make similar inroads in the business market by employing a different spin to its Trojan horse strategy. It is offering "free" business applications on its cloud platform, trying to take the cost and complexity out of basic back- and front-office business operations involved with information access. Google believes that "simplicity" sells, because most small or midsize businesses (SMBs) want instant gratification, with minimum investment in cost and time. Google's "cloud computing environment," global low-latency network, search appliances and SaaS service Google Apps is the foundational architecture that is delivering these capabilities.

Google slowly engaging enterprises will not have a major near-term impact on carriers who themselves are only in the very early stages of developing SaaS offerings. The problem is that developing and promoting business-in-a-box tools either on a hosted or SaaS basis is now going to have not just Microsoft but Google to contend with. This escalating war between Google and Microsoft — each playing in search, online ads and applications — is, in effect, taking the profit out of this potential market for carriers. Both Google and Microsoft are likely to continually innovate and develop tailored applications for different verticals.



Google's shortcomings in the enterprise market (robustness of applications and business grade-quality) are likely to be temporary. Google does know consumers but admittedly is on a learning curve with enterprises. The SaaS tools in the Google Apps suite lack the ability to support large numbers of corporate users today (due to lack of scalability) thus, is no real threat for Microsoft, but Google will likely make headway with SMBs. The exceptions to this are Google Finance which contains public financial records and Google Health which will enhance Google's understanding of that vertical. On the other hand, transactions that occur via e-commerce are of limited visibility to Google currently — its Google Checkout payment initiative for point-of-sales has not been very successful in capturing a large market share.

Google's Strategic Threat to Carrier Margins for New Services While Google and the carriers might be in agreement on high level market principles, they disagree vociferously on how best to achieve them. This market polarization may take enough margin off the table for carriers to make their business plan for many new revenue opportunities (for example, entertainment, SaaS and mobile services) unattractive. Competing with Google on its own turf is also not a viable economic option. Unless carriers find ways to reach an accommodation with Google, Google's actions will continue to be disruptive to the telecom ecosystem. Although Google may not be able to exercise full control over everything, it has publicly espoused the following goals:

• Google will do everything it can to "change the game" in mobility by stimulating the pace of mobile innovation in devices and applications. It will focus on encouraging the development of "smarter" edge devices plus spectrum-sensing technologies.

• The goal of Android is to have mobile phones work at least as well as the computer, leveraging software toolkits based on Linux, Java and high-end Web browser technologies.

• Enable the development of open standards and a consistent user interface across apps, allow mix and match, encourage a plug-and-play environment, and unified fixed and mobile access devices.

• Looking to have businesses move all their back-office operations onto the Google cloud and have Google run all their computing and application assets. A current example is Google's e-mail on-demand offering, which eliminates need for manual self-management, archiving and rapid recovery to meet government regulations.

• Promote open and unlimited global broadband availability. It will continue to push for a national broadband policy (in the U.S. and globally), over-the-air use/sharing of spectrum (for example, 700MHz, white-space) and the development of spectrum-sensing technologies.

• Constantly trial and experiment with marketing approaches using "free" offers as an acquisition tool. Will not rush to monetize applications or services, but rather identify the most effective way to engender customer loyalty before monetizing.

• Continue to develop horizontal as well as vertical applications and collaboration tools that can be easily accessed or shared and simple to use on any device or computer in the world.

• Continue to evolve the Google search engine to be the world's best, creating an artificial intelligence capability to make it as "smart as people."

http://www.google.com/apps/intl/en/business/index.html



Google's Actions Disrupt Telecom Service Provider Plans In addition to disrupting the traditional telecom ecosystem, Google's actions are also diluting the market potential and the service providers' ability to profitably monetize their investments in new markets, for example: entertainment, media channel distribution and aggregation, location-based services and Web 2.0 application/technologies. While Google's seemingly disjointed actions (for example, Android, investments in telecom network and trans-oceanic cable, data centers, 700MHz auctions/WiMAX, Wi-Fi and Femtocell) were initially somewhat puzzling to telco pundits, but with hindsight these actions all align well with Google's espoused mission and vision.

Mission: Organize the world's information and make it universally accessible and useful.

Vision: Provide the right information, at the point of need, to anyone in the world, on any device.

Gartner believes that Google has the corporate will (even if not necessarily the corporate resources) and commitment to do whatever it must to achieve its vision. In some cases, that may require making non-core investments to bring about a change in the status-quo. Six critical actions by Google that will have the greatest impact on the telecom industry are discussed below.

(1) 700MHz Auctions Google pressured the Federal Communications Commission (FCC) to set aside the "C" Block (22MHz to 11MHz in the uplink and 11MHz in the down-link within the U.S. 700MHz spectrum auctions) as an open access spectrum. All winning "C" Block bidders would be required to provide open access to applications (cannot be blocked) and devices (cannot be locked). One provision Google did not get is spectrum wholesaling. However, this is one provision that Google did not expect to get anyway and was willing to bargain away in favor of open access.

• Google's Motivations: Google's primary motivation was to encourage the development of open broadband network platforms to ensure they will be able to deliver bandwidth-intense over-the-air services and applications. The C-Block was intended to accommodate fourth generation (4G) services, although there remains some disagreement about what bit-rate density the 700MHz spectrum would eventually be able to accommodate for next-generation wireless content and services.

• How Google Applied Its Influence: Google never had any intention of winning any spectrum. It used all of its leverage — regulatory and legislative influence before the auction and direct involvement in the auction process. Google bid multiple times to ensure the eventual major winner (in this case Verizon) would be forced to bid past the open-access threshold. Even more telling is that Google was prepared to take ownership of the licenses and had developed contingency operating and management plans in that eventuality.

• What Does It Mean for Telcos: As the primary winning "C" Block bidders, for Verizon and AT&T to use this spectrum they must provide open access (devices and applications) to all customers and application developers/providers with the following caveats: Operators will be allowed to protect the "safety and integrity" of their networks against non-carrier applications and devices, and will be permitted to restrict use of its network to devices "compatible with network control features."

(2) Formation of OHA and the 'Android' Open Mobile Device Platform On 5 November 2007, several technology and wireless companies jointly announced the formation of the Open Handset Alliance (OHA) and the development of Android, a new software platform for mobile devices that includes an operating system, middleware and key applications



based on the Linux operating system and open-source principles. This was quickly followed on 12 November 2007 with a preliminary release of the Android SDK, as part of Google's $10 million developer challenge. The SDK provides the tools and APIs necessary to begin developing applications on the Android platform, leveraging Java development tools and, interestingly enough, Apple's open source WebKit browser (see Appendix for details about Android).

• Google's Motivations: To help ensure that application and access openness is maintained on the mobile Internet as effectively as on the wired network to:

• Enable Google's ad model to spread as successfully as it has on the wired Internet.

• Open up the "closed" mobile industry ecosystem for its applications.

• Enable it to exert a strong influence over the development of next-generation mobile OS and not leave that solely to its competitors Microsoft, Apple and Symbian.

• How Google Applied Its Influence: While the launch of Apple's iPhone clearly launched the debate over the currently closed mobile ecosystem, it has been Google's leadership on OHA and Android that continues to keep the handset and network "openness" debate on the front burner. The participation of some well known brands in OHA and the overall "Google effect" in addition to the success of OVi pushed Nokia into an early decision to acquire Symbian and form the Symbian Foundation.

• What Does It Mean for Telcos: Operators today still exercise significant control over which devices can access their networks; however, a number of leading mobile operators (for example: Telefonica, Telecom Italia, Sprint, T-Mobile, Verizon, AT&T and others) have indicated their willingness to embrace the Android initiative to replace the numerous feature phones based on proprietary OS. They have pledged to open their networks, albeit most "at their own pace," with Verizon offering to do so as early as 2009.

(3) Fueling the Network Neutrality Debate There is growing demand for ever-increasing bandwidth intensive applications such as video streaming, picture sharing, social networks and peer-to-peer (P2P) applications (for example, music, video, games and voice over Internet Protocol [VoIP] services) generating substantial congestion in some parts of the Internet. It is estimated that nearly 75% of the world's Internet traffic is P2P with 5% of all Internet consumers in effect using 90% of the bandwidth. This has set the stage for a vociferous debate in the U.S. between the content providers such as Google, eBay and Microsoft, and the network providers such as AT&T, the ISPs and cable companies on how best to address this reality.

On 5 August 2005, the U.S. regulator (FCC) adopted four network neutrality principles designed "to encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet." Since the issuance of these principles, Google and other Web-centric companies have been actively lobbying the U.S. Congress to codify these rules in favor of something called non-discrimination in network design between the public and private Internet. While limited discussions regarding network neutrality principles have been held in various countries, notably Japan, South Korea and the U.K., there has been no legislation or regulatory rules adopted to codify this issue.

• Google's Motivations: In the words of Eric Schmidt: "The phone and cable monopolies, who control almost all Internet access, want the power to choose who gets access to high-speed lanes and whose content gets seen first and fastest. They want to build a two-tiered system and block the on-ramps for those who can't pay." Google wants



regulation to ensure that the public Internet remains free from potential discrimination and content blocking but also wants equality between the public and private Internet at no cost to customers or Web companies (in essence no quality of service [QOS]).

• How Google Applied Its Influence: Google has been effectively lobbying legislators and regulators in the U.S. and Canada, sending letters to Google users, promoting network neutrality in public speeches, funding industry foundations (Open Internet Coalition) and encouraging consumer interest groups (SaveTheInternet) to make their voices heard on this topic. On 1 August 2008 these pressures resulted in a recent ruling against Comcast (a U.S. cable company) for allegations of misconduct in traffic management, requiring them to change their network management technology and policies.

• What Does It Mean for Telcos: This is potentially the most onerous issue for carriers. To date technical solutions (for example, deep packet inspection techniques) that facilitate the prioritization and management of different types of traffic, their use and carrier motivations are under assault. In the U.S. political winds are shifting in favor of the Google position, with some form of network neutrality legislation likely to be adopted in the 2009 through 2010 Congress. This would potentially require the private and public Internet to provide equal QOS, not allow carriers to charge for QOS, require massive investments in capacity and encourage Internet inefficiency.

(4) Looking to Own Both Static and Dynamic Location Information Being location-aware will become one of the most important features in all types of mobile devices/computers and enables context-ware applications and services. This capability will be able to source and deliver context-enriched services to individuals in their current persona (at play, at work, shopping, traveling and so on). Gartner's Hype Cycle has identified location-aware technology as having reached the "Slope of Enlightenment" and expects mainstream market adoption within two years. Location-aware technologies (for example; Wi-Fi MAC, Cell-ID, Observed Time Difference of Arrival, Enhanced Observed Time Difference, Advanced Forward Link Trilateration, Assisted GPS and GPS) are proliferating and Gartner forecasts that by 2011 50% of mobile devices will be GPS-enabled.

Google has been investing heavily to develop the world's most complete storehouse of geographic and mapping data supported by innovative applications that can detect mobile devices. For example Google's "My Location" beta feature on Google Maps for mobile helps to detect the mobile device position on the map, regardless if the phone supports GPS or not. For non-GPS devices the "My Location" feature takes information broadcast from mobile towers to approximate the device position within 1,000 meters using either CellID (if connected to wireless area network via general packet radio service or third generation [3G]) or access point triangulation based on SkyHook's technology (if the device is connected to Wi-Fi).The "My Location" feature is available for most Web-enabled mobile phones, including Java, BlackBerry, Windows Mobile and Nokia/Symbian devices.

• Google's Motivations: Google wants to be "the most trusted source" and the best at matching-up unique geographic and location-based data so it can take advantage of just-in-time advertising opportunities derived from location-aware applications. Google is looking to bypass device manufacturers or mobile carriers as gatekeepers of location data.

• How Google Applied Its Influence: Google is looking to get the customer dependent on Google data, info or applications through its "free"-use policy. Google continues to invest in sourcing static geographic and mapping data to develop applications like



Google Earth and Maps applications, and is looking to add dynamic location-data to deliver mashed applications like "My Location."

• What Does It Mean for Telcos: Mobile carriers today have proprietary data derived from GPS and other means about the location of mobile devices. Open networks, applications and devices over time are likely to mitigate this advantage for carriers to be able to exclusively offer location-based services. But that is not stopping Google from finding creative ways to obtain location data and more innovative ways to use or mash this data, which could significantly reduce the carrier potential for LBS.

(5) Promoting 'White Space' Spectrum Development The 800MHz spectrum used to broadcast TV through the airwaves, specifically the ones used by traditional network television, is dramatically underutilized. This unused spectrum space is known as "white space" in the U.S. and "interleaved spectrum" in the U.K. This spectrum has highly favorable propagation characteristics for wireless broadband and a greater range of operation (including the ability to pass through buildings, weather and foliage) including lower power levels than 3G operation at 1.9GHz or 2.5GHz allow. This makes white spaces ideal for broadband service in less densely populated areas and bad weather areas where higher spectrum services are costly to deploy.

In the U.S. the FCC has been testing prototype "white space devices" (WSDs) for their possible commercial use after 17 February 2009, the date for mandated transition from analog to digital television broadcasts. The U.K. regulator Ofcom is following the FCC trials and has shown interest in this unused TV "interleaved spectrum," indicating that it would allow "cognitive radio devices that have sense-and-avoid capabilities" as part of the U.K.'s digital TV switchover program.

A powerful industry lobbying group backed by Google, Microsoft, Philips, Dell, HP, Skype and others (collectively known as the Wireless Innovation Alliance ) has been urging the FCC to develop rules to unlock the potential of TV white spaces especially as unlicensed spectrum for personal fixed and mobile WSD devices. Several major vendors including Philips, Motorola, Microsoft and Adaptrum have already submitted WSD devices to the FCC for testing. While the spectrum band sensing and mesh networking technology is still in the early stages of development, a variety of devices have at least demonstrated that white-spaces technologies can detect and protect wireless microphones and television signals. Mesh networks are self forming networks in which devices locate each other in the same way Wi-Fi hot spots are located today.

• Google's Motivations: Google's interest in promoting white spaces is another effort to ensure that there are viable broadband options available for their services. Google's telecommunications counsel has called the white space mobile broadband "Wi-Fi on steroids." Google believes that unlicensed broadband spectrum will unleash all kinds of unique developments and applications that will not be under the control of the cable-telco duopoly.

• How Google Applied Its Influence: Google continues to lobby members of the U.S. Congress, the FCC and the Office of Engineering and Technology, making numerous filings individually and as part of the Wireless Innovation Alliance as well as the New America Foundation. Google is not interested in building its own white space networks but would provide, at no cost to third parties, the technical support necessary to make these plans happen; this could include intellectual property and reference designs for underlying technologies, open geo-databases maintained by Google and other supporting infrastructure.

http://wirelessinnovationalliance.org/index.cfm



• What Does It Mean for Telcos: This spectrum will likely be released as an "open" spectrum sometime in 2010, which would become another means for bypassing the carrier access network (if the carriers do not win the auction) and if they do win, they would be are required to provide open access for all devices and applications with similar caveats as the 700MHz auction.

(6) Engaging Businesses via Google's "Cloud" and SaaS Offerings Google is looking to engage enterprises by getting them hooked on using Google's applications and cloud computing infrastructure. Google is using an ever-expanding array of business productivity solutions (see Figure 3): Google Apps (including Communications) and Google Apps Engine, Google Enterprise Search Solutions, Google Geospacial Solutions and Google Security Solutions.

Figure 3. Current Google Productivity Applications

Google Apps

Collaborate and Publish

Google Apps Engine

Google Docs

Google Sites

Google Start Page

Security and Compliance

Web Security

Email Encryption

Email Security

Email Archiving

Enterprise Search Solutions

Universal Search

Web Search

Google Maps

Earth Enterprise

Geospatial Solutions

Sketchup Pro

Google Calendar

Google Talk

Communications Gmail

Google AppsGoogle Apps


Google Apps Engine

Google Docs

Google Sites

Google Start Page


Google Apps EngineGoogle Apps Engine

Google DocsGoogle Docs

Google SitesGoogle Sites

Google Start PageGoogle Start Page

Security and Compliance

Web Security

Email Encryption

Email Security

Email Archiving

Security and Compliance Security and Compliance

Web SecurityWeb Security

Email EncryptionEmail Encryption

Email SecurityEmail Security

Email ArchivingEmail Archiving

Enterprise Search Solutions

Universal Search

Web Search

Enterprise Search SolutionsEnterprise Search Solutions

Universal SearchUniversal Search

Web SearchWeb Search

Google Maps

Earth Enterprise

Geospatial Solutions

Sketchup Pro

Google MapsGoogle Maps

Earth EnterpriseEarth Enterprise

Geospatial SolutionsGeospatial Solutions

Sketchup ProSketchup Pro

Google Calendar

Google Talk

Communications Gmail

Google CalendarGoogle Calendar

Google TalkGoogle Talk

Communications GmailGmail


Google is continually looking for the Achilles heel or unfilled needs to differentiate its applications. A recent example is Google's e-mail archiving offering to help companies rapidly recover missing



e-mail, comply with government regulations and deal with data discovery requests associated with litigation. With this feature/service Google is trying to simplify the tedious and often ineffective archiving process in use by small businesses and highlights the on-demand capability of its cloud. Google Message Discovery could be an important step in Google's effort to appeal to corporate IT managers. The question is whether IT managers can be convinced to use an archival service from Google rather than to manage backup and discovery themselves.

Another way Google is looking to break into the SMB market is by providing them with Web-based business tools (see Figure 4) to help address two critical issues: build/enhance their Web site and help them acquire new customers.

Figure 4. Google Business Tools

Helping Businesses Enhance Their Website

CheckoutSell onlineOffer a convenient checkout method, increase sales, and get free credit card processing when you use AdWords.

AnalyticsAnalyze website trafficUse easy-to-understand reports to make measurable improvements to marketing campaigns and websites.

AdSenseEarn revenue from your websiteAdSense delivers ads precisely targeted to your site, helping you earn revenue from your website.

Google Site SearchAdd site search to your websiteCreate a site search engine with Google Site Search.

Website OptimizerBuild effective websitesAutomatically test different site content in order to maximize visitor conversion rates.

Helping Businesses Acquire New Customers

Book SearchPromote your books on GoogleIncrease visibility and sales for your books with Google Book Search

Webmaster CentralImprove your site's visibilityYour one-stop shop for comprehensive info about how Google crawls and indexes websites.

Google BasePost all kinds of content to GooglePost it on Google Base; find it on Google.

Local Business CenterMake your business searchable on mapsCreate or edit a Google Maps business listing. Add hours of operation, photos and other details.

AdWordsAdvertise your business on GoogleYour ads can appear when people search Google or visit our network of partner sites.

Helping Businesses Enhance Their Website

CheckoutSell onlineOffer a convenient checkout method, increase sales, and get free credit card processing when you use AdWords.

AnalyticsAnalyze website trafficUse easy-to-understand reports to make measurable improvements to marketing campaigns and websites.

AdSenseEarn revenue from your websiteAdSense delivers ads precisely targeted to your site, helping you earn revenue from your website.

Google Site SearchAdd site search to your websiteCreate a site search engine with Google Site Search.

Website OptimizerBuild effective websitesAutomatically test different site content in order to maximize visitor conversion rates.

Helping Businesses Acquire New Customers

Book SearchPromote your books on GoogleIncrease visibility and sales for your books with Google Book Search

Webmaster CentralImprove your site's visibilityYour one-stop shop for comprehensive info about how Google crawls and indexes websites.

Google BasePost all kinds of content to GooglePost it on Google Base; find it on Google.

Local Business CenterMake your business searchable on mapsCreate or edit a Google Maps business listing. Add hours of operation, photos and other details.

AdWordsAdvertise your business on GoogleYour ads can appear when people search Google or visit our network of partner sites.




• Google's Motivations: Google recognizes that it has a very weak to nonexistent presence in enterprises, but also recognizes that the consumerization of enterprises is also inevitable. Making it easy for users to download Google applications and giving them free space on their cloud infrastructure will provide them great marketing insight on use/preference to help them develop a presence within the SMB market initially, with eventual migration to larger enterprises where enterprises will come to Google for all the back office SaaS needs.

• How Google Applied Its Influence: Google tries to exert its influence by getting a customer hooked on "free" applications, thus generating customer dependence and a barrier to churn when it monetizes its SaaS offerings. However, recent outages of Google's Gmail, salesforce.com and the RIM BlackBerry network, and recent failures by Apple's Mobile Me, as well as Jott and Cuil online-delivered software indicate the precarious SaaS service market and will give pause to businesses considering a SaaS model.

• What Does It Mean for Telcos: Google is losing money or may break even with its free basic Apps offering, hoping to generate revenue with its premier Apps for a fee and by Gmail users clicking on ads. However, Google is willing to absorb losses to keep existing competitors (for example, Microsoft) and potential competitors (like carriers) out of the ad business. The impact on carriers looking to generate revenue from the SaaS business model within the SMB market will require carriers to clearly differentiate their applications from Google or to partner with them. In any case, their business model revenue assumptions for SaaS will need to be reduced.

Other Google Activities Likely to Impact Carriers Discussed below are three other areas where Google either has an important stake in a market that telecom service providers are trying to enter (for example, Web advertising) or where Google is likely to enter and may potentially disrupt telecom service provider plans.

Communications Services A growing virtual and mobile workplace — that is, "road warriors," telecommuters, or simply mobile workers within a corporate campus that require efficient work-group interaction and collaboration — is driving the need for unified communications (UC). Gartner projects that by 2012, nearly 20% of enterprises will source telephony as a software application of a UC portfolio, with many SMBs opting for delivery over the Web (SaaS).

UC is a broad category of applications integrated around a "presence" core: VoIP, IP audio conferencing, video conferencing, unified messaging, instant messaging, blogs, wikis and persistent chat. Because presence will provide core functionality in emerging UC applications, many suppliers want to "own" and control presence. Google offers some elements of the UC applications today — Gmail, Google Talk, blogs, Google SMS and wikis. Google Presentations plus Google Talk today can be used as a "free" way to do low-end Web conferencing. For telecom service providers, differentiating and monetizing elements of UC may be more difficult because of current and potential future activities of Google in this space.

For consumers, Google GrandCentral which is in beta, provides a full over-the-top telephone experience that includes: a single number for all devices, one voice mail, centralized messaging, address book, many additional features (for example, selective ringing, listen-in, call routing) and presence. This set of services includes UC features and applications for cell, desktop and VoIP phones.

http://www.networkworld.com/community/node/31744



Advertising Google today owns anywhere from 70% to 80% of the worlds online "search" advertising revenue market (or 32% of overall online advertising market). Needless to say it will be extremely hard for telecom service providers to break into that market to any significant degree because Google has sophisticated advertising applications for business to reach customers (for example, AdWords) and to advertise on websites (for example, AdSense). Most of all, its search engine gives it a commanding position in the competition for online advertising revenue.

Google has recently implemented a DoubleClick ad-serving cookie across the Google content network (partner sites for which Google provides advertising). This cookie, Google claims, is currently used for ad frequency capping, frequency reporting, ad quality improvement and ad conversions. Regarding behavioral advertising, Google has not ruled this out indicating it will respond to its "user's desire for more relevant advertising, and to its advertisers' desire to provide more relevant advertising to users. We are watching the behavioral advertising space closely and evaluating whether there is the potential to provide users with additional value beyond our current contextual ad serving models. If we do go into this area in the future, we will do so in a way that safeguards user privacy by honoring our commitment to transparency and choice." Behavioral advertising and packet inspection techniques used by ad firms like NebuAd and Phorm have received high visibility and bad press in the U.S. and Phorm in the U.K., but has not been an issue to date in other countries.

U.S. — The practices of some firms in the U.S. have given deep packed inspection (DPI) a bad name resulting in increased U.S. governmental scrutiny over the use of DPI in regard to online- and network-based targeted advertising. There is a strong possibility of government oversight of advertising techniques which will negatively impact advertising technology and telco advertising business case assumptions.

Europe — While similar concerns have been raised in Europe, the experience with DPI in the U.K. has been positively received. PlusNet, a BT-owned ISP, began using DPI in 2006 to launch a Subscriber Service Portal that allows its customers to monitor their own usage, among other things. PlusNet positioned DPI properly (that is, to improve customer service) and asked its customers' permission to use DPI. Since the European market is still nascent and the U.K. experience has been positive, the potential advertising impact will be less onerous.

Asia/Pacific — The more developed markets (for example, Australia, Singapore, South Korea and Hong Kong) will take their cue from developments in Western markets. Among developing countries the impact in the near-term will be negligible since telco online services are not heavily supported by online advertising revenue; in the longer term, however, the impact is likely to increase.

On the other hand, telecom advertising opportunities will also depend on the degree to which carriers are willing to share targeting data and pool their advertising inventory (similar to what Canoe Ventures is looking to do among MSOs), and the degree to which they can keep Google from accessing this data and inventory. Regulation is part of the issue, but so is winning consumer and advocate support for identity-based targeting techniques by providing transparent opt-in and opt-out platforms and best-of-breed privacy controls.

Mobile Payment Through its recent filing with the U.S. Patent and Trademark Office, Google is clearly indicating that it is considering entering the mobile-phone-based payment market. This market is becoming increasingly complex and while it has made some headway in Japan, there is currently limited customer interest in the U.S. and Western Europe. Thus there is real debate in the industry about the viability of this application.



A large number of mobile payment services are being piloted or have launched globally as "over the air (OTA) mobile payment applications" or "mobile contact-less payment systems" (MCPs), with Google's patent focusing on OTA. At this point Google has not announced a service nor if it has an application in beta. Anything Google does in this area is likely to negatively impact telecom service provider ambitions.

Video Distribution Cable and digital broadcast satellite (DBS) remain constrained both by infrastructure challenges associated with HD and other legacy broadcasting requirements, as well as challenges in designing systems that can support both intuitive access to and on-demand delivery of a broad range of titles. Thus carriers, as well as Web-based service providers, saw a window of opportunity to get into video-on-demand (VOD) market. Carriers are deploying IPTV solutions over last-mile fiber and hybrid fiber/coax access networks, and Web-providers such as iTunes Video Stores, Amazon and Netflix are using over-the-top (OTT) TV delivery solutions to attack this market.

As early as 2006 Google announced it would enter the VOD business, but has yet to officially launch its Video Store. It does have a beta application, called Google video, where trailers and clips are available free, supported by ad revenue. However, Google should never be counted out. Google skunk works are supposedly working on an open TV player and set-top box device. Google could decide to launch and or enable a competitive OTT VOD service fully or partially supported by ad revenue. Google could create more competition for VOD licenses and undercut the value of the compulsory statutory licenses IPTV was recently granted by the FCC (in the U.S.). Of course this is true for other OTT providers as well; for example, YouTube on TV could undermine professional TV programming. Another threat to IPTV advertising is Google TV, with its burgeoning ability to sell remnant ad spots with minute-by-minute set-top-box (STB) tracking through an AdWords-like self-service interface, which has been under way for over a year with Echostar and Dish network in the U.S.

These various activities could undermine an already struggling VOD market and make carrier IPTV business cases even harder to justify.

BACKGROUND AND CONTEXT

Over the last 18 months, leading Web-centric software providers, device manufacturers and content providers have introduced breakthrough devices (for example, iPhone and Instinct), over-the-top services (for example, Google video and iTunes Movie Rentals), developed open operating systems (for example, Android) and deployed application development frameworks (Android SDK) that will undermine and disrupt time-tested business and marketing principles. Google and Apple specifically have been at the forefront of challenging traditional telecom ecosystem value and supply chain notions. This comes at a difficult time for telecom carriers as they are investing in new market opportunities to replace core telecom revenue. Unfortunately these are the same markets that Web players like Google are also targeting (mobile data and content applications, entertainment, media channel distribution and aggregation, SaaS applications for SMB, advertising, mobile payment, unified communications and so on).

What is Google's strategy regarding the communications market, what likely roles is it willing or able to play, and therefore what impact is it likely to have on the telecom market during the next three years — as an enabler, partner, competitor, influencer or disruptor?

Since carriers really cannot and should not compete with Google on Google's turf, what can and should carriers do?



THE IMPACT

Should Carriers Compete With Google? The business cultures of Google and telecom carriers and the needs of their markets for the services they offer are so different that for either to compete in each other's market would be folly (see Figure 5).

Figure 5. Business Model Differences

Innovation Process

Collaboration/IT

Company Ethos

Bus Development

Operational FocusGovernance

Business Strategy

Business Structure

Application/Product Market Testing

Google• Risk-Based, Trial & Error

• Chaotic, Open to Everyone, On-going

• Open, Free Choice

• Ethics, trust and data integrity

• Limited, Loose

• Productivity

• Flexible, Partner

• Own Data/Be the Best/Influence

• Google Labs, Free Use, On-going Feature/Usability Feedback

Telco 1.0• ROI-based, Risk Adverse

• Structured, Limited Participation, ad-hoc or time-window

• Standard Operating Environment

• Ethics, trust and privacy

• Tight

• Cost Efficiency + Productivity

• Vertically-integrated

• Own Access/Manage/Control

• Telco Labs, Market Research for Potential Demand and Price

Innovation Process

Collaboration/IT

Company Ethos

Bus Development


Business Strategy

Business Structure


Innovation Process

Collaboration/IT

Company Ethos

Bus Development


Business Strategy

Business Structure






• Limited, Loose

• Productivity








• Limited, Loose

• Productivity








• Tight









• Tight





Source: Gartner (September 2008)

For the same reason wholesale accommodation between Google and traditional telecom service providers is unlikely in the near-term. Google will continue to interact with the carrier community as it does today: as customer (for example, buyer of communications services), influencer (regulators and the developer community), market enabler (broadband WiMAX), market disruptor (free SMB applications), value-chain decoupler (Android) and partner (Clearwire). Despite Google's opposition to the carrier community on most Internet and telecom issues, Google is unlikely to use its assets to compete directly with carriers in core communication markets. The main threat to telecom service providers will be from Google's ability to disrupt the existing telecom ecosystem and from providing oblique competition within SaaS, advertising, entertainment, LBS and other potential new carrier revenue growth segments.

While carriers are not strong portal players they have unique assets (for example, individual customer relationship and behavioral/preference profiles, location-based information via GPS, billing and efficient customer service teams), that would bring value to Google in the consumer and enterprise space. What are the positioning strategies carriers should consider?

Scenarios 1 and 2 — Partner With Google Google and carriers potentially would make excellent strategic partners because of the "complementarity" of their competencies and assets. The main stumbling blocks to a partnership, however, are their divergent cultures and market philosophies. This has not stopped other



carriers from making mutually beneficial business arrangements, for example: Apple's iPhone and iTunes with AT&T, and Google arrangements with Sprint/new Clearwire company on WiMAX.

Figure 6. Google Partnership Model Scenario

Telco

Fixed/Mobile Web-Enabled Devices Context (Home, Job, at Play)/Location

SearchSecurity CodePresenceBilling/Payment

Customer Name/NumberCustomer Needs/Preference Fixed/Mobile/SatelliteAlias/PersonaSecurity CodePresence

Mass Market Voice/Data/VideoCollaboration/UC Applications/API/Tools

Web/Phone/Store Portal/Direct

Mass Market/EnterprisesVoice/Data/Video Collaboration/UCApplicationsBilling/Payment

IP/Ethernet Legacy/Mobile Applications PlatformAPI/Tools

Goo

gle

Media

Content

Data

Web

Partners

Web 2.0

Partners

Devices

CustomerCloud

SaaS

Channel

Service

AccessInternetPortal

NetworkPlatform

Telco

Fixed/Mobile Web-Enabled Devices Context (Home, Job, at Play)/Location

SearchSecurity CodePresenceBilling/Payment

Customer Name/NumberCustomer Needs/Preference Fixed/Mobile/SatelliteAlias/PersonaSecurity CodePresence

Mass Market Voice/Data/VideoCollaboration/UC Applications/API/Tools

Web/Phone/Store Portal/Direct

Mass Market/EnterprisesVoice/Data/Video Collaboration/UCApplicationsBilling/Payment

IP/Ethernet Legacy/Mobile Applications PlatformAPI/Tools

Goo

gle

Media

Content

Data

Web

Partners

Media

Content

Data

Web

Media

Content

Data

Web

Partners

Web 2.0

Partners

Devices

CustomerCloud

SaaS

Channel

Service

AccessInternetPortal

NetworkPlatform

Source: Gartner (September 2008)

A customer-centric business model would be best suited to ensure that the most appropriate assets from Google and carriers are combined to deliver the required customer solution (see Figure 6). This business model approach identifies the unique core assets that each of the partners can bring to the table to deliver a successful solution. Critical core assets that carriers would bring to the table are shown in blue (communications access, services and network platform), while Google would bring its unique cloud, Internet portal and SaaS portfolio to the partnership. The channels and access device areas are where both Google and carriers have a well developed strong presence.

Figure 6 demonstrates how the complementary strengths of Google and carriers with local access assets can be brought together in a mutually-beneficial partnership, despite some minor overlapping capabilities (for example, collaboration/UC). Technology exists today to deliver this solution using standard Web-services-based service-delivery platforms/interfaces, service inter-working and automated partner management applications. Vendors like Aepona are already enabling the mutual sharing/combining of critical assets from multiple partners to deliver customer solutions. Carriers globally (for example, Bharti, Orange, Telus, Sprint and BT) have already implemented parts of this solution from various vendors or are in the process of evaluating these capabilities.

We conclude that if Google and carriers pooled their capabilities it would be to both of their benefit and would effectively expand the customer reach of each of the partners. There are multiple partnering options, however. These fall primarily into two categories:



• Scenario 1: Exclusive strategic partnership with Google — which allows both to contribute their core assets to address customer needs. This would be a win-win for both, but would weaken industry innovation and competitiveness.

• Scenario 2: Multiple partnerships, including Google — would result in a more balanced market structure, a win-win for the industry, ensuring that no one wields excessive market power.

Both types of scenario should be pursued by carriers with a focus on exclusivity only in selected cases. The "open" genie is out of the box, exclusivity and proprietary interfaces should be the exception not the rule from this point on.

• Within the consumer market carriers should encourage device manufacturers to support the two major mobile open-source platforms (Android, Symbian Foundation) and Apple to reduce costs, time to market, improve innovation (through SDKs and APIs) and develop true market differentiation.

• Carriers should encourage second tier manufacturers to develop a mid-level Android product, that would limit the need to underwrite the cost and would allow carriers to develop flexible plans requiring no contract commitments.

• In addition to direct market knowledge, carriers can bring other benefits to the strategic relationship with Google. Carriers should seek to leverage their customer information (preference, communications usage, payment and credit data) to help with product needs profiling, offer management and ad targeting. This makes acquisition of advertising cheaper and more effective for customers and guarantees that Google and carriers do not try to bypass each other.

• Since Google is the premier global search company, consider including Google's Toolbar or making its search bar the default on carrier-supported mobile or fixed-screen devices. Pursue revenue sharing on advertisements and transactions as compensation but also be concerned about the use of search data to tie it back to customer profile (privacy and loss of customer data as a differentiation).

• Carriers need to refine their offerings to work with companies like Google. This will be crucial to their long-term profitability and the strategic market position they will have in the future. In particular, carriers in Asia/Pacific might be in the best position to create unique relationships with Google and device/content/applications developers, especially when it comes to the mobility market.

• The market is moving toward a more open device, network and IT architecture which requires that carriers also embrace a more horizontal business structure. Google will continue to be a major supporter of this strategy. It is a good time to join Google in that effort and to convince it that a practical evolutionary approach is in both of their best interests.

• Carriers should carefully evaluate how they can serve as a SaaS portal for Google and other third-party vendors' apps and under what circumstances Google would be the more effective portal to meet the needs of carrier customers (business and consumer). However, before carriers commit themselves to SaaS partnerships and/or providing SaaS applications themselves, they need to thoroughly stress-test their cloud and network to ensure they do not incur major failures as happened with Gmail, RIM and Apple.



• Carriers should identify where they can partner with Google on mobile payments, but should not ignore partnerships with developing players as well. Carriers can differentiate by supporting multiple P2P payment platforms, without extensive and costly infrastructure investments.

• Google's position in social networks (YouTube, OpenSocial and FriendConnect) should be leveraged by carriers to deliver mobile payments and highly targeted advertising.

Scenario 3 — Where Accommodation Is Not Possible, Strongly Challenge Google on Break-the-Carrier Business Issues

• Carriers and Google must seek an equitable accommodation on "break-the-carrier" business issues like net neutrality, otherwise broadband investment and innovation will suffer as regulatory and legal challenges will likely tie up the industry for years.

• Carriers must also aggressively respond to the Google and Apple threats by opening their networks to additional devices, content and applications and effectively communicating their efforts to change market perception.

• As Google's power increases so will the distrust of the marketplace. Carriers should use this opportunity to leverage their relationship with end users to position themselves as trustworthy guardians of security and privacy concerns. In addition to opening their networks, carriers should develop policies and programs that specifically protect information, content and identities and effectively market these benefits to customers and key industry stakeholders (for example, regulators, legislators and vendors).

• Pursue investments and partnerships that Google cannot duplicate, for example:

• Make unified CRM systems and federated customer databases that capture all customer touch-point data across the carrier enterprise a No. 1 priority.

• Partner with cable companies and media/content companies to develop a common DRM and CRM platform for entertainment services.

• Position the value of the customer database with the advertising industry and with businesses as more personalized and consumer-friendly than Google.

• While it is unclear how to value or monetize LBS applications, everyone agrees that location information will be a critical differentiating asset for carriers and device vendors. The movement toward open mobile platforms, however, could mitigate the advantage of location information as a differentiated asset for carriers. Therefore a strategic relationship (based on mutual success and risk) between carriers and handset vendors like Nokia (that have invested in location for example, acquisition of Navteq) will be a critical counterweight to Google's and Microsoft's entry into the LBS space.

Bottom Line Impact Google's investments in GrandCentral, Android and other communications applications are primarily meant to help it acquire new customers and to allow it to influence the direction of telecom, rather than to compete for communications revenue. Google will continue to play the role of industry influencer, threatening to invest or enable others to compete until the industry is fully open. We estimate that during the next five years, this oblique competition by Google and other Web services companies could potentially have a 1% negative impact on consumer voice revenue in mature markets, with 1% to 2% of mass market consumers (the price-sensitive and quality-agnostic segment) opting for "free" or nearly-free services.



If Google decided to become an over-the-top communications service provider, we estimate that despite offering a multidimensional array of voice-enabled horizontal and vertical services/applications, Google would be only slightly more successful within the price-sensitive segment of the mass market (consumers and small business). The impact over a five year period could potentially reduce voice revenue by as much as 2% to 3% in mature markets due to a combination of additional market share gains and commensurate price reductions by carriers to stem churn.

In the enterprise market Google would likely make insignificant inroads, lacking carrier-grade capabilities and professional service skills. More importantly the carrier market potential for business SaaS applications and consumer new service opportunities in entertainment (including advertising), mobile and LBS could be severely affected, only time will tell by how much.

CONCLUSION

Google has demonstrated its willingness to venture into new markets, experiment with new revenue sourcing models, and do what it takes to change the status quo to achieve its goals. Google is, and will continue to be, a market disruptor and disintermediator, rather than a direct competitor. A heavy focus of Google has been, and will continue to be, the communications market where it will continue to innovate in the convergence sweet spot between communications, information and applications with a heavy emphasis on mobility. This should worry carriers, although Google will receive increased governmental and regulatory scrutiny regarding its privacy, security and advertising policies. Google dominates the consumer portal market and is looking to carve out a place for itself in the enterprise market. Carriers should selectively partner with Google rather than trying to compete, especially in areas where they don't have differentiated and core assets. However, carriers should also find a common ground with Google and, if necessary, look for creative ways to oppose Google on issues critical to the survival of carriers (for example, net neutrality).

Appendix 1 — Google Competencies, Challenges and DNA Google Core Competencies and Web Dominance = Influence The combination of Google's "because I can" management attitude, the company's hard to duplicate core competencies and with a dominant position in the fast-growing Web marketplace enable Google to exercise significantly more market power than a $17 billion company would normally be able to wield. Some of Google's key competencies and capabilities are discussed below:

• Is the world's most valued brand — according to the Brandz list from Millward Brown Optimor published in April 2008, Google is the world's leading brand followed by: GE, Microsoft, Coca Cola, China Mobile, WalMart, Citicorp and Toyota.

• Has the ability to engage leading industry partners to fulfill its goals, for example: development of Android via the OHA of 35 plus partners; develop fixed and mobile broadband alternatives via WiMAX Clearwire network investment and partnership, Wireless Innovation Alliance (Microsoft, HP, Dell and so on) and "white spaces" coalition (WSC); cloud computing (IBM); social networking (OpenSocial Foundation with Yahoo and MySpace); partnerships globally with many groups to obtain local data for Google Earth and Google Maps and so on.

• Is a threat potential to disintermediate elements of virtually any industry's ecosystem — for example, law, healthcare and the financial industry. The "Google Health" health records database initiative is an early example of how Google can impact



industries, especially those with weak information supply chains. Healthcare industry lags in automation and lacks the capability. Google Health duplicates on a larger scale what Google has done for the U.S. Veteran's Administration. The net result will be a pre-emptive outsourcing of critical function from the healthcare industry worldwide.

• Employs a constant innovation culture — Google excels at IT and business architecture, experimentation, improvisation, analytical decision making, participative product development and other relatively unusual forms of innovation. It balances this admittedly chaotic ideation process with a set of proprietary and internally-developed data-driven methods for evaluating ideas.

• Has massive investments in data server and storage capacity — Has made and continues to make massive investments in IT (data centers worldwide to ensure quality/speed) to enable experimentation in highly creative forms of innovation.

• Has made massive bandwidth/connectivity investment in a closed/secure network that is impervious to network probes and permits Google to control its own quality, latency and so on.

• Continues to enhance its proprietary and highly advanced database management technology which manages the largest data library in the world — existing data store is constantly fed with new data gathered from search, from sensors (such as roving cameras) that it has deployed globally, from donations by Google users, from newly copied and cached Web content, from data input by Google (for example, scanned books) and other sources. Layered data technology can make connections between seemingly disconnected pieces of information.

• Google is the world's largest search engine — an easy-to-use free service that usually returns relevant results in a fraction of a second.

• Has the world's largest archive of Usenet messages — more than 1 billion posts dating back to 1981.

• Google mapping tools are already being exploited by a number of third parties to "mashup" map information with other Internet information gathering sources to produce amazing real or near-real time views of geographic, demographic and personal information.

Google Not Without Challenges • Despite these competencies Google will continue to face challenges to its Web

hegemony. The dynamics of the Internet and Web marketplace do not guarantee even powerful players like Google a leadership position five years from now. Clearly, the low barrier to Web entry, the inexorable movement to open standards and an ever-expanding developer base will make success tenuous for the long term. Google, on the other hand is doing everything possible to remain relevant and ahead of the innovation curve. Some of the critical challenges it will be facing include:

• Privacy regulation regarding its search and maps products/applications and how these are used for target advertising. There is growing concern among privacy advocates, legislators and regulators on both sides of the Atlantic. In the U.S. elections results will likely make this a "hot button" issue in 2009 through 2010.



• Antitrust challenges in U.S. and Western Europe because of Google's dominant market position in the Web 2.0 economy — search, content delivery and online advertising.

• Potential Google liability regarding DRM when it comes to content manipulation, mashing or transmission of personal content or media-generated content.

• Google software patents (for example, Google's PageRank patent claim) may be in danger as a result of the ruling by the U.S. Patent and Trademark Office that it will invalidate many and perhaps most software patents, including pioneering patent claims.

• Proprietary data rights how long Google can maintain proprietary rights over or use of derived or unique content, either because regulators perceive this to be in the public domain or because the content can be easily duplicated.

• Search competition the competition for a world-class navigational search engine is over because the investment is too, but competition from new startups that are highly focused is real, for example: Blinkx is chasing the video search market; Powerset is pursuing the semantic search space; and Kosmix is working on "topical" search engines.

• Narrow business model and overwhelming revenue dependency on advertising, with Google still being heavily mistrusted by Madison Avenue. It will be nearly impossible for Google to grow at its current rate and diversify its business enough during the next three years (except through acquisition) to reduce its dependency on advertising to below 50%.

• Google is too visible. For many governments control of Google may become a national security issue by 2010. Many leading companies — for example: software and Web-based (for example, Microsoft), the telcos and cable companies, and device manufacturers (for example, Nokia) — are also "gunning" competitively for Google.

Goggle DNA — What Google Will or Will Not Do • Google will not change how it operates as a business, viewing its lack of an overall

business road map as a strength instead of a weakness.

• Wants to remain a low-cost and open infrastructure while offering a near-unlimited bandwidth Internet service, improving every year as computer and radio technologies continue to continuously optimize its ever-green network capabilities.

• Google's model will remain a model of experimentation, try new ideas until it identifies an application that has a great return (99 failures for every success).

• Google will continue to "systematize everything" it does, via massive data processing to improve context. It's in its DNA and is unlikely to change unless there is turnover at the founders level.

• Will not program or create content but focus on content partnerships, allowing users to make content decisions — will provide as much choice as possible by leveraging infrastructure and building an infinite content shelf.



• Never lose its focus — will remain fundamentally a search company at its core — however, it doesn't want to be known just for its search and wants to eventually monetize its core.

• It wants to be a leader in the transformation of the global economy and therefore is enabling digital services.

• Wants to be an enabler of individuals, offer data to anyone/anytime/anywhere (and get paid for it), just as it now offers data to the advertising industry.

• Wants to encourage people to contribute knowledge (content) which it will store and disseminate as widely as possible — no exclusivity of content.

• Google believes in itself and won't change the formula for success — for example, it believes it has the right formula to sustain and grow its advertising market share.

Appendix 2 — Android Tutorial (Republished with permission from Google)

What Is Android? Android is a software stack for mobile devices that includes an operating system, middleware and key applications. This early look at the Android SDK provides the tools and APIs necessary to begin developing applications on the Android platform using the Java programming language.

Features

• Application framework enabling reuse and replacement of components

• Dalvik virtual machine optimized for mobile devices

• Integrated browser based on the open source WebKit engine

• Optimized graphics powered by a custom 2-D graphics library; 3-D graphics based on the OpenGL ES 1.0 specification (hardware acceleration optional)

• SQLite for structured data storage

• Media support for common audio, video and still image formats (MPEG4, H.264, MP3, AAC, AMR, JPG, PNG, GIF)

• GSM telephony (hardware dependent)

• Bluetooth, EDGE, 3G and Wi-Fi (hardware dependent)

• Camera, GPS, compass and accelerometer (hardware dependent)

• Rich development environment including a device emulator, tools for debugging, memory and performance profiling and a plugin for the Eclipse IDE

Android Architecture The following diagram shows the major components of the Android operating system (Figure 7). Each section is described in more detail below.

http://code.google.com/android/download.html

http://webkit.org/



Figure 7. Android Components

Source: Gartner (September 2008) (Used with permission)

Applications Android will ship with a set of core applications including an e-mail client, SMS program, calendar, maps, browser, contacts and others. All applications are written using the Java programming language.

Application Framework Developers have full access to the same framework APIs used by the core applications. The application architecture is designed to simplify the reuse of components; any application can publish its capabilities and any other application may then make use of those capabilities (subject to security constraints enforced by the framework). This same mechanism allows components to be replaced by the user.

Underlying all applications is a set of services and systems, including:

• A rich and extensible set of Views that can be used to build an application, including lists, grids, text boxes, buttons and even an embeddable Web browser

• Content Providers that enable applications to access data from other applications (such as Contacts), or to share their own data

• A Resource Manager , providing access to non-code resources such as localized strings, graphics and layout files

http://code.google.com/android/reference/view-gallery.html

http://code.google.com/android/devel/data/contentproviders.html

http://code.google.com/android/devel/resources-i18n.html



• A Notification Manager that enables all applications to display custom alerts in the status bar

• An Activity Manager that manages the life cycle of applications and provides a common navigation backstack

For more details and a walkthrough of an application, see Writing an Android Application .

Libraries Android includes a set of C/C++ libraries used by various components of the Android system. These capabilities are exposed to developers through the Android application framework. Some of the core libraries are listed below:

• System C library — a BSD-derived implementation of the standard C system library (libc), tuned for embedded Linux-based devices

• Media Libraries — based on PacketVideo's OpenCORE; the libraries support playback and recording of many popular audio and video formats, as well as static image files, including MPEG4, H.264, MP3, AAC, AMR, JPG and PNG

• Surface Manager — manages access to the display subsystem and seamlessly composites 2-D and 3-D graphic layers from multiple applications

• LibWebCore — a modern Web browser engine which powers both the Android browser and an embeddable Web view

• SGL — the underlying 2-D graphics engine

• 3-D libraries — an implementation based on OpenGL ES 1.0 APIs; the libraries use either hardware 3-D acceleration (where available) or the included, highly optimized 3-D software rasterizer

• FreeType — bitmap and vector font rendering

• SQLite — a powerful and lightweight relational database engine available to all applications

Android Runtime Android includes a set of core libraries that provides most of the functionality available in the core libraries of the Java programming language.

Every Android application runs in its own process, with its own instance of the Dalvik virtual machine. Dalvik has been written so that a device can run multiple VMs efficiently. The Dalvik VM executes files in the Dalvik Executable (.dex) format which is optimized for minimal memory footprint. The VM is register-based and runs classes compiled by a Java language compiler that have been transformed into the .dex format by the included "dx" tool.

The Dalvik VM relies on the Linux kernel for underlying functionality such as threading and low-level memory management.

Linux Kernel Android relies on Linux version 2.6 for core system services such as security, memory management, process management, network stack and driver model. The kernel also acts as an abstraction layer between the hardware and the rest of the software stack.

http://code.google.com/android/reference/android/app/NotificationManager.html

http://code.google.com/android/reference/android/app/Activity.html

http://code.google.com/android/intro/tutorial.html



RECOMMENDED READING

"Google Plans Massive Open Services Development Platform"

"Google's Strengths Pose Threat to Carriers, Others"

"The State of Google Apps"

This document is published in the following Market Insights:

Carrier Operations & Strategies Worldwide

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Asia/Pacific Headquarters Gartner Australasia Pty. Ltd. Level 9, 141 Walker Street North Sydney New South Wales 2060 AUSTRALIA +61 2 9459 4600

Japan Headquarters Gartner Japan Ltd. Aobadai Hills, 6F 7-7, Aobadai, 4-chome Meguro-ku, Tokyo 153-0042 JAPAN +81 3 3481 3670

Latin America Headquarters Gartner do Brazil Av. das Nações Unidas, 12551 9° andar—World Trade Center 04578-903—São Paulo SP BRAZIL +55 11 3443 1509

Dataquest Insight: How Google May Influence the Future...

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