Next-Gen Personal Clouds for Mobile Providers

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1 Next-Gen Personal Clouds for Mobile Providers Some people say that the heydays of mobile operators may be fading, as their ability to monetize voice, SMS and data decreases, while upstart competitors encroach their turf and disrupt traditional strongholds. These people might further suggest that operators are missing out on key mobile opportunities today. Consider a huge issue - what will be 'the next big thing' for operators? Oft-cited areas include expanded wireless infrastructure, telco-infused business services and richer consumer experiences. These are to be driven by innovations such as Big Data, The Internet of Things and open ecosystems of mobile services. What do personal clouds have to do with this? Regardless of strategy, operators need a core, unifying foundation of their mobile ecosystem to integrate user data, content and services. Failure to do so is likely to result in missing the next big thing. This paper starts with a brief history of the personal cloud market and how companies are leveraging it. It describes personal cloud trends and provides a blueprint for operators to leverage the next generation of personal clouds. It makes the case that operators would be wise to adopt a personal cloud platform, now. What qualifies Funambol to discuss this? We are the leading provider of white-label personal cloud solutions. We have been dedicated to this for 10+ years. Funambol-powered personal clouds are offered by operators for more than a billion people. We have learned much about how operators are using personal clouds and how they intend to do so going forward. While the market is young, it is growing up quickly. Opportunities remain but like other tech-based services, rewards often go to faster movers. Market Overview The personal cloud market landscape is dominated by a few companies - their estimated number of personal cloud users are in parentheses: 1. Ecosystem clouds: Apple icloud, Google Drive, Microsoft OneDrive (1B+) 2. Dropbox (300M+) 3. White-label clouds: Funambol, Synchronoss, F-Secure (100M+) 4. Box (tens of millions) There are others, but when an operator considers a personal cloud service, these are the usual suspects. Next-Gen Personal Clouds Funambol white paper page 1 September, 2014

2 Market Origins Apple catalyzed the personal cloud market with icloud. Before icloud, Apple had MobileMe, however, MobileMe was not fully ready for prime time, nor were most people ready for personal clouds. From a technology perspective, the heart of personal clouds is wireless sync. Wireless sync of simple data such as files between one device and the cloud is not difficult, however, syncing complex data across multiple mobile devices is challenging. Apple, which makes icloud work mainly on its own devices, has had a tough time of it, underscoring the difficulty of wireless sync for multiple brands of devices. The failure of early personal cloud services was due to immature technology, not lack of demand or interest. Following icloud, Dropbox found a sweet spot of people looking for an easy way to access and share files without ing attachments. It was initially known for easy sync of files between PCs and the cloud, sharing files via links, and later, accessing files on mobile phones. This heritage has been both a blessing and a curse. Dropbox's ease-of-use spurred its viral adoption, while the focus on files limited its appeal for mass market consumers, who rarely access files on mobile devices, they use smartphones more for messaging, social networking and rich media. After Dropbox, Box became a leader in cloud file sync and sharing for businesses. Business users have very different needs than consumers, and Box had a different focus and user experience. Google saw the traction of icloud and Dropbox, and understood the strategic importance of this space. It transformed Google Docs into Google Drive, which is similar to Dropbox. This posed a big challenge for Dropbox, as Google gives away more storage and has integrated Google Drive into Gmail. Dropbox may not mind casual users adopting Google Drive, as these people are unlikely to pay, but this limits Dropbox's potential user base and monetization options. Dropbox has recently turned more towards the business market, where they are finding more competition. For operators considering Dropbox as their personal cloud solution, they should be aware that Dropbox will have difficulty competing with Google and other ecosystem providers who give away large amounts of storage. Dropbox currently has no other way to make money or other products. Dropbox cannot afford to be the low cost provider and its paid services are premium priced for a service that many find to be a commodity. This strongly suggests that Dropbox must alter its approach, change strategy or that it will ultimately be acquired. This is likely to be at odds with operator short- and longer-term interests. The moral is that it strongly behooves operators to control their personal cloud destiny, given its strategic significance, making Dropbox a risky option for operators. Next-Gen Personal Clouds Funambol white paper page 2 September, 2014

3 Microsoft, a follower of Google's mobile strategy, decided it needed a better personal cloud. This led to its reformation of SkyDrive now-called OneDrive and its deeper integration into Microsoft products. The upshot is that the major ecosystem clouds are ongoing attempts by providers to get users to store their personal content in their clouds, so people will continue to use their products and services. This is user retention 101, familiar ground for operators, albeit in a different form. It is worth examining icloud closer, as it is the most advanced ecosystem. icloud is not only for user data, but also commercial content. Many Apple users barely understand icloud - most think it is backup - but icloud is core to Apple's long-term plan (no pun intended). Apple is committed to establishing icloud as a critical element in users' daily lives, so it becomes too inconvenient to buy products, services and content from anyone else. Google and Microsoft aim to do the same. What are the take-aways for operators? Operators would be smart to copy the strategy of making a selfbranded personal cloud the core of their ecosystem. Why? It is not just user convenience, it is more. Personal Cloud Evolution Personal clouds are changing in several ways. Obvious changes include downward pricing and a march towards unlimited storage. But there are other changes that are less apparent but just as meaningful. As noted, personal clouds have bifurcated between consumers and enterprises. This will continue because the needs of these users are quite different. Personal cloud solutions must continue to offer optimized capabilities and experiences for each type of user. For consumer clouds, the most successful are now much more about simplying digital lives and less about files. icloud is an example, where it is entrenched in Apple products. In some ways, icloud use is passive, it runs unnoticed in the background, in other ways, it is overt, where users interact with it. As an Apple user, chances are good that you will use icloud in one form or another. In other words, it is tightly integrated into the Apple ecosystem, with itunes and other components. Another growth direction, which may seem counter-intuitive, is feature phones. The majority of people still use feature phones. Many people have prepaid mobile plans. Although they have a more limited ability to pay for mobile services, they have a big need to preserve their data and they represent a large part of the market. New activity is being performed to bring personal clouds to feature phone and prepaid users, so when people upgrade, the transition is seamless and they stay loyal to their provider. Next-Gen Personal Clouds Funambol white paper page 3 September, 2014

4 Other important ways that consumer personal clouds are evolving include: Integrating more sources of data and content that are external to a provider's cloud Making personal clouds more relevant for families through private sharing Storing structured data for areas such as health, finance and other consumer interest areas Leveraging analytics and services to make personal clouds actionable, to automate a variety of tasks Emerging third party apps and services that augment the default capabilities of personal clouds Enterprise personal clouds are also being enhanced in many ways. Some of the more significant include additional security and verticalization with built-in capabilities and content for specific industries. The relevance for mobile operators is that personal clouds are evolving from simple wireless sync to being engrained in people's daily lives via ecosystem integration. Operators must decide if it is important to offer their own branded personal cloud service or to co-exist with others. Here's why both are essential. Leveraging Next-Gen Personal Clouds The best companies make decisions that are in their long-term interest, not suboptimal choices to appease short-term priorities. What do personal clouds for operators have to do with this? In the past two years, the pendulum started at one end, with operators choosing third party services such as Dropbox. The pendulum has swung the other way, where operators realized that outsourcing key customer data via third party services was a bad idea. If operators have aspirations of being more than a dumb pipe, they understand that they must control their customer data in the future. This trend has gotten stronger. As a company at the center of this market, here are a few truisms about personal clouds for operators that seem obvious to us. It is a blueprint for success that operators (as well as other companies that provide a significant amount of digital goods and mobile services) can follow. 1. Having your own branded personal cloud service is highly strategic and important for your future due to the march towards mobile and the cloud. Like other ecosystems mentioned, a personal cloud service needs to be at the core of your ecosystem. The personal cloud solution should satisfy both consumers and businesses, albeit with different capabilities and user experiences. The consumer cloud needs to support both smart and feature phones, also with different user experiences. 2. An operator must be able to adapt and differentiate their personal cloud services to fit changing market needs, otherwise, they will be overly dependent on a third party who has their own agenda at heart. Next-Gen Personal Clouds Funambol white paper page 4 September, 2014

5 3. It's important to view a personal cloud as much broader than simple wireless file sync. We are working with many operators who are integrating their personal cloud service into several facets of their ecosystem. They will be far ahead of other operators and it will be very expensive for others to catch up, due to the high cost of getting consumers to move data and change their behavior. 4. Operators need to establish a personal cloud vision based on how personal clouds are evolving, one that augments their strengths. A good starting point is learning from other operators. A key aspect is leveraging a mature platform that has withstood the rigors of demanding mobile cloud requirements, as opposed to 'shiny new solutions' that lack time-tested deployments. 5. Operators need to launch their own branded personal cloud service asap, to gain experience and to condition subscribers to store content in the operator's cloud as opposed to elsewhere. Failure to do this is akin to undoing prior retention efforts. It would be like saying, we don't care if users store important mobile data elsewhere - this is flirting with churn disaster. Can Operator Personal Clouds Succeed? Can operators compete against the 'ecosystem' clouds - haven't they tried this before - what's different now? Conditions today are aligning to favor operator clouds. Operators sell many brands and types of mobile devices, and they can support all of them with a single cloud. They can also peacefully coexist with personal clouds from other providers, making their cloud a 'one stop shop' to 'defragment' users' digital lives. Many operators are now more trusted than Apple (see Celebrity icloud hacks), Google and Microsoft. When people have questions about mobile services, they often turn first to their operator, positioning operators as the natural point of contact for personal cloud services. Once an operator establishes their personal cloud as the core of their mobile ecosystem, and people get used to it (like Apple, passively and overtly), many more users will remain loyal. As long as an operator personal cloud is based on the right foundation and is high quality, it cannot only compete, it can thrive. The Future is Bright Personal clouds are strategic and core to mobile ecosystems. They also complement and can help operators leverage the Internet of Things and Big Data. In summary, Funambol can help operators architect their personal cloud blueprint to convert vision into reality for maximum benefit. Copyright 2014 Funambol, Inc. All rights reserved. Funambol and OneMediaHub are trademarks of Funambol, Inc. Other company and product names may be trademarks of their respective companies. Next-Gen Personal Clouds Funambol white paper page 5 September, 2014