Thoughts on Twilio IPO, Part II:

Cloud APIs Ride Consumer Demand for Integrations

This is the second blog post touching upon the Twilio IPO prospectus filed with the SEC on 26 May, 2016.  While the previous post focused on the company’s observation that “build, not buy” is becoming the norm for organizations developing software-based services, this post will focus on another, broader observation reflected in the document.  The success of Twilio’s business model illustrates the extent to which integrations between applications and communications infrastructure — driven in large part by consumer demands for interoperability between the telecommunications and digital ecosystems — have become an essential part of the value proposition of many companies, particularly those whose core business relies in some part on communications.  This importance is reflected in the market’s exuberance for Twilio stock, which has risen dramatically since the June 23rd offering.

Consumers expect their applications to be able to communicate with them wherever they are, and through whichever medium they find most convenient, be it instant messaging, SMS, email, or voice, and it is exactly this need — to facilitate connections between applications and telecommunications infrastructure — that Twilio addresses.  The implications of these new consumer expectations for telecom Service Providers are significant, and consumer preferences for integration and ease of access have already been reflected in the rise of Unified Communications.  As time goes on, the Cloud’s role as the locus of software integration solidifies, and the conversion of legacy networks to VoIP continues, the current emergent trend towards the provisioning of Unified Communications over the Cloud will accelerate.

From Infrastructure to Integrations

Historically, the core business for communications companies was tied to infrastructure ownership.  The power and leverage that these companies had was bound up in the fact that they controlled access to and service over physical infrastructure.  The Bell Telephone Conglomerate — which dominated US telephony and possessed an intermittent monopoly on voice communication until its dismantling by the Justice Department in 1983 — is a prime example.  As communications services advanced, however, and the communications infrastructure began to function more as a common resource and telecom services as a commodity, the nature of the business began to change and establishing and maintaining control of the relationship with the customer became the most important element of the business, reflecting the variety of options the consumer possessed for communications services.

Continuing this trend, now, as software applications have become the locus of productivity (the infrastructure) in the economy and continue to “eat the world,” spreading to ever more verticals and business processes, customer preferences for ease of use and a seamless digital experience (see again build not buy) are driving companies to create ever more sophisticated and user-friendly, consumer-facing applications.  Addressing consumer expectations increasingly means not only a streamlined and engaging experience within the bounds of the application, but also seamless integration with other applications and telecommunications infrastructure.  Uber’s users don’t simply want a push notification from their mobile application; they want the ability to receive an email and an SMS as well.  Beyond personal preference, this demand for options is driven by the unique utility of each medium – quick and reliable notification for SMS, memorialization of the transaction for email, as well as infrastructure limitations (e.g., low availability of data).  Facilitating these inter-application and infrastructure integrations as a third party is exactly what Twilio does.

What Does Riding the Demand for Integrations Look Like?

Twilio’s core business is facilitating telecommunications integrations, and the company provides software developers with a programmable Cloud API which allows them to interface with the company’s “Super Network,” a global software layer that interfaces intelligently with physical communication infrastructure across geopolitical boundaries around the world.  Use-cases include programmable text, voice and video.  Twilio’s entire business is devoted to using cloud computing to provide software developers with the means to integrate with legacy infrastructure (in this case, physical communications networks) around the world.

A similar case is CloudPipes, which provides individuals and organizations with the means to create automated work-processes across multiple cloud-based applications, including OTT and other communications platforms.  One use case, for example, would be sending a Slack notification to all the members of a project when a particular task has been marked completed in Asana, or uploading all PDF links from Gmail messages to Dropbox.  Cloudpipes owns the integrations by, as a third party, making it easy for users to integrate discrete applications and automate tasks across them.

What does this mean for UCaaS/Telecom service providers?

First of all, it means that consumer expectations for integrations will continue to rise.  This doesn’t simply mean that the trend towards UC as the industry standard for Hosted Business Telephony will continue, but also that business users will eventually expect all of their applications to communicate intelligently with each other.  This means at the very least integrations with standard business productivity software, and as time goes on, the list of expected integrations can only be expected to grow.

Further out into the future, (this is more of a pie-in-the-sky prediction) the increasing importance of integrations is pointing to the web-browser as the seat of communications, with WebRTC as a facilitator.  Cloud-based productivity applications (think Google for Work) and native applications are converging in terms of their capabilities, and the Google Chrome app store provides users of the browser with an almost endless array of possibilities.  Service providers must become aware that this is where Unified Communications is heading, and prepare themselves appropriately.

For the time being, however, Service Providers need to continue to focus on the customer relationship.  By drilling down on this relationship and the knowledge of the customer’s business processes that it provides, Service Providers will be able to customize their offering to the needs of their user base, or even to a specific user.  What does customizing the offering mean in the age of Twilio and Cloudpipes? Increasingly, it will mean delivering exactly the integrations that the end users’ business processes demand.  After all, it is changing business-user expectations that are driving the growing demand for Unified Communications in addition to integrations of all types.  By leveraging their knowledge of their users, Service Providers can stay one step ahead of these changing expectations and create an offering that exceeds the industry standard.

Posted Under:VoIP Logic Blog