Detecon Executive Briefing

Think ICT 2032!

Position for ICT
everywhere

Information and Communication Technology (ICT) is one of

the most dynamic industry sectors of our times. The future of
the ICT industry is shaped by long term socio-economic
trends and at the same time ICT will shape the way we work
and live in the future. Accordingly, we have developed a
framework to set the scene for the year, when today’s ICT-
executives will reach the end of their careers: 2032!

What are the most important trends, what do future ICT

applications look like and what does this mean for players in
the market? This paper provides an extract of our recently
published Think ICT 2032! opinion paper and takes the
viewpoint of a telecommunications operator – or to be more
precise of a company which is now a telecommunications
operator, but will most probably not be so anymore in 2032.

We make ICT strategies work

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Global trends shaping the ICT market

In our opinion four mega-trends out of the plethora of demographic, macro-economic and
social developments are of fundamental importance to the future ICT ecosystem:

 Increasing and high life expectancy, in particular in the Western hemisphere, drives
the demand and overall costs for health services: Seniors emerge as a significant ICT
customer segment, while ICT is necessary to make health services better and more
efficient.

 In 20 years more than 60% of the population will live in urban areas and several
mega-cities with more than 10 million inhabitants will become melting pots with the
economic potential of a G7 nation in terms of GDP: A smart ICT infrastructure will be the
life blood of these conglomerations.

 Globalization of world trade carries on with an expected tripling of the current world
trade volume of 13 trillion USD to more than 50 trillion USD over the next two decades:
Not only MNCs, but also SMEs will become globally present based on ICT enabled
collaboration and digitalization of products and services. ICT becomes an ubiquitous
production factor and potential means for differentiation in almost all industries.

 Automation of business processes will reach a next level and smart business
networks allow for ad-hoc build up of production, sales and services value chains with
near real time “add-in” and “phase-out” of business partners: Smart ICT is the
preconditions for these business networks to flourish and capture a market share of up
to 30% over the next two decades.

These four mega-trends stimulate the demand for smart ICT services and at the same time
ICT enables these trends following the law of mutually accelerating return.

ICT in 2032 in work and life

In our personal environment we will experience the power of ICT in various forms. Our
homes will become smart: appliances like washing machines, refrigerators, security
functions and utility supply will be linked to a centrally managed sensor network. Chips will
be implanted in human bodies to provide health or fitness related data. Pervasive ICT
constantly collects and processes status, usage or context information. Smart Agents,
software with artificial intelligence connected to the Internet, will help to manage the vast
quantity of data generated. They enable multi-modal semantic search engines, for example,
assisting and improving human decision making in an increasingly complex world.

ICT will not only have a significant impact on our daily life, but at the same time ICT evolves
as a, if not, the central production factor or differentiator in most industries. The energy
sector is one such example:

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For the energy industry, digitalization means virtualization – similar to Cloud Computing in
the IT industry. ‘Managed energy’ based on information gathered at various points of the
energy supply chain leads to an abstraction of energy from the physical grid infrastructure. In
the future, connected batteries of electric or hybrid cars will constitute virtual energy storages
that can be used to compensate for typical volatility of renewable energy (Vehicle-to-grid).
Virtual Power Plants, heterogeneous energy generators connected by ICT, serve a similar
purpose: distributed resources can be managed efficiently to best match demand and
supply.

The logistics industry is an example of how wireless communication and IT have already
fundamentally transformed business processes and production models. With the real-time
management of supply chains, fully automated warehouse systems and telematic
applications ICT made itself indispensable to modern logistics. Technologies such as near-
field communication, sensor networks and machine-to-machine communication play a pivotal
role in optimizing logistics processes. IT based planning and routing of components allows
just-in-time production, RFID technology allows to exactly identify where components are.
Overall, ICT results not only in a higher flexibility, but also in an improved efficiency through
the end-to-end management of the whole supply chain.

A lot more examples can be provided on how ICT captures, enhances and transforms our
working environment and personal life. Obviously this transformation process does not only
generate benefits, but also comes with challenges, in particular with regards to data and
individual rights protection as the recent discussions about the Facebook data leakage,
Google street view and Apple’s patents for identifying unauthorized use of i-phones show.
Trust will be a major and determining factor for the future market position of any ICT
provider with direct end customer access in the future.

We expect that these challenges will not form ultimate barriers to the technological and
economic progress, but that the associated risks will - at least partly - be balanced by a
industry sector policy with intervention for/with advanced data security mechanisms.

Industry Dynamics
Convergence is and will remain the driving force behind the further development of the ICT
market till 2032. During the past years we have witnessed a “vertical” convergence,
supporting the paradigm of a horizontally layered organization (SalesCo-ServCo-NetCo-
Approach) and driven by the ‘unification’ of telecoms/IT, Content/IP or fixed and mobile. We
expect “tectonical” shifts in the market landscape by “horizontal” industry convergence,
challenging ICT players to ‘reposition for ICT everywhere’. The rather disruptive moves in the
music or publishing industry, or foreseeable in the energy sector, are only a first sign.

 ICT is everywhere: significantly miniaturized ICT components (wearables, white

goods, wallpaper, medicine…) will be “IP-enabled”.

 Smart Business Networks dominate industrial production: Rigid value chains

will “dilute” into a couple of central and very agile value creation networks. By the
means of self-learning business operating IT-systems, these will become
increasingly automated and “intelligent”.

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 Vertical ICT value chains will disintegrate quickly: Due to IP and increasingly
open APIs, the pace of change will be the highest in our industry.

 „ICT everywhere” will be the “central nervous systems” for each individual and
societies as a whole. Political governance in the digital age will center on consumer
protection and the homologation of socio-economically important technologies, like
smart agents1.

A new era of convergence

4,1 trillion $ ? trillion $

ICT convergence 2010 ICT enabled industry convergence fields 2032

Fixed- Content/
TC/IT Life & living Transport & Mobility Health & Environment Energy
Mobile IP

Consumer
Business as Smart Business
Sales Co B2B2C Enablers ICT
a Service Networks Facilitator
Mediation

Increase customer intimacy

Horizontal economies of scale

depend on B2B2C maturity
Serv Co

Vertical integration only

with deep field experience

Decrease production modules

Alternative Carriers
Infrastructure Licensed fixed- and Cloud Computing and
Net Co electricity/ gas, roads
as a service mobile operators Supplier Players
PPPs infrastructures,

2032 market structure

We expect a multiplication of the global ICT market volume of currently 4,1 trillion USD. ICT
2032 will have a significant impact on the GDPs of the industry nations.

Driven by the vertical disintegration and increasingly diverging competencies necessary to

serve the consumer and business customer segment in horizontally integrated markets, we
expect three core areas of value creation for ICT in 2032:

 Business as a Service (BaaS): players with excellent process, IT and industry

know-how enable “business operating systems” across several industries. BaaS is
key in 2032 for dynamic business networks which build up production, sales and
service value networks by ad-hoc “add-in” and “phase-out” of business partners.

 Consumer ICT Mediation (CIM): Top brands and trusted partners provide
“intelligent customer intimacy” in ensuring a central technical mediation role, by
means of an easy to use ecosystem comprising smart agents, net phones, robots or
wearables.

1
We define them as „cognitive e-Butlers“, an „artificially intelligent“ IT-application, which can process information,
apply knowledge, change preferences and take decisions on behalf of a consumer or business agent.

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 Infrastructure as a Service (IaaS): Converged ICT and possibly further

infrastructure components are provided by IaaS players. IaaS is primarily a
wholesale business model serving BaaS and CIM customers for instance with native
access, managed infrastructure services or dedicated network infrastructure
(backbone, robot parks, sensor networks). In addition IT & data centres and device
fleets will be crucial infrastructure components in the future. A small portion of
consumers, with enhanced system integration capabilities will be served directly.

Conclusions for your “ICT 2032 Boardroom Agenda”

ICT is and will be a key industry. There are significant opportunities, but each ICT-provider
needs to assess its position individually.
 BaaS, Consumer ICT Mediation and IaaS require new and different core
competencies. Individual ICT companies will not be able to take a leading role in
all three areas simultaneously. On which of the one or two of these three areas of
value creation should we focus?
 Companies operating in the Consumer ICT Mediation Market find themselves in a
horizontal competition, which is marked by innovation and agility and requires
flexible organisation structures. Smart agent technologies and a strong trusted
retail brand play a pivotal role. Would todays and next generation customers really
choose us?
 Ad hoc smart business networks will represent a large portion of an automated
and embedded economy. What are the strategic components of a “business
operating system? Where could we create a substantial industry intimacy?
 The IaaS business model offers sustainable profits for few large ICT companies,
providing they generate international economies of scale and build capabilities to
manage the B2C/B2B wholesale business. Would we be capable of ensuring a top
3 position in our regional market?

Each strategy to position for ICT 2032 must start with an honest assessment of your core
competencies in the DNA of your company. Today’s telecommunication operators’
capabilities and business models are closest to IaaS value creation. However, they neither
explore the full potential of IaaS nor are operators prepared to compete successfully in the
BaaS and CIM environment. We believe it’s time now to think about the necessary strategic
and organizational transformation processes to prepare for playing a leading role in the
future ICT landscape.

For further insights see the Detecon Opinion Paper ‘Think ICT 2032’!

The authors

Dr. Karl-Michael Henneking

Karl-Michael.Henneking@detecon.com

Lars Theobaldt
Lars.Theobaldt@detecon.com

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