Axa Assurance Maroc - Insurer Innovation Award 2024
The Physical to Digital Transformation
1. DATASHEET
The Physical to Digital Transformation
Achieving Business Model Flexibility with Software Monetization Solutions
The days of network equipment being defined,
designed, manufactured, shipped, installed, and living
its entire life until obsolescence without any further
changes or upgrades are over. With connected,
intelligent devices, the lifetime is much longer and more
complex. Devices are renewed, refreshed and updated
through the use of software to extend a product’s life
over a longer period of time.
For most network equipment manufacturers, the
majority of their intellectual property is now based in
software, rather than in hardware. Industry trends like
Software Defined Networking and Network Function
Virtualization are emphasizing the importance of
software and as a result, a number of manufacturers
are offering virtual versions of their traditional
hardware appliances that can run on commercial
off the shelf hardware.
As the Internet of Things becomes a reality and more
device manufacturers move to shifting value to the
software from the device, some manufacturers are also
taking the approach of offering their Devices as a
Platform, opening them up for 3rd applications.
As a result of these drivers, today’s network equipment
manufacturers must move to hybrid software and
hardware business models and develop business
processes and supply chains that can support both
their physical and digital products. This shift for
many can’t happen fast enough. Throughout their
journey, manufacturers will achieve various levels
of maturity, including:
Level 1 - SKU Reduction
With software license-enabled flexible feature sets
the manufacturer is able to cut manufacturing, supply
chain and support costs by reducing the number of
unique SKUs required to be manufactured. This enables
manufacturing cost savings, efficiencies in forecasting
and stocking in the channel, and reduction in finished
goods inventory.
Level 2 – Device + Digital Add-On
With the ability to provision and add capabilities over
time the manufacturer can easily upsell additional
features while enabling the customer to manage the
quantity of features they consume. This requires a
hybrid business model where the hardware product is
sold and fulfilled using a hardware business model and
supply chain, and the software/digital add-on is sold
using a software business model. This hybrid model
enables recurring revenue opportunities for the network
equipment manufacturer through feature add-ons and
subscription revenue.
Level 3 - Device + Digital Add-On + Pooled Capacity
As companies move to Level 3, they start adding
flexible capacity and “pay as you grow” models to
the mix to sell based on capacity rather than physical
boxes. This enables your customers to manage the
geographic distribution and consumption of their
licensed capacity as needed. As your service providers
and large enterprises demand an easier way to do
business with you, offering pooled capacity models for
“site-based volume purchases and upgrades” will
Transformation
At-A-Glance
Changing Endpoint
Device (Network Element)
Lifecycle
• From “one and done”
• To being renewed/
refreshed over time
• To becoming a
platform for
additional capabilities
Need for Business
Model Flexibility
• From perpetual and
node-locked
• To recurring,
subscription and
consumptive
revenue models
• To digital add-ons and
“pay as you grow”
Support for Network
Function Virtualization
• Being driven
by operators
• Changing
deployment models
• “Elastic capacity”
“Femtocells look like
hardware products but
the sophistication and
strategic differentiation
is in our embedded
Femto-Engine software.
It is therefore vital for us
to be able to customize
the capabilities of
Femto-Engine to
meet each customer’s
specific requirements.””
Keith Day
Ubiquisys
LEVEL 1
SKU Reduction
LEVEL 3
Device
Digital Add-On
Pooled Capacity
LEVEL 2
Device
Digital Add-On
LEVEL 4
Virtual/Physical
Appliance
Elastic Capacity