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ABS FINAL REPORT

Co-opetition in the Cloud Computing

Industry

Singtel and Globe Telecom

By: Candelaria, Daruka, Dey, Jha, Srinivasan

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CONTENTS

Topic Page #

Executive summary 3

I. ASEAN 2015 Vision for ICT and Cloud Computing 4

II. Cloud Computing and Background 4

What is Cloud Computing? 4

Cloud Computing – Its significance to the Telecom Industry 4

Cloud Computing in ASEAN 5

III. Scope of the Paper 5

IV. Cloud Computing Industry 6

Singapore 6

Philippines 7

Singtel 7

Globe Telecom 7

V. Environmental Analysis 8

Pestle Analysis 8

SWOT and Strategic Options 9

Porter’s five forces for Cloud Computing Industry 10

VI. Co-opetition 11

Value Net 11

Application of Parts 12

Circumventing the Traps of PARTS 13

V. Conclusion 13

Exhibits 14-20

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Executive Summary

The ASEAN 2015 ICT Master Plan envisions ASEAN to move towards a transformational and

empowering ICT which would help create an inclusive, vibrant and an integrated ASEAN. The

paper looks at the growth and usage of cloud computing as a mode to achieve the ICT vision for

ASEAN 2015. Cloud computing is a revolutionary ICT technology which helps businesses in

bringing down their operational costs significantly. It works on the concept of economies of

scale by integrating the infrastructure and services for a lot of companies in one place. One of the

industries which is gradually moving to become a provider of cloud computing services is the

telecom sector. The telecom sector sees cloud computing as another revenue generating

opportunity beyond its traditional revenue making model which includes providing mobile, fixed

and broadband services.

The paper speaks about the creation of a co-opetition strategy between two companies namely

Globe telecom (second largest telecom player in Philippines) and its principal Singtel (leading

Telecom Company based in Singapore). The strategy is such that the eventual consequences

benefit both Globe and Singtel in increasing their respective customer base (thus revenues) as

well as global footprints. In the game, Globe and Singtel both cooperate first to set up IT

infrastructure in Philippines and later both compete as the cloud services offered by both

companies will help them capture a bigger customer base.

The paper peeks into the environmental analysis of the Singapore and Philippines cloud industry.

A Pestle analysis for the Philippines helps us assess the readiness of the market for new and

advanced cloud based solutions. The SWOT framework is further used to arrive at the strategic

options for both Globe and Singtel. Finally, a porter’s five forces framework for the cloud

computing industry helps us assess the attractiveness of the industry.

The paper also analyse the value net of Globe and do a PARTS analysis to see if the strategy

adheres to the classic game theory approach.

If the strategy works between Singapore and Philippines, it is suggested that a similar strategy

can be implemented across ASEAN. As a result, not only will the telcos in ASEAN get a larger

market share of the bigger cloud customer base, but also the enterprises using these cloud

services across ASEAN will be able to bring down their costs of operations. This will help the

enterprises to focus on their core competencies rather than focus on IT infrastructure

maintenance. The enterprises will, therefore, become more efficient in their area of operations. If

we look at the bigger picture, ASEAN will be thus be able to attract more international

enterprises to setup business in the region which in turn will generate added value for the

economies of various member states of ASEAN.

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I. ASEAN 2015 Vision for ICT and Cloud Computing

ICT or Information and communications technology is one of the key elements in improving and

enhancing the ASEAN connectivity. ASEAN connectivity is an essential in achieving a single

and unified ASEAN Community through an ASEAN Political-Security Community, ASEAN

Economic Community and the ASEAN Socio-Cultural Community. In a nutshell, the ASEAN

connectivity focuses on taking steps to boost the physical connectivity, the institutional

connectivity and people-to-people connectivity. ICT, along with energy and transport make up

the physical connectivity aspect of the complete ASEAN connectivity.1

ICT infrastructure plays a role in facilitating trade and investments, connecting people,

supporting delivery of services and reducing cost of business and trade-related transactions. ICT

infrastructure largely includes fixed, mobile and satellite communication networks and the

internet along with the software required to develop and operate these systems.

The vision of ASEAN in ICT synergizes with the bigger vision of unifying the ASEAN

community where one business operating in one part of ASEAN can conveniently service other

parties in other parts of ASEAN. The physical distances should zero out with the help of latest

technology and swift information flow. To realize this vision, it is required from the member

states of ASEAN to cooperate with one another in order to bridge the digital divide that exists

now between countries in ASEAN.

Given the vision to build a strong and reliable ICT infrastructure, an area of focus for ASEAN

would also be to build capabilities to support cloud computing. Cloud computing is a growing

form of computing which enables organizations to adopt ICT infrastructure at low costs.

Adoption of cloud computing still remains an area of potential growth in ASEAN with respect to

its 2015 ICT vision.

II. Cloud Computing and Background

What is Cloud Computing?

Cloud computing is internet-based computing, whereby shared resources, software, and

information are provided to computers and other devices on demand, like the electricity grid. It

offers the ability to run programs on many connected computers and systems at the same time.

Cloud computing has an advantage of usage where there is economies of scale. This is to say that

the cost of moving the resources to cloud in an enterprise would reduce with the increase in the

number of users who would access cloud. It is also more convenient to use cloud when the

system is accessed from different regions globally at different times as per demand. It greatly

helps companies avoid investing in depreciable assets such that it leads to lower a capex for the

business and more opex with the pay-as-you-use model. It thus, allows many companies to avoid

spending on upfront IT infrastructure costs and thus concentrate on their core competencies.2

Cloud Computing – Its significance to the Telecom Industry

1 Source: ASEAN Connectivity Master Plan, http://www.mfa.go.th/asean/contents/files/customize-20130130-

140932-379647.pdf 2 Source: Wikipedia, https://en.wikipedia.org/wiki/Cloud_computing

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Cloud computing is changing the face of the telecom industry by restructuring the industry’s

value chain, redefining the telecom operating model and leveraging strategic alliances between

the telecom and IT firms (cloud service providers). Three ways that the telecom operators are

slowly aligning themselves in the cloud value chain are by managing cloud connectivity,

delivering cloud-based capabilities, and by leveraging network assets to enhance cloud

offerings.3

The telecom operators act either as a user or as a provider of cloud services or does both of this

(Exhibit 1). By being a user of cloud services the operators are able to save costs, on the other by

being a provider of cloud services the telecom operators create a new revenue stream for

themselves. The operators who act as users of cloud services have been able to transfer selected

functions of their business to cloud like many other organizations have done. Some operators

build their own cloud infrastructure, thus becoming their own customers. They can further

harness on this capability by selling the in-build cloud services to other operators.

To conclude all the above, not only are telecom operators reducing their own cost of operations

by using cloud solution but also offering cloud services to businesses and enterprises thus adding

a new revenue stream to their portfolio. The telecom industry views the opportunity of offering

cloud services as an avenue to diversify its services beyond the traditional telecom services of

offering mobile, fixed-line and broadband services. Given that many markets are globally

reaching saturation in the mobile and fixed-line usage, telecom operators are finding their way to

explore other options of revenue generation. As businesses and countries become more aware of

the benefits of cloud computing globally, telecom operators have a hope to cater to an all new

market by building cloud-based capabilities and fulfilling the unmet needs. According to a study

done in 2011 by Gartner, the cloud technology spending globally is forecasted to reach $207

billion by 2016 from $91 billion in 2011.4

Cloud Computing in ASEAN

Cloud computing is gaining increasing importance under ICT in ASEAN. It is being invariably

used across industries in the world to either reduce costs for some organizations or create

revenues for others. However, the adoption of cloud computing in businesses is still low in

ASEAN owing to the lack of knowledge about the technology and its use among the business

fraternity in ASEAN. Evident from the cloud readiness index (CRI) assessment released by Asia

Cloud Computing Association in 2012, Singapore ranks 4th

in CRI assessment while Malaysia,

Indonesia, Philippines, Vietnam and Thailand occupy the lower rungs in the Asian rankings.

Brunei, Laos, Cambodia and Myanmar do not yet appear in the list. CRI assessment is done on

the basis of information regulations, information infrastructure, and business & government

environment in the countries in Asia.

III. Scope of the paper

A recent concept that has crept into the telecom industry is that of a federated cloud network. A

federated cloud is the deployment and management of several internal and external cloud

3 Source: Ericsson documentation on Telecom cloud opportunity,

http://www.ericsson.com/res/site_AU/docs/2012/ericsson_telecom_cloud_discussion_paper.pdf 4 Source: http://www.gmanetwork.com/news/story/269679/scitech/technology/cloud-technology-improves-phl-

businesses-gartner

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services in order to match business needs. Singtel lately implemented a federated cloud network

across three countries: Singapore, Hong Kong and Australia such that an enterprise can keep

operating with the same operator’s cloud services seamlessly irrespective of the country the

enterprise operates in. Singtel, a telecom giant of Singapore, has left its footprints in the whole

Asia Pacific region by setting up data centres in all the three countries and thus becoming a

provider of federated cloud network and the enterprise-level services that it is offering over it.

A lot of businesses have started viewing ASEAN as a single bloc to spread their wings into. For

such enterprises to seamlessly carry out business across ASEAN, one of the key factors would be

ease of using the same computing services irrespective of the physical location. This would aid

in significantly adding value for these businesses.

In this paper, we would consider Singtel taking an initiative in setting up a federated cloud

network in other ASEAN member nations just like it did the in the Asia Pacific. As the scope of

this paper, we will study the environment in the telecom sector in Singapore and Philippines in

an attempt to begin a federated cloud network across these two countries first. Such a model

could hopefully be replicated to other ASEAN countries later with Singtel acting as a key player.

Given that Singtel has 47.34% of stakes in Globe Telecom, Philippines, we feel that it would be

easier for Singtel to work with Globe and set up the needed infrastructure for a federated cloud

between Singapore and Philippines. We will do a brief analysis of the scenario of the companies

and the industries in these two countries and the possible outcomes of such an application of co-

opetition.

IV. Cloud Computing Industry

Singapore

Singapore ranked 2nd

in international connectivity and 4th

in broadband quality as per the study

by Asia Cloud Computing Association (ACCA) in 2012. The adoption of SaaS5 is among

Singaporean businesses has grown at a CAGR of 20% over 2012-2015. Singapore topped the

cloud readiness index6 in e-government and ICT prioritization, and in IP protection, according to

a white paper released by ACCA. Singapore now hosts more than 10 cloud data centres of global

cloud service providers. The development of major information communication infrastructure

such as the Next Generation Nationwide Broadband Network, Singapore Internet Exchange and

Data Centre Park, provides a conducive environment for nurturing a vibrant cloud computing

ecosystem in Singapore.7 Infrastructure development has long being viewed as an enabler of the

knowledge economy that Singapore aimed to become.

Philippines

According to the 2012 study by ACCA, the Philippines remain at the lower tier of the cloud

readiness index. It ranks low in data privacy, IP protection and broadband quality. There is a

5 SaaS: Software as a service, sometimes referred to as "on-demand software" supplied by ISVs or "Application-

Service-Providers" (ASPs), is a software delivery model in which software and associated data are

centrally hosted on the cloud. 6 Cloud Readiness Index: The Index has been designed by ACCA to track the development of the necessary

infrastructure and enabling environment for cloud computing across leading Asian economies.

7 Source: http://news.idg.no/cw/art.cfm?id=305490CE-94AA-5121-92D0514D585FB30F

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clear indication that the intellectual property protection regulations need to be strengthened and

treated with a high priority to boost confidence of the cloud service providers. Emerging

markets, including Philippines, will show the fastest growth in the public IT service sector.

According to International Data Corporation (IDC), by 2016 the collective share of the emerging

markets including Philippines will nearly double, accounting for nearly 30% of the new public

IT cloud services spending growth.8

Singapore Telecommunications Ltd. (Singtel)

Singtel is Asia’s leading communications group providing a wide variety of multimedia and ICT

solutions including voice, data and video services over fixed and wireless platforms.9 Singapore

with the help of its excellent infrastructure has managed to build a competitive telecoms market.

Headquartered in Singapore, Singtel’s main operations are in Singapore and Australia. In

Australia, Singtel operates with its local arm there called Optus. Singtel has been operating for

about 130 years and as of 2013, the group stand to server around 468 million people and employs

around 23,000 staff worldwide. Singtel has strategic investments in five regional mobile

operators: Telkomsel (Indonesia), Globe Telecom (the Philippines), Advanced Info Service

(Thailand) and PBTL (Bangladesh). The Group also has investments in Bharti Airtel (India),

which has significant presence in Bangladesh, Sri Lanka and Africa.

Singtel provides a whole suite of applications under cloud based application-as-a-service

category. It makes offerings under infrastructure-as-a-service as well as security-as-a-service.

Singtel’s recent initiative towards cloud adoption has been its expansion into the private and

hybrid cloud offerings. In March 2011, Singtel with the help of its cloud software provider,

VMWare, brought forward the hybrid cloud offering of PowerOn Compute. This software allows

companies to expand their resources on their private cloud infrastructure into Singtel’s public

cloud.

Globe Telecom

Ayala10

-owned Globe Telecom is 2nd

largest telco in the Philippines with close to a 34% market

share11

following PLDT (and its subsidiaries). Globe has been increasing spending on improving

network quality by making international tie-ups and upgrading the current technology. Globe

supports 2G, 3G, 4G and WiMAX services in the region. Singtel with a major control has about

47% stakes12

in Globe Telecom thus putting Globe at an advantage in technology upgrading with

the support of its principal. Globe is already into the business of offering cloud services to large

and small & medium enterprises in the form of infrastructure, storage, backup and computing

using cloud based solutions.

8 Source: www.bworldonline.com%2Fcontent.php%3Fsection%3DBeyond%26title%3DSMEs-and-the-Public-

Cloud-%26id%3D66926&h=4AQFI_4uZ 9 Singtel company profile from their website: http://info.singtel.com/about-us/company-profile

10 Ayala Corp. is a holding company for the diversified interests of the Ayala Group. Founded in the Philippines by

the Spanish and German Ayala, Roxas, and Zobel families during colonial rule, it is the country's oldest and

largest conglomerate. 11

32% market share for Globe Telecom in 2011; it rose by 2.2% in the following years. 12

Source: http://www.asiaone.com/News/The%2BBusiness%2BTimes/Story/A1Story20080628-73448.html

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V. Environmental Analysis

Pestle Analysis

Political: Department of Science and Technology (DOST) agencies, the Information and

Communications Technology Office (DOST-ICTO) and the Advanced Science and Technology

Institute (DOST-ASTI) are encouraging the government of Philippines to embrace cloud

computing instead of the traditional IT system. This will be called GovCloud. Whenever

GovCloud is implemented, it is hoped that it will provide cost savings, better agility,

standardization of the IT system, and greener ICT and reduced risk.

Economic: One of the major advantages of cloud computing is the reduced capex for businesses.

Thus in a given period of time cloud based system reduce costs to much lower levels compared

to traditional IT systems.

A factor which may affect the growth and adoption of cloud computing in an economy is the

growth of economic GDP. In Philippines, economy is growing at a GDP growth rate of 7.8%13

.

Social: Growth in internet and social networking usage amongst the people is a big factor

fuelling to the increased adoption of cloud solutions.

The social networking penetration in Philippines has reached a whopping 95%.14

This supports

the fact that the social factors would be in favour of the adoption of cloud computing in the

Philippines.

Technological: With an increasing focus on improving bandwidth capabilities by the leading

telecom operators in the Philippines, the ease of adoption of cloud computing will increase. One

of the technological criteria is high quality bandwidth for usage of cloud services. The cloud

providers need to set up data servers to maintain the cloud data. With the increasing entrance of

international cloud service providers, the technology, infrastructure and know-how is easily

available in the Philippines.

Legal: The factors that need to be considered for cloud adoption from legal view point are: data

protection, software licensing, open source use and liability. The Philippines is still faces some

issues on the data protection and data security aspects.

Environmental: Usage of cloud computing automatically reduces the energy consumption. The

introduction of green systems has further helped organizations in benefiting from much reduced

costs of power consumption to operate the servers and systems.

The environmental analysis of Philippines suggests that apart from the data security issues

around adoption or acceptance of cloud computing, the other aspects including economic,

political, social, technological and environmental generally favour the growth of cloud

computing industry in the Philippines.

13

Source: http://www.nscb.gov.ph/sna/2013/1st2013/2013qpr1.asp 14

Source: http://asiancorrespondent.com/54475/philippines-named-the-social-networking-capital-of-the-world-

indonesia-malaysia-amongst-top-10/

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SWOT Analysis and Strategic Options

The internal (strengths and weaknesses) analysis and external (opportunities and threats) analysis

for Singtel was performed. The internal analysis has been done based on the company and its

operations. External analysis has been done based on the Competitiveness Roadmap for 2013-

205015

. The strengths and weaknesses were then combines and the strategic options for each of

the companies were arrived at.

Singtel is the leading telecom operator in Singapore offering mobile, fixed and broadband

services. They have a wide reach in terms of customers in Singapore. They have an extensive

infrastructure to cater to their customers across Singapore and are able to operate on economies

of scale due to a high subscription. Owing to a small Singaporean population, Singtel has stakes

in various other Asian telecos. In terms of cloud computing, Singtel is a leader in Asian as it has

been able to remain ahead of the others in terms of technology, strong IT partners and a presence

in other countries including some countries in Asia and Australia. Nevertheless, a slowdown in

the Asian economy can affect Singtel as it holds high stakes in the Asian telcos. If these telcos

are affected adversely during a crisis, so will Singtel be under the circumstances. An increasing

concern for Singtel is also that the traditional telecom market in Singapore is slowly getting

saturated. Singtel needs to build newer capabilities to sustain its positioning in Singapore.

Globe is the second largest telco in Philippines after PLDT which also offers fixed, mobile and

broadband services. It has an extensive infrastructure in the Philippines and to add to its strengths

it has strong principals or stakeholders like Singtel to bolster its growth. However, Globe is

relatively a laggard in adoption of latest technologies to the extent that it introduced cloud

solutions about a year after its competitor, PLDT, introduced cloud solutions in the Philippines

market.

There are various opportunities for players like Singtel and Globe given that there are a growing

number of SMEs in ASEAN which creates a big market demand for cloud solutions. ASEAN is

moving towards knowledge sharing rather and more open systems which are an indication of

collaborations between players of a given industry in ASEAN. Since remoteness is becoming

irrelevant with technical advancements, people are becoming used to virtual systems and

technology like the internet. A big threat, however, is also that there would be more players now

in the telecom industry vying for a larger pie in ASEAN. For example, telco of Singapore could

compete with telco of Philippines.

Below are summed the strategic options for Singtel from the SWOT analysis:

Singtel should share its cloud best practices that it has developed over a period now, with

other regions in ASEAN. ASEAN is a good market for cloud service providers given the

growing number of SMEs operating across ASEAN. It will be a good chance for Singtel to

expand its footprint with increasing customers beyond its current customer base.

Singtel can hope to balance out its risks across its subsidiaries in case one region is affected

by economic crisis. Diversification by expanding to different regions can reduce risk to

15

The competitiveness roadmap published by IMD; source:

http://www.imd.org/uupload/imd.website/wcc/Roadmap.pdf

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Singtel in terms of falling sales and profits in case one of its investment regions is affected by

an unseen crisis.

As an additional revenue stream, Singtel can provide cloud computing solutions to anyone

irrespective of their location.

Singtel should focus on getting the first mover advantage in the newer and unexplored

markets with its cloud capabilities hence making good for any lost market share elsewhere.

Focus on offering cloud services and expand into more regions to diversify risk of losing

market share in one.

Below are summed all possible strategic options for Globe from the SWOT analysis:

Globe can offer cloud services to their existing customers using SingTel’s infrastructure and

knowledge base

Develop and improve own cloud services capability and infrastructure through best practices

adopted from other ASEAN ICT firms

Use SingTel’s infrastructure and knowledge base to update own capability in offering cloud

services, thereby minimizing the threat of foreign firms taking Globe’s market share in cloud

computing

Discontinue offering cloud services; focus on traditional offerings of fixed line, mobile and

broadband

Embark on joint ventures with more foreign partners to offer cloud services in the PH

Porter’s five Forces for the Cloud Computing Industry

The cloud market players (sellers of cloud services) include all cloud-solution providers

including IBM, SAP, Microsoft, Google and other big ICT giants. However, because of low

product differentiation and almost the same cost structure offered by these companies the market

is very competitive.

The threat from new entrant is considered high overall. In SaaS market, the threat of new

entrants is high because of the requirement of low initial investment, low time to market and low

exit barrier. In PaaS16

market, presence of industry giants such as Google and Amazon creates a

high barrier to entry which can be reduced by product differentiation and innovation. In IaaS17

market, threat of new entrants has been low because of the requirement of high initial investment

and presence of high risk.

The threat from substitutes is low for the cloud computing industry since the technology itself

is at the stage of early adopters in the technology adoption life cycle (Exhibit 4). The other

substitutes for cloud computing today could be open source computing or shared server hosting

or dedicated server hosting.

The bargaining power of buyers would be rated generally medium (between low and high).

Based on whether the buyer avails cloud services in the form of IaaS, PaaS or SaaS, the

16

PaaS: Platform as a service (PaaS) is a category of cloud computing services that provides a computing

platform and a solution stack as a service (Source: Wikipedia) 17

IaaS: Infrastructure as a service (IaaS) is a category of cloud computing services that provides a virtual servers

and storage anytime.

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bargaining power of the buyer may vary depending on how big are the switching costs to move

from one service provider to another. In SaaS and IaaS the bargaining power of buyer may be

high because of low switching costs however in PaaS the bargaining power is consider low

because of high switching costs.

The bargaining power of suppliers would be considered low. The suppliers of the cloud

computing players would be the hardware and software suppliers who furnish the needs of the

cloud service providers in order for them to serve their customers. The bargaining power of

suppliers is low since switching costs to move from one cloud provider to another is high.

Looking at all the above factors it can be concluded that the cloud computing industry is quite

attractive. The demand is still growing given that the technology is still in its nascent stages of

development. With the further innovation and R&D there could be scope of product

differentiation and hence more scope for innovative cloud providers.

VI. Co-opetition

Co-opetition is a form of strategy where companies cooperate yet compete to get a bigger market

share. At the end of the game, total value of the players’ gains must be more than the total value

with which they entered the game.

The co-opetition strategy that we are considering intends to benefit both Singtel and Globe after

they practise co-opetition. Singtel should consider investing in the cloud infrastructure and

technical know-how of Globe Telecom. Given that Singtel is already a pioneer in building a

federated cloud network, they should consider doing the same in ASEAN. They can begin doing

this from Philippines by first setting up data centre in the Philippines for the federated cloud

infrastructure. Globe is a partly-owned subsidiary of Singtel. Singtel can, therefore, get Globe

Telecom to cooperate and help set up the needed infrastructure in Philippines. The idea of setting

up data centre locally in a region is to improve the latency period for accessing services in and

around that region. If this happens, Singtel will get to increase its cloud service footprint in

Philippines as well in addition to the other regions in close proximity to Philippines. Singtel

customers can use the cloud services offered by Singtel seamlessly at the same latency rate in

any of the countries i.e. Singapore or the Philippines. Globe will benefit since it will get boost

with new technical know-how and improved technology and infrastructure. Globe being a part of

the federated network of Singtel will be able to attract customers from even outside Philippines.

See Exhibit 5 for a summary of this co-opetition strategy.

Value Net

Globe’s value net consists of its customers, substitutors, complementors and suppliers. Before

we understand the game further is important to understand the various players in the game. In

this case, the strategy is to convert one of the substitutors to become a part of the game such that

it works in favour of Globe Telecom.

The customers of Globe Telecom in the cloud computing space are the SMEs and the large

enterprises. The complementors who add value to the services offered by Globe are the internet

service providers. The faster the speed of the network, more effective the cloud solutions offered

by Globe become. Substitutors from the point of view of Globe would be big multinational firms

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like Microsoft (Azure), Amazon (EC2), Singtel (PowerON ezCompute) and PLDT Cloud.

Suppliers from Globe’s point of view are the software and the hardware capability providers.

The software suppliers would count in VMWare and Microsoft and the hardware suppliers

include players like IBM and Cisco. Refer exhibit 6 for a brief overview of Globe’s value net.

Application of PARTS

If we want to change the game or maybe change the strategy in this case, we may have to change

the below elements.

1. Changing players: Globe, by bringing in Singtel into the cloud computing market in

Philippines, will manage to create economies of scale thereby bringing down the cost of

infrastructure for them and thereby offer cheaper solutions to the customers. It will create

a market for itself internationally by letting one of its substitutors i.e. Singtel to take a

prime role in bringing a change to the game. As a result of the changing game, Singtel

would become a complementor (adding value to Globe’s position) and a supplier

(provide technical know-how and possibly human resource such as managers) to Globe

Telecom.

2. Changing added value: As a result of collaboration with Singtel, Globe will be able to

introduce more advanced cloud products in the cloud market in Philippines. This will aid

in reducing the cloud market share of other cloud telecom providers like PLDT.

Simultaneouly, Globe will raise its own value as it would get access to superior

technology and will find a market even outside Philippines.

3. Changing rules of the game: Singtel new technology and Globe’s current cloud

capability will help reach economies of scale and thus both of the players will be able to

offer cheaper solutions than other competitors such as Amazon and Microsoft. Also,

Globe can set apart its target market to ASEAN unlike the other global players who are

looking at other markets like US, Europe and Australia as well. Globe can thus maintain

its position in spite of the tough competition by playing judo economics with the bigger

and older cloud service providers. If Globe remains small and focuses on the ASEAN

market, it could create custom solutions for the smaller customer base. However, for the

bigger players like Amazon and Microsoft, the solutions are more generic since they cater

to a larger global customer base.

4. Changing tactics: Singtel could have served the Philippines market through their data

centre in Singapore, without setting up data centre in the Philippines. However, it would

have not enabled them to provide low latency services that it can by locating data centres

in the Philippines. This is because proximity of data centres is an important factor in

enabling low latency of cloud services. Thus the strategy of Singtel setting up data centre

in the Philippines lifted the fog.

5. Changing scope: Given the nature of federated cloud network, not only will Globe be

able to capture a market within Philippines but can also expect to win customers outside

Philippines. For example in other countries where the federated cloud network exists

such as Hong Kong, Singapore and Australia, could act as alternative markets for Globe.

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Thus Globe will change its scope from Philippines to many other countries given that

PLDT covers a lion’s share in cloud computing in Philippines with better and more

advanced technologies.

Circumventing the Traps of the PARTS Strategy

First mental trap is to think that you have to accept the game you find yourself in. In this

case Globe has been vying on the second position after PLDT in the cloud telco industry.

However, by cooperating with Singtel, Globe can change the current game and thus Globe can

become a game maker rather than remain as a game taker.

Next trap is to think that changing the game must come at the expense of another. In this

case, Globe cooperates with Singtel, even though there is a chance that Singtel might get

benefited from the whole arrangement. However, it is more important for Globe to see if they are

benefiting at the end and less important to keep the other player devoid of benefits.

Another trap is to believe that you have to find something to do that others can’t. In our

case of co-opetition, it is highly possible that another player could set up a similar federated

cloud network in the same region as Globe and Singtel. However, in spite of this it is in the

benefit of Globe to adopt the strategy to attain greater market share.

The fourth trap is failing to see the whole game. In the given case, after creating the value net,

we realized that Singtel PowerON ezCompute was actually a competitor or substitutors to

Globe’s cloud solutions. However, after looking at the whole game, it was possible to see how

the one can turn around the substitutor to a complementor or a supplier.

The fifth trap is failing to think methodically about changing the game. The game strategy

was developed using the PARTS framework. The approach was allocentric which would allow

more than just Globe to benefit from the strategy. The other beneficiaries here would be Singtel

and the other telcos in ASEAN who will be a part of the federated cloud network.

VII. Conclusion

The long-term vision of the strategy talked about is more than just setting up data centres in the

Philippines for Singtel. In the short term this would benefit Singtel and Globe. However, in the

longer term it is hoped that the strategy would be adopted by telcos throughout ASEAN. As a

result of this, not only will the telcos in ASEAN get a larger market share of the bigger cloud

customer base, but also the enterprises using these cloud services across ASEAN will be able to

bring down their costs of operations. This will help the enterprises to focus on their core

competencies rather than focus on IT infrastructure maintenance. The enterprises will, therefore,

become more efficient in their area of operations. If we look at the bigger picture, ASEAN will

be thus be able to attract more international enterprises to setup business in the region which in

turn will generate added value for the economies of various member states of ASEAN. In context

to the ASEAN ICT 2015 master plan (Exhibit 7), by laying stress on the foundations of human

capital development, infrastructure development and bridging the digital divide, and the pillar of

economic transformation, we would achieve the outcome of making ICT an engine of growth for

ASEAN countries and contribute towards the ASEAN integration.

14

Exhibit 1: A telecom company as a Cloud Provider and a Cloud User

Adopted from Ericsson Telecomm

Exhibit 2: Pestle Analysis of Philippines

Telecom Company

as a cloud user

Telecom Company

as a cloud provider

Using cloud for internal operations

Using and selling cloud services to others

Managing cloud connectivity

Delivering cloud capabilities

Enhancing cloud offerings

Technological

Enablers are maturing of

virtualization technology and

the development of universal

high-speed bandwidth

universal software

interoperability standards

Legal

Data protection, software

licensing, open source use and

liability

Environmental

Reduces energy consumption

Concept of green policy can

further work towards

environmental cause PESTLE

Political

DOST-agencies, DOST-ICTO

and DOST-ASTI are

encouraging government to use

cloud application (G-Cloud)

Economic

Economic-crisis prone businesses

find more value in cloud

Reduces heavy capex instead

generates opex based on usage

Social

Growing usage of internet and

networking sites plays

significance in adoption of cloud

technologies.

15

Exhibit 3: SWOT Analysis for Singapore Telecommunications (Singtel)

1. Leading domestic fixed, mobile and

broadband operator in Singapore

2. Wide reach, extensive infrastructure

and economies of scale

3. Strong Asian coverage, has stakes in

other Asian Telcos

4. Developed range of cloud based

products in partnership with strong

IT companies providing cloud

solutions

1. Economic slowdown may

affect SingTel's overseas

Asian markets, which account

for two-thirds of group sales

and profit.

2. National telephony revenue are

declining as the number of local

fixed lines in service falls, a result

of the popularity of alternative

services such as VoIP and mobile

1. Emergence of a new middle class #20

Growing number of SME’s in the region –

ASEAN

2. Intellectual property vs. open

systems #27

ASEAN 2015 ICT vision: focus on a

culture of sharing information and best

practices

3. Remoteness becomes irrelevant (both

an opportunity and a threat) #42

Services can be offered to anyone with an

internet connection;

S4, S3, O1, O2, and O3: Singtel should

be able to share its cloud best practices

with other regions in ASEAN given the

growing number of SMEs operating

across ASEAN. It will be a good

chance for Singtel to expand its

footprint with increasing customers.

W1, O1, and O2: Singtel can hope to

balance out its sales across its

subsidiaries in case one region is

affected by economic crisis.

Diversification by expanding to

different regions can reduce risk of

economic crisis in one region.

W2, W3: As an additional revenue

stream, Singtel can provide CC

solutions to anyone irrespective of

their location.

1. Remoteness becomes irrelevant (both

an opportunity and a threat) #42

Other larger foreign telco/ICT service

providers can serve Singtel’s customers,

taking market share away from Singtel

S3, S2, and T1: Singtel should focus on

getting the first mover advantage in the

newer and unexplored markets with its

cloud capabilities hence making good

for any lost market share elsewhere.

W2, and T1: Focus on offering

cloud services and expand into more

regions to diversify risk of losing

market share in one.

OP

PO

RT

UN

ITIE

S

TH

RE

AT

S

STRENGTHS WEAKNESSES

16

Exhibit 4: SWOT Analysis for Globe Telecom Ltd.

1. Offers an integrated set

of services – fixed line,

mobile, and

internet/broadband

2. Second largest

Philippines telecoms

operator with wide reach,

extensive infrastructure

and economies of scale

3. Strong support from

principals (Ayala

Corporation and

SingTel), including

infrastructure, knowledge

and resource base

4. Slow adoption of

latest available

technologies

5. Young cloud

computing arm

(Globe Business);

introduced only in

2011

1. Emergence of a new middle class

(#20)

Growing number of SME’s in the

country and nurturing of entrepreneurs

2. Intellectual property vs. open

systems (#27)

ASEAN 2015 ICT vision: focus on a

culture of sharing information and best

practices

S1, S2, S3, O1 - Globe can offer

cloud services to their existing

customers using SingTel’s

infrastructure and knowledge base

W2, O2 – Develop and

improve own cloud services

capability and infrastructure

through best practices adopted

from other ASEAN ICT firms

1. Remoteness becomes irrelevant

(#42) Foreign telco / ICT service

providers can serve PH customers,

taking market share away from Globe

S3, T1 – Use SingTel’s

infrastructure and knowledge base

to update own capability in

offering cloud services, thereby

minimizing the threat of foreign

firms taking Globe’s market share

in cloud computing

W1, W2, T1 – Discontinue

offering cloud services; focus

on traditional offerings of

fixed line, mobile and

broadband

W1, W2, T1 – Embark on

joint ventures with more

foreign partners to offer cloud

services in the PH

OP

PO

RT

UN

ITIE

S

TH

RE

AT

S

STRENGTHS WEAKNESSES

17

Exhibit 3: Porter’s Five Forces for the Cloud Computing Industry

New Market Entrants

Geographical Factors

Entrant Strategy

Routes to market

Technology

Development

Substitutes

Trends

Legislative effects

Buyers

Buyer Size

Buyer Number

Product Service

Requirement

Suppliers

Level of Quality

Size of the process

Bidding capabilities

Cloud Market

Cost Structure

Product Service

Ranges

Differentiation/

Strategy

Number of Players

HIGH

HIGH

LOW

MEDIUM HIGH

HIGHLY ATTRACTIVE

18

Early Majorities

Early Adopters

Innovators

Exhibit 4: Technology adoption Life cycle of Cloud Computing

Adopted from an online tech blog

Exhibit 5: Co-opetition Strategy between Singtel and Globe

Growth

Time

Cloud computing

today

Globe Singtel

Singapore Philippines

Shares cloud infrastructure & know-how

Federated cloud network

Data Centres

Customer on the federated

cloud can choose to host

applications from either

location

Helps set up data

centre in PH

19

Exhibit 6: Value Net for Globe Telecom

Globe

Customers

-SMEs and large

enterprise

Substitutors

-Microsoft Azure

-Amazon EC2

-SingTel PowerON

ezCompute

Suppliers

-Software suppliers like

Microsoft, VmWare

-Hardware like IBM and

Cisco

Complementors

-Internet service

providers

20

Exhibit 7: ASEAN ICT 2015 Master Plan

1. Economic

Transformation - To promote trade,

investment and

entrepreneurship in the

ICT sector, and build an

ICT engine for sectorial

transformation

2. People Empowerment

& Engagement - To enhance the quality

of life through affordable

and equitable ICT

3. Innovation - To nurture a creative,

innovative and green ICT

sector

4. Infrastructure Development

- To provide the next generation infrastructure backbone and enabling policies and legislation

5. Human Capital Development - To develop a skillful ICT workforce and knowledgeable community

6. Bridging the Digital Divide - To elevate countries and people through ICT capabilities

FOUNDATIONS

PILLARS

KEY OUTCOME

• ICT as an engine of

growth for ASEAN

countries

• Recognition for

ASEAN as a global

ICT hub

• Enhanced quality of

life for peoples of

ASEAN

• Contribution towards

ASEAN integration

VISION Towards an empowering and transformational ICT: Creating an inclusive, vibrant, and

integrated ASEAN