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Session 1.1 - Value creation, value flows and liability over virtual resources

Value creation, value flows and liability over virtual issues (draft) (undefinedPDF)

Poznan, October 25th 2011, 11:30 - 13:30

Motivation and Expected Outcome: Value creation, value flows and liability over virtual resources (Editor: Makis Stamatelatos, UNIVERSELF)

The creation, distribution, and consumption of virtual resources is a foundation element of Future Internet and the digital economy. Disruptive innovations in virtualised infrastructures has reduced TCO, enabled faster time-to-market for new application and services, and improved business continuity/disaster recovery. Virtualisation is rapidly moving from its roots in computing to encompass all Internet-connected hardware from the network to the Internet of Things. In addition, disruptive innovations in content distribution and business models has moved virtual goods into a major revenue stream for the media and entertainment industry. Consumers are spending real money on intangible virtual goods with the estimated total European market for virtual goods alone in 2010 was estimated at $1.02 Billion which is comparible to the US. In the session, virtualisation and liability aspects will be approached from two perspectives:

  1. Infrastructure Perspective: in order to explore value creation and revenue flows in Future Internet business scenarios for network and service co-management as well as to exploit such issues in the area of Future Internet of Things,
  2. Societal and Business Application Perspective: in order to challenge business applications in Software as a Service context and services infrastructures for social and business innovation.

In the session several aspects related to network, service and application management needs to be addressed in the context of Future Internet and virtualized infrastructures:

  • What are the value structures? What are the activities that contribute to value creation?
  • How does money, information and knowledge flow between stakeholders? How such information and knowledge impact value creation? What monetization strategies are working?
  • What technical abstractions have the potential to maximise value creation from physical assets (e.g. Grid vs Cloud)?
  • How should responsibility be distributed between stakeholders? What are the corresponding scenarios? Who is the value guanrantor?
  • What is the balance between regulation, self-regulation and market forces?

The Infrastructure Perspective (Makis Stamatelatos, UNIVERSELF, Dieter Uckelmann, Bremen)

Future Networks are expected to be highly dynamic and ubiquitous; at the same time the wide introduction of network virtualisation enabling co-existence of several virtual networks over the same physical infrastructure results to complex scenarios of network and service comanagement.

Introducing autonomic networking may have several business impacts related to changes in the business players’ positioning in the various values chains, split, re-assignment and decentralisation of control contributing to improved QoS, better service provisioning and QoE as well as the emergence and support of new relationships between stakeholders and roles archetypes: resource owner splits from resource provider or platform provider.

The Future Internet ecosystem is therefore increasingly organised into systems interacting and exchanging virtual resources between infrastructure, application and services that are aggregated into complex integrated communities. This ecosystem is providing the potential and opportunity for new business roles and patterns of value exchange between virtual trading communities, virtual knowledge communities and emerging intermediaries.

However, technology and business need to be developed in a way that will ensure a cost benefit (make money – save money) as well as a certain level of trust inside the ecosystem and especially between value producer and value consumers meta-roles. In this sense, accountability and liability in value networks of virtualised resources remains a challenge due to the opaqueness of contractual relationships and indeterminate distribution of responsibilities between stakeholders.

Value propositions should be always assigned a value guarantor to ensure liability between the value producer and the value consumer; it is expected that different scenarios will de deployed reflecting differentiations in liability and responsibility between involved players in new dynamic value chains. Such scenarios will be always challenged in terms of their viability, and, therefore, novel business metamodels are expected to be developed to reflect more generic responsibilities, flows and interrelations inside the ecosystem; such metamodels can serve a references for the different scenarios.

Such reference models will provide a framework for the setup, the analysis and the description of business activities and reduce the complexity of an ecosystem to its core elements and their interrelations; more detailed business models “instances” will then be applicable to certain parts of the ecosystem (e.g. within an enterprise) to better understand business potential, scenarios’ viability and corresponding roles positioning in the new everchanging contexts.

Moreover, the Internet of Things provides a (conceptualised/abstracted) networked infrastructure enabling incremental business transformation as well as radical business changes; increased competition, market changes and new laws or regulations may require a radical rethinking of doing business. We are considering the value of information provided through the Internet of Things rather than on physical product offerings as the value proposition. Therefore, special rules concerning "Information as a Service" have to be considered. The fundamental rules of value creation through information in the Internet of Things may change business models for the Internet of Things. However, there is also a need for corresponding infrastructures to monetize on information in the Internet of Things. Open billing interfaces need to enable the free flow of money/payments without a tie-in to a specific billing provider at minimal transaction costs even for micro-payments.

The Societal and Business Application Perspective (Man-Sze Li, Co-Chair of FInES Cluster, Artur Nowakowski, Verax Systems)

Research from the Future Internet Enterprise Systems (FInES) domain suggests that an increasing number of enterprise centric services will be commoditized and factorized in the Internet of the Future as a set of Utility Services, available to all enterprises at a very low or zero cost, with guaranteed quality of service, and provided under non-discrimination and nonexclusivity policies. The Utility Services are to be contrasted with Value Added Services, which are premium, typically pay-as-you-go services, offered on a proprietary basis. Historically, the commoditization of hitherto value added services has been a clear trend in many industrial sectors including ICT. It is envisioned that IT services which are commoditized would be provided as (part of) an open platform, or via federation of open platforms. Examples of utility services include service search, composition, security, privacy, collaboration and interoperability.

At the same time, Software as a Service (SaaS) is a software distribution model widely discussed recently, with more and more suppliers applying it. However, contrary to SaaS predecessors (Platform as a Service, Infrastructure as a Service), its more general application with regard to enterprise software is still debated in the context of business, technological, legal, quality and security aspects. The proposed innovative service infrastructure, as a collection of utility services provided via one or more open platforms is called Interoperability Service Utility (ISU) and is one of the four Grand Challenges identified in the Research Roadmap1 of the Future Internet Enterprise Systems Cluster2, of DG INFSO at the European Commission. SaaS can be considered as an approach enabling or facilitating utility service infrastructures.

Preliminary results from the ongoing research on service infrastructures described above indicate that technical, social and business innovation is increasingly intertwined.

Specifically:

  • Business innovation is constrained by continuous tension and tussle of interests between innovation and monopolisation/lock-in. Technical collaboration between the relevant actors, which is essential for bringing and implementing utility services to the market, can easily be eroded by competitive pressures and the general trend towards ICT consolidation,
  • There is in principle business (and money) to be made for implementing sector or application specific utility services for encouraging and catalysing the development of value added services within individual and well defined industrial settings. However, interoperability of enterprise centric services between such “islands” of service infrastructures cannot and should not be automatically assumed,
  • The ROI for (utility) service infrastructures based on the supply-demand model of conventional economics is not compelling for market actors in purely commercial terms,
  • The structure (topology) of enterprise networks will be as important as the structure of the Future Internet in which they inhabit. The parallel present market developments characterised by the rising dominance of “open” service platforms and infrastructures, while creating its own ecosystem, are simultaneously deconstructing existing value chains and market structures. In other words, incremental market evolution may paradoxically lead to its opposite: large scale dislocation, consolidation of market power and foreclosure of market opportunity,

In parallel, for SaaS wide application in ecosystems and enterprises a number of business; techmological and legal issues have been identified:

  • Different actors have their role and their interests: software vendors, system integrators / software resellers, data centers, end-clients. Various billing approaches can be applied: cooperation between software vendors and data center providers can be arranged either according to the service separation model or revenue sharing models,
  • Technological challenges include software delivery platform, standard application interfaces, integration issues,
  • Legal aspects include constructing Service Layer Agreeements, questions of responsibility and legal regulations,
  • With regard to SaaS security, there are many reservations concerning the identity management, weak standards (SAS 70, ISO 27001), security processes non-transparent, risky access from everywhere, uncertain data location. Also, the imperfections related to the processes of preparing and handling SaaS solutions are often underlined. Concerns about quality overall performance, reliability of suppliers and SLA compliance are discussed.

The question as regards the (Future) Internet as a Universal Business System for Enterprises and SMEs in particular has been raised leading to the proposition of considering different forms of innovation through the lenses of business innovation, with potential ramifications of how to go about conceptualising, architecting, developing, testing and ultimately implementing technical architectures and enterprise systems. Moreover, again from a business perspective, such endeavours need to account for continuous innovation of business models and the underlying value models upon which the specific business models premised.

At this stage, relevant key questions include:

  1. Assuming that the existence of utility based service infrastructure(s) is(are) a precondition for realising the Future Internet as a “Universal Business System”, who is/are going to develop and maintain such infrastructure(s), and according to what principles and interests?
  2. How to preserve the neutrality of the Internet of Services and the open competition among Added Value service providers, while providing basic Utility Services as a public good?
  3. Is the commoditization of certain basic services a necessary pre-condition for stimulating entrepreneurship and innovation?
  4. What would be the optimal governance model for the service infrastructure(s)?
  5. What are the technical ramifications for architectural development?
  6. How could SaaS be exploited towards utility-based service infrastructure?
  7. Which are the software categories better and worse matching the SaaS distribution model? The suggested criteria to assess software suitability: business criticality, need for security assurance, legal requirements, usage patterns, data storage, software specificity.

Agenda

11.30 – 13.30 25 Oct 2011

Motivation and relevance to FISE-WG - undefinedMichael Boniface, IT Innovation Centre

Keynote - The Hermes network - Railways transition to a digital future - undefinedMike Haynes (Chair of GPH, European Railways)

The Infrastructure Perspective - Chair Makis Stamatelatos, University of Athens

  •  Position statements
    • undefinedMakis Stamatelatos, University of Athens
    • Management issues in virtualisation business scenarios, undefinedSimon Delaere, IBBT - Makis Stamatelatos, University of Athens
    • High Speed Accounting in the Future Internet, undefinedMartin Waldburger, Univeristy of Zurich
    • Business models for dynamic optical infrastructures - undefinedSergi Figuerola, i2CAT
    • Discussion


The Societal and Business Application Perspective - Chair Man-Sze Li, IC FOCUS, co-chair of the Future Internet Enterprise Systems cluster, Head of the FInES Business Task Force and FInES architectural design principles Task Force

Debate and discussion on virtual resources across perspectives Professor Marcus Seifert (Uni Bremen)

The principles for the session:

  • We will require position statements to be very short and focus on insight rather have projects. Maximum two slides per speaker under the topic sessions.
  • We will be directive in the topic presentations providing a small set of questions to the presenters that we want them to answer. This will help to provide consistency and coherence between different viewpoints
  • We will review presentations prior to the session to ensure they are relevant and address the questions in ways that we think add value to the FIA community

Please see:

fisa.future-internet.eu/index.php/%22FIA_Poznan:_Value_creation,_value_flows_and_liability_over_virtual_resources%22