IBM Urges Communication Providers to Embrace Social Networking

New Analysis Examines Social Networking’s Growing Influence on Telecom Providers and Long-Term Trends in Communications.

ARMONK, NY .- IBM (NYSE: IBM) today unveiled a new report, “The Changing Face of Communications,” available at www.ibm.com/telecom, that highlights the need for Communication Service Providers (CSPs) to embrace social networking in order to protect and enhance their role in the communications industry. CSPs who don’t take bold steps to adapt to this rapidly evolving cultural phenomenon -- which is redefining communications as we know it today -- risk losing revenue and marketshare.

Social Networks have become primary destinations for a rapidly expanding universe of online users to manage and enrich their digital lifestyles both personally and professionally. In June 2008, unique monthly visitors to social networks represented approximately two-thirds of the world’s Internet audience.(i) Based on the projected growth of the global Internet audience, IBM estimates that by 2012, the number of unique monthly visitors to online social networking sites will surpass 800 million.(ii)

Social Networking Today

Social networking, considered a “communication fad” in recent years, is transcending that phase and is weaving itself into the intrinsic fabric of the Internet. Throughout the world, Internet users are turning en masse to such sites as Facebook and MySpace to meet their communication needs. For example, before 2005, not a single social media network was ranked among the world’s top 20 English-language Web sites.(iii) By June 2008, social networking sites comprised half of the same list, surpassing many traditional Internet “stars,” such as AOL, eBay and Amazon in the upper tier.

Not only have social networking sites become a primary communication platform, but these sites are also increasingly being used as distribution channels for digital content which leverages the “viral” nature of an individual’s network of relationships. While first gaining a foothold among individual online users, companies are now more actively recognizing the potential benefits of a social media strategy to build brand loyalty by involving these networks of consumers. Depending on the brand and its goals, establishing a social network site dedicated to its clients can attract a better-targeted audience, more actively engage them, and allow them to exchange information among a community that is most suitable for the user.

Transforming the Telecommunications Industry

“Successful communications systems are those that beyond providing basic connectivity allow individuals, organizations, communities and objects to interact and communicate in ways that were not possible before,” said Chris Pearson, Partner and Global Telecom Industry Leader, IBM Global Business Services. “Driven by the widespread growth of Internet connectivity and the emergence of interactive online communication tools, our century-old telecommunications industry is being redefined by this phenomenon and is changing the way people around the world communicate in both their personal and business lives.”

According to the IBM study, the rise of social networking is changing the fundamentals of the telecom industry and creating a future that is being shaped by two key trends:

* Communication patterns are shifting from point-to-point and two-way conversations, to many-to-many, collaborative communications; sharing videos, photos and other multimedia content that substantially enrich the user experience.
* Control of communications is shifting away from the proprietary domain of Telecom providers to open Internet platform service providers.

These two trends are enabling new entrants, such as Skype, Google, Microsoft, Facebook and MySpace, to enter the communications marketplace, undercutting the position of traditional providers and capturing a significant share of incremental communication time. These providers feature disruptive Internet-based business models and a diverse set of communication tools and applications, ranging from e-mail and instant messaging to social networking and collaboration.

The Future of Communication

“The option of doing nothing is not a luxury many providers can afford, as a new ecosystem is emerging from these long-term shifts in communication patterns and trends that will require bold, significant changes by existing providers,” said Gary Cohen, General Manager of IBM’s Communications Sector. “By adapting new capabilities like social networking, communication service providers can develop new forms of communications and spark interactions that breed collaboration and innovation across all businesses and thereby, improve efficiency, reduce cost, increase productivity and enhance the quality of life.”

The evolving communications marketplace represents both a window of opportunity and a challenge for telecom providers. Over the long-term, CSPs should broaden the scope of their traditional “voice” business to more actively encompass both point-to-point communication and many-to-many collaborative models that include “voice, internet-based communications and content,” and align their organizations and industry partnerships accordingly. This has strategic and transformational implications for the business, impacting areas such as product and services offerings, skills, platforms, revenue models and markets, among others.

IBM has been at the forefront of modern-day social networking since its inception, and long before with its rich history in collaborative networking and thought leadership. Additionally, IBM has invested heavily in industry-specific solutions and partnerships that leverage social networking, positioning clients to achieve results quickly. To view the complete report with detailed recommendations for communication providers and the telecommunications industry please visit: www.ibm.com/telecom

The IBM Institute for Business Value provides strategic insights and recommendations that address critical business challenges to help clients capitalize on new opportunities. The Institute is comprised of consultants around the world who conduct research and analysis in 17 industries and across five functional disciplines, including human capital management, financial management, corporate strategy, supply chain management and customer relationship management. For more information on IBM, please visit: www.ibm.com

(i) “Internet Users worldwide by region, 2007-2012.” eMarketer. January 2008. http://www.emarketer.com/

(ii) “Social Networking Explodes Worldwide as Sites Increase their Focus on Cultural Relevance.” comScore. August 12, 2008. http://www.comscore.com/press/release.asp?press=2396

(iii) IBM Institute for Business Value Analysis based on information from the Alexa, the Web Information Company, website. http://www.alexa.com