The enterprise market is divided into three segments: Infrastructure as a Service (IaaS), Platform as a Service (PaaS), and Software as a Service (SaaS). Examples of each are: Amazon EC2, Heroku, Salesforce. These three layers enable each provider to focus on delivering a key part of the software stack as cheaply and as scalably as possible. Infrastructure provides commodity compute and storage; platform provides simple and scalable development environments; software provides user interfaces and services.This morning, GigaOm ran a story about Skype's explosive growth, particularly in international markets, correlating positive Skype growth with declining growth rates in the telco/carrier international calling market. NewTeeVee covered XBox discussions with ESPN to provide over-the-top video to XBox Live subs and called reference to Apple's rumored parallel efforts. Lastly, YouTube announced live coverage of cricket matches.
Looking back at the three news stories, a platform layer is developing on top of core telco and cableco infrastructure. 10 years ago, content providers like Disney and network owners like Comcast and DirectTV were the entirety of the stack. The content providers sold content and network owners provided the hardware for content consumption with the network, set-top box and modem.
Today, there is a new tranche to the market: a platform whose constituency includes third party STBs like TiVo, Boxee, AppleTV and XBox and voice products like Skype, and Google Voice. These platforms deliver content and services in more effective ways than their predecessors by focusing on the customer experience and leaving the infrastructure companies to optimize network utilization.
Much like the enterprise market, the infrastructure or network layer is a low margin, high volume business. Many of these companies like AT&T, Comcast and others are attempting to move up the stack into the platform with efforts like TVEverywhere and Epix. These platforms are joint ventures between the old guard, network providers and content providers. Given these moves, vertical integration and consolidation is likely in the near future in search for higher margins.