VAS transformation Vision into action

Transcription

1 Tao of Business VAS transformation Vision into action Operators must transform their VAS infrastructure, service offerings, and business models if they wish to turn threats from Internet and OTT providers into opportunities. By Kristofer Kimbler & Mac Taylor 23

2 VAS transformation is a multi-dimensional process that exceeds the mere basic evolution of service platforms and offerings. The lack of appropriate business models relevant to service creation, operation, and monetization issues leads to poor ROI and revenues from VAS platforms. VAS transformation: Overview Telco business transformation In the mature markets, although regarded as a threat, Internet and over-the-top (OTT) services, as well as smartphones and tablets, are today s main drivers of mobile data usage/revenue. High-bandwidth M2M services will continue to expand thanks to the cost-efficient service delivery enabled by cloud technologies and the proliferation of powerful MBB-connected devices. However, operators have been connecting these services/devices to the Internet through a gigabyte pipe with a generous flatrate data package, which has eroded their bottom line and enabled said players to literally invade their space. Therefore, operators need a clear strategy to combat these challenges and a comprehensive plan to leverage new opportunities. This can only be achieved by rationalizing and harmonizing network & IT infrastructure; optimizing operations and business processes to reduce OPEX; adopting new open business models based on partnerships with CPs/SPs; and creating new service offerings and applications to compensate for falling revenues from core voice and messaging services. Operators in emerging markets suffer from intense internal market competition and low ARPU, but are as yet less threatened by the OTT and Internet players. They can learn from the mistakes made in North America, Europe and other mature markets. They still have time to proactively transform their businesses to take advantage of the coming revolutions in their territories. VAS transformation VAS transformation is an integral part of an operator s business transformation. It is a multi-dimensional process that exceeds the mere basic evolution of service platforms and offerings; many operators in mature markets learned this lesson the hard way. They invested in new VAS infrastructure, including SDP, but neglected to adopt appropriate business models relevant to service creation, operation, and monetization issues, which has been a key reason why ROI and revenues from VAS platforms have not met expectations. As a central part of their VAS transformation strategy, operators recognize that they need to maximize revenue from data services and content. Furthermore, they want to drive more revenue through data service innovation by competing in vertical markets traditionally addressed by other industries and service providers, such as IPTV, M2M, mobile money, mobile health, and cloud-based ICT solutions for small-medium enterprises (SMEs). Operator requirements for VAS transformation Operators in both mature and emerging markets have a clear set of business objectives that are the basis and justification for a VAS transformation program. Timeto-market (TTM) for new services should be reduced as much as possible. To quickly respond to competition and counter threats from new services, operators must conceive, create, test, launch and market new services and content offerings in a timely manner. Service-related CAPEX and OPEX must also be reduced to be more in line with competitors in the OTT and Internet space. Service innovation is vital to continued success. Beyond traditional telecommunication services, operators also need to enter different vertical markets with mobile, cost- 24

3 Tao of Business VAS investment requires engagement beyond platforms and products. Huawei has formulated a VAS Transformation Program to facilitate this process in terms of service innovation, platform consolidation, operational strengths, and more. effective counterparts of already existing services and applications. Operators also need to increase the VAS contribution to total ARPU, which means that service offerings must be expanded and improved along with adoption rates. Finally, operators must bring data revenue more in line with data traffic, without alienating customers. In other words, they have to introduce services and offerings that will help them increase revenue from mobile broadband. Huawei VAS Transformation Program Program objectives Successful VAS investment requires much deeper engagement on the business and operational level; provision of best-in-class service platforms and VAS products is just not enough. Therefore, Huawei has formulated its comprehensive VAS Transformation Program to facilitate this process in four respects. Service innovation Service innovation remains a key pain point for most operators; many have made substantial investments in 3G and 4G networking but still offer 2G service portfolios, while nearly all innovation in the mobile space is coming now from OTT players and the Internet. Operators must therefore extend their offerings through new voice, messaging, data, and content services that will yield a smart pipe that generates profits for years to come. Operators also can enter vertical market segments such as healthcare, education, security, and the automotive industry. Platform consolidation To stay innovative and differentiate, operators can only create new value for their customers by leveraging all service and network assets, including basic service enablers such as voice & messaging and advanced ones such as mobile cloud & M2M. This can be achieved through a horizontal SDP architecture that aggregates and orchestrates all these VAS assets. Going forward, migration of service platforms and other service layer systems to the cloud will further increase flexibility and rationalize costs. Operational excellence Outsourcing has been proven to reduce OPEX and risk in the telecom field. Vendors can host platforms/services and offer them to operators as managed services; today the concept has been even extended to the service operation and business planning level, to achieve tangible gains in service revenue. This model has been very successful and is growing more popular in the mobile content business. Ecosystem & business models To date, operators have generally been unwilling to share revenue with third parties; this needs to change. To significantly expand their service offerings, operators need effective partnerships with application developers, service providers and vertical industry experts. These market players must be given a strong business incentive (service revenue sharing and business intelligence sharing) to enter such partnerships. Only then will operators be able to create a true ecosystem that will expand and diversify their service portfolios. Huawei cloud-based service platform All Huawei service platforms and service solutions are based on state-of-the-art SDP architecture and cloud technology. They share SDP service enablers and management capabilities, while providing unique functionality necessary for specific service areas, such as M2M, IPTV, or mobile broadband. This approach enables radical reductions of CAPEX and OPEX for operators who wish to quickly enhance their service offerings. The cloud itself is a powerful service enabler for broad classes of services and applications. It will certainly reshape 25

4 The cloud itself is a powerful service enabler for broad classes of services and applications. It will certainly reshape operators IT Infrastructure in the coming years. There is a great synergy between SDP and the cloud. operators IT Infrastructure in the coming years. There is, in fact, a great synergy between SDP and the cloud. Huawei SDP can provide computing infrastructure (virtualized OS with underlying computing hardware/ storage). It can also provide the necessary service enablers, such as authentication, charging, messaging, or location for applications & value-added services created in the cloud. Developers can build applications through SDP s service creation environment/service execution environment (SCE/SEE), without installing any tools on their own computers, and then deploy these applications without any specialized system administration skills. SDP can also provide the exposure, management, orchestration, and charging capabilities necessary for effective delivery of cloud-based services to end users. With software deployed online, providers rent applications to customers through a subscription-based or pay-as-you-go model. From this perspective, SDP can become both the front-end and facilitator of cloud-based services. Of course, the entire SDP architecture itself can be deployed in the cloud as well, which makes cloud-sdp synergy even more powerful. From this point of view, the cloud becomes a foundation for the next generation of SDP architecture, which, along with the cloud, will certainly generate new added value for operators. In the near future, other service layer systems and platforms such as SMSC, MMSC or maybe even IMS can be absorbed by the cloud to create homogenous, highly-elastic, and cost-effective next-gen mobile service architectures. Leading mobile operators such as Vodafone are already working on such projects. Multi-segment service innovation To enable service rollout and timely platform investment monetization, Huawei has created a broad portfolio of ready-to-deploy services and applications based on its SDP and ancillary service platforms. With these tools, operators can quickly generate new revenue while gradually rolling out third-party services provided on their service platforms. They can therefore secure control over the key cornerstones of their business. A good example of this approach comes from the Telefónica Group in Latin America; after deployment of a group-wide SDP, they quickly introduced an initial set of services provided by Huawei and subsequently launched several more from third-party application developers, with a TTM now shortened from six months to six weeks, or even several days in some cases. Huawei s segmented services have already proven successful for numerous operators in terms of both commercial and user value. Examples include Digital Shopping Mall (DSM), Color Ring Back Tone (CRBT), Mobile Newspaper (MNS), Rich Communication Suite (RCS), Time-Shifted TV, Turbo Button, Parental Control, ehealth, and msecurity. Turbo Button is probably the best example of how a simple value-added service that leverages mobile broadband (MBB) can both improve user experience and generate significant revenue. It basically works just like it sounds. Users who normally subscribe to basic data packages and need a larger chunk of bandwidth for a limited period of time can pay a little extra for it. It can be thought of as bandwidth-on-demand. Users just click the button and more bandwidth is provided instantly. This service has proven quite successful for MegaFon (Russia), which has earned up to USD1.6 million extra a month through this service. E2E managed VAS services & hosting The professional service and operational models provided by Huawei are essential for operators who are looking to improve their operational efficiency, shorten 26

5 For operators, the key advantage of revenue sharing is the elimination of CAPEX related to costly and time consuming procurement, which consequently has a drastic effect on TTM. TTM, and reduce OPEX. Huawei provides managed services which allow operators to outsource both their platform and VAS operations. Huawei also provides local service development and customization services that allow operators to create on-demand VAS products and enhance platform functionality, without launching change requests and tender processes. Professional services also include thirdparty management and business consulting, the latter of which involves market analysis, service planning, marketing planning, service performance evaluation, and business process optimization. Huawei actively supports operators in partnership ecosystem development. Partner management services include partner acquisition & qualification, partner lifecycle management, application development, and system integration support, as well as settlement & reconciliation. Tata is the number five operator in India, with 85 million subscribers. As a relative newcomer to the telco industry, Tata has limited knowledge and experience in VAS product operation and marketing. After deploying Huawei s SDP platform, Tata decided to outsource the platform operation and certain business functions (partner management & service marketing) to Huawei. Within a year of operation, this decision proved quite efficacious. Tata s CP/SP network exceeded 300 members and its SDP platform generated over USD39 million in revenue, with over 200,000 content downloads per day. New business models Sharing revenue & risk Today, operators are reluctant to incur all the risks related to VAS product launch, while VAS vendors yearn to share in the revenues generated by their products for operators; this creates strong incentives on both sides to assume a revenue-sharing model. Revenue-sharing is a cornerstone of the Huawei VAS Transformation program. For operators, its key advantage is the elimination of CAPEX related to costly and timeconsuming procurement, which consequently has a drastic effect on TTM. Huawei has already signed individual and group-wide VAS revenue-sharing agreements with several operators. Huawei has raised the revenue-sharing model to the next level of maturity through joint-service innovation, market analysis, and service planning with a diverse body of telecom operators. Huawei also provides business consulting while revenue-sharing is in place, which increases the value proposition of the model and makes it much more attractive for operators since Huawei has the superior understanding of its own line of products and solutions. Telefónica in Latin America and MTN in Africa have successfully launched ring back tone (RBT) and other VAS services on a revenue-sharing basis with Huawei, which bears all the costs of RBT solutions (hardware/ software), system integration, and service operation. The services have been launched across 13 and 21 countries for Telefónica and MTN, respectively, and the model has proven mutually beneficial, as MTN Nigeria has reached an impressive 30 percent penetration for RBT, which translates into millions of dollars of additional revenue per month. Both operators are now ahead of the game in the developing world, following a smoother path that should enable them to better maintain their leadership when their markets finally mature and the situation tightens. In other words, with Huawei, they will remain leaders for the next decade. Editor: Joyce Fan joyce_fan@huawei.com 27