Why CSPs should re-invent themselves as retailers

IBM Sales and Distribution Thought Leadership White Paper Telecommunications Why CSPs should re-invent themselves as retailers Digital service providers are embracing next-generation BSS for an improved customer experience

2 Why CSPs should re-invent themselves as retailers By focusing on customer experience and embracing the digital, online, real-time market, communications service providers (CSPs) can transform the way they do business and emerge as the driving force in the digital economy. This fundamental change requires a fresh approach to the next generation of business support systems (BSS) so that they can be more agile and responsive to market changes, and dramatically reduce their cost structure. Instead of traditional BSS components such as customer relationship management (CRM) and billing, next generation BSS must have a digital front office (DFO) and a digital back office (DBO) both focused on optimizing growth in digital services revenue. CSPs have been slow to adapt to the changing world. Existing products were not designed for the digital market and CSPs continue to underperform on customer experience when compared to other industries. Existing BSS solutions are often inflexible and costly to operate and maintain. CSPs continue to search for an IT solution to their problems, thinking that maybe a new billing or CRM system will save the day. These IT initiatives lead to costly delays as solutions are customized to serve established analog products and to allow for the migration of existing customers. Despite these challenges telecom operators are uniquely positioned to capitalize on the changing market. Their networks give them a central role in the digital world. To take advantage, CSPs need to incorporate the experiences of other industries particularly retail and leave behind the products and processes of the past. It used to be enough for a telecom operator to be better than the next CSP. If the customer experience was bad, who cared if it was equally bad for other CSPs? Today being the best CSP is no longer good enough. Retail market leaders such as Amazon and Apple have changed customer expectations across industries. In addition, digital products often require partnerships between CSPs and specialists in other industries, such as security, healthcare, logistics and banking. There is a real risk that CSPs become the lower value utility providers of network services in these partnerships. To remain competitive, CSPs must become more effective retailers and develop the appropriate customer experience for their digital customers. Forces Social media revolution: The ways in which individuals and organizations engage, interact and collaborate are changing Hyper-digitization: Digitized content is being produced and consumed more quickly than ever before Mobile revolution: Use of mobile Internet, smart devices and sensors is exploding Power of analytics: Big data real-time analytics are creating business insight for more and more data Implications Empowered, connected, informed and less loyal consumers Soaring customer expectations of service, price and delivery Products and offers designed to be sold, delivered and serviced through an online experience Innovative products delivered through partnerships and cross-industry collaboration Network costs for CSPs, valuemigration towards OTT Figure 1. Dramatic market and technological change results in severe challenges for CSPs

IBM Sales and Distribution 3 For those CSPs taking up the challenge of adapting to this new world, we believe their chances of success are greatly improved by focusing on a few key principles: CSPs can learn from examples in other industries such as retail, travel and hospitality and leapfrog their competition as they create an exciting new level of customer experience. Simplify products and processes. Reducing complexity is critical to delivering products that enhance the customer experience. This begins with product design. CSPs need to design their products from the customer s perspective, making them simple to buy, use and maintain. The Apple ipad and the Amazon Kindle tablet computers are prime examples of this approach. Prioritize online retailing. New products should be designed to be sold, serviced and maintained through online channels and processes. Customers want easy self-service, which means CSPs must design products and online screens that are easy to understand and manage. Leave legacy behind. It is not a good idea to bring existing analog products and processes into the new digital environment. The opportunity to create a lower cost structure for BSS is lost if solutions are customized to cater for old business models. CSPs should invest in new solutions for the digital world and plan the rapid migration of customers to new digital offerings. Everybody better get on to the world of IP. We can t sit [...] and hold onto policies that keep us holding onto obsolete technologies Randall Stephenson (CEO AT&T) Fiercetelecom.com February, 2013 Complexity is the coward s way out. But there is nothing simple about simplicity and achieving it requires following three major principles: empathizing (by perceiving others needs and expectations), distilling (by reducing to its essence the substance of one s offer) and clarifying (by making the offering easier to understand or use). Wall Street Journal 03/29/2013 Key areas of change for the CSP industry In the digital environment, CSPs do not have the same degree of control they used to have over several aspects of their business. Areas of change include the following: Changing products. Customer interaction for traditional products is mainly designed around the call center the CSP control model. New products need to be designed for the online, empowered customer model. Customers must be able to serve themselves successfully and repeatedly. In the long term, maintaining existing products, with their associated expense and complexity, is impractical.

4 Why CSPs should re-invent themselves as retailers Changing customer behaviors. The growing customer preference is for online transactions without involvement of a call center or, in many cases, a retail store. In the future, a CSP may have no direct involvement with a customer because the whole transaction including research, comparison shopping and purchase is done online. Changing partnership models. Traditional products are network-based voice, messaging and data. Digital products are applications that use the network as an enabler machine-to-machine (M2M) logistics, mobile health, mobile finance and so forth. These new products require active partners, not just suppliers, who may compete for ownership of the customer relationship. What impact do these changes have on BSS? Time to market is absolutely critical. BSS must provide the flexibility and agility to launch and service new products, and on-board new partners quickly and easily. They need to be designed for online access and real-time processing. At the same time, next generation BSS needs to do these things at a fundamentally lower cost. This cannot be achieved by technology alone. The business needs to change. The biggest opportunity for achieving a lower sustainable cost structure is through the simplification of products and processes, which make the supporting BSS systems simpler. The creation of a DFO and a DBO will replace traditional BSS transformations. CSP data Cross industry data Customer Segment Social network Demographics Sex, age group, etc. Tenure Rate plan Credit rating ARPU group Transactions Voice, SMS, MMS Data and web sessions Click streams Purchases Downloads Signaling, authentication Probe/DPI Product/service Subscriptions Rate plans Media type Category/classification Price Network Availability Throughput/speed Latency Location Interface Facilities Device Class Manufacturer Model OS Media capacity Keyboard type Starts, stops Success rates Errors Throughput Setup time Connection time Usage Discovery Navigation Recommendations Recovery Frequency Monetary Latency Travel and transport Social media data Retail/ shopping Banking/ payments Other industries Figure 2. CSPs are at the heart of their customers digital universe

IBM Sales and Distribution 5 Traditional BSS Next Gen BSS Call center Shops Web Digital front office CRM Order management/ Product management Digital marketing optimization Real-time offer management Ordering/buying Unified product catalog Core billing Product catalog Prepaid Digital back office Core billing Partner management Real-time charging/policy management Figure 3. Next generation BSS looks quite different from the traditional model The digital front office Delivering the online customer experience Products should be designed from the point of view of the online customer. This should be the case even where the actual customer will not be online (for example, in areas of low Internet adoption or availability). The online experience will drive a simplified process, with a potentially much lower cost structure. This same experience can then be used to drive channels such as retail stores, dealerships and call centers. CSPs have tried for years to achieve a seamless multi-channel experience for their customers, usually doomed by attempts to recreate parts of the call center experience in other channels (web, stores, dealers and so forth.). Beginning with the online experience the preferred experience of the customer it is possible to achieve a seamless experience across all channels. For example, where a call center is still required, customer service representatives (CSRs) can use the online screens for all front office transactions. Customer management CSPs should behave more like retailers and deploy the strategies of customer experience leaders from other industries. If DFO is comprehensive, then it eliminates the need for complex CRM systems by removing the centrality of the call center which can reduce the cost of ownership and maintenance. DFO, when combined with real-time analytics, can provide a multi-layered view of the customer, and deliver the right information at the right time to drive automated actions. CRM is becoming more of a customer account management tool while the customer relationship will be managed more by dynamic online, real-time transactions combined with analytic tools to help monitor customer demands and network policies. DFO will dynamically service customers in a fully digital world.

6 Why CSPs should re-invent themselves as retailers Ordering versus buying and the unified product catalog CSPs traditionally think ordering when customers are thinking buying. As a result, CSP processes focus on efficient throughput of orders, instead of focusing on providing a good buying experience for the customer. The ability to buy any service needs to be an option online, anytime, since smartphones have become the primary means for conducting personal and business activities. The main technical requirement is for a unified product catalog for all digital offerings to improve the seamless buying process customers are demanding. Digital marketing Customers are better informed than ever and demand engaging and efficient service online and on mobile devices. They expect personalization and convenience in service and sales interactions. The automation of marketing promotions based on real-time analytics can be a market differentiator for CSPs. They have to get in tune with the digital consumer by listening to, and becoming part of, the digital dialog and finding the influencers to market products and services effectively. CSPs can use social tools to collaborate with customers and partners, as well as to shorten the product innovation and offer cycle. CSPs can personalize interactions in all phases of the customer lifecycle. They can employ data analytics to better understand customers and meet their wants and needs by identifying and acting on real-time data at the point of impact. CSPs are perfectly positioned to analyze subscriber use patterns in real time and combine the insights gained with customers profiles to create new, original promotional or retention offers. The digital back office delivering the real-time product experience The traditional CSP model developed as real-time for prepaid and batch for postpaid. This is no longer a relevant distinction. Customers consume products in real time more and more and will continue to do so. Real time will permeate all service offerings. Real-time charging, policy management, unified product catalog and partner management are components of increased importance for next generation BSS but as a result, the need for a complex billing module is dramatically lower. Real-time charging and policy management The action today is at the network edge. Network traffic data and the ability to manage and analyze it instantly are critical. How a customer chooses to pay for a service should not be confused with the need for real-time transactions. Some services lend themselves to prepay while others may be more likely candidates for postpaid or transactional (credit or debit) payments. Flexibility here is essential. The need for active balance management across the digital business is vital. Customers should be empowered with control over personal spending by enabling them to monitor and set limits on account balances. In addition they can manage account funds as needed, for example transfering funds from account to account. Customers should be able to dictate which accounts they want charged for specific services. Customers can use their smartphones for a variety of remote activities, including viewing their home s utility consumption; controlling security, heating and lighting systems; and activating home appliances. This growth in the Internet of things is again dictating the real-time nature of the business. The growth in M2M transactions will continue into the future as customers increasingly use their smartphones for activities other than traditional telecommunications services. Billing becomes less central instead online charging takes center stage in the transactions supporting digital offerings.

IBM Sales and Distribution 7 Managing partnerships In the past, CSP culture has centered on customers and suppliers, rather than partners. Now, CSPs must seek out partners capable of creating innovative digital products and new services. This requires a completely new approach to business: Innovative products will involve multiple partners with radically different business models content providers, developers, wholesalers, retailers, service companies and other CSPs. Protecting and increasing the value of the CSP brand will be critical. Many partners will have little or no telecom expertise. This is an opportunity for the CSP to provide BSS-as-a-service, particularly for charging, billing and ordering. New products will often be in new markets requiring innovative pricing and transactional billing. The product lifecycle will become shorter, which increases pressures to get to market quickly. A repeatable and rapid process will be required to onboard partners. How will CSPs move from old to new BSS? The number of war stories about BSS conversion programs should be enough evidence that a different approach is needed. The most common complication is the desire to migrate existing analog products, processes and customers. This leads to massive customization efforts that make the new solution look remarkably like the old one at a huge cost and disruption to the business. If a CSP is transitioning to digital offerings, there is a significant incentive to leave existing offerings and processes behind. Trying to recreate existing products and processes in a new BSS stack is volunteering to be the next war story. Instead, CSPs should consider a strategy that allows them to reinvent themselves as retailers of digital products and capabilities. One appealing approach to this challenge is to create a new BSS greenfield stack for the digital business with new product designs optimized for online and self-service adoption. This results in less demand for BSS complexity. Standard telecommunications modeling framework (TMF) processes can be adopted and using out-of-the-box technology is not only possible, but recommended. CSPs taking this approach should create aggressive marketing programs to move customers from existing products to digital product bundles and target two years or less for the market migration. A successful market migration can yield a lower cost structure to maintain in the long term, but will result in some additional costs while maintaining both existing and new BSS stacks. This approach is less risky than traditional complex conversion approaches because customers only move to the new platform when they buy product bundles supported by the new platform. CSP industry call to action the digital reinvention of telecom A digital tsunami is feeding on itself driven by cloud, mobile broadband, smart devices and a mushrooming internet of things enabling every sector of every business to rethink how business is done almost anything that can be digital will be. Tmforum.org December 2012 The market is changing rapidly and CSPs need to respond to succeed against a new wave of competition from outside the traditional telecom industry. CSPs must reinvent themselves as

digital retailers. The abject quality of customer experience that has been a defining aspect of CSPs globally has to improve exponentially. CSPs face a choice: either continue as before, becoming a utility provider providing bandwidth as a commodity, or transform themselves into vibrant providers of the digital lifestyle. For BSS this means focusing on the essentials: Simplify products and services. Implement online first as a key corporate strategy. Excel at partnering. Leave legacy behind. Above all, CSPs must realize the transformation required is a business one that will not be achieved by IT transformation alone. Business transformation means just that the business model must change to meet the ever changing environment. The central position of CSPs in the provision of digital products and services gives them a unique opportunity to leadin the digital marketplace. It is time to grasp that opportunity. For more information To learn more about telecommunications and the next generation of business support systems, please contact your IBM representative or IBM Business Partner, or visit the following website: ibm.com/communications About the authors Richard Norris leads the BSS practice within the IBM Global Center of Competence for Telecom, Media and Entertainment. He can be reached at norrisr@us.ibm.com Copyright IBM Corporation 2014 IBM Corporation Software Group Route 100 Somers, NY 10589 Produced in the United States of America February 2014 IBM, the IBM logo, and ibm.com, are trademarks of International Business Machines Corp., registered in many jurisdictions worldwide. Other product and service names might be trademarks of IBM or other companies. A current list of IBM trademarks is available on the web at Copyright and trademark information at ibm.com/legal/copytrade.shtml This document is current as of the initial date of publication and may be changed by IBM at any time. Not all offerings are available in every country in which IBM operates. THE INFORMATION IN THIS DOCUMENT IS PROVIDED AS IS WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND ANY WARRANTY OR CONDITION OF NON-INFRINGEMENT. IBM products are warranted according to the terms and conditions of the agreements under which they are provided. Please Recycle Susan Yezzi is BSS/OSS Sales Executive for IBM Global Telecommunications. She can be reached at slyezzi@us.ibm.com TLW03023-USEN-00