Generating value and competitive advantage from BSS managed services

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Introduction ABOUT INFORMA TELECOMS & MEDIA Informa Telecoms & Media is the leading provider of business intelligence and strategic marketing solutions to global telecoms and media markets. Driven by constant first-hand contact with the industry, our 60 analysts and researchers produce a range of intelligence services including news and analytical products, in-depth market reports and datasets focused on technology, strategy and content. Informa Telecoms & Media Head Office Mortimer House, 37-41 Mortimer Street London W1T 3JH, UK www.informatandm.com ABOUT COMVERSE Comverse is the world s leading provider of software and systems enabling converged billing and active customer management, mobile Internet, value-added and managed services. Comverse s extensive customer base spans more than 125 countries and covers over 450 communication service providers serving more than two billion subscribers. The company s innovative product portfolio enables communication service providers to unleash the value of the network for their customers by making their networks smarter. Comverse s solutions support flexible deployment models, including in-network, cloud, hosted and managed services. Comverse, which ranked number 55 in PwC s Global 100 Software Leaders based on research by Pierre Audoin Consultants, is a subsidiary of Comverse Technology, Inc. (Nasdaq:CMVT). For more information, visit www.comverse.com 2

Key points Changing telecoms market conditions are influencing more CSPs to consider the managedservices route as a way of ensuring continued growth. Key drivers for managed services include the need for CSPs to seize new revenue opportunities, gain access to best practice and achieve a faster time to market. CSPs need to align their technology with the requirement to improve overall customer experience. In turn this means there is a key requirement for an efficient interface between CSP business processes and their applications development and operations. There is a also need for greater connectivity between CSP existing services and the mobile Internet in order to allow better monetization. Managed-services business models are also evolving in response to greater sophistication among CSPs and a trend towards longer-term engagements. There are significant value-add benefits from working with a managed-services provider on a longer-term basis, in terms of independent consulting expertise, access to best of breed support, and monetization of CSP assets. 3

Overview Market evolution The telecoms market today is changing as a result of increased competition from new players and the increasing complexity of service offerings. This is influencing more and more communications services providers (CSPs) to consider the managed-service route as a way of ensuring their continued growth and focusing more on core competencies. The need to open up new sectors, gain access to best practice, and achieve a faster time to market with reduced risk and predictable costs are all powerful drivers in the emerging managed-business-services arena, as distinct from network and technology-led approaches. Keeping the customer satisfied As the consumer appetite for high-quality service grows, CSPs have another challenge: to align their technology with a stronger focus on customer experience, bringing implications for legacy systems, front-line response and customer life-cycle management. This in turn has led to an increasing emphasis on added value provided by the managed-services suppliers. Managed services the trend towards value-add In the managed BSS/OSS sector, even more than in network and IT managed services, there is a requirement to combine and simplify solutions while still maintaining the robustness of a proven platform. At a time when CSPs are looking to improve their product innovation, they can use managedservices providers to focus more on their core business imperatives of marketing, sales and customer management, while at the same time being assured of best business process and applications-development practice. 4

Market evolution Survival of the fittest The telecoms market for CSPs today is highly competitive both in terms of ever more disruption from competitors and the increasing complexity of service offerings. The need for CSPs to focus on their core competencies is now vital and it is this that is influencing the rise in the number of CSPs using the managed-service route as a way of ensuring continued growth and staying ahead of their competition. Faced with these challenges, CSPs are looking to achieve growth through a rigorous examination of their core business processes, and even areas such as marketing and sales are no longer offlimits in the search for greater competitive effectiveness. Data is at the heart of CSP strategy Growth opportunities come from the ongoing rise in data consumption spurred on by demand for access to the mobile Internet and the popularity of smartphones and media tablets. Over the next five years, Informa Telecoms & Media s forecasts indicate that demand for data will increase sevenfold to reach 40,000 PB per year by 2016 (see fig. 1). Fig. 1: Data traffic forecasts, 2011-2016 Millions MB/year 42.4 mil. 30.3 mil. 5.8 mil. 9.1 mil. 13.9 mil. 20.8 mil. 2011 2012 2013 2014 2015 2016 Smartphones have proved to be the single most successful and consistent device in driving growth, both in terms of volume (for example, from video) and of operator revenue. However, the ability of smartphone users to access IP-based over the top (OTT) communication services as well as those on a mobile network could ultimately erode operators core voice and messaging services, so, in response, the operators business models will need to evolve in order to meet this potential threat. Without such an evolution, operators will lose business to these OTT players and they will also fail to capture new revenue opportunities in areas such as cloud-based apps, video-ondemand or services targeted at enterprise verticals. At the same time, CSPs should develop new domains and capabilities (like M2M) and position themselves as service enablers. The issues are largely the same whether an operator is mobile, fixed or a converged player pursuing a multiplay strategy. CSPs have evolved as stovepipe organizations with organizational structures, assets and processes that do not allow them to make best use of their strengths. 5

The changing market for managed services Keeping the customers satisfied The growth in competition and the importance of service quality (made more important by the rise in data consumption) have created a more demanding customer base (see fig. 2). CSPs quite rightly are putting more emphasis on customer experience management (CEM) as a way of earning the users loyalty and persuading them to stay on the network. Given the costs of customer acquisition, this is a commercial imperative. Fig. 2: The CSP challenge: meeting growing customer data needs Consumer Business Online gaming File transfers Video & audio streaming Consumer cloud Corporate VPN Enterprise cloud Consumer M2M Video on demand Business M2M Real-time video communications By drawing on a CSP s inherent knowledge of its customer base, and exploiting its network and IT assets, service packages can be designed that are relevant to each of the CSP s target audiences, and, by adopting a customer life-cycle strategy, CSP offerings can be matched to the needs of both the existing and new customers. The importance of CEM to CSPs was illustrated in a recent Informa industry survey, where almost 40% of CSPs identified CEM as the single most important area of focus for 2012, exceeding by some margin the importance of network deployment and developments (see fig. 3). Fig. 3: Informa Industry Outlook Survey, 2011 Q: What will be the single most important area to focus for operators in 2012? Partnership with other operators and Internet players 8% Efficiencies, cost control and best practice 16% Customer experience management 37% New digital service developments (digital service) 10% Network deployments and developments (NGN and LTE) 29% 6

CSPs fighting back While CSPs face a more competitive landscape and a more demanding customer base, there is better news: The CSP remains a powerful beast with some unrivalled strengths, which it can and must harness. What are these strengths? CSPs control the pipes that underpin the Internet. CSPs have unmatched capabilities in customer support. CSPs have made a huge investment in device subsidies and distribution networks. These strengths are critical to the evolution of the CSP in an evolving marketplace. They are fundamental to the CSP s ability to build a lean and pragmatic business fully attuned to its existing strengths and capable of exploiting them to become an enabling platform for an ever-expanding services ecosystem. 7

Exploring BSS managed services as a way to overcome market challenges It is imperative that CSPs align their technology with the new focus on customer experience, which has implications for legacy systems, front-line response and customer life-cycle management. This trend in turn has led to an increasing emphasis on value-added services from managed-services suppliers. Managed services the trend towards value-add Changing attitudes towards the range of functions that CSPs are prepared to outsource is mirrored by a desire on the part of major technology vendors and managed-services providers to help with the management of business operations and services. The results of a recent survey by Informa Telecoms & Media indicate that many CSPs are expecting to outsource considerably more operations in three years time than they are currently (see fig. 4). Fig. 4: The growing appetite for managed services Q: Areas of an operator s business likely to be outsourced in three years time compared with what is currently outsourced In three years* Now Maintenance, repair or construction Training/education Customer servicing/support Transmission network operations Access network operations Applications/content hosting Integration including consultancy and FMC support Supply chain/logistics BSS/OSS IP network operations Technical/ operational management Core network operations Technical/ operational planning Partner management Business planning Other *Respondents who replied "very likely" or "likely" 0 10 20 30 40 50 60 70 80 Respondents (%) Until now, much of the focus of managed services in a network operations context has been on radio-access outsourcing, but in future there will be greater willingness to make use of outsourcing in the service layer, in BSS/OSS systems and in business transformation. For example, just over 50% of the operators surveyed expected BSS/OSS to be one of the areas that would be outsourced in three year s time. Managed-services drivers Managed-services drivers comprise: The need for CSPs to align complex existing systems with a new business focus The requirement for greater connectivity between CSPs existing services and the mobile Internet in order to allow better monetization The ongoing shift from network-led services to apps/business support services Managed-services business models are also evolving in response to greater sophistication among CSPs: there is a trend to extend build-operate-transfer (BOT) engagements towards longer-term engagements. 8

The BSS managed-services lead-point The managed-services drivers have combined to create an opportunity for CSPs to generate efficiencies and create more value at the interface between their business processes and their applications development and operations. We have identified this opportunity as the BSS leadpoint (see fig. 5). In particular, there are opportunities to innovate in marketing and sales and in customer management, both of which are critical to the longer-term development of both the consumer and enterprise sectors. Fig. 5: The BSS managed-services lead-point Business layer Marketing/sales Customer experience management Apps layer Network/IT layer In critical areas such as real-time billing and business information, service providers are increasingly stressing the advantages of user-friendly on demand interfaces, which allow stakeholders within the CSP organization to access customer data in different formats according to whether they are viewing from a marketing customer care or network/it management perspective. There is also a new emphasis on a granular customer focus. Key performance indicators (KPIs) and key quality indicators (KQIs) are increasingly being mapped to an individual level as well as being linked to other business indicators in order to generate actionable insights rather than just generalized information. Applications are starting to be built in the network, with IT helping to blur the dividing lines between those applications and the network infrastructure. The convergence of network, IT and apps platforms is also going to drive organizational and structural changes, with a greater role likely to be played by dynamic service or experience packages that enhance operator platforms. In this scenario, the network itself becomes a platform, with a full range of functionalities offered as part of a service-delivery process. While infrastructure as a pure technical enabler is reaching its limits, infrastructure as a service seems set to offer plenty of new opportunities. In the managed BSS/OSS sector, even more than in network and IT managed services, there is a requirement to combine and simplify solutions while still maintaining the robustness of a proven delivery platform. In these circumstances, the supplier can assist a CSP to meet client expectations by managing the complexity of multiple-point solutions. 9

BSS managed services goes mainstream BSS/OSS vendors are well positioned to act as managed-service providers, as there are clear synergies between products and services in the support-systems space. As Informa s report on BSS/OSS trends at this year s Mobile World Congress points out: " The overall message... is that telecoms software support systems are no longer back office. They are now mainstream so far as the industry is concerned and, while new handsets and operating systems may grab the headlines from time to time, it is the means of supporting those devices and mitigating their effects on mobile broadband networks that is occupying the attention of the telecoms industry " right now. 10

How CSPs can benefit from BSS managed services With the overall trend towards managed services, CSPs are focusing more on competitive advantage in terms of improved time to market and distinctive benefits for the consumer rather than solely concentrating on cost reduction through opex savings. By working with a specialist managed-services provider that knows the business support system inside out, the CSP can benefit from an informed second opinion, based on a wide experience of successful solutions and innovations from a varied range of sources, whether from the same geographic market or more widely around the world. The CSP can also benefit from the managedservice provider s ability to fully utilize the BSS capabilities. Closer integration creates leaner organization As noted in the previous section, the increasing interaction between business processes and their underlying applications now means that areas such as revenue management and service delivery management are moving closer to an integrated platform approach, with the result that there are significant advantages of a model where point solutions are blended with the power of a platform solution (see fig. 6). Equally, a carefully planned product life-cycle strategy can be combined with operational support for applications and infrastructure to ensure end-to-end delivery of an optimum service for the end user. Fig. 6: BSS managed services overview: new opportunities in BSS and apps management BSS management Business analysis Product life-cycle management Revenue management Apps management Apps operational services Portfolio design Configuration management Service delivery management SLA management Vendor management Legacy migration Infrastructure/IT management Asset management System administration Production management Time-to-market savings A key area of business focus is on time to market, as CSPs strive to bring new services on stream to meet the competitive challenges outlined earlier. One example of ensuring that applications and services are designed right first time is the ability of the managed-services provider to roll out new services or necessary changes to configuration faster. Fig. 7 illustrates the kind of time-to-market savings that can be achieved; for example, time savings of 20% across the overwhelming majority of the product s functionality, and higher savings of 30% in a narrower range of cases. 11

Fig. 7: 80-20 rule of time savings 20% 30% time-saving Proportion of BSS service developments impacted 20% time-saving 80% Achieving maximum advantage from BSS managed services CSPs can take advantage of the services of the many larger managed-service providers that are currently leveraging their global presence, whether in the form of network operations centers, data centers or software development centers. Some of these services, such as newservice development, can be provided remotely on a regional or global basis while others, such as consultancy, are located closer to or at the point of delivery. This ability to combine global with local services can be a key differentiator in areas such as customer support, where local knowledge and expertise are most valuable. A larger BSS player may also be able to use the power and resilience of a platform solution, in combination with other more specialized solutions, to provide a fully customized product for a given client. By drawing on the knowledge of its specialist professionals, the managed-service provider is able to use its experience of operating across a wide range of engagements and is thus better equipped to address complex business and technical operational issues in a timely and focused manner. The benefits for a CSP of working with a BSS/OSS managed service provider can be summarized as follows: Independent consulting expertise: this helps to add value across the CSP product range Access to best-of-breed support: access to this support allows CSPs to use their system capabilities more effectively Reduced time to market: the solution configuration is designed right first time, so that on-site implementation can be tuned optimally New CSP product development: new products can be developed by experienced technical staff who have an intimate understanding of the limitations and the capabilities of the systems with which they are working Improved monetization: assistance is provided with monetization of network, applications and support systems assets Cost savings: advantage can be taken of the cost reduction expertise developed from working closely with CSPs across a wide range of markets Provision of a single point of contact: where a service provider is able to co-ordinate a number of third-party solutions in order to address business, technical and operational issues in a concerted and effective manner. 12