How new business models are shaping CSPs' service operations
Telecoms IT has changed fundamentally over the last decade. One of biggest shifts stems from communications service providers’ (CSPs’) fast-growing use of cloud native systems, developed using modular microservice architectures and DevOps methodologies. This excerpt from our latest report 'BSS strategies for new lines of business' looks at the scale of the opportunity and why CSPs are going to all this trouble.
16 Sep 2021
How new business models are shaping CSPs' service operations
Telecoms IT has changed fundamentally over the last decade. One of biggest shifts stems from communications service providers’ (CSPs’) fast-growing use of cloud native systems, developed using modular microservice architectures and DevOps methodologies. This excerpt from our latest report 'BSS strategies for new lines of business' looks at the scale of the opportunity and why CSPs are going to all this trouble.
The worldwide market for telecommunications services totals around $1.5 trillion, according to IDC. Recent research conducted for our upcoming Benchmark report, Mapping a path to revenue growth, shows that B2C revenues overall have been declining by around 1.5% annually over the last three years and that B2B revenues were flat before the Covid-19 pandemic started in 2020.
The pandemic hit many CSPs’ core B2B communications businesses as the global office workforce started working from home using existing consumer broadband connections and some businesses failed. It appears that it may be a short-term problem, however, with many workers returning to the office often enough to require full-service connectivity again.
CSPs’ investments point to an industry-wide belief that the next decade’s revenue growth will come not from B2C markets, or indeed from traditional B2B offerings, but from new B2B and B2B2X services. As CSPs move beyond providing traditional B2B services, they are investing heavily in diversifying into areas such as IoT, cloud services, security services, Fintech and digital services, with value coming from their connectivity capabilities.
Even with a focus on connectivity, however, new B2B and B2B2X services are significantly more complex to support than a traditional B2B solution, such as providing an enterprise communications suite for a single company. Some new services involve CSPs delivering the whole solution, but many require CSPs to partner on creating new service packages or to enter established value chains with new connectivity capabilities.
Our research identifies high potential for short-term growth in the following areas:
Interviews with CSPs about their new lines of business reveal that today they are principally participating in the connectivity piece of the value chain. If CSPs are to tap additional revenue from those value chains – for example in the application layer – then they will need to make more fundamental changes to their IT environments.
Take the IoT segment, for example. Here CSPs are entering unfamiliar value chains in which they depend on a wide variety of other partners, including device manufacturers, sensor manufacturers, cloud service providers, application developers and others. This makes service delivery complex.
From a BSS point of view, it means that CSPs need to be able to interface with other players via standardized APIs, such as the TM Forum Open APIs and perform complex rating, charging, partner settlement and billing functions in a fully automated way. And because CSPs cannot afford to build each new business unit in a silo, they must also take into account wider organizational changes.
The wider drivers of evolved BSS
Alongside growing new revenues, CSPs have other solid operational and business reasons to evolve their BSS:
Key BSS components for new lines of business
Interviews with around 30 CSPs for our Benchmark report on revenue growth revealed which BSS components they believe are the most important for addressing current business models and pivoting towards unforeseen services and partnerships. They include:
Connectivity is still at the core
Creating customized connectivity solutions that deliver services based on network attributes such as speed, latency and location is a challenge for CSPs. Most traditional connectivity services do not require dynamic changes in the network, but if operators want to offer service level agreements for variable attributes, they will need to introduce new charging and billing capabilities. This will require tight integration between the network, IT systems and business units.
Rather than thinking of billing only in the context of services delivered to end users, CSPs need to reposition billing internally as a capability that can add value to relationships with partners. The ability to offer realtime visibility and transparency of the way partners and enterprise customers are using all the features that make up a service can be a real differentiator. As part of this approach to deliver value to partners, operators will need to invest in systems and capabilities that feed data to their customers about usage.
Co-creating with customers
CSPs should aim to build a new kind of relationship with prospective enterprise customers where they quickly experiment with new services. Experimentation requires software developers and engineers from CSPs, enterprises and other partners to collaborate on potential use cases. While the commercial arrangements between partners are unlikely to be prioritized during the early stages of co-creation, it is important to understand what is and is not possible if the trial becomes a commercial service.
The BSS should support this concept by allowing any new partnership to set up quickly, scale up as necessary or ‘fail fast’ if results of the experiment fall below predetermined commercial thresholds.
Download the full report to find out more.
The worldwide market for telecommunications services totals around $1.5 trillion, according to IDC. Recent research conducted for our upcoming Benchmark report, Mapping a path to revenue growth, shows that B2C revenues overall have been declining by around 1.5% annually over the last three years and that B2B revenues were flat before the Covid-19 pandemic started in 2020.
The pandemic hit many CSPs’ core B2B communications businesses as the global office workforce started working from home using existing consumer broadband connections and some businesses failed. It appears that it may be a short-term problem, however, with many workers returning to the office often enough to require full-service connectivity again.
CSPs’ investments point to an industry-wide belief that the next decade’s revenue growth will come not from B2C markets, or indeed from traditional B2B offerings, but from new B2B and B2B2X services. As CSPs move beyond providing traditional B2B services, they are investing heavily in diversifying into areas such as IoT, cloud services, security services, Fintech and digital services, with value coming from their connectivity capabilities.
Even with a focus on connectivity, however, new B2B and B2B2X services are significantly more complex to support than a traditional B2B solution, such as providing an enterprise communications suite for a single company. Some new services involve CSPs delivering the whole solution, but many require CSPs to partner on creating new service packages or to enter established value chains with new connectivity capabilities.
Our research identifies high potential for short-term growth in the following areas:
- Security services – regulators force CSPs to have highly secure network operations, which has resulted in telcos developing a strong skillset that they can package for enterprises as a service.
- Cloud network services – similarly, the huge amount of work CSPs are putting into migrating their own IT workloads to the cloud means they have internal pools of expertise and relationships with partners that they can use to help their business customers’ cloud transformations. Our research shows that some of the more digitally advanced CSPs are achieving strong growth in selling telco cloud services to their existing enterprise customer base.
- IoT – this segment is vast and is only just beginning to generate significant revenue for the telecoms industry, with a handful of large operators such as China Mobile, Vodafone and AT&T responsible for much of the growth.
- B2B2X – longer and more complex value chains are rapidly becoming a reality and many B2B2C scenarios differ greatly from today’s B2C propositions. The key focus here for CSPs is to avoid becoming a cheap data pipe and add as much value as possible.
Interviews with CSPs about their new lines of business reveal that today they are principally participating in the connectivity piece of the value chain. If CSPs are to tap additional revenue from those value chains – for example in the application layer – then they will need to make more fundamental changes to their IT environments.
Take the IoT segment, for example. Here CSPs are entering unfamiliar value chains in which they depend on a wide variety of other partners, including device manufacturers, sensor manufacturers, cloud service providers, application developers and others. This makes service delivery complex.
From a BSS point of view, it means that CSPs need to be able to interface with other players via standardized APIs, such as the TM Forum Open APIs and perform complex rating, charging, partner settlement and billing functions in a fully automated way. And because CSPs cannot afford to build each new business unit in a silo, they must also take into account wider organizational changes.
The wider drivers of evolved BSS
Alongside growing new revenues, CSPs have other solid operational and business reasons to evolve their BSS:
- Improved customer satisfaction – business customers’ expectations have shifted and CSPs need to deliver modern IT-centric experiences to match those provided by over-the-top (OTT) service providers and hyperscale cloud platforms. Customer experience and satisfaction is becoming one of the main KPIs by which CSPs measure the effectiveness of their IT strategies.
- Better process automation – CSPs’ traditional telecoms connectivity divisions and new business units must minimize operational expenditure on fixing issues that result from process automation. Many BSS suppliers help by supporting open APIs and enabling interoperation in a more open ecosystem, which is designed to drive out the faults that lead to order fallout or process breakdown.
- Lower churn – churn is a well-studied area of telecoms operations and many CSPs have been successful in reducing it. However, new service models are likely to generate unknown causes of churn initially. Customer analytics programs should therefore have an end-to-end view that can correlate events in network operations or in processes like service fulfillment with customers’ issues and churn.
Key BSS components for new lines of business
Interviews with around 30 CSPs for our Benchmark report on revenue growth revealed which BSS components they believe are the most important for addressing current business models and pivoting towards unforeseen services and partnerships. They include:
- Centralized catalogs – catalogs should provide a single source of truth about the form and configuration of products and services. Ordering and fulfillment processes rely heavily on the concept of a centralized product/service catalog, so it makes sense for revenue management in the BSS to use the same source of data.
- Dynamic rating and charging – rating is the assignment of customers’ data traffic to a tariff, and charging is the application of that tariff. Many services in new lines of business, such as industrial IoT, may have a large number and wide variety of data connections within a single deployment. The requirement to rate and charge each connection using different tariffs is becoming more commonplace as customers seek accurate billing based on exact usage.
- Advanced partner management – CSPs increasingly want to provide zero-touch onboarding for partners such as resellers, suppliers, distributors and wholesalers as they become involved in new service ecosystems. B2B2X supply chains increasingly rely on more advanced partner management and crosspartner settlement systems and may even be a factor in the establishment of commercial partner contracts going forward.
- Convergent billing – billing for complex service bundles requires an end-to-end approach to service management, which mirrors the streamlining activity happening in service orchestration. Eliminating old world issues like order fallout in the billing phase is a key priority. Within the modular architectures of new cloud-native BSS, vendors are providing features such as libraries of executable tasks, AI-driven configuration engines and customer-centric analytics to ensure fault-free operations. Billing therefore is once again becoming a big focus.
- Self-service and automated interfacing – many CSPs are trying to figure out the right balance between offering self-service capabilities to enterprises and using account management teams to deliver customized solutions, as business buyers demand to engage digitally, faster and with shorter activations times, much as they do with hyperscale cloud providers. For CSPs to deliver similar experiences, account management roles will have to change. Account managers likely will become more of a trusted advisor rather than the person who sorts out invoices and billing.
- Advanced connectivity awareness from OSS – tight integration of BSS with operational support systems (OSS) is essential to provide advanced revenue management functionality for new network services as mass 5G deployment takes place and new B2B network services such as SD-WAN start to generate more revenue.
Connectivity is still at the core
Creating customized connectivity solutions that deliver services based on network attributes such as speed, latency and location is a challenge for CSPs. Most traditional connectivity services do not require dynamic changes in the network, but if operators want to offer service level agreements for variable attributes, they will need to introduce new charging and billing capabilities. This will require tight integration between the network, IT systems and business units.
Rather than thinking of billing only in the context of services delivered to end users, CSPs need to reposition billing internally as a capability that can add value to relationships with partners. The ability to offer realtime visibility and transparency of the way partners and enterprise customers are using all the features that make up a service can be a real differentiator. As part of this approach to deliver value to partners, operators will need to invest in systems and capabilities that feed data to their customers about usage.
Co-creating with customers
CSPs should aim to build a new kind of relationship with prospective enterprise customers where they quickly experiment with new services. Experimentation requires software developers and engineers from CSPs, enterprises and other partners to collaborate on potential use cases. While the commercial arrangements between partners are unlikely to be prioritized during the early stages of co-creation, it is important to understand what is and is not possible if the trial becomes a commercial service.
The BSS should support this concept by allowing any new partnership to set up quickly, scale up as necessary or ‘fail fast’ if results of the experiment fall below predetermined commercial thresholds.
Download the full report to find out more.
