Communications and Media Industry Points of View December 2014 - INSIDE Internet of Things Customer experience Evolving digital delivery Four ...
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Communications and Media Industry Points of View December 2014 Presented by HP Solution Consulting Services INSIDE Internet of Things Customer experience Evolving digital delivery Four views to transformation success Challenge of real time
Communications & Media Industry Points
of View – December 2014
Foreword
Hello and welcome to the December 2014 edition of the HP CMS Solution Consulting
Services Industry Points of View. We have timed the release of this issue to coincide with
the major tmforum live! event, in San Jose, California
This year’s conference focuses on digital disruption, the digital transformation journey.
Game changing disruptions like NFV, IoT, Big Data and Analytics present opportunities to
achieve the business outcomes communications service providers are continually
striving for – a differentiated unique customer experience, sustainable revenue from
innovative services, and a competitive cost structure. Bill Zimmer, HP SCS
Worldwide Practice Manager
However, as many companies painfully learn, with opportunity comes technological, operational, and organizational
risk. Since 2003 HP Solution Consulting Services has been guiding communications service providers around the
globe through market and technological driven transformations. We have learned truly successful transformations
take into consideration a clear understanding of the issues and opportunities, and a holistic examination of the
business model, and it’s linkage to people, process, and technology. Only by transforming each of these elements in
a harmonized fashion can you deliver truly successful strategic business initiatives.
HP SCS captures our experiences and learnings and publishes relevant industry points of view twice a year.
These articles are written by senior HP industry business consultants who engage directly with Communications
Service Providers on strategic and operational challenges. In this issue of our magazine you will find topics of
relevance to digital disruption and more. Here is a synopsis of this edition’s articles:
Here is a synopsis of what you will find in this issue:
• Internet of Things - Opportunities and considerations for Service Providers
• Customer experience - Using operational, bottom-line, and direct measurements to increase customer
satisfaction
• Evolving digital delivery - Providing exceptional quality of experience in digital TV
• Four views to transformation success - A proven approach to Business and IT alignment for competitiveness
• Challenge of real time - Transforming your business support systems for the digital disruption era
Enjoy tmforum live! We hope you find the insights from our first-hand view of the industry thought provoking and
useful.
Sincerely
Bill
Bill Zimmer
WW Practice Lead
Solution Consulting Services
HP Communications and Media Solutions
Business white paper Internet of Things Opportunities and Considerations for Service Providers
Business white paper | Internet of Things
We are in the era where all kinds of devices are connected: it’s
real and tangible that this innovation is changing the way we
interact, communicate and live. Service providers that master
it all will have the opportunity to create streams of revenue
from current and new customers
Living in a hyper-automated world
M2M to IoT evolution: The Internet of Things (IoT), as a natural evolution of machine-to-machine (M2M) technology,
is the interconnection of pervasive intelligent devices and management platforms that
collectively enable the “smart world” around us. From live health monitoring to smart utility
• M2M meters, integrated logistics, and self-driving drones, it’s a hyper-automated world
• Smart Environment Per Strategy Analytics, M2M is expected to grow from 1% of mobile connections today (greater
than 300 million) to more than 50% of all mobile connections in 2020 (2.9 billion). The speed
• Internet of Things and sophistication achieved in each market and industry may vary due to specific needs of
different segments, the availability of connectivity and other supporting technologies, and
economic and regulatory environments in each market. For example, European Union (EU)
utilities and insurance industries are early adopters of the technology. It’s considered a basic
need due to clear and immediate business benefits and/or regulatory requirements. On the
other hand, the healthcare sector is slowly adopting the technology, seeing it as an experimental
innovation
Figure 1. From M2M to IoT evolution
1Business white paper | Internet of Things
Capitalizing on the opportunities, many innovators are swiftly adopting IoT technology in their
respective industries, as this new generation of devices is more useful, affordable, and easy to
integrate. Additionally, national regulators in many industries are mandating M2M adoption as a
technology enabler in achieving national socio-economic objectives.
Rapidly growing M2M adoption—in different industries—presents significant market
opportunities for communications service providers (CSPs). Per market research published by
Analysys Mason , M2M connectivity revenue is expected to increase from $6 billion USD in 2011
to more than $50 billion USD by 2021, while connectivity ARPU is expected to witness massive
decline during the same period. The exponential growth in M2M connectivity helps reduce the
effects of the current decline in revenues, and also opens up new market opportunities for CSPs.
Figure 2. M2M connectivity revenue by industry sector an d total connectivity ARPU, Worldwide, 2011-2021 (Source: Analysys Mason)
60 6
50 5
Revenue (USD billions)
ARPU (USD per month)
Connectivity ARPU
40 4
30 3
20 2
10 1
0 0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Utilities Security Automotive and transport
Healthcare Retail Government
Financial services ARPU
The evolutionary trajectory from limited capability M2M services to the super-capable
IoT eco-system has opened up new dimensions and opportunities for traditional
communications infrastructure providers and industry-specific innovators. Those
exploiting the potentials of this technology—to introduce altogether new services and
business models—can achieve unprecedented levels of experience for existing services,
and in many cases transform their internal operations to match the needs of a hyper-
connected world.
As the model of “everything connected” is no longer in doubt, the only questions now
cover different patterns of diffusion, timing, geography, and adoption areas. Utilities,
security, and transport are expected to witness maximum growth in IoT applications in
coming years.
2Business white paper | Internet of Things
Seeing IoT as more than connectivity
In the early phase of IoT adoption, connectivity has been the natural area of interest for
most CSPs. However, it didn’t take long to realize that the major portion of revenue comes
from areas outside of a typical CSP’s traditional focus.
As connectivity is a readily available commodity, the majority of revenue lies in greater
innovation and value-add happens—innovation and practical use cases applied to specific
industries. Close collaboration among participants of this complex M2M/IoT eco-system is
required to conceive and deliver a service that will make business sense for all participants.
Key participants of the M2M/IoT eco-system are:
• Smart device and sensor manufacturers
• Systems Integrators for M2M/IoT services and industry vertical applications
• Managed ICT providers (CSPs, Data Centers etc.)
• Management Platforms, fulfillment, assurance, charging, and analytics
• Identification, development, and roll out of industry-specific use cases to customers like
public utilities, home automation, insurance, healthcare, national regulators, municipality, and
other civic bodies
To deliver an end-to-end M2M service, different stakeholders need to collaborate and define
an ddeliver key solution components.
Figure 3. Components of IoT/M2M Solutions
The core technology components that are mandatory to launch an M2M service, based on
our experience are:
• Smart devices
• Connectivity infrastructure such as 2G/3G, WiFi, and 169Mhz
• Data centre and computing infrastructure facilities
• Management Platforms (OSS/BSS)
• Logistics and field service
3Business white paper | Internet of Things
These core components are typically provided by CSPs and form the foundation on which
industry-specific solutions could be designed and delivered. In order to achieve maturity
and industrialization of M2M services, these two components are necessary:
• Security
• Legal and regulatory frameworks
Security of the overall infrastructure and industry-specific application is an important aspect,
especially in the healthcare and financial/insurance industries. This can be delivered entirely by a
CSP or in collaboration with third-party providers. Similarly, a regulatory framework fosters
technology adoption and industrialization in the complex eco-system of IoT/M2M. This is
typically championed by the national regulatory agencies and industry forums.
In more sophisticated and advanced applications, vertical applications and analytics components
are employed by industry players to meet niche requirements and be a market differentiator.
Reviewing key considerations
While CSPs are still trying to understand how small, data-only devices are impacting their
business, the enterprise, consumer, and public sector are swiftly adopting all kinds of new
connected gear, machinery, and devices. Following are key considerations to forming an
effective IoT strategy.
Finding the right business model
IoT presents a unique opportunity for your organization to expand into the vertical industries
you serve. Meanwhile, nonTelco players are presented with equal opportunity to provide unique
applications totally independent of a CSP or by using a CSP just as a pipe to their customers.
Due to the wide variety of components and players involved in an IoT service, defining the right
business model is one of the biggest challenges in designing and delivering an end-to-end IoT
solution. Some of the major approaches being followed are:
• CSP-led solution—These are mostly ad-hoc solutions for specific customer needs using
specific sensors and types of connectivity. In this model, you would own the customer and
take full accountability of designing, installing, and managing the solution.
• NonTelco-led solution—A nonTelco player builds a highly productized solution to serve its
customers. They manage the entire service on its own and use CSPs only as a connectivity
service provider. Usually, it’s possible to employ multiple types of connectivity from multiple
CSPs to deliver an end-to-end solution.
• Partnership between CSP and nonTelco players—In this approach, both players design, build,
and maintain the end-to-end service to meet customers’ specific needs, leveraging their
independent customer relationship for their cormmon benefit.
Due to the nature of relationship between CSPs and their customers, and also to an industry’s
specific needs, some business models implemented are more common than others in each
domain.
4Business white paper | Internet of Things
Figure 4. Common business models per Industry Verticals
CSP Led Non-Telco Led Partnership
Smart Metering for Utilitiies
Transportation & Logistics Automation
Security & Surveillance
Smart Homes/Buildings/Cities
Point of Sale, Integrated Manifacturing,
Warehousing
Health
Most common Less common
In our view, the best approach is collaborative—working with industry verticals to identify
and implement use-cases with the right business model, that is mutually beneficial to both.
Working together with industry, you have the opportunity to play greater value-add roles. By
leveraging the technical know-how and ownership of the underlying infrastructure, you could
be a systems integrator or managed administration provider for IoT applications and services
The greater the value you can add, the greater share of revenue you can control. So, it’s
necessary to keep inventing new and revising existing business models to create new
partnerships.
Reviewing technology implications
Traditionally, a CSP’s key role in IoT applications is the provider of the connectivity backbone
—in the form of a SIM card. This helps CSPs monetize their investments in the underlying
cellular access infrastructure access such as 2G, 3G, and LTE. However, there are many
applications that require alternate access methods where traditional CSPs have little or no
role to play, resulting in a limited ability to tap into greater share of revenue. For example,
gas smart meters in Europe are adopting lower frequencies (169MHz) to connect meters and
must be able to cover a wider area and pass through walls. All that information is gathered
by hubs that send the consolidated data through the mobile network or any other network
available.
Therefore, CSPs must start thinking about alternative access method enablement and
provision of seamless connectivity via multiple access technology when it comes to designing
their networks. Convergence technologies like IMS and unified access, authentication, and
charging architecture will become key in delivering a diverse set of IoT services across
multiple industries with access-method implications.
Security of IoT/M2M services and information assets
While different components of the IoT eco-system—for specific applications—may be owned
and managed by independent entities, it’s extremely important that these entities are
integrated in a cohesive manner. This delivers a seamless, end-to-end service without any
impact on the user. This makes security, end-to-end service delivery and assurance very
important for complex IoT services. Some key security aspects:
• Using identity management and authentication of the device or sensor
• Securing connectivity
• Managing fraud such as stolen and switching devices and blocking of illegal use like voice
calls and roaming, among others
5Business white paper | Internet of Things
Impacting management platforms
IoT services—in terms of volumes, margins, and the way services are sold, activated, charged
for, and supported, it’s clear that the traditional BSS and OSS systems may not be the best fit
for your IoT strategy. Some important aspects are:
1. OSS/BSS software licensing—BSS/OSS solutions are mostly licensed per subscription by
system vendors. Service providers needs to implement dynamic network resource
provisioning, such as dinamyc SIM provisioning, to conserve the license capacity.
2. SIM lifecycle management—traditional mobile, consumer-oriented SIM card lifecycle is not
applicable to M2M solutions. Therefore, the management platforms should require adoption
of M2M-specific lifecycle management, with lots of controls provided to the customer via
self-service.
3. Device management—Device/sensor configuration and management solutions
4. Provisioning & activation of M2M services—Network resource optimization to avoid
unnecessary overloading of CSP network and systems
5. Charging and billing—Real-time charging, policy control, and sharing of bandwidth across a
customer’s M2M solution
6. Fraud management—M2M requires strengthening of fraud detection to ensure devices/
sensors and the underlying infrastructure are not misused intentionally or unintentionally.
7. Resource inventory—Typically, inventory systems maintain very minimal information about
SIM cards. M2M applications require comprehensive modelling of M2M services, underlying
infrastructure, and resources such as SIMs and devices.
8. Self-administration—M2M services, by their nature, demand a much greater degree of self-
administration. This can be done in a fully automated fashion or by limited involvement of
the customer’s IT function, without requiring involvement of traditional brick-and-mortar
support functions. This would require significant reshaping of the architecture and relevant
business processes would have to adapt accordingly.
Therefore, a dedicated and purpose-built BSS/OSS stack should be considered. One that
caters to the volumes generated by IoT services without requiring corresponding exponential
growth in total cost of ownership (TCO). This includes licenses and infrastructure, enables
greater self-administration, and provides seamless integration with the customer’s own
management systems.
Using analytics as a differentiator
Low-value communication between devices and sensors and their users, in terms of ARPU,
could be analyzed by CSPs and other IoT industry stakeholders and turned into highly
valuable insight. You could leverage the information to further monetize the infrastructure
and offer new innovative and personalized services and experiences. Some examples of how
information could be used by different stakeholders:
• New revenue opportunities—Analyze user behavior and predict trends to proactively grab new
revenue opportunities. At times, this would entail sharing insight and collaboration with unusual
partners, not just for increasing revenue but generating greater value to society. For example,
studying an epidemic’s spread by monitoring people’s location and physical symptoms.
• Strengthen the existing products—Identify and address niche user needs by offering
differentiated services and experience for micro segments.
• Monetization of the infrastructure—Use network traffic trends and performance of different
components, spurring optimization and monetization of the underlying infrastructure.
6Business white paper | Internet of Things
Effectively analyzing information that is massive in scale and continuously evolving is critical for
the success your IoT/M2M strategy. Application of Big Data analytics and related technologies
enable you to tap into the endless data exchange and turn it into actionable intelligence. This
enables you to achieve your business objectives by providing higher value products and services
to stakeholders and users.
Reviewing operating model and processes
Like any new disruptive technology, rapid proliferation of IoT/M2M services, in coming years, will
force CSPs to reconsider or reinvent their organization and processes while scrambling to
benefit from this technological phenomenon. Their ability to quickly transform their operating
model to adapt to the unique needs of the IoT/M2M market will determine their level of success.
As we have discussed earlier, Strategic Analytics estimate that around 50% of all cellular
connections by 2020 will be for M2M services. These connections will be sold in bulk, delivered
and serviced by third parties, and self-managed by the customer as part of complex industry-
specific applications. End-to-end service assurance will not just be about connectivity. It will
also involve other components like sensors installed on the "Things” and vertical applications
spread in a cloud environment (as a service).
Figure 5. IoT ecosystems
7Business white paper | Internet of Things
To be successful in this rapidly changing environment, CSP’s must continuously evolve their
operating model to maintain their key pivotal position in the IoT/M2M eco-system. Based on
our industry experience, it’s gradually becoming mainstream to set up dedicated business
organizations for M2M offerings—product management, sales, partnership management, and
operations and support. Often, IoT/M2M services are global in nature and involve very close
partnerships with the vertical industry, device/sensor manufacturer supply chain, and global
field service providers. A dedicated business unit ensures continuous focus and alignment with
the rest of the eco-system.
Similarly, we see that dedicated communications infrastructures for IoT/M2M services is also
becoming a necessity. Due to fundamental differences between traditional telecommunications
services and IoT/M2M services in terms of scale, complexity, and the nature of the business
relationship, a dedicated infrastructure is often the best option.
However, it’s not mandatory—or financially viable—for CSPs in the beginning. But it
becomes a necessity and is also feasible once a certain level of maturity is reached in terms
of products offered and underlying technical solutions—economy of scale.
To prepare for the IoT/M2M explosion and reinvent your operating model, the as-is
environment—technology, people, and processes—should be assessed by the TMF
Business Process Framework (eTOM). And necessary improvements should be introduced in
an evolutionary manner in all impacted areas.
Figure 6. TMF Business Process Framework (eTOM)
8Business white paper | Internet of Things
HP SCS Transformation Approach to IoT journey
This is a big transformation and most CSPs aren’t set up to handle it. By using a vendor like HP,
you get a global, proven technology solutions provider that offers IT infrastructure and global
services, and user devices. We invent, engineer, and deliver technology solutions that drive
business value, create social value, and improve customers’ lives. We help organizations:
• Manage the IoT operations
• Monitor IoT devices and SIMs
• Generate actionable, unparalleled customer intelligence
• Enable seamless, connected user experiences
• Deliver operational efficiencies and enable more innovation
The HP M2M Business Strategy Workshop for Communication Services Providers is the first step
of a comprehensive M2M consulting offer that enables Service Providers to define and clarify
their strategy to monetize the M2M opportunity: from the strategy envisioning to the evaluation
of the business case and its execution.
The consulting offer is targeted at Key Stakeholders (e.g. CxO, Strategy, IT, Sales and Marketing
representatives), interested in understanding how to Generate new opportunities (e.g. new
markets, new customers) are the natural audience for this workshop
About the authors
Rafaqat Chaudhary
Rafaqat Chaudhary is a business consultant from HP Communication Media Solutions (CMS)
Over 17 years of experience in IT and Telecommunications sector. Rafaqat has extensive
experience in greenfield cellular projects and complex transformation programs in large
converged CSPs in South Asia and Middle East regions. He has hands-on experience in OSS/BSS
solution delivery, IT Strategy and Management, operational optimization, and customer
experience management. He has thorough understanding of telecommunications technology
and business and has keen interest in policy and strategy issues at the global level that keep
shaping the industry and consumer behaviour.
Marco Pizzo
Marco Pizzo has more than 15 years of experience working on strategy and innovation projects
for major clients in the telecommunications and media industries. He interfaces directly with
C-level executives to discuss business strategy and technology enablers.
He is a recognized subject-matter expert in monetization strategies for cloud services, telco big
data and analytics, customer experience management, digital ecosystems (advertising,
couponing, ePayment, and eLoyalty), Internet of Things/machine2machine, and network
functions virtualization.
9Business white paper Customer experience Use a consultative approach to achieve customer satisfaction
Business white paper | Customer experience
The global telecom landscape is changing. Service providers
must handle new competitors, ever-changing technology,
increasing customer demands, competition from traditional
competitors, and regulations that aren’t always favorable. It all
results in margin pressures. New business and operating
models and alternative revenue sources are much needed.
Define objectives and measures
A successful Customer Experience Focus on specific segments
initiative drives to: The paradigm shift in the telco industry is causing disruptions at three levels—business,
information, and technology. This trend is driving communications service providers (CSPs) to
• T
ransform CSPs organization towards a more look at new business models and alternative sources of revenue while controlling expenditures.
customer focused mode of Operations
• P
rioritize the resolution of Users & SLA Service providers have proved adept at managing capital expenditures (CAPEX) by balancing
impacting issues it with free cash ow and dividends. Nonetheless, a strict CAPEX control can limit the ability
• M
eet the services performance committed in to quickly grow new services. This is forcing a need to maintain a commitment to investing in
business SLAs growth opportunities, and tracking technology and customer experience very closely to ensure
• Control the health of o ered services in real time
nancial investments are targeted.
• C
onsolidate existing environment, leverage
Figure 1. SPs questions
existing portfolio & applications and protect
current investment
Where do I need to start?
What data to collect and how to utilize
this efficiently?
How to extract the key data—in real
time—and act on it
Make key decisions allowing information
available to:
Customer
Operations Marketing
care
1Business white paper | Customer experience
Beyond this, it’s essential that service providers understand how investment in new technology
will a ect their businesses—operationally and nancially. Businesses want to leverage new
technology to support major business initiatives, improve revenue and margins, enhance customer
service, and reduce operating costs. In order to make an informed strategic decision, business
impact analysis and modeling help measure the e ect of new technology across the organization.
They help you identify critical success factors in terms of the key performance indicators (KPIs)
and business indicators to measure success, highlighting the nancial bene ts of a potential
technology investment and assisting in business decision-making.
Figure 2. 360 degree view of customer
4 Key dimensions of how a customer experiences a provider
Products & offering Emotional appeal
Economic benefit
Customer
Tangible Intangible
Connections Communities
Quality of
Quality of Service Interactions
• The value for benefit trade-off from its products
• Emotional attachment or brand value
• Direct or indirect interactions with the operator
and its agents
• The quality of service received
Get measurable outcomes
It’s important to de ne the goals and metrics of your customers’ experiences, as these
measurable outcomes form the basis of planning for and evaluating the success of customer
experience initiatives.
If you examine the typical measures of customer experience, it becomes apparent that there’s
a need to translate customer experience goals and metrics into targets that design, marketing
and sales, operations, and supporting teams can act on. These might include direct customer
measurements, such as customer survey results, or bottom-line measures, such as churn
rates. Adopting an operational, measure-based approach gives you control over your customer
experience program’s success factors. It also provides the opportunity to build customer-
focused, quality practices into your daily operations.
Include operations-focused measures
In structuring a customer experience initiative’s detailed objectives and measures of success,
it’s recommended that CSPs develop a set of goals and measures geared toward achieving
operational results. Good starting points include examining aggregate performance measures
and end-to-end processes.
Aggregate performance measures, such as availability and meantime between failures, are
baseline measures for the quality of service enjoyed by an organization. A support team
capable of proactive incident to resolution processes can resolve issues before they generate
complaints. It’s important to note that aggregate measures not only track the e cacy of
operations teams, they also track the capability of the design teams responsible for the
parameters and infrastructure’s constraints.
2Business white paper | Customer experience
End-to-end processes include concept-to-market for product development and lifecycle
management, lead-to-cash for service ful llment, incident-to-resolution for customer
experience assurance, and plan-to-provision for infrastructure development and lifecycle
management. Each of these should have one or more macro goals.
Examples include lunching products within three months, activating services within one hour
of a sale, resolving more than 95% of issues within de ned service levels, or provisioning
a computing resource pool within one day of the request. Each end-to-end process can be
decomposed into increasingly granular levels across the various units involved. At each
component process and granularity level, the macro goals are likewise decomposed into more
speci c, operational measures.
Your organization can structure a results-based customer experience initiative—with the
end in mind—by designing programs and projects around meeting and exceeding desired
operational measures.
To complement the operational measures focus, other methods provide means to validate the
impact to you and your customers. Direct measurement—through surveys or technical tests,
for example—can be performed prior to, or at the start of, a customer experience program to
establish a baseline. After this, it needs to be performed only periodically to measure progress.
Using operational measures, as proxies for customer experience, removes your reliance on
potentially time-consuming, expensive, and complex direct measurements.
While direct measurements track impact on customers, bottom-line measures track the
impact to you. In contrast to direct measures, measures—such as churn and sales gures—are
typically already collected and made available as part of regular management reporting. Using
operational measures provides the means to identify and manage areas of improvement, which
can a ect your bottom line.
Figure 3. Visualization of the main causes for bad QoE
The network impacts Customers using the same The customer only
all customers device type are not impacted is impacted
3Business white paper | Customer experience
Make the customer’s experience real
Use a business impact analysis
A customer experience management (CEM) approach is a company-wide, cross-functional
discipline that requires an end-to-end holistic vision, implying the adoption of an integrated
process among the di erent stakeholders. It encompasses di erent organizational boundaries,
responsibilities, processes, and well-de ned roles.
The business impact analysis approach is designed to quantify the bene t of a solution investment
in terms of CAPEX and operating expenses (OPEX) savings, plus direct revenue bene ts. CEM
use cases are de ned to realize the impact for the di erent telco organizations impacted: from
the operations and network department, to marketing and customer services teams.
Table 1. CEM business bene ts for di erent stakeholders
Organization Benefits
Operations and network • Reduce the number of issues from predictive and proactive
management in operations
• Increase ticket closure speed at operations level (L2 and L3)—
e ciency
• Help operations identify and prioritize issues with highest impact
on customer experience—e ectiveness
•Notify the network and identify network expansion areas—
optimizing network planning and network investments—regarding
congestion areas
Marketing • Provide engineer-to-engineer visibility regarding how customers
are using services—service type, over-the-top (OTT) apps type,
location, and device, among others
• Monitor new services, products, and device performance as they
are launched into the market
• Improve selling to customers—marketing campaigns, new
revenues for targeted services, and value-add products
• Reduce revenue loss due to customer churn
Customer services • Better understand customers and deliver better services
to solve complaints: Customer service representatives can
interact with customers, based on facts and real customer
experience—e ectiveness
• Increase closure rate at customer care level (L1)—e ciency
• Retain existing customers—churn reduced
• Reduce number of inbound calls due to proactive caring
and notifi ation
Critical to the business impact analysis are benchmarks and assumptions—gathered from
industry research and global HP experience—for the main KPIs that support the desired
solution. They help quantify cost reductions, revenue and margin improvements, operational
e iencies, and customer experience.
This approach—evaluating business impact of operational changes and qualifying how KPIs
can be positively impacted—should be adopted for every kind of investment to demonstrate
how customer experience management solutions can produce a real impact to the bottom
line, helping stakeholders make good and informed investment decisions. This analysis is
particularly important as telecoms approaching this topic often overlook hidden and indirect
bene ts and costs.
4Business white paper | Customer experience
Historically, service providers are well known for the subpar customer experience they provide
to the end customers. But this is changing, as margins are shrinking and competition is
increasing. They now need to provide a superior customer experience.
The new competitors, such as OTT players, are performing far better in this area. They truly
use Big Data analytics to understand the impact of people and technology on customer
experience—and how ultimately, this all a ects the bottom line.
Use a CEM-phased approach
While customer experience is broadly recognized as an important strategic goal, the challenge
is in translating it into a plan of action with clear and, most importantly, agreed-on objectives
and measures. More than simply increasing the average level of customer experience, you
should consider programs focused on speci c value and level of advocacy segments, which can
provide the best return on investment. Operational, bottom-line, and direct measurements of
customer experience form the basis of structuring and evaluating the success of your customer
experience initiatives.
Figure 4. CEM Business Case Framework
Benefits
Improved efficiency of customer care staff that Executive KPIs Increased revenue from services being more
are able to cope with subscriber issues more used by customers due to increased satisfaction
quickly and proactively (also reduced training cost) and better user experience (more services with
Churn targeted services offering, services more available,
Improved operations efficiency reduces time to Revenues NPS and new revenue stream)
fix Level 2 and Level 3 support ARPU
Reduction of churn rate
Reduced number of inbound calls to customer
service (proactive maintenance) Operational efficiency
Reduced SLA penalties and SLA violations
Operational cost
Reduced cost/time for network planning OpEx aspects (business customers)
Customer service cost
MTTR Additional benefits
Reduction in the network capacity investment • Revenue leakages for fraud and/or admin errors
(targeted investment and not flat/blind network CapEx Network investment • Capability to control network/services partners
expansion) and outsourcing mechanisms
CapEx saving OpEx saving Direct revenue benefits
About the authors
Marco Pizzo
Marco Pizzo has more than 15 years of experience working on strategy and innovation projects
for major clients in the telecommunications and media industries. He interfaces directly with
C-level executives to discuss business strategy and technology enablers.
He is a recognized subject-matter expert in monetization strategies for cloud services,
telco big data and analytics, customer experience management, digital ecosystems
(advertising, couponing, ePayment, and eLoyalty), Internet of Things/machine2machine,
and network functions virtualization.
Bill Zimmer
Bill Zimmer is managing principal for the worldwide Solution Consulting Services (SCS) practice,
Communications, Media and Entertainment. He is responsible for the overall SCS strategy,
plan of record, and consistent performance across regions. Additionally, he leads the team
responsible for the business consulting community, eld enablement, knowledge management,
and marketing.
Zimmer has extensive industry experience, with more than 14 years at HP holding various
solution management and consulting services positions. Most recently, he led the expansion of
the CMS SCS portfolio, developing new business consulting capabilities that include strategic
and nancial advisory, benchmarking, and business impact modeling. 5Business white paper Evolving digital delivery The challenge of quality of experience in digital TV
Business white paper | Evolving digital delivery
The proliferation of smart devices and expectation to access
rich content are driving demand by consumers who expect
unconstrained access from every device in any location.
Don’t risk compromising quality of experience
Many analysts predict that all TV content will be moved into the Internet, requiring a network
bandwidth scaled by a factor of 30. In the last few years, the video viewing time on smart
devices has seen record growth.
Year over year, share of time spent watching Year over year, share of time spent watching videos on tablets and mobile devices has
videos on tablets and mobile devices has increased 719% since Q4 2011. From Q4 2012, it’s gone up 160% year over year.
increased 719% since Q4 2011. From Q4 2012,
it’s gone up 160% year over year. Mobile and tablets combined for more than 18% of time played in October, and reached more
than 26% by the end of December 2013, a 44% increase. (Source: Ooyala Research 2013)
The growth in Internet tra c is driving a change in the business model, leading to a
decoupling between revenues and tra c.
On the other hand, companies and subscribers alike are willing to pay for quality of
experience (QoE) to stay connected with uninterrupted service quality. High-audience
engagement, however, comes only with a high-quality viewing experience. The evolution
from standard de nition to HD, 3D, and soon 4K is accelerating the need for video and
content transmission to be enabled by appropriate infrastructures.
This means the adoption of speci c solutions, on managed and unmanaged networks, is
necessary to deliver high-quality digital TV. Right now, in fact, di erent players are pursuing
a variety of strategies to address the challenges:
• Telecommunication providers are applying the concept of customer experience management
to IPTV, integrating control rooms with business intelligence and Big Data technologies.
• Over-the-top (OTT) players are simultaneously leveraging multiple content delivery
networks (CDNs) to manage content ow over the Internet.
• Cloud providers are hosting CDN-like services.
• CDN providers are likely to deliver cloud-based encoding to distribution services.
1Business white paper | Evolving digital delivery
Embrace a new content distribution ecosystem
Pay TV operators continue to pursue multiple CDN models as OTT video content and
their own multiscreen services overtake their traditional broadcast video services. Some
operators are building out their content delivery networks whilst others are partnering
exclusively with existing CDN providers. Finally, others are investing in a hybrid model, with
some partnering and discrete CDN ownership.
Worldwide spending on video delivery equipment was expected to reach $258M in 2013.
CDNs were projected to hit $193M that same year. Adaptive bit rate (ABR) origin and
packaging servers were expected to reach $65M in 2013. (Source: Infonetics Research)
A cloud media platform provides an Figure 1. Video content delivery networks spending forecast
on-demand capability—from content
creation and management to distribution $600
and monitoring—enabling:
• L ess complexity by leveraging cloud-based $500
services
• F ast deployment—much faster than $400
Revenue (US$M)
developing in-house
• C
omprehensive and secure storage of media $300
assets and subscriber information
• Q
uick and easy discovery of relevant content $200
for operators and consumers
• A
better business model—operating expenses $100
instead of capital expenditures
$0
CY12 CY13 CY14 CY15 CY16 CY17
CDN edge servers ABR origin and packaging servers
By 2017, researchers expect revenue for these platforms to increase to just over $547M,
with the highest growth coming from origin and packaging servers. They are being used
in operator networks, content delivery networks, and at studios to originate and package
multiformat, streaming video content.
Video CDN equipment will grow at a 2012-2017 compound annual growth rate (CAGR) of
24%. CDN edge servers will grow at 21% CAGR, reaching $372M by 2017.
Figure 2. Video content delivery networks spending forecast by region
50%
40%
30%
Revenue (%)
20%
10%
0%
CY12 CY13 CY14 CY15 CY16 CY17
North America EMEA Asia Pacific CALA
2Business white paper | Evolving digital delivery
Understand telco’s pivotal role for content distribution
The competition and motivation to attract customers and provide content are focused on
technologies for distribution and delivery.
Telecommunication providers have a pivotal role in content distribution and delivery. They
have to build sustainable networks, supporting the Internet and control and e ciently
manage tra c. Furthermore, they need to be the innovation enablers for content producers
and consumers.
Telecommunication providers, broadcasters, over-the-top players, and CDN pure-play
operators are all looking to establish a space for their o erings. Telecommunication
providers, however, have the edge.
HP helps media organisations: Telco carriers know that quality of service is more easily guaranteed on a managed network.
So they are creating business-to-business services for OTT players, such as quality of
• T
ransform to IT-based operations and service, billing and invoicing, and di erent content types or levels that include free vs.
Internet-based business premium. Examples of these are alliances between telco operators and over-the-top players
• E xploit content across multiple channels that will ensure quality of experience, using local distribution channels.
• G
enerate actionable, unparalleled customer
intelligence This is enabling the TV companies to recapture advertising spending, which has shifted to
emerging digital media platforms.
• Enable seamless, connected user experiences
• D
eliver operational e ciencies and enable The content delivery network supports distributors’ demands for high-performance delivery
more innovation of rich media content. They include technology solutions for localised caching, as well as
metro and regional/national overlay CDN services that enable Internet service providers
(ISPs) and content providers to establish mutually bene cial commercial agreements.
• A content delivery network enables up to 30% reduction of tra c (on peering point this value
can be higher) and an overall improvement of the quality perceived by consumers (QoE).
• A content delivery network deployment can solve some of the tra c congestion that telcos can
experience. Some have more tra c congestion at the MAN level; others at the peering point.
• A content delivery network enables consolidation of all telco content delivery infrastructure—
such as IPTV, wholesale, OTT, and multicast— in a single content delivery network.
• It also enables a bandwidth strategy, based on average rather than peak tra c volume.
Figure 3. The evolution of content delivery networks
Integration of network delivery content with
Traffic storming: leading to the start of content
Big Data solution (CDN analytics) to support
deliver networks.
marketing and operation.
Worldwide CDN pure players enter the market. Virtualised CDNs are placed on the market with
Price competition between CDN Pure Play and the integration with NFV/SDN technology to
telecommunication starts. Telecommunication optimise the use of resources (turn on when
operators struggle to match price. needed/pay as per use).
CDN Year Now
timeline 2000
Telecommunication operators are becoming Broadcaster companies willing to take a long-
content providers with their OTTV+IPTV term strategy foresee adoption of vCDN in-house
solution, so they can monetise their content technology and to manage peak, aaS CDN (CDN
delivery networks. pure players).
CDN pure players are not able to support live
Telecommunication operators start to build their
event peaks that is, SuperBall events (such as
own content delivery networks.
the Super Bowl).
3Business white paper | Evolving digital delivery
Recognise the challenges, opportunities in digital video
QoE management
The management of quality of experience is bringing challenges on di erent dimensions.
Figure 4. How CDN services can address QoE challenges
CDN Users
Digital consumer needs
Multinational corporations
TV DVR
QoE Challenges
Tier 1 telcos
• Assure compelling QoE
PC In-car entertainment
• Manage traffic storming
• OPEX and CAPEX control Tier 2/3 telcos
Portable
Digital signage
media devices
Broadcasters
Mobile Laptop
Publishers
Quality of Experience challenges
• Immediate or near-immediate content access, with low latency
• No lag during viewing, with adjustable bit rate
• High quality, with large bandwidth
• No distribution stops, with high system and network reliability
• Video (but not limited to) quality experience monitoring, with reporting and analytics
• Management of very large volume of tra c, with high scalability
CDN Challenges: Traffic-storming challenge
TV and Internet – Strong increase in content is leading to:
• Quality of Experience
• In nite channels and o ering
• Tra -storming
• 2x HD-3D
• Costs
• Network-PVR
• Second screen
• Rapid channel change
• “Everything” moving to video
This increase is impacting transport and access:
• Transport—seeing increasing diversity in access:
–– Devices, SmartTV, PC
–– Mobile, wireless, LTE
–– Free vs. pay
–– Fibre to the home, bre to the cabinet
–– Sustainable cost level and total cost of ownership
• Access—ever-increasing bandwidth demand means:
–– Policy management
–– Low upgrade costs
–– Allocation of bandwidth
4Business white paper | Evolving digital delivery
Cost challenge
• OPEX control: easy to maintain and manage
• CAPEX control: sustainable expansion costs
• Capacity planning: model to support forecasted needs
• Delivery strategy: agile approach to introduce and manage new technology
Figure 5. CDN bene ts
Internal network
• Significant improvement in efficiency optimisation & savings
and quality of experience • Reduce network investments
• Optimisation with NFV: CDN as a service • Enhanced management of network usage,
• From uncompensated traffic growth improvement in capacity
to monetisation • Prepare for LTE/FTTH
Netwo
savinrk op
ion gs tim
ct fo
r
isa leco
e
nn
te
tio m
rco
n an
Inte
• Potential content interconnection with
federated operators
d
• International coverage opportunity
CDN • Enhance B2B2C customer’s high-quality
video/content user experience
ence
CDM-related media market • Deliver content to end users with minimal
T ra
startup delay and little or no rebuffering
eri
• Digital asset management events during content play out
ffic
• Storage
xp
• Network excellence proposition
• Transcoding & encrypting an re e
m
ag
• Content management system
em tom
• Advertising ent Cus
• DRM User experience quality for:
• Analytics, track and measure • Gaming • Application ebook stores
• Payment system • eCommerce • M&E, music evideo
• MNO • Megaportal
• Enlarge offer to local B2B clients • Government • Advertising
• Support cloud services and • SNS Sharing • Internet-connected TV
premium services
Opportunities realised
• When Google search queries slow down a mere 400 milliseconds, tra c drops 0.44%.
• Eighty percent of people will click away from an Internet video if it stalls whilst loading.
• When car comparison pricing site Edmunds.com reduced loading time from 9 to 1.4
seconds, page views per session went up 17%, and advertising revenue went up 3%.
• When Shopzilla dropped load times from 7 seconds to 2 seconds, page views went up 25%,
and revenue increased between 7% and 12%.
• When you speed up service, people become more engaged—and when people become
more engaged, they click and buy more.
5Business white paper | Evolving digital delivery
Figure 6. Cloud media platform paradigm
From iPad to Consumer Second Screen Advertising
Examples CDN & nPVR
production in 5’ relevance Personalised EPG
Administration
Content and
Sources Devices
Production Analytics Distribution Services
Services Services Services
Service
Service providers ingestion
SaaS
Service providers PaaS
Cloud Media Platform
Revenue Service
settlement ingestion
End User
Service providers IaaS
Get a solution that works—establish a cloud media
platform
Innovation is an unstoppable force, as carriers continue to carry the tra c for over-the-top
players— sometimes with limited returns. E ciency and lowering costs are imperative.
The digital TV industry has to leverage a cloud media platform to manage the solution’s
evolution and address future needs. It accommodates all technology parameters and o ers
the exibility necessary to address geographic and service expansion, such as TV Everywhere.
This approach enables providers to share the xed costs of equipment and development
across large customer bases and drive down prices.
A cloud media platform provides an on-demand capability—from content creation and
management to distribution and monitoring—enabling:
• Less complexity by leveraging cloud-based services
• Fast deployment—much faster than developing in-house
• Comprehensive and secure storage of media assets and subscriber information
• Quick and easy discovery of relevant content for operators and consumers
• A better business model—operating expenses instead of capital expenditures
6Business white paper | Evolving digital delivery
This approach, applied to content distribution, is enabled by the adoption of disruptive
technologies, such as network function virtualisation (NFV). It can enable exploiting virtual
content delivery network (vCDN) as a solution to their problems, with exponential growth in
demand for bandwidth. Right now, the types of network functions and services that operators
plan to move to virtual provider edge (vPE) include content delivery networks and caching.
vCDN enables the dynamic deployment of end points as customer demand grows. It
o ers agility and quickly addressing the issue—without the need for going through the
procurement and deployment cycles.
Like all technology strategies bounded by guiding principles and business drivers, it is
important to balance the short-term requirements with long-term policy.
Figure 7. vCDN concept
Virtual CDN B1 ...
Warner Bros.
DreamWorks
Video with QoE
Facebook
Iberia
CSP CDN Yahoo!
Terra
Content providers pay CSP to have Real
connectivity to the end user with
video quality (video QoE) Netflix
RTL
End users pay content providers
Twitter
to watch content with video Jamba
quality (video QoE)
7Business white paper | Evolving digital delivery
Consider CDN requirements and features, such as web-caching, video optimisation, routing,
monitoring, and multidevice support. Consider CDN distribution strategy in the network.
Also consider CDN ownership or CDN in the cloud—or even the new disruptive technology of
virtual content delivery networks.
The CDN business case must be predicated on a comprehensive assessment and a proven
estimation model. Look for low-hanging fruit but ensure your CDN incorporates features for
future demands, can scale, and meets the obligation for quality of experience. This may even
open up new markets and revenue streams.
Figure 8. Example of CDN business use case
A high level analysis
25,0000
20,0000
15,000
10,000
5,000
—
-5,000
Year 0 1st Year 2nd Year 3rd Year 4th Year 5th Year
CAPEX OPEX Revenues CDN Customer loyalty/improve revenues Bandwidth saving/free bandwidth Cash flow
• Assumptions • Revenues:
– 10 year contracts/year with an average value of €~100K – Pure CDN delivery (national, international, interconnected CDN)
(for Y1 and -10%/year) for video/content, Web acceleration, and digital media VAS
– Estimated a 10% price reduction/year on the services offered – Digital media services: ingestion, trascoding, optimisation,
– Cost reduction benefit valued considering GB delivered DAM, storage, etc.
efficiency (no need to invest or buy transit) • Potential revenues not considered:
– Reduced churn rate (cumulated) – Up-selling/cross-selling of hosting/cloud/connectivity services
– Capability to sell at national and international level – ePayment
– Advertising platform
– Other VAS
8Business white paper | Evolving digital delivery
Get worldwide support
HP is a global, proven technology solutions provider, o ering IT infrastructure and global
services and user devices. We invent, engineer, and deliver technology solutions that drive
business value, create social value, and improve the lives of customers.
Speci cally, we help media organisations:
• Transform to IT-based operations and Internet-based business
• Exploit content across multiple channels
• Generate actionable, unparalleled customer intelligence
• Enable seamless, connected user experiences
• Deliver operational e ciencies and enable more innovation
HP Digital TV Framework provides a modular solution to manage innovative business
models and deliver digital TV services through an agile, e cient approach. It is a set to a
common foundation that shows areas, modules, and components that compose the digital
TV context. A background language with broadcasters, OTT players, and content producers.
About the authors
Alessandro Puglia
Alessandro Puglia has almost 10 years of consulting and industry experience, helping
clients improve their performance by addressing strategic and operational issues. In his
career, Puglia served top players across communication and media industry as a business
consultant, applying advanced subject-matter knowledge in complex business issues, and
identifying and executing their IT strategies.
Alberto Curcio
Alberto Curcio is a solution-oriented professional with a business, technical, and communication
background. Curcio has extensive experience in business process modeling and adoption of
communication and media industry frameworks. He has a special interest in the digital
television technologies, and his activities include coordination of thought leadership initiatives.
Marco Pizzo
Marco Pizzo has more than 15 years of experience working on strategy and innovation projects
for major clients in the telecommunications and media industries. He interfaces directly with
C-level executives to discuss business strategy and technology enablers.
He is a recognized subject-matter expert in monetization strategies for cloud services,
telco big data and analytics, customer experience management, digital ecosystems
(advertising, couponing, ePayment, and eLoyalty), Internet of Things/machine2machine,
and network functions virtualization.
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