Nick Wilson explains how communications service providers can use analytics to transform aging copper into golden growth.
Dealing with constant change has become the new norm for communications service providers (CSPs) as they try to compete not only with each other, but also with a host of new competitors attacking previously safe revenue streams. CSPs in Asia Pacific have found themselves at the center of a hyper-connected world where new players are emerging almost daily and business agility is now critical to meet customer expectations.
To remain relevant, CSPs must avoid the race to the bottom on pricing, which relegates them to being 'dumb pipes' burdened with the losing proposition of having to provide more whilst charging less. They need to find new ways to challenge over-the-top (OTT) players. They need to respond to the disruption OTT players cause to traditional CSP revenue streams by offering new services that are difficult to provide without having direct control of the underlying network.
Much of the shift in demand profile for CSP services is driven by the increasing use of machine-to-machine (M2M) technology - the interconnection of intelligent devices and management platforms. Research firm Analysys Mason has tipped this to grow from 2.3 percent of total mobile connections in 2014 to 7.9 percent by 2020. That's huge considering total mobile broadband connections are predicted to reach 4.8 billion in Asia Pacific and Australia during this period.
As M2M services mature over the next several years we will enter the realm of a super-capable ecosystem - the Internet of Things (IoT) and its logical successor, the Internet of Everything (IoE) - which are opening up unprecedented opportunities. CSPs that grasp the nuances of this shift to transform their operations and exploit the potential of this technology will be well positioned to introduce new, sustainable services and business models that deliver unmatched levels of customer experience.
But here's the catch: the key to making this possible is investing in analytics for the optimization and personalization of network services. Network services provided by the CSP to connect OTT application providers and their users are central to the OTT application's ability to deliver a superior customer experience, whilst minimizing the underlying operational costs.
Using analytics as a differentiator
Critical to any successful IoT strategy is the ability to efficiently analyze the connection quality, timing and distribution of the communication between devices and users. The amount of data this generates is both massive in scale and continuously evolving. In some markets, such as Australia, this meta-data is now required to be captured and retained for law-enforcement purposes. Initially, this will impose an additional cost on network operations. However, in the mid to long-term, CSPs will leverage this data to their advantage via the application of analytics to create 'actionable intelligence' on what the devices and people who use them are actually doing in an aggregated manner across all applications.
These insights will help them to:
'¢ Unlock new revenue opportunities - analyzing user behavior to predict trends and develop new products and services in anticipation of expected demand. This may involve sharing insights with partners with a different view of customers to add value as well as increasing revenue for existing services.
'¢ Strengthen existing products - identifying niche user needs by tracking usage patterns on a geographic basis relative to the consumption of other products and services. This affords the ability to provide insights on how to modify existing products to differentiate them so they can meet the requirements of particular micro segments.
'¢ Monetize infrastructure - creating new services that provide interactive network controls based on the analysis of network traffic trends and performance. These services will directly expose analyses to M2M/IoT and OTT applications, modifying the demands they make of the underlying infrastructure. Smart CSPs will use this capability as part of their software defined networking (SDN) or network function virtualization (NFV) strategies to defer the cost of upgrading core network capacity by enabling traffic to be prioritized in different ways. This keeps them relevant and lessens the chance of them being sidelined as 'dumb pipes'.
Ultimately, the aim is for CSPs to provide higher value products and services to stakeholders and users, helping to drive customer satisfaction and loyalty as well as revenue.
CSPs also need to think beyond traditional connectivity
Connectivity has been a natural area of interest for most CSPs in this early phase of IoT adoption. However, it hasn't taken long for market leaders to realize that the bulk of revenue will come from areas outside a typical CSP's traditional product suite. Because connectivity is a readily available commodity, increased revenue for the majority of CSPs will come from innovation and value-add for specific industries.
Launching a successful M2M service involves a suite of core technologies beyond smart devices that includes data center and computing facilities, appropriate connectivity infrastructure and management platforms, as well as logistics and field support. These principal components are typically managed by the CSP and provide the foundation on which industry-specific solutions can be designed and delivered.
Close collaboration between CSPs and industry partners is needed to conceive and deliver a service that provides business benefits for everyone. Industrialization of M2M services also requires legal and regulatory frameworks and most importantly, heightened security.
The latter is crucial since new vulnerabilities emerge every day in this hyper-connected, software-centric environment. CSPs have a critical role in enabling end-to-end security since they control the network infrastructure and have wider visibility of traffic anomalies when they occur. High levels of security for industry-specific applications is particularly important in areas such as healthcare and financial services, and it can be delivered either entirely by the CSP or with the support of third-party providers.
The need for speed
Like all disruptive technologies, the rapid spread of M2M and IoT services forces CSPs to reinvent their organization and business processes to truly benefit from this phenomenon.
Success will be determined not only through embracing analytics to extract valuable business insights, but also by how quickly CSPs can transform their operating model to adapt to the unique needs of the changing marketplace.
As CSPs get started on planning their IoT strategy, here are five things they need to consider:
1. Explore ways to sell cellular connection in bulk that enable rapid M2M service deployment. These can be delivered and serviced by third parties, and self-managed by the customer as part of a suite of complex industry-specific applications.
2.Factor in service needs beyond basic connectivity that involve other components such as sensors in cars and household appliances, as well as vertical applications delivered in the cloud.
3. Ensure operating models can rapidly adapt to changing market conditions to maintain a pivotal leadership position. Dedicated business units will be required for M2M offerings, including product management, sales, partnership management and operations support.
4. Consider future investments strategies so the IT department can go beyond operational efficiency improvements to support growth and new projects, as well as management of monitoring devices.
5. Plan for an expanded role for IT, ideally, accompanied by changes in culture, processes and skills, as these can be serious barriers to a successful transformation program.
Using analytics to focus your IoT vision
The huge growth of big data and the evolution of M2M technology to the Internet of Things both affords opportunities and poses threats for the telecommunications industry. To thrive in such a dynamic environment, CSPs must start using analytics to help formulate their responses now as the traditional telecom business model continues to lose its effectiveness to OTT pure plays.
To succeed in the most optimal and least disruptive manner, CSPs need a comprehensive technology strategy and roadmap to harness the vast amounts of business data available to them (and only them) through analytics.
A key differentiator will be the ability to capture, analyze and convert IoT data into rich consumer insights - and ultimately use analytics to turn copper into gold.
About the author
Nick Wilson is general manager, enterprise services and managing director of Hewlett Packard Enterprise, South Pacific.