What is a next-generation service provider‾ Speak to ten industry experts and you will get at least eight different answers. Most will have something to do with the technology: it's an all-IP network"&brkbar;it's about separation of access and services"&brkbar;it means opportunities for media and content providers.
Perhaps all these are true, but there is one common thread that ties all of these together: that the business models that define traditional service providers will change.
Throughout the history of the industry new technologies have created opportunities in relatively small steps and underlying business models have been relatively stable. One of the most important changes we have seen is the addition of selling bytes of data, to providers of minutes of time. What we are facing now, though, are far more radical changes to business models.
To explain this, let's compare a telco with a commercial TV channel. At first sight there are similarities: both operate in competitive markets, and both sell well-established services to customers. If you look a bit deeper, though, there is more to it. Media companies have adapted to make the most of a number of different revenue streams, so in addition to selling subscriptions to viewers, they also sell viewers to advertisers. Business models are flexible and enable them to sell a range of attractive content packages to customers, as well as packaging viewers into segments that advertisers want to buy.
Telecom service providers do not have this flexibility, having built operational and business support systems (OSS/BSS) to optimize their business models. When done well these systems have brought operational efficiencies, better quality of service, faster fault repair and customer care that is at least close to the level which the company has decided is acceptable, given the costs. A side effect of this is that they have solidified around the business of selling minutes and kilobytes to subscribers and now add inertia to the problems of legacy systems.
But opening up these systems to take advantage of different revenue streams is going to be a challenge. And the worrying aspect for existing operators is that although they have the advantage of market position, they will also suffer from outdated legacy systems.
In the coming months and years some very bright people will have some ideas that take advantage of the new technologies and the changing expectations of customers. They will create businesses that are unencumbered by legacy IT. It is unlikely that they will own very much infrastructure - why would they‾ There is already lots of fiber in the ground and overlapping mobile coverage from multiple competing incumbents. Many new businesses will fall short with their ideas, but others could bring about a radical change. Those that sell the same services as incumbents at lower prices are unlikely to get far. Those that innovate with radically different business models stand a chance of succeeding.
This puts incumbent service providers in a terrible position. After many years and billions of dollars of optimizing their IT systems to sell minutes and bytes they realize that this is probably not where most of the value is in the next-generation service provider business. The message is clear: transform or become a wholesale provider.
OSS/BSS is one of the key components of competitive advantage: next-generation systems can be adapted to new business models, they do not constrain them. They support multiple revenue streams, not just revenues from partially captive subscribers. They provide the basis for integrating with external businesses both as customer and supplier. They allow the service provider themselves to experiment with sub-brands aimed a specific segments when previous one-size-fits-all approaches to branding stop working.
Unfortunately, OSS/BSS transformation is difficult. There is no magic way to solve this problem. Skilled and experienced people need to work though the problem and address the fundamental questions: what do our IT systems need to do‾ How will they support our business strategy‾ How do we manage the risks of transformation‾ How do we build flexibility into the new systems‾ What are the organizational needs‾ How do we reclaim a competitive edge in the market‾
Only when these questions have good answers is it sensible or productive to start working with systems integrators that can deliver the change. Too many OSS/BSS transformation programs fail because the objectives at the start are not clear, or the people defining the requirements have been working with the legacy systems for years, or because there is an organizational gap between executives that understand strategy and the architects and program managers tasked with implementing new systems.
Transforming OSS/BSS to become a next-generation service provider takes time, but it is not optional and the future is almost here.
Steve Lewis is a senior consultant for Mason Communications, which is part of Analysys Mason Group, global telecoms and IT advisors - www.mason.biz