Building a New BSS Stack to Support Digital-First Offerings a Heavy Reading White Paper Produced for Vlocity, Salesforce, and MATRIXX Software

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Building a New BSS Stack to Support Digital-First Offerings A Heavy Reading white paper produced for Vlocity, Salesforce, and MATRIXX Software

AUTHOR: JAMES CRAWSHAW, SENIOR ANALYST, HEAVY READING

EXECUTIVE SUMMARY

Faced with saturated markets, a rising number of mobile operators are launching new digital-first offerings in order to differentiate and win market share. For some, it is about empowering customers with digital-first experiences. For others, it is about counteracting the threat of new entrants (e.g., Rakuten in Japan). In almost all cases, operators find they need new business support system (BSS) capabilities to support the new digital proposition, as their legacy systems lack flexibility or simply take too long and cost too much to change.

All communications service providers realize they must raise their game when it comes to customer service. Today’s millennial and Generation Z customers demand fast, reliable mobile services and a fully digital customer experience (on web, in app, or by chat). Legacy BSS do not support multichannel very well, let alone a seamless omnichannel experience.

A digital-first approach enables the provider to digitally attract, acquire, service, and retain customers, allowing effortless engagement via their channel of choice. It also leverages artificial intelligence (AI) to anticipate customer needs and behavior while proactively driving loyalty. This approach enables a level of automation that dramatically reduces the operator’s cost to serve (call centers, retail stores, etc.). Customers get greater visibility of the services they are consuming, which eliminates bill shock and the associated negative sentiment. By giving customers more control over their spending, operators may find they consume more than when operating under the fog of legacy billing.

Whether operators are looking to build fresh brands, enable a digital-first approach, or simply monetize new digital services (e.g., music passes/4K virtual reality [VR] gaming) as part of a 5G launch, legacy BSS is often the Achilles’ heel of the project. A modern IT stack can give the operator greater business agility to test new tariffs, products, and strategies. Iterate and fail fast is the mantra in 21st century consumer services.

Adapting a legacy BSS to support a digital-first proposition is risky and expensive. The strategy that successful operators typically adopt is to build a new subset of BSS capabilities exclusively for their new digital service offering. Over time, as the new digital IT stack matures and demonstrates its ability to scale, operators can gradually migrate their existing customers onto the new IT stack and retire the legacy systems. Rather than attempt a “Big Bang” transformation, the operator restricts its IT risk to the new, digital-first offering. Once that risk has been controlled, the full IT transformation can take place in stages. CIOs can effectively bypass the blocked arteries of their legacy BSS and begin focusing on innovation, rather than risk mitigation.

THE DIGITAL-FIRST APPROACH

The concept of digital-first propositions in the mobile market is not new. In 2009, Telefónica launched its no-frills, pay-as-you-go brand, giffgaff, in the U.K. That was likely not the first offer, but it has proven to be popular with consumers, as Figure 1 shows. Giffgaff has no stores and no customer contact center. All transactions take place via its website, and if customers have queries, they are initially directed to an online community of users who can resolve many of their issues. In 2017, Vodafone UK tried to replicate this digital-first approach with the launch of Voxi, and Three UK followed with SMARTY in 2018.

To some extent, creating all-digital propositions, often with sub-brands, is an extension of a well-established mobile virtual network operator (MVNO) strategy. Mobile network operators (MNOs) often sweat their assets by opening them up to other companies that want to leverage an existing brand (e.g., Tesco, Asda, Sky, or Virgin in the U.K.) or see a mobile service as synergistic with their core business (e.g., consumer electronics retailer Dixons Carphone’s iD Mobile).

As Figure 1 shows, MVNO brands are often more highly rated than the underlying MNO on whose network they run. This result may reflect different pricing and customer expectations. It might also reflect a superior, non-network-related customer service or a superlative digital-first experience.

A digital-first offering allows operators to target new segments with a proposition and experience that better fit that niche. The niche could be digitally savvy consumers that prefer to engage via an app. The all-digital proposition might be wrapped in a new brand (e.g., iD) or a sub-brand of an existing operator (e.g., giffgaff) – or it might simply be a new product line under an existing brand.

Figure 1: U.K. Mobile Brand Consumer Preferences Brand Type Owned by Customer Score Rank Network

giffgaff Sub-brand Telefónica 1 Telefónica O2 Utility Warehouse MVNO Telecom Plus plc 2 BT/EE Plusnet Sub-brand BT 3 BT/EE Tesco Mobile MVNO Tesco 4 Telefónica O2 Asda Mobile MVNO Walmart 5 BT/EE Sky Mobile MVNO Comcast 6 Telefónica O2 iD MVNO Dixons Carphone 7 Three UK Three MNO CK Hutchison 8 Three UK BT Mobile Sub-brand BT 9 BT/EE Virgin Mobile MVNO Liberty Media 10 BT/EE O2 MNO Telefónica 11 Telefónica O2 EE MNO BT 12 BT/EE Vodafone MNO Vodafone Group 13 Vodafone UK Source: Heavy Reading; customer score rank based on Which survey, February 2019

New digital propositions can be successful because they allow operators to segment the market and target particular niches:

• Discount/no-frills • Cultural and language-specific • Nostalgia/silver generation • Digital natives

By using multiple sub-brands or distinct service categories in a market, an operator can test different strategies, channels, and levels:

• Pricing strategies (e.g., discount, premium, speed-dependent, sponsored tariffs, data/voice/text bundles) • Product strategies (e.g., subscriber identity module [SIM]-only, unlimited or zero- rated data, content subscription bundles) • Distribution channels (e.g., online only, retail partner, etc.) • Customer care levels (e.g., self-serve and community care, niche language support)

To maximize the chances of success for the all-digital offering, operators should do the following:

• Ensure they have an operations support system (OSS)/BSS platform that can enable rapid service innovation and experimentation • Partner with segment experts (e.g., ethnic groups) or form joint ventures with other brands (e.g., sports or music related) • Empower the all-digital offering’s management to run the business autonomously

Of course, the operator must accomplish all these objectives without unduly disrupting its existing business. This is the reason why creating a new, parallel IT stack is so important.

KEY FACTORS FOR THE NEW BSS STACK

As stated earlier, legacy BSS do not generally support a digital-first experience very well. Many traditional BSS were developed before there was an internet, smartphones, and social media. Legacy BSS stacks often involve a tangled, spaghetti-like mess of systems. This legacy makes them inflexible and ill-equipped to handle rapid change. Every time a new product or service is introduced, IT architects need to go through an exhausting process of updating systems and interfaces.

Legacy BSS solutions often require custom development (as opposed to simple reconfiguration) before new use cases can go into production. Even with long test cycles, changing these systems poses operational and business risks. Often, the documentation for legacy systems is lacking and the institutional knowledge for how to maintain them may have left the organization through retirement or redundancy. Inevitably, mistakes are made, and they may prove hard to pinpoint and resolve.

When evaluating BSS solutions for a digital-first offering, operators should consider the following:

1. Time-to-market: Can the solution be deployed in a reasonable timeframe (i.e., a minimum viable product in 3-6 months)? How long will depend on the size and complexity of the business. Ask for a breakdown of the implementation into multiple stages such as requirements capture; high level design; low level design; functional, system, and user testing; production deployment; go live; etc. 2. Business agility: Does the solution allow the business to rapidly respond to new market dynamics (e.g., merger and acquisition activity, new entrants, disruptive regulation) by rapidly launching new products, tariffs, and offers? How easy is this objective to do (configure, not code) – and how long does it take? 3. Omnichannel: Does the solution deliver a consistent and seamless customer experience across the entire customer life cycle (from sales to ongoing service) across every digital touchpoint? Does it enable a self-care experience that meets consumers’ needs, rather than just frustrating them before they search for the contact number? 4. Catalog-driven: Is the solution based on a flexible enterprise product catalog that supports rapid offer design and accurate order capture and integrates easily with real-time monetization and fulfillment systems? 5. Open application programming interfaces (APIs): Can the solution easily integrate with other vendors’ OSS/BSS solutions and can they easily integrate with it via well-documented, TM Forum-compliant open APIs and web services? 6. High performance, real-time rating, charging, and policy control: Can the solution scale to meet the rating, charging, and policy needs, not just of the digital- first offering, but potentially of your entire business in the future? 7. Webscale resilience and elasticity: Solution should be cloud native to deliver scalability and high availability under load. Cloud economics can reduce the cost to serve each transaction, which is key to supporting the massive machine-type communications (mMTC) use case of 5G.

8. Ease of product upgrades: Does the supplier regularly deliver new features and product capabilities that do not require heavy investment in consulting or professional services?

New BSS to Support 5G Service Offerings Many operators are now deploying 5G networks and are beginning to experiment with new services based on the general use cases of ultra-reliable low latency communications (URLLC) and mMTC. Operators are also exploring novel solutions that network slicing can bring to enterprise and industrial users.

As operators develop these new service concepts, they must consider how to successfully monetize them. Traditional pricing strategies such as metered connectivity, multi-device plans, and service passes will remain part of the monetization toolkit. But with 5G, service providers will also experiment with speed-based tiers, premium pricing for low latency applications (e.g., cloud gaming), and new charging models for enterprise network slicing.

To enable a “fast fail” approach to service experimentation, mobile operators will need a BSS that can spin up and tear down services with over-the-top (OTT)-like agility. These new service propositions must be created quickly and scaled to meet demand or discarded if unsuccessful. That agile product development requires BSS software that can be adapted through configuration, not lengthy code rewrites.

The BSS must also support a digital-first experience where consumers can purchase new 5G-enabled services on-demand and access them immediately. The BSS must leverage cloud economics to enable scalability and reduce the cost to serve. 5G will lead to an explosion in connectivity with many more smart devices per person (Internet of Things [IoT] and wearables), but legacy BSS will be unable to cost-effectively support such opportunities.

Figure 2: BSS Must-Haves to Support 5G Monetization Enabler Description

A completely digital customer journey, including onboarding, ordering, ID All-digital journeys checking, delivery, activation, retention, and upsell. Provides the flexibility to implement new business models (indirect, value- B2B2X business model added services, two-sided platform, etc.) that will develop as markets enablement embrace the potential of 5G. Native integration to external payment partners to support on-demand Card payments purchases and recurring subscriptions. Configuration-based Allows pricing to be changed in minutes to create new offers without pricing coding or vendor change requests. Promotions to upsell tailored offers based on usage thresholds, applications Flexible promotions used, websites visited, or other network triggers. Source: Heavy Reading based on MATRIXX Software presentation

NEW DIGITAL-FIRST CASE STUDIES

Although Heavy Reading presented the U.K. mobile brands above, the digital-first approach is by no means specific to that country. For example, in 2011, all three incumbent mobile operators in neighboring France launched no-frills, digital-first offerings ahead of the debut of the fourth operator, Free, in that market: Bouygues launched B&YOU, Orange started Sosh, and SFR formed Red.

Examples of digital-first offerings outside the U.K. and France, some of which were acquired rather than launched organically, include the following:

• Comviq (Tele2, Sweden) • Congstar (Deutsche Telekom, Germany) • Simyo (KPN in Holland, Orange in Spain) • Tuenti (Telefónica, Spain) • Visible (Verizon, U.S.) • Orange Flex (Orange, Poland)

Below we discuss in more detail two digital-first offerings: Verizon’s Visible and Orange’s Flex.

Verizon Visible In 2016, Verizon decided to enter the pre-paid, bring-your-own-device (BYOD) market with a sub-brand. The Visible service launched in 2018 with one simple price: $40/month, all in. For that, Visible offers unlimited data, messages, voice minutes, and a mobile hotspot on Verizon’s 4G LTE network. As Visible explains on its website: “No annual contracts. No hidden fees. No nonsense. Oh yeah, we also ditched the stores, lines, and annoying salespeople.” While $40 per month may not sound cheap to consumers outside the U.S., compare it to Verizon’s unlimited plans, which range from $45 to $55 (plus taxes and fees) for a similar service.

During the design phase, Visible’s head of Technology, Adil Belihomji, initially considered reusing Verizon’s existing IT stack. However, after 6 months of planning, Belihomji realized that “If we do it the legacy way, we're going to be stuck with the same amount of problems ... We're not going to be able to react quickly to the changes we need, especially being in this digital mode where everything is on social media, everything travels by one click of a button." Instead, Belihomji and team developed a completely cloud-based OSS/BSS – one that did not require any hardware and was nimbler and more flexible than the legacy solution.

Core solution components include Vlocity Communications, Salesforce Service Cloud, and Salesforce Community Cloud for cloud-based customer engagement, pricing, and ordering, as well as an instance of MATRIXX on Google Cloud Platform for online charging. Salesforce Marketing Cloud attracts consumers to Visible across digital channels, including social, short message service (SMS), and email, with proactive engagement to drive loyalty. Going cloud-first enables Visible to scale its IT resources as the business grows. As Belihomji states, “Scaling with our customers makes much more sense than just rolling in millions and

millions of dollars spent on hardware.” The net result is a fraction of the cost of the legacy solution. Visible minimizes costs by running on 100% cloud infrastructure and avoiding investment in call centers, retail stores, and dealer channels.

With no contract, the onboarding experience is streamlined, and there are no bills. Customers manage their service via the Visible app (see Figure 3). Moreover, the BSS is extremely flexible and allows Visible to easily create new tariffs or pricing tiers for different data speeds. In the future, Visible may enable Verizon to migrate from its legacy IT systems to a cloud-based OSS/BSS without having to undertake a “Big Bang” transformation.

Figure 3: Verizon Visible Consumer Portal

Source: Vlocity

Orange Flex In May 2019, Orange Polska (Poland) launched an innovative new offering, Orange Flex, aiming to provide a fully digital experience to its consumers. A smartphone application lets customers adjust their mobile plans and change packages without long-term contracts. Orange Flex also offers streaming services such as Netflix and HBO Go as part of its digital subscription.

Customers can choose from among 10 tariff plans that offer unlimited calls, SMS, and multimedia messaging service (MMS) but differ in data usage limits. In addition, customers can choose one of the zero-rated packages, Social Pass, Music Pass, or Video Pass. They can change plans as often as once per month, buy additional services in real time, or even temporarily disable services (e.g., if traveling abroad for an extended period). Payments are taken in advance by bank card, so there is no need for invoices. Flex combines the flexibility of pre-paid offers with the convenience of post-paid. A breakthrough feature is that customers can activate a new number in a few minutes using embedded SIM (eSIM) technology.

Orange Flex was developed from scratch. According to Orange Polska, its agile development teams incorporated customer feedback at all stages of the app design, marking a new way of developing a consumer product within the company and forming an emblematic project for its cultural transformation.

By launching Flex, Orange Polska aims to increase its market share within the youth segment. From a financial point of view, Flex brings efficiencies, as the cost of acquisition is much lower and there is no retention cost. The cost of customer care is reduced and there are no issues with the non-payers because a debit/credit card is used during the onboarding process.

In a LinkedIn post, Orange Polska’s CEO, Jean-François Fallacher, explained how his company built Orange Flex using a new state-of-the-art digital IT backend based on MATRIXX, Vlocity, and Salesforce solutions. MATRIXX supplies its Digital Commerce Platform while Vlocity provides Enterprise Product Catalog, Configure-Price-Quote, commerce APIs, and a comprehensive library of pre-built sales and service processes. Salesforce Community Cloud, Salesforce Service Cloud, and Salesforce Marketing Cloud deliver the omnichannel digital customer experience in the cloud.

Fallacher noted, “We chose Vlocity and Salesforce for their deployment speed but also for their advanced products and journey management capabilities. This partnership will enable us to meet our customers’ expectations for simple, transparent, easy-to-use and easy-to- manage offers. Innovation and customer experience are significant cornerstones of the Orange strategy.”

Figure 4: Orange Flex – Key Selling Points

Source: Orange Polska

CONCLUSIONS

Mobile operators have an opportunity to deliver an app-based, digital-first proposition to grow customer segments (digital natives, cultural, generational, etc.) in the markets they serve. With a new IT stack, operators can disrupt the competition by introducing digital- and mobile-first experiences.

Some operators are using new brands to explore the digital-first terrain. One such example is Verizon’s Visible brand, whose edgy tagline states, “We also ditched the stores, lines, and annoying salespeople.” Other operators are pursuing the digital-first approach while continuing to leverage their established brands. For example, Orange Polska launched the Flex product line and found the cost of acquisition is much lower with online channels and the cost of customer care is reduced with self-serve.

By adopting modern, cloud-based BSS software, these operators can rapidly change their service offerings and pricing through configuration, not expensive and lengthy code rewrites. Innovative IT platforms enable personalized plans with flexible tariffs and features such as shared data, bill capping, and data rollover.

Telcos have a large OSS/BSS software estate and there is no magic switch to make everything “digital-first.” They can seamlessly reach out to consumers via digital channels, attract them to their brand, and rapidly engage them as long-term fans. The vanguards tend to be greenfield operators such as Rakuten in Japan or challengers like Visible in the U.S.

Operators evaluating BSS solutions to support digital-first should ensure they do the following:

• Offer the necessary business agility to shorten time-to-market for new offers. • Enable a seamless omnichannel experience that delights customers rather than simply tries to divert them from the call center. • Have industry-standard APIs to enable easy integration with adjacent systems. • Remain hybrid-cloud-native to support the needs of the operator today and in the future as the digital-first offering gains traction.