Given the diversity of companies represented, we were struck by the similarities in their themes and solutions to the CSP's role in the ICT industry. A consensus on challenges, strategies, and roles seems to be developing in the telecommunications industry. That consensus acknowledges the difficulties facing the CSP's business position as well as profitable roles at the center of the emerging digital ecosystem.
Huawei sees CSPs as having to evolve their networks and decrease costs while substantially improving their focus on customer experience. Huawei has established specialized centers to assist in this effort, namely a Global Network Evolution & Experience Center (GNEEC) that simulates network evolution models, five Service Operations Centers that work in concert with its GNOCs, and recently, a Customer Experience Transformation Center that focuses on customer journeys, purchase, use, payment, and inquiry. On the managed services side, Huawei has a major CEM module in our IT and network services suite.
Huawei places heavy emphasis on making the quality of the mobile network experience part of a carrier's brand. High availability and high performance, we argue are still important differentiators in mobile markets. As outlined by Dr. Howard Liang, Senior Vice President and President of its Global Technical Services, the CSP focus is moving from an “old value zone” to a “new value zone” – from network functions to service experiences, from siloed telecom services to an open digital model, and from growth by acquiring new customers to growth by providing innovative services.
Huawei has coined the ROADS acronym to describe the attributes that the CSP world will demand of ICT services, irrespective of whether the CSP sells them to customers directly or supports those services as part of a larger ecosystem. These services will be real-time, on-demand, all-online, do-it-yourself, and social (ROADS). By “do-it-yourself,” Huawei refers to self-service paradigms, enabling mashups and collaboration via open digital operations.
The industry consensus
Given the diversity of companies represented, we were struck by the similarities in their themes and solutions to the CSP's role in the emerging ICT industry. A consensus on challenges, strategies, and roles seems to be developing in the telecommunications industry. That consensus acknowledges the difficulties facing the CSP's business position, but is also optimistic that CSPs can develop profitable roles at the center of the emerging digital ecosystem. Major points of agreement include:
CSPs are well placed in the new ICT world
Running a network can still be a good business. The network is the foundation of emerging ICT services; even the "dumb pipe" business model can be profitable as long as the network is simplified and run efficiently.
CSPs occupy a privileged position in the growing digital economy as the entities that connect customers of all types with the services they consume. CSPs have expertise in mobile devices and connectivity, which can influence service design and enable them, for example, to help enterprises change the way that they provide services to employees and customers.
Network quality and a CE focus are essential
A focus on customer experience can increase the top line by aiding competitive differentiation, helping upsales and reducing churn. While key performance indicators (KPIs) will always be used, they should be supplemented by key quality indicators (KQIs) that focus on the customer experience. CSPs should incorporate these customer experience indicators into their partner and vendor relationships so that the entire ecosystem is working toward similar goals. Several CSPs have dedicated departments to translate customer experience goals into specific targets for each department as a way to give every employee a stake in this transformation.
Network quality is still an important differentiator, and that quality must be assessed in terms of actual customer experience. Most CSP presenters at the forum had devoted significant time and funds to improving network quality. One European CSP shared its experiences where they overemphasized LTE. In building out its 4G network, it let its focus on the 2G and 3G experience lapse, which led to customer dissatisfaction and poor ratings in consumer tests. Most of this dissatisfaction related to degradations in the voice network; while the temptation is often to focus primarily on mobile broadband, CSPs should remember that voice is still a vital component of the mobile experience. CSPs presenting at the forum also hinted at the importance of being able to differentiate around new innovative services – showing more willingness to test new ideas out even if many would fail. The need to keep ahead is seen as vital by CSPs, especially with markets that are highly competitive and mature.
Service ecosystem acumen is a new core competency
Openness and collaboration are the best ways to grow revenue. CSPs should publish open interfaces that enable third-party developers to incorporate operator capabilities into their own applications. In some cases, this will mean that CSPs are enabling direct competition to their own offerings, but this competition is the cost of the agility and growth that openness enables. One major Asian CSP has an ongoing effort to identify common capabilities across services. Once identified, these services are abstracted and modularized so that they can be reused by both internal developers and external partners.
All but the largest CSPs will need to manage an ecosystem of suppliers and partners to provide the full range of ICT capabilities that the market demands. Selecting and managing these ecosystem players will be a key determinant of efficiency and agility. Ecosystem management must therefore become a core capability of both CSPs and the vendors and consultants that advise them.
Networks must be virtualized, simplified, automated, and smarter
Network function virtualization (NFV) is inevitable, but faces some challenges in the short term. Most notably, testing and deployment of virtualized network functions (VNFs) is running ahead of the standards bodies. ETSI's NFV group estimates that a full set of standards for NFV will be finalized in 2018 and 2019, but many CSPs plan to start using VNFs in 2016. The resulting shortfalls in multivendor interoperability, management and orchestration, and the cost benefits of a common code base will be filled by the open-source software community.
Simplification is crucial to efficient and agile operations. As they transform their systems, CSPs should work towards having only one system for each function. This goal applies especially to hybrid environments of legacy and virtualized elements; network virtualization must not create a new batch of digital silos.
Increasing network capacity holistically and linearly is unsustainable, since network demand in some areas of the network will always outpace CSPs’ financial and technical abilities to bring the entire network up to that threshold. Rather, CSPs and their partners must improve their abilities to target upgrades to the most important customers, services, and locations.
Automation will be increasingly essential to the CSP's business. As the number of services, customer types, KQIs, partners, and infrastructure nodes explodes, the scale and complexity of the ICT environment will grow beyond the ability of human beings to manage it in any sort of cost- or time-efficient manner. One large European incumbent advocated complete network autopilot, saying that it wanted to get out of the business of managing the network entirely.
Analytics are essential to this automated operation, as well as to every other aspect of CSP operations. Analytics are often discussed, with budgets justified, in terms of customer experience improvement. Analytics can also help CSPs monetize their data by helping third parties with targeted offers and enhanced services. However, vendors and CSPs still have a long way to go to bring analytics to the necessary levels of maturity, functionality, and pervasiveness required.
Organization, process, and culture are just as important
A CSP's organization must evolve in parallel with its infrastructure to realize maximum efficiency. Similarly, a customer-focused culture must suffuse the entire organization. The organizational and cultural changes may be the hardest tasks to achieve in CSP transformation. The CEO plays an essential role in driving these changes throughout the organization.
Many CSPs are considering moving to a developer operations (DevOps) paradigm to ensure continuous improvement as well as more agile development and more efficient operations. DevOps should automatically increase automation in management and orchestration.
Global services organizations will have to respond to the expansion of NFV, SDN, and ICT transformation by providing assistance with network design, business cases, product design, organizational transformation, and ecosystem management. They will thus have to increase the proportion of their staff devoted to consulting and planning.
Voice of the customer
In the forum's demonstration area, Huawei posed a series of questions for attendees to vote on. IDC felt that the most notable overall outcome was the fairly even distribution of top challenges and priorities in almost every question. While the forum did indeed showcase a common emerging vision, it is clear that the paths to that goal will be as varied as ever.
When asked what the most important capability to build into operations was, 27% responded that it was some form of customer experience management, followed by cloud service enablement with 18%. The digital opportunities that most interested the CSPs attending were cloud services (23%), partnerships with OTT providers (21%), and applications/content/video (19%). The most important network issues facing delegates were coverage (31%), network evolution (22%) and capacity management (18%). Delegates felt that the biggest barriers to innovation within their organization were slowness in introducing new services (29%), followed by a lack of strategic focus and agreement (23%). The main drivers for network optimization were reducing OPEX (33%), followed by addressing user complaints/churn reduction and service assurance (tied at 26%). There was a broad range of experience with NFV, with 25% still studying the issue, while 22% had one or more virtualized network functions in production, and an additional 19% had trials in progress or planned, with 18% saying that they would not invest in NFV in the short term.
IDC agrees with the priorities laid out at the forum, and is heartened by the constructive attitude that permeated both the presentations and the informal discussions. CSPs are moving beyond mourning for legacy business models and resentment toward OTT providers, and toward a collaborative focus and a conviction that they will play a key role in the coming digital ecosystem. While all recognize the scale of the associated challenges to technology, operations, processes, organization, and business models, there is also a conviction that these hurdles are surmountable with mature and committed leadership as well as healthy collaboration among CSPs, vendors, partners, and customers.
Huawei's Global Services team showed confidence in making the forum less about the mechanics of service relationships and more about how to grow the CSP business. From what we heard at the forum, it seems that Global Services is in alignment with its customers on the tasks ahead.