IT as a Differentiator for MVNx BusinessesWhite Paper

Telecom

Prakash Sadagopan

Prakash Sadagopan is a Principal Consultant specializing in product management and marketing in the Hosted OSS/BSS domain with the telecom practice at TCS. In this role, Prakash is responsible for mapping key market and industry trends with strategic direction for OSS/BSS products and telecommunication clients globally. The last 13 years of his career with solution providers have been focused on business transformation, engineering value and evangelizing solutions in global markets. Prakash has over 20 years of experience in the IT industry, covering multiple vertical markets, including telecommunications, insurance and manufacturing.

Sathya Murthy

Sathya Murthy Srinivasan is part of the product management and marketing team in the Hosted OSS/BSS domain with the telecom practice at TCS. He is responsible for managing go-to-market strategies for OSS/BSS products and providing business solutions to telecommunication operators globally. He has over 14 years of experience in Business Operations and providing business consulting to communication service providers across a variety of geographies.

About the Authors

The global Mobile Virtual Network Operator (MVNO) marketplace has come a long way since its formation in Western Europe. From simple beginnings to infusing competition into the marketplace, MVNO as a business model has become an alternative approach for operators who have traditionally viewed direct retail as the best approach to take. The MVNO business model has led to allied business models like sub-brand operators (MNOs), enablers (MVNEs) and aggregators (MVNAs) resulting in a larger global MVNx market spectrum.

As the MVNx business matures and strives to differentiate itself, do innovation levers go beyond pure play communications? The MVNxs of today need a supportive partner, who can initiate and act as a catalyst in their business interests and long-term well-being.

This white paper tries to identify the hurdles in the path of present and newly emerging MVNx businesses and how IT can be an enabler, differentiator and a revenue generator for their success.

Contents

Introduction 4

The MVNO Market Outlook 5

The MVNx Eco System 5

MVNO Business Opportunities 6

MVNx Business Levers and Strategies 8

Need for IT as an Enabler 9

Can IT help Differentiate? 10

Transformation of IT to Revenue Generator 12

Conclusion: Hosted OSS/BSS Enables Differentiation through Revenue Generation 13

Abbreviation/Acronym

BSS

CAPEX

CSP

e2e

HLR

HOBS

IT

LTE

M2M

MNO

MVNE/A

MVNO

OPEX

OSS

QoS

SIM

SMB

SP

VAS

VHA

List of AbbreviationsExpansion

Business Support Systems

Capital Expenses

Communications Service Provider

End-to-end

Home Location Register

Hosted OSS/BSS

Information Technology

Long Term Evolution

Machine to Machine

Mobile Network Operator

Mobile Virtual Network Enabler/Aggregator

Mobile Virtual Network Operator

Operational Expenses

Operations Support Systems

Quality of Service

Subscriber Identity Module

Small and Medium Business

Service Provider

Value added Services

Vodafone Hutchison Australia

IntroductionThe Mobile Virtual Network (MVNx) market is fast maturing. with ongoing innovation creating opportunities for various sectors and business around areas that have been traditionally viewed as 'unchartered territories' for telecom service providers. While the business model lends itself adequately to developing customer intimacy and providing value offerings, what is often overlooked is that the mortality rate in this business is relatively high.

In most markets in the world, the MVNx concept came about as the result of regulatory intervention. Regulators wanted the mobile network operators to offer wholesale access to their networks to ensure an atmosphere of robust competition, which would in turn be beneficial to the consumer. The MVNx model presented a cost effective and quick route for the operators to enter segments that required a differentiated approach and offerings.

Vagaries of the telecom business and the impact of social media, cloud computing, Big Data and technology developments like Long Term Evolution (LTE) have given birth to new and lucrative opportunities. This has yielded new concepts like Machine to Machine (M2M) technology, and alternative business models like Mobile Virtual Network Enabler/Aggregator (MVNE/A), which are expected to increase the business stakes in the MVNx market place and make it more secure for investors.

With this backdrop, the need for differentiation becomes paramount and all available avenues for innovation have to be examined, especially given the higher chance of failure in the MVNX business.

The MVNO Market OutlookThe global outlook currently suggests that MVNOs are gradually moving away from saturated markets towards markets that afford more opportunities. The developing markets of the world, such as the Asia-Pacific and Latin American regions have the fastest growing economies of the world and offer huge potential. The business is also moving beyond the concept of pure play SIM sale, towards more lucrative options.

While the consumer-oriented MVNOs (largely centered around prepaid/discount offers) have been dominated by new market entrants, the small and medium business enterprise has been a niche and overlooked market. The MVNOs focused on the Small and Medium Business (SMB) segment need to imbibe a different culture as the challenges in offer management, on-boarding and customer experience management are radically different from the traditional retail segment.

Another MVNO market segment that has a future in the SMB and Enterprise market is the M2M MVNO. The services offered through these segments are verticalized based on the industry they serve, namely, telematics, asset tracking, smart metering, eHealth and so on. As much as the M2M MVNO market looks lucrative, the initial setup challenge of establishing the ecosystem needed to provide seamless services (access, the unit, monitoring applications and analytics) still remains. MNOs traditionally have been successful in horizontal play and the M2M landscape might prove to be a challenge for MNOs as it requires a deep domain skill set, which has not been their core strength.

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Given the high mortality rate in this line of business, either due to cessation of trading or acquisition by host MNOs, it is highly imperative that MVNOs find their right play area and survive by outplaying the competition through staying power and innovation.

The MVNx Eco SystemThe MVNx ecosystem is a constantly evolving one as it spreads geographically and technologically. Figure 1 depicts the current representation of the value chain and its associated responsibilities.

Figure 1: MVNx Eco-System

Figure 1 illustrates the flexibility of choices available to an MVNO and its associated business partnerships. The MVNE is in the middle tier where their value proposition is to bring the network access to the MNOs and IT capabilities to the MVNOs.

The 'MNO-owned MVNO' scenario is a simple ecosystem as it is based on leveraging network capacity by reusing most of the existing assets in play across Access, Value Added Services (VAS), Home Location Register (HLR), Operations/Business Support Systems (OSS/BSS), Sales, Marketing and Customer Services.

The MVNE/A aspirants typically tend to share or own the HLR/Core Network Routing while the OSS/BSS applications tend to be provided on a shared services basis to aspiring MVNOs.

Traditionally, the MVNOs do not have too many choices and predominantly ride on the MNO's network. In the current business climate of 'wholesale of wholesales', the option to ride on the infrastructure of the MVNE/As is indeed a lucrative opportunity for the MVNOs. However, as MVNOs graduate to full services play, it becomes critical for them to own the necessary IT and networking elements to provide continued customer experience at optimal costs.

Radio/Access

Spectrum

Network Routing

Content/Application/

VAS

SIM(Activation)

OSS/BSS

Customer Services

Marketing & Branding

Sales & Distribution

MNO

MVNE/A

MVNO

MNO Owned MVNO Owned MVNE/A Owned

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MVNO Business Opportunities Despite a 'perceived' volatility in the business, there has been a significant increase in MVNO adoption globally. Typically, in a quest to become successful in alternative business models and revenue streams, Communication Service Providers (CSPs), investors and other business entities embark on this 'attractive' MVNx business.

The CSPs venture into the MVNx business primarily to target 'niche' segments (outside of their classic retail segmentation realm) and diversify into 'adjacent' services/geographies. Some examples of CSPs embracing MVNO business models include Orange Horizons, Telecom Italia, Vodafone Hutchison Australia (VHA) and COX. It is considered one of the ideal options for a service provider's expansion strategy.

The investor community has a keen eye for emerging business models as they tend to be disruptive and create value for their investment partners in ways or means different from traditional sources. Most MVNOs tend to be in this bracket with some form of seed or recurring funding from groups of investors.

The other business entities are probably best placed to be successful in the MVNx business, due to the huge potential to upsell telecommunication services to a large captive customer base and increase 'loyalty' in the process. Some examples in this category include TESCO, ASDA, Scottish Power, and Powertel.

The MVNx business heralds a new era where interoperability and interdependent functioning are set to be the key drivers to organizational efficiency and effectiveness. The various kinds of MVNOs open up opportunities for the MNOs and MVNE/A to mix and match the market segments they wish to target and hopefully deliver profits through larger economies of scale.

Unlike the MNO business model, since the MVNO touch points go deeper into the customer segmentation, a simplistic Retail, Enterprise, Wholesale segregation would be futile. In this context, understanding the MVNO classifications and the unique characteristics of these individual 'types' make it important for an aspirant to choose the most appropriate business landscape to be successful.

Figure 2: MVNO Classification and Characteristics

Vertical Specialization

Partner

Bandwidth

VAS/Content

Customer Base

Flexible Pricing

Distribution Network

Customer Base

Flexible Offering

Regional Presence

Bundle Offers

QoS

Subscriber Base

Best Wholesale

MVNO

Retail

Business/Roaming

Telecom

Discount

Data/M2M

Media/Content

Ethnic

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Figure 2 provides some of the key characteristics that are typical of the target MVNO category. For example, a Retail business investor deciding to launch a Retail MVNO would definitely use the captive customer base and their distribution network for maximum customer touch-points, and potentially drive 'loyalty' through the retail purchases. On the contrary, for a Telecom MVNO (fixed incumbent with an MVNO), while the captive customer base is indeed attractive, the success potential lies in their ability to offer bundled services.

MVNx Business Levers and StrategiesThe individual MVNO types are pressured with specific issues and needs. However, irrespective of the type of MVNO, a common thread runs across the challenges and success criteria. Any investor seeking to be successful in any of these areas needs to take cognizance of the common items, to ensure a solid business foundation and be tactful in overcoming critical operational challenges.

Category Challenges Success Factors

Market Pressures

Price/Profitability Competition/Market Saturation Time to Launch Innovate vs Imitate

Innovative Product Pricing Right Market Positioning Faster Time to Market

Cost CAPEX/OPEX Cost Avoidance

Cost Optimization Operational Efficiency

Customer Customer Experience Customer Retention

Uniform & Enhanced Customer Experience Know your Customer � Customer 360

Partner Management Wholesale Contracts Right sized Commercials

Embrace Digital Revenue Share driven Commercial Formula

Figure 3: Common MVNO Challenges and Success Criteria

It is often said that a well-managed business is a 'cost managed' business. While this is true, it has been proven that taking costs out of the business without addressing the needs for improving the revenue line, is a clear indication of a business in its early years. The MVNO market is founded on prudent cost management principles, but as a business lever/strategy, a siloed cost-based approach alone will not enable continued success.

The common critical business lever for MVNOs of different classifications, types, and characteristics, is driving innovation through right sizing the market, products and positioning in the most aggressive manner. Beyond innovation, it is highly imperative that MVNOs embrace the highest benchmarks for achieving time to launch targets and marketing great ideas through a 'relevant' branding exercise, using the ideal distribution channel for 'reach'.

Digital MVNOs provide digital communication services (M2M, data and SMB services), and their success depends on strong 'partnerships' in country-specific adaptations, delivered as uniform customer experience while managing the commoditized 'services' business in the most business effective manner.

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Lean and Mean operations are essential strategic ingredients for effective leverage of the most valued assets of an MVNO�cash and time-and thus automation of most business processes is not a luxury anymore.

Finally, in this social world, as enterprises ideate on graduation tactics from using social media as an advertising vehicle to a core business process, MVNOs need to replace 'online first' with 'social first' as the new channel mantra across their e2e customer lifecycle management.

IT as an EnablerThe fundamental question on every MVNO entrepreneur's mind is 'Do I need to invest in IT?', as IT means CAPEX and this scarce commodity needs to be rationed appropriately.

This is not a yes or no question, as the answer lies in some of the lower level business strategies that the MVNO is pursuing to be successful. Figure 4 illustrates the standard expectations from IT as a business support service (green denoting the service and blue denoting the functions supported). It also depicts the potential for IT contribution beyond BSS boundaries that CSPs need to evaluate in their bid to differentiate themselves in the market (pink).

Figure 4: IT Enablement Potential

If an MVNO needs to reduce its time to market for creating products/packages and improve the customer experience largely through a self-management strategy, and requires both to be delivered with least cost outlay � then at least a basic IT enablement strategy is essential for the MVNO.

Real Time & Social Media Analytics ?Analysis & Business IntelligenceReports & Dashboards

New Revenue Models ?Effective Operational Processes

Measure IT � SLA/KPIs?

Cost Optimization

Effective Business Processes

Predict Customer Needs ?Customer Self Management

Self Service

3rd Party Integration Challenges?Improved Customer Experience

Data OwnershipQuicker Partner Onboarding ?

Reduced Time To MarketApplication Integration

Complex Bundles ?Create Product & PackagesProduct Catalogue

Faster Time To Market ?

IT E

nab

les

BU

T W

hat

Ab

ou

t

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The basic IT enablement strategy can be fulfilled by adopting an MNO model, where the MNO provides the IT enablement strategy along with the necessary connects into their network. This approach definitely gets the MVNO off the launch block quickly. The critical element in this approach is for the MVNO to own the innovative offerings and customer experience. It is paramount that any such arrangement be largely OPEX-driven and frees up the CAPEX for market reach, branding and distribution activities.

Most MVNOs with a prudent business model and a suave marketing approach succeed in their business plans. Having achieved a decent market size, they need to identify the next steps in their growth. In such a scenario, a decision made earlier to use an MNO solution might prove to be limiting, as the MVNO is not in any position to dictate IT changes. Hence, business needs relating to offering complex bundled offerings, targeting an alternative segment (like post-paid) and accelerated time to market becomes a business impediment to the growth ambitions.

This is a crossroad that most successful MVNOs come to � a basic IT enablement strategy that delivered for the first phase of growth, fails when the requirement is for greater needs to differentiate, and the solution falls short.

IT as a DifferentiatorAny MVNO in its second or third generation phase needs to diversify, integrate offerings and reach newer growth markets. Such a situation necessitates IT as a part of business strategy and the back-bone of the business focus. The following figure depicts the benefits of IT as a differentiator.

Figure 5: Benefits of IT as Differentiator

Complex Bundles ?

Real Time &Social Media Analytics ?

Faster Time To Market ?

Quicker PartnerOnboarding ?

3rd Party IntegrationChallenges?

Predict Customer Needs ?

Measure IT � SLA/KPIs?

New Revenue Models ?

Product LifecycleManagement

PRLM

SOA/CollaborativeArchitecture

Customer 360 Common Data ModelMobile Enablement

Outcome Based IT Model

Pre-Modeled & Pre-Integrated \ Cloud Based Multi Tenant IT

Actionable &Real Time Analytics

Reduced Product Bundling Complexity & Faster Time To Market

Quicker & Efficient Partner & Products Onboarding & Management

Ease of 3rd Party Integration �Plug n Play

Uniform Customer Experience

Build As You Need, Pay As You Grow

Build As You Need, Pay As You Grow

Better Customer Insights, Mindshare & positioned to be an OTT Player

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MVNOs currently relying on an MNO's IT infrastructure typically have time-to-market burdens due to legacy IT and waitlist pipeline, comprehensive offers turnaround processes, CAPEX/OPEX challenges as well as challenges in remaining relevant to the chosen customer segment.

This scenario warrants MVNOs to view IT as a necessary asset that would deliver sustained competitive advantage. However, the fundamental economic data points surrounding the CAPEX avoidance cannot be compromised. The best way to achieve this is 'by owning IT and yet not owning IT', that is, realizing the benefits without the pains by owning the outcome and not the asset.

The enablement of this need can be achieved either through a shared IT solution from a MVNE or by leveraging a state-of-the-art BSS from a cloud-based solutions provider. This approach enables the MVNO to focus on the core business needs of driving growth and customer experience.

The scope of BSS provider should include a comprehensive product lifecycle management solution combined with next generation partner lifecycle management (the future is all about partnerships) to drive unparalleled uniform customer experience delivered across 'any channel' in the most cost effective manner. The MVNOs need to know their customer well and data delivered by BSS enables actionable analytics that help gain deeper insight of their needs and further provide relevant offers � a key differentiator for MVNOs.

The MVNx reliance on IT to help differentiate will become even more critical in the near future as the marketplace becomes more complex with competition and launch of more MVNOs. However, differentiation cannot be at the cost of sacrificing the fundamentals of an MVNO business - Lean/Mean operations combined with the best of customer experience.

The MVNO journey is incomplete without IT. The quest to achieve 'sustained competitive advantage' can be realized by enabling comprehensive product/partner lifecycle management across different channels for uniform customer experience through real-time actionable analytics.

Transformation of IT to Revenue GeneratorThe MVNx market (specifically MNOs and MVNEs) struggle with IT system challenges to support multi-tenant business, un-optimized operations for multiple business support, increase in system integration cost proportionate to increase in new offerings and geography, along with slow replication of IT stacks for a new geography and longer time to launch a new brand/MVNO in new business models.

These issues have a significant bearing on monetization and it is important to understand the IT characteristics at differing maturity stages. As organizations move up the maturity curve or start at the transitional boundaries, deployment of the right IT characteristics is essential for success. For example, an organization transitioning from an enablement phase to a differentiation phase needs to provide automated processes (in place of process enablement), faster time to market to gain first mover advantage (as against reduced time to market) and innovation driven customer experience, whereas, transition from differentiation to revenue generation requires faster IT stack replication, cloud enablement and multi-geography support.

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Figure 6: IT Maturity Model

IT as a revenue generator is a basic necessity for MNOs and MVNE/As, and for MVNOs graduating to become an MVNE. In each of these scenarios, the firm�s revenue generation potential is a function of its ability to deliver a �multi-MVNO� promise in the most cost effective manner without compromising the customer experience. The success criteria for IT as a revenue generator is the ability to monetize IT assets by offering IT as a product to peers and partners through significant savings on CAPEX, and by reducing risk on entry barrier to the market through a cloud-based �shared services, shared solution� outcome-driven application model.

This revenue generation approach can potentially transform a single vertical centric horizontal organization into a multi vertical organization, especially through the M2M and cloud-based offerings.

Conclusion: Hosted OSS/BSS Enables Differentiation through Revenue GenerationA cloud-based hosted MVNx solution can help MVNOs, MVNE/As and MNOs achieve their business goals by offering a true partnership model, where the partner would manage the IT needs, letting MVNx focus on core needs of managing business growth and customer experience.

The hosted solution needs to be deployed in the �shared solution, shared services� model (MVNE) over the cloud through the Build-as-you-grow and Pay-as-you-use model, helping MVNx transform IT into a competitive edge as well as realize revenue from it.

In summary, this is a unique opportunity to monetize successful differentiators and IT is a strategy that helps achieve this need effectively. It is imperative to note that MNOs have not been able to leverage this across geographies as well as some of the MVNOs/MVNEs have managed to do in the recent past.

For all organizations that are strong on IT strategy, the road from enablement to revenue generation is accelerated, and those languishing in the enablement phase need to re-evaluate the �star� in their own backyard. IT is an enabler, differentiator and revenue generator and MVNxs have a distinct advantage in leveraging it to maximize their key business interests.

Business Enablement Day to Day Transactions Business

Process Enablement

Quicker Replication of IT Stack Multi Tenant

Architecture IT Capacity Management On Demand

Services Multi-Geo Play

Rev

enu

e G

ener

atio

n

Plug N Play Architecture Faster Time to Market Real Time & Social Media Analytics

Enhanced Customer Experience Automated Processes Optimized IT

investments Digital Enablement

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