Subscriber Data Management - Review of Nokia Siemens Networks User Conference
Buying Apertio earlier this year has put Nokia Siemens Networks (NSN) right at the forefront of the Subscriber Data Management (SDM) movement. This is an increasingly interesting topic, since customer data is the bedrock of future two-sided business models. We were asked to provide some Telco 2.0 context to stimulate their User Conference a few weeks ago and facilitate a debate. The event focused on exploiting NSN's OneNDS product, created by Apertio. This is such an important part of NSN's overall market proposition that their CEO came in person to the event.
Telco 2.0 Keynote
For the content of our own opening keynote presentation, click here. With respect to subscriber data, there is one specific take-away worth noting. We don't see the opportunity being the direct exploitation of that data by selling or sharing it. There are common business processes that every consumer-facing organisation undertakes. Telcos can remove friction from these processes, and will be rewarded for the improved process outcomes. The customer data is the raw material, not the good for sale.
As one delegate observed in the interactive feedback, "The companies that make this [two-sided market] work are the next winners". However, there were concerns: How do you get buy in to this concept at the senior management level? How to deal with privacy and data protection issues? How to overcome the risk-averse culture of telcos, and regional fragmentation of industry? [Ed - We'll be digging into these and other go-to-market questions in our research, and during our events, including November 4-5, as well as on this blog.]
Nokia Siemens Networks executive presentations
Simon Beresford-Wylie, CEO of NSN, presented an overview of where the industry was heading from the viewpoint of the captain's deck. His principal concern was that the vendor segment was suffering from malnutrition and starvation, whilst the operators continued to feast on subscriber revenues. Yet operators continue to turn to vendors for their R&D, with low levels of investment themselves. Several (named) vendors are suffering severe distress, but even as one of the leaders of the pack, NSN feels the pain. Whilst cost-cutting continues apace, something will have to give for the ecosystem to come back into balance.
He observed that the cost of energy was an increasing factor in telecoms. NSN has already reduced the power consumption needs of base stations by two thirds. GPON fibre architectures require lots of powered cabinets in the field, which increasingly suggests that point-to-point architectures, more like the traditional telco central office, are worth the incremental cost. Finally, in some emerging markets with low ARPUs, some customers were not even covering the marginal cost of the diesel used to power the network.
Moving away from networks to services, he recalled how Club Nokia had incensed the operators, who felt that the customer was 100% theirs, and they were in a position to control that customer. How times change, and Nokia's Ovi suite, which complements handsets with online services, is a pointer to a world where operators had accepted the need for external innovation and partnership. That innovation can only occur, however, if suppliers and partners are healthy.
In closing, he noted how every telco needs to undertake four key subscriber data management initiatives:
- A single customer identity, to support a converged experience.
- Intelligence and analytics to provide customer insight.
- Policy enforcement, for a managed customer experience across multiple networks and services.
- Profile repository, for a personalised experience.
Paul Magelli, Head of Subscriber Data Management at NSN, gave a comprehensive tour of the state and future of SDM. Internet companies like Yahoo! are recognising that customer data is a strategic business asset, and have recently created new executive positions and organisations to manage it appropriately. In undertaking this journey, there are four stages to pass through:
- Recognising the importance and value of customer data, and aligning process and organisation to this need.
- Unifying the data.
- Profiling behaviour across services to drive internal business processes.
- External exposure of subscriber data to drive business processes along value chains.
The greatest value comes from being able to integrate static, dynamic, operational and transactional data. NSN's OneNDS product is aimed at performing this for real-time applications. There are many ways in which this data can then be used, but as an example, users should be able to redeem a discount voucher for any one of a number of services across multiple network types (WiFi, 3G, DSL, etc.). This type of rating or policy decision ("is this payment type valid for this service?") is something that is impossible in most of today's business systems.
Google created a $100bn company from one single piece of user data, he said. Telcos have much richer information which is there to be exploited...
We used our 'Mindshare' interactive technology to get feedback from participants based on what they had heard from the presenters. In the first question we asked them to judge how today's telecoms business model will fare:
Today's telco business model is primarily based on a 'one-sided' market focused on selling voice, video and data directly to retail users. If this model continues, what will happen to industry (fixed and mobile operator) revenues 5 years from now, in the mature markets of W. Europe and North America?
The result is a clear belief in a gradual decline. This poses a challenge to operators, who have been used to growth. It requires new priorities, leadership and business models.
Future of telcos is not rosy with current business model.
In our second question we asked delegates to judge how credible our Telco 2.0 two-sided market models are.
Support for telcos becoming more general-purpose retailers was strong:
Importance of enhanced retail platform: selling many more third party products to the telco base, as well as enabling third parties to sell core telco products
Meanwhile, belief in growth through new wholesale products was more muted:
Importance of new wholesale distribution platform: allowing third parties to package voice, video and data delivery in with their own digital goods and services
One respondent commented:
I don't think we need a fundamentally new wholesale platform ("network"). It can already largely do what's required. The critical steps will be in developing the capability to package that and approach the (vendor) side of the market with an "it just works"/technology agnostic proposition. Underpinning this, a new mindset: Let the market build it, or even, let the customers build their own services, not us.
Increasingly, the innovation will be externalised. Operators facilitating this in the most attractive way (cost effective, speed of integration, etc.) will drive the standards and therefore dominate.
This follows what we see the role of the wholesale platform being: an enabler for others to build digital goods and services with "postage and packing included", and without having to negotiate the bizdev maze of dozens of telcos to get there.
Strongest of all, however, was the need to use subscriber data to take friction out of everyday B2C interactions and business processes:
Importance of new B2B2C Value Added Services platform: facilitating common business processes between consumers and merchants/government
Respondents noted how operators are in the best position to act as a broker to access the customer, be it in terms of confidence, direct business relationship, or customer knowledge.
We then asked how do telcos today compare with other service industries (supermarkets, airlines, banks, utilities) in terms of their effectiveness at increase revenues by exploiting subscriber data.
Telcos still have much to learn from other industries in extracting value from customer data
Finally, we asked attendees to rank the following in terms of the commercial opportunity they offer telcos from exploiting their subscriber data:
- Segmenting and promoting telco products to the telco customer base
- Promoting 3rd party products and services to the telco customer base
- Personalisation of advertising
- Helping enterprises (big and small) improve the efficiency of their everyday business processes and interactions with the public. ("Everyday business processes" include authentication, market research, content delivery, order fulfillment, payments, customer care.)
The results are below; the shorter the bar, the higher the rank. The top priority is selling what's already on the truck.
Graham Baxter, CTO, 3UK
Graham Baxter, CTO, Hutchison 3G UK
Graham gave an overview of where UK operator 3 was heading in its business. He was clear that 3 sees internet-based players as an opportunity, not a threat. The job of the telco is to deliver the best Internet and communications experience to its users, at a price they can afford. That means getting the network, provisioning, handsets, service, and support to all "just work".
Telcos in particular need to focus on daily communications needs, not infrequent media sales. Just from the top search terms on 3's portal, it is clear what the end users want. Hence the Skypephone as a response to that demand.
The alliance with Skype hints at deeper forces at work. Termination fees act to keep new entrants like 3 at bay, since they have to pay (and pay heavily) for the net imbalance between inbound and outbound calls. This outflow of cash exists because new entrants typically have to offer more minutes at a lower price, which stimulates more outbound calls. Skype is a means of having "termination-free" communications. Graham indicated that 3 are keen to see regulators take another look at rules that were more about balancing the interests of a small group of oligopolists than creating genuine competition and innovation.
Graham also expounded the significant benefits of a single real-time view of the customer. For example, you could enact spending limits for roaming customers, and detect fraud (or high usage) immediately, allowing you to alert the customer and manage their overall experience.
A few things struck us from attending the breakout sessions:
- Traditional vendor models of selling cheap and then getting the money from overpriced change requests won't wash any more. Operators want open systems -- like OneNDS -- that let them use standard protocols to get at their own business data.
- The hot action is in emerging markets, where Darwinian forces are intense. Arakin Rakchittapoke of Thai operator AIS gave an impressive overview of the forces on his business and their architectural response. At peak times, they are processing 200,000 transactions per second against their OneNDS subscriber repository.
- The complexity of managing subscriber data is increasing. In the past, all applications were internal. Now, many applications are external to the operator. However, there are privacy issues that may prevent the release of identifiers such as the customer's telephone number or handset ID, so you need to substitute some kind of anonymous synthetic identifier when passing data externally. Keeping track of all this is what OneNDS is for.
How the OneNDS technology works
What's the secret sauce of OneNDS? It's an in-memory database tailored to consistently quick lookups of data needed in real-time processes, such as call processing. Unlike relational databases such as Oracle, it's not designed to support complex queries. The business justification is to consolidate your data in one place, lowering costs of management and inconsistencies, and eliminating licensing costs for multiple databases.
NSN provide a reference data model that each operator can customise. There are 30-40 applications that are pre-integrated via the standard LDAP API. This means it doesn't require vendor intervention to get at the data, unlike with many HLRs, for example.
Corporate events always come with their share of fine dinners, entertainment and gifts. Whilst the Nokia Siemens Networks branded power adapter will no doubt come in handy, this event has a special place in the heart. Your correspondent's souvenir comes from his five year old daughter, and is a re-interpretation of the NSN corporate swoosh on the back of an NSN business card, re-drawn on the back of one of a blank business card.
Rothko eat your heart out!
[Ed - Paul Magelli from NSN will be among the stimulus presenters at the Telco 2.0 event in November].