Getting the Stats Right
Keeping in mind that data is money, telcos need to use advanced analytical tools for more progressive business approaches
“The sexy job in the next 10 years will be that of the statisticians,”
Hal Varian, chief economist, Google
Telecom operators worldwide, including wireline, wireless, internet, and cable operators are flooded with volumes of data everyday and the mounds of data are slowly becoming more precious resources for organizations than their manpower. They have started investing hugely in advanced technology solutions like business analytics and business intelligence to analyze these data to optimize their resources and derive more progressive approaches in offering newer solutions. The need arises from the fact that fierce competition has forced operators to reduce their service tariffs resulting in decreasing ARPUS. Adding to the woe is the entry of greenfield operators who are in a better position to offer more lucrative offers to consumers as they are not burdened with huge investments on legacy and outdated infrastructures. This results in subscriber churn. Moreover, paradigms like MNP are a classic example of how the industry is slowly and gradually becoming customercentric. It is no surprise that the telecom
players are doing their best to cut down the churn with more value provided to customers and same old mantra of survival of the fittest. Besides these issues, the age old problem with the industry is the revenue leakage that occurs at various network points—especially at the inter-carrier exchange points. A recent study by Frost & Sullivan’s analysts and Stratecast, a consulting group, estimates that plugging inter-carrier leakage can result in approximately 3-5% savings for an operator—equating to several millions of dollars annually.
All this calls for a disruptive approach using advanced business analytical tools and more futuristic intelligence.
Why BA?
The Indian telecom industry is divided unevenly when it comes to the subscriber graph of urban versus rural divide. This huge divide calls for a difference in the behavior and usage patterns of both these segments. While in rural markets, the key factor is enabling basic connectivity; in urban markets it is the drive to have infotainment and convenience by a more tech-savvy population, resulting in more usage of value added services. Such services include traditional VAS and data heavy services. All this is forcing the operators to better understand the needs of their higher value customer segments for retention and increased loyalty.
Kapil Sood,vice President, Systems Business, Oracle India says, “Understanding customer issues is critical for these companies in the age of mobile number portability towards customer retention. With the help of insights derived from these data, telecom players can make timely changes to their marketing, pricing, product planning, and customer service to address customer requirements in an efficient manner. Another key trend in BI today is the growth in packaged analytic applications that provide pre-built business metrics, dashboards and reports, and integrations based on industry’s best practices.”
Meanwhile, Prashant Tewari, country manager, business analytic, SWG, IBM ISA explains, “Data-driven decision-making based on accurate, timely, and relevant reports allow telecommunication service providers in India to manage customer satisfaction and business performance more effectively.” “Business analytic software directly impacts a service provider’s ability to drive informed decisions based on real-world information, instead of settling for a subjective decision-making process based on anecdotal information,” he adds.
Echoing similar thoughts, Shyamal Mittra, head, OSS/BSS, Ericsson India explains, “Over the last few years, the telecom analytics industry has moved from pure play reporting to advanced data mining. Today, the operators are working more and more with data mining and simulation platforms in the areas of churn prediction, campaign simulation, tariff optimization, and others. Hence the focus of the analytic industry is now shifting from non-real-time to real-time. And this will become even more important, especially with the introduction of 3G/4G when data becomes as important as voice.”
Operating in a more competitive arena than ever, telecommunication service providers are striving to even sustain or cut out minimum profitability under multiple adverse conditions. Looking at the industry’s downturn, the service providers have been extremely vigilant about all spendings. In this highly volatile markets like India where multiple operators are competing with each other, this requirement becomes much more important as the adage ‘whoever controls the future will stay in business’ or in other words, we can say the market is really for survival of the fittest and omission of the weaker links. And today,
we all know this happens not in weeks or months, but in hours! This is a real-time world where today’s predictions might become obsolete tomorrow or no longer remains a USP for one player. In this scenario, understanding the pulse of the customer and predicting the behaviour well in advance can be the only savior for the companies to be on the right track. Telcos have 80:20 distributions when it comes to its subscriber base and revenue. As the larger chunk of revenue comes from a small percentage of subscriber base, any shift in that group will result in a drastic fall in revenue. On the other hand, when the customers are not properly handled, it may lead to drain on revenue. Hence telcos need a unified decision support system, which can provide the analytics at different levels as per the need and keep the customer hooked to themselves and prevent them from moving to the competitors.
Whether business analytics resides in the IT or business organization, companies will need to modify their business models to reflect the contributions and needs of an analytic organization. Companies need to decide whether they will bring analytic talent by acquisitions, hiring, or by outsourcing. Social media has become an even more important key data source, which can be used to reduce the time that it takes to predict trends affecting companies and their competitors. The companies that successfully leverage analytics in social media to detect future trends and make changes to their strategy, will differentiate in the marketplace by using ‘swift insights’ to quickly adapt to changing market conditions.
The next-generation technologies and tools allow easy integration of disparate data sources and require minimal IT design and development efforts. They eliminate the traditional storage and performance limitations regarding quantity of data, number of end users, and methods of analysis. Many of these solutions are also being offered as hosted or Software as a Service (Saas) solutions, which allow organizations to quickly pilot and adopt new solutions to complement existing systems at minimal cost and commitment. Any organization should evaluate some of the new solutions entering the market and assess their usefulness. Most organizations will find that these new offerings produce immediate value and a fast ROI, which is particularly attractive in the current economic climate where organizations need to ‘do more with less’ and exploit the data and systems already in place.
Current Picture
Business analytics software today is helping service providers transform their business by enabling new business models and service innovation, improving operational efficiencies while reducing costs and differentiating the customer experience. Network operators are benefiting from the expertise, global delivery capabilities, and comprehensive and proven end-to-end solutions. There are also new and innovative delivery models for providing cheaper, faster, and more nimble delivery models to suit customer timeliness and budgets.
Telecom industry is unique with respect to the amount of data available for analysis. All telecom operators have leveraged analytics for business growth. Management information systems for the purpose of analysis have become more advanced with leading Indian and Global IT majors investing heavily into providing solutions to support the information requirements of telcos. According to Ovum, over half of the global telecom enterprises are allocating money to spend on big data IT investments over the next 2 to 5 years, and a third of all global companies will begin spending on big data technologies over the next year.
Hence the projected growth in the telecom industry generates huge amount of data for every transaction that hap-
pens with a subscriber as well as data generated through other processes of the telcos. But data may not be directly proportional to the revenue generation. More data does not necessarily mean more intelligence or better decisions. More efficient way of processing of large data and deriving effective information/ knowledge for decision making is the ultimate function of any BI/BA effort in a telco. In the last 3-4 years, a number of niche small and medium sized operators together with the IT majors have begun providing a range of solutions with respect to advanced analytics, especially predictive analytics.
The operators are offering to increase usage/revenue from existing subscribers, manage churn by identifying subscribers most likely to churn, and improve campaign performance. Niche operators have made MIS more user friendly, helped customer contact centers plan operations better, assist in assuring revenue, manage sales channel better, and optimize network operations besides saving costs across the company.
Neeraj Arora, director and lead, IBSG India and Saarc service provider, Cisco Systems says, “SPS are looking for new ways to effectively monetize their investments in disparate network platforms, deliver innovative and revenue generating VAS offerings, enhance customer experience while efficiently managing network traffic and costs. To be able to achieve this, SPS need a fine grained view of information and leading key performance indicators that impact business decisions.”
“We, at Cisco, believe that SPS are at strategic cross-roads when it comes to information analytics and have the potential to transform themselves from network service providers to ‘information providers’ by leveraging the power of ‘big data’ analytics,” he adds.
Agreeing to Arora, N Veeraraghavan, senior vice president and global head, enterprise information management and analytics, Cognizant says, “Newer technologies and resulting products/services like smartphones, video based services, and internet connectivity have increased the data volume that a telecom firm deals with. The need of the hour is to process the big data efficiently to derive the understanding about customer usage and preferences and use these insights for optimizing the decision-making process. Cognizant’s analytics practice helps telecoms obtain a holistic view of their data and provide firms with insights to tackle questions of customer needs, retention, and loyalty.”
This is considering the vast amount of data that they have access to—be it traffic and usage, location awareness, session state, VAS, access technology, devices and mobility, etc. This unprecedented growth in data traffic has been caused by the advent of smartphones, mobile broadband, peer-to-peer traffic, video based services, and machine to machine communications or ‘internet of things’. However the traffic that we are witnessing today is just the tip of the iceberg. According to a Cisco IBSG visual networking index study, the industry is in the midst of an exponential increase in the amount of data that service providers have access to.
Romal Shetty, head, telecom practice, KPMG India, “Almost all telcos in India have already deployed or have plans to deploy some sort of comprehensive tool to support in business intelligence and advanced analytics. Further, almost all telcos are building processes to ensure greater customer-centricity in building products and in service delivery. The Indian operators could soon lead the way in the use of advanced data analytics given the obvious returns on investments as their global counterparts.”
The Market Size
Gartner predicts that the Indian market for business analytics is worth $65 mn (new license revenue), with a strong growth rate of 15.7%. Incidentally, the global market for BA is pegged at $10.8 bn and when compared to that figure, the Indian market seems smaller. The market is estimated to be about $40-50 mn for BA/BI/DW platform/products and about $100-150 mn for services. It’s expected to go up significantly as the competition grows stronger and analytics starts playing a crucial role. IDC, too pegs the Indian BI market at around approximately R 1,200 crore for IT 2012-13.
The BA industry is still nascent but is expected to grow in leaps and bounds. There is an increasing focus on generating the ‘insight’ from data. Further, the market conditions are forcing marketing teams to derive maximum value per rupee spent.
Business intelligence tools are evolving to provide a cost-effective solution for providing a greater insight in a user
friendly manner. Open source tools and cloud based computing solutions are set to challenge incumbent tools that are perceived expensive at this moment. Further, tools are becoming more advanced to manage large data sets.
Telcos are also looking at multiple vendors to support them based on their individual expertise. For instance, vendors for analyzing subscriber links and clusters may be different from vendors providing campaign analytics. These may be different from vendors providing real-time analytics who could be different from the marketing mix and pricing service providers.
Over the next 3-5 years, the function is expected to evolve into a specialized function with unique skill sets and investment models just like the revenue assurance function has evolved over the last few years.
Challenges
While most of the Indian service providers have invested in analytics capabilities, several challenges still exist in getting full business value. Although the analytical capabilities have advanced significantly in the telecom industry, most operators face challenges in acting on the insight obtained from the analysis. The challenges faced are in terms of both the time between analysis and action as well as the time to execute the action due to intervention of manual processes across multiple systems. Some of these challenges include fragmented/siloed analytics capabilities—network side analytics that is based on deep packet inspection and network analysis of traffic/ streaming data from network elements like routers/switches, cell towers, media gateways versus customer side analytics that is based on customer demographic/ psychographic data from various systems like CRM, billing, etc.
Moreover, launching the new products and services will enable SPS to meet customer expectations, ensuring that they remain satisfied which is possible only if the operational process metrics are aligned to the customer experience drivers . This is an area where most SPS are facing challenges. The fact that most SPS have retained their legacy systems and process frameworks for the fulfillment, assurance, and billing of newer products and services have not helped their cause either. Operational inefficiencies are resulting in revenue and cost leakages as well. Challenges have been disparate data sources, lack of quality demographic data, expensive tools, and absence of specialized skill-sets. The need for extensive involvement of the IT function in configuring and integrating applications with other transactional systems limits interest from business users and network departments.
Inability to balance strategic and tactical approaches to analytics applications. For example, metrics at a department level (billing, CRM, and network, for example) that fail to roll up at the aggregate corporate level can limit the benefit of analytics applications.
Data management strategy that fails to address the demands of real-time applications (for events triggered or contextual data) or of applications that do not use the underlying information management infrastructure.
Vendor hype about the benefits of analytics applications as a complement to core OSS/BSS solutions. This often leads to tactical purchases by SPS and a stovepiped application system.
Fostering the Future
The BI will see an increased role in the telecommunication and this is the consequence of the competitive landscape and business user focused BI. While the product and services differentiation are becoming blurred, companies need to differentiate themselves from the rest through more effective use of the transactional data created.
This will give telcos the much needed competitive edge by helping them to cut down operational costs, reduce revenue leakages, understand consumer behavior, and offer better products and services. Hence BI & analytics are becoming increasingly vital today for a telco’s sustainable growth in a dynamic environment. Thus, the demand for business analytics solutions is expected to increase as the awareness of the benefits of the technology and related business practices to improve decision making and analytic processes is expected to spread its wings wider.