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CSPs Caught in Complexity Death Spiral

Communication service providers (CSPs) are failing to handle new subscriber complexity, and they'll be the first to admit it. But one vendor says their inability to manage this complexity could spiral out of control and erode profits in the next two to five years.

"The future state could be very dire for [CSPs] as nothing more than dumb-pipe connectivity," warns Mike Manzo, CMO of Openet Telecom Ltd. "And it's not that far in the future."

The Service Provider Information Technology (SPIT) specialist teamed up with the CMO Council , a group of 5,500 C-level execs, to survey 212 senior professionals and conduct in-depth interviews with wireless operator executives, who essentially admitted they didn’t have a clue when it comes to the data-driven customer experience.

Eighty-three percent of the respondents said they need to gain a better understanding of the network resource and support challenges they face as devices and new services proliferate.

That's because the operators are focusing on traditional infrastructure and operational requirements when they should be focusing on the customer experience, says CMO Council Senior Vice President Derek Kober.

"They are working on a commodity, utility basis where they aren’t in sync with the reality of an on-demand, segmented user base," Kober says. "Support for new devices and pricing are their main priorities, whereas we feel they need to look much more at granular customer experience issues as opposed to tactical support issues."

Nearly half of the CSPs surveyed said if this complexity around bandwidth needs, new devices and pricing is left unmanaged, it could spiral out of control, making the optimization of the customer experience unattainable. And, as a February report from Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) also suggests, it will lead to dwindling profits for CSPs that can't adapt. (See Mobile Data's Doomsday Scenario.)

The importance of SPIT
Openet admits it has a big dog in this fight with its policy management software suite. But it's also a message Light Reading has been highlighting with its focus on the increasing importance of Service Provider Information Technology (SPIT) and the trend towards Bridging the Chasm. (See Openet Upgrades Policy Management Suite, Waking Up to the Power of SPIT and The SPIT Manifesto.)

Of Openet's respondents, 72 percent said there was poor alignment between marketing, sales and IT. And, while some have merged their CIO and CTO roles at the top level, Manzo says the rest of the organizations remain in silos with policy and charging managed by two separate divisions.

As a result of this approach, 81 percent indicated they struggle to launch and provision new services quickly and cost effectively, causing them to lose out to more agile companies such as Apple Inc. (Nasdaq: AAPL) and Google (Nasdaq: GOOG).

"Everyone agrees with this stuff, but you go to try to drive change within an operator, 50 people can say 'no' to anything and no one can say 'yes,'" Manzo says. "Change doesn't happen rapidly, and nothing proceeds quickly."

So what should these CSPs be doing to move forward? Manzo and Kober suggest seeking new sources of revenue by partnering with over-the-top companies instead of ignoring or competing against them. In terms of pricing, they can also explore segmented offers and promotions, improve their subscriber management and tracking capabilities and offer more personalized user experiences. (See Verizon: Turn Tiers to Smiles.)

Manzo also recommends smarter service tiers, addressable advertising, loyalty campaigns, parental controls, congestion management and fair usage policies. But, mainly, he advocates doing something before it's too late.

"The issue to me is partly lack of innovative ideas, but that's not the biggest issue," Manzo says. "The biggest one is inability to act or move quickly. It's a cultural shift that needs to take place to contend with the legacy infrastructure."

— Sarah Reedy, Senior Reporter, Light Reading Mobile

DCITDave 12/5/2012 | 4:59:45 PM
re: CSPs Caught in Complexity Death Spiral

So specifically which CSPs do we see dying as a result of haphazard subscriber data management in the next couple of years? It's always easy to say profits will erode, but whose profits and how badly? That's the more entertaining stuff we should be discussing here.

paolo.franzoi 12/5/2012 | 4:59:44 PM
re: CSPs Caught in Complexity Death Spiral

I guess my view is completely backwards from this.  I agree with SPIT but think the idea that there is a tool or a process to overcome complexity is simply wrongheaded.  What I would suggest instead is simplifyiing the business.  To think you can create some tool to make life beautiful when the underlying infrastructure is complex means that people are willing to lie to themselves.


The question is are there products/services that are offered that are not worth the cost of running or maintaining (most Service Providers have those).  Is there some way to dump them either through Sale or Replacement? 


In terms of whom fails first, it is pretty simple.  It is the companies that do not recognize and deal with their strategic situation effectively.  In the standard telco space, the issue is Opex Reduction and Network Simplification.  By adding more things, nothing gets simpler.  The question is:  "How many network elements AND how many SPIT tools AND how many processes AND how many people can be eliminated by doing a simplification?"  This is the basic issue of adding products to lower Opex.  Adding things does not reduce Opex - Eliminating things reduces Opex.  For large networks, until there is 100% elimination there is normally additional cost during the transition.


seven

Iluzun 12/5/2012 | 4:59:43 PM
re: CSPs Caught in Complexity Death Spiral

http://www.mrv.com/library/doc...


Aren't additional SPIT srvcs. r being integrated into edge/demarcation devices?  I'm pretty


sure this eliminates boxes & complexity.  Utilization of 'soft silicon/fpga' can help


assimilate/converge various functions into intelligent edge devices.  Additionally, 


with deployment of 100G/won't nextgen OTN be utilized within a GMPLS context?


Utilizing 'open' demarc/edge/access/aggregation service platforms would seem to provide 


a mechanism for integrating the various functions & services, no?  


 

DCITDave 12/5/2012 | 4:59:43 PM
re: CSPs Caught in Complexity Death Spiral

I think a wise use of service provider IT tech will help service providers simplify their networks. One way would be to create a self-service portal for customers. That sort of thing can cut down on calls, allow them to make changes to their accounts and even be used to suggest new services. It would add more complexity at first, but the benefits seem straightforward.


The other thing that could help SPs a lot is getting all the info they have on customers in one place. AT&T thinks I'm 10 different people. Amazon knows I'm one guy and presents me with a comprehensive view of every service I've used, everything I done, etc. Weird that the guys who own the network are so terrible at this.

paolo.franzoi 12/5/2012 | 4:59:43 PM
re: CSPs Caught in Complexity Death Spiral

Phil,


You are saying some things that are not what I think you mean... or maybe we are talking past one another.


By simplifying their networks, I mean something like - Eliminate all the ATM switches remaining in the network.  This might mean re-engineering services or actually eliminating services and causing customers to migrate to different services. SPIT can not do that.  But that is one of the basic causes of SP complexity.  Too many legacy pieces that do not go away for a long time.  That was the point of something like FiOS.  Retire all the old OSP equipment to allow for a more efficient new structure (and in parallel the sell off of the non-FiOS properties).  That plan is not yet done, but even to deliver a basic POTS line one would install an ONT.  Whether this is a good choice is a separate issue.


The second (and separate) thing you are talking about is a self-service portal with a single sign on technology.  Now that is something that SPIT can address but not with a given tool.  The underlying organizational issue (AT&T is actually many separate companies internally) prevents the idea of single sign-on.  A second problem is that the disparate web technologies have led to a multiplicity of places to go and how to get there.  AT&T is not the only company with that problem....even an SP as small as I am has this.  We have our self-service portal, our partner portal, our salesforce.com stuff for service, all of which generated from different sources and have different toolchains, etc.  They all have their own customer databases as well.  There are ways out of this that take time (for example a common LDAP to pull customer info out of) and the use of Portlets/Widgets to get you to the disparate web technologies (think iGoogle).


The other groups that need this are internal to the SP - service, sales, network operations, etc.  I can tell you it is a huge time waste and cost when this stuff is all spread out.  But you have to architect it to work (and that gets complicated with acquisitions for example) and it has to be extensible to 3rd party tools/platforms.  No single piece of software can do it all and it bothers the heck out of me that people pitch their stuff that way.


The last thing I would like to add on to this topic is that SPIT can be used as a lens to focus on the complexity (Example:  How many steps and how many systems are involved in moving a customer from standard DSL to U-verse?)  But the big issue is that the lack of organizational coordination is the bigger issue.  Amazon has been an IT company from the start with a singular architecture in this regard.  AT&T not so much.


 


seven


 

DCITDave 12/5/2012 | 4:59:42 PM
re: CSPs Caught in Complexity Death Spiral

I think we were talking past one another because I do totally agree with you on network simplification. SPs should want their networks to have fewer legacy switches, fewer buildings running POTS equipment (and the leases, cooling and real estate that eats up) and, in general, just they should work to have fewer "things" to manage.


I also agree with your thought on services. Some just need to go and customers need to be moved to something that's easier and cheaper to manage.


That is really why I think our discussions on Bridging the Chasm (what we call all the organizational/people issues) and SPIT go hand in hand. You have to fix one before you realize the value of the other, in many instances.


Bigger point, I think the "death spiral" hand was overplayed in this article. We need to be smarter about how we characterize service provider problems.

Duh! 12/5/2012 | 4:59:40 PM
re: CSPs Caught in Complexity Death Spiral

"Bigger point, I think the "death spiral" hand was overplayed in this article. We need to be smarter about how we characterize service provider problems"


 


Ding! Ding!  We have a winner!



Overly dramatizing stories does not win credibility points.  While maintaining IT in alignment with the needs of core operations, and improving efficiency of core operations through IT are certainly important to service providers - as they are to any large scale business - I suspect that it's a bit of a stretch to claim there's an impending crisis.

rjmachin 12/5/2012 | 4:59:30 PM
re: CSPs Caught in Complexity Death Spiral

I agree that this sounds the alarms rather over-dramatically. There are more sophisticated and nuanced futures for telco than either 'dumb pipe' (which in any case, depending on how you define it, could be a profitable play for some carriers) or providers of-massive-and-massively-complex-service-and-handset-portfolios.


The piece also suggests that CSPs are complacent ("That's because the operators are focusing on traditional infrastructure and operational requirements when they should be focusing on the customer experience"). The impression I've formed over the last couple of years is that most CSPs are all too aware of how complex and challenging life is at the customer-facing end and are focusing a huge amount of effort on improving the customer experience. It may not be bearing that much fruit yet, but neither is it being dismissed.


stevecrawf 12/5/2012 | 4:59:26 PM
re: CSPs Caught in Complexity Death Spiral

A suggestion was made in this article that telcos should seek relationships with 'over the top' providers.  I'm not convinced this solves the dilemena of how telcos get out of the model of being 'dumb pipe' providers and increasing their knowledge of how their users are actually using their 'pipes.'


Gartner and others have been advocating a Cloud Services Brokerage model where, related to telcos, it allows them to be a single point of purchase, provisioning, SSO, billing, administration and support for a wide variety of cloud services.  Doing this is a way for telcos to get better usage data on what their customers are using broadband/mobile services for, drives retention and profitability, and extends their brand.


 

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