The Role of Customer Experience in Telco Transformation

1. The Role of Customer Experience in Telco Transformation Clare McCarthy, Evan Kirchheimer evan.kirchheimer@ovum.com; clare.mccarthy@ovum.com September 2012

2. Agenda • Drivers for innovation and transformation • Telco investments to improve the customer experience • The telco as an enterprise, and as a service provider

3. Changemanagement Basicservices Intelligent network Port/bandwidthconnectivity Projectmanagement IP expert Hosting IP telephony Mobile remote access/CRM/Equip sales (Cisco) Conferencing Applications centric networking Enterprise apps managementFixed voice/GPRS/LAN VPN/LAN IPT/LAN-based VPNPSTN/SOS calls Maintenance (Co-branded)/Mobile/VoIP (vendor) MPLS VPN Informationservices Professional services IPservices Datamanagement User portals NPM tools Market drivers: Enterprise telco revenues migrate to professional and value add services

4. Competition from telco peers: The shift to enterprise ICT services has competitive implications Snapshot from Ovum’s Telco-led ICT Services Deals Database

5. Mapping SI competitive positioning = successful execution = strategic importance

6. Pressure from the customer - CIOs Source: Ovum survey, Business and investment trends for IT, June 2011. What are you business priorities for the next 12 months

7. Pressure from the customer – consumerization drives enterprise expectations The consumer as a smart, connected customer of personalized services, social engagement and dynamic context. The media is the application, the CMO is a data miner, and the CIO acts as marketing technologist • The consumer as a connected participant in a process, whose context & behaviour can be influenced & derived by a combination of location intelligence, transactional footprint, and network of sensors. • The employee brings consumer technology into the workplace as a preferred tool, opting for enterprises with BYOD policies, mobile apps and data strategies – but protected with effective security & governance

8. Commoditization of core services • Telcos cannot justify premium charges for core service. Consumer and enterprise customer expect more features and value-add for the same price regardless of the rise in cost to service • Our tracking of telcos contracts shows they are bundling more in to the deals with their suppliers. • Telcos are turning to their suppliers for greater support.

9. On the one hand - bundling Telefonica's VoIP service provider, Jajah, has announced plans to include voice calling to Microsoft Lync Online, a cloud-based next-generation communications and collaboration service. Telefonica will market the joint Microsoft-Jajah service to its business customers globally. The service will be available later this year through Microsoft and Telefonica sales networks. Deutsche Telekom has launched DeutschlandLAN, a service, based on the Ericsson Business Communication Suite and combining fixed and mobile telephony, a 10Mbps SDSL connection, VoIP, hosted PBX and a hosted Exchange service, with support for up to 20 simultaneous calls and eight IP addresses. Fastweb has announced new business offerings for SMEs. It has launched a managed HD video service, VideoPartecipa, in collaboration with Cisco and a unified communication service, ComunicaCon. It has also announced a small business fixed telephony and internet service, which includes hosting, two voice lines, all fixed-line national calls, unlimited internet and up to 100 MB of web space at no extra cost. In a promotional offer, Fastweb is offering this at a starting price of €50 per month with an additional voice line free indefinitely. Fastweb has launched an initiative that provides a bonus of up to €3,000 for companies that decide to replace their old PBX with IP-based technology. UPC has given more details of its service bundle aimed at SMEs which integrates Internet telephony with Microsoft's Office 365, giving customers access to online versions of Exchange, SharePoint, Office Programs and Lync. The option of access to Office 365 services will be added to UPC's existing broadband and voice bundles and the portfolio will also include managed voice services in the form of a hosted PBX. The new service bundle will be available first in five of the ten European countries where UPC operates. The service is already available in Ireland, Switzerland and Austria, and is expected to be made available in Poland and the Netherlands by early 2012. Telefonica's mobile arm Movistar has unveiled a series of offerings in unified communications specifically for SMEs. Announced in a road show called "Entre Professionales", they include a one-number PBX extension service for mobile phones called Puesto de Voz en Red Total (PVR Total), GPS tracking of company mobiles for organizations with field forces or sales forces that need managing, a videoconferencing service called Spontania and Oonair, a mobile app that turns a phone into a video camera to transmit moving images to a network (also called Oonair) where all the other users on the network can see the footage. O2 has launched a service called IP-Voice-Plus combining an SHSDL connection, flat rate domestic voice and data and mobile telephony in a single package for businesses. Prices start at €129.00 per month, or €139.00 with flat rate data, or €154.00 with flat rate mobile.

10. On the other – cutting prices BT Business has announced the launch of a new finance scheme, Kick Start, that allows start-ups to get up to £15,000 worth of technology on lease. The main aim of this scheme is to help small businesses raise funds in a challenging economic climate and avoid over-dependency on banks. The scheme is open to businesses under three years old. CosmOTE has introduced a program for business customers which includes unlimited intra-company calling, fixed monthly fees and low-cost domestic call rates. With Greece headed into economic misery thanks to the government's austerity plans, it is clearly a good moment to offer special programs to keep business customers loyal. Telefonica will take part in a €100m program of joint public and private funding for start-ups in the ICT segment, It is part of public-private initiative, under which the government plans to allocate €300 million towards development of businesses across a variety of industry sectors. This program is not only good PR for Telefonica, but also should enable it to cherry-pick future acquisition targets in ICT, as well as helping to shape the things start-ups are developing to make them relevant for its cloud offerings, O2 has announced a workspace in the O2 retail store in Central London for local entrepreneurs and small businesses. This workplace provides the businesses that have relinquished their own office space due to the economic crisis, with open workstations, meeting rooms, free Wi-Fi access and even technical advice services. The new workplace can cater for up to 75 visitors and has open workstations for up to 10 people. This looks like a good marketing idea from O2. Telefonica has announced a scheme whereby SMEs and the self-employed can start a business, acquiring all their IT requirements with a 40% payment up front, paying another 10% of the cost over the next 18 months, then the other 50% in the 19th month, provided they contract all their communications services with the carrier. With Spain in a difficult economic situation, this move by Telefonica is a good way of stimulating new business Virgin has announced a connectivity trail with THECUBE. Virgin will provide a dedicated 1Gbps internet access, which will be available to start-ups to use on flexible commercial terms. It will be free of charge for one year. During this time, the incubator will explore a range of commercial models and packages. This looks like a smart move. On the one hand Virgin gets good PR from supporting UK small start-up high tech businesses at a time of economic hardship and on the other hand it gets its partner/reseller to test out new commercial models. Blueface is offering three phone packages based on Panasonic hardware including a fixed reception phone and a choice of either two, four or six cordless desk phones. This new deal, targeted at cash-strapped Irish small businesses needing to upgrade or possibly start-ups buying their first PBX, is not really a partnership - just voice bundled with a Panasonic PBX. It shows just how low prices for voice have fallen. Dutch MVNO Simpel has launched a new SIM-only subscription, Simpel Business, for very small businesses and the self-employed. The plan allows businesses to prepay bundle costs and postpay running costs. This is an interesting offer from Simpel, who is targeting the potentially large number of small businesses with no payment record - Simpel will not be doing credit checks. It looks a fairly low-risk approach with a combination of prepayment, two-year contract and maximum size.

11. Agenda • Drivers for innovation and transformation • Telco investments to improve the customer experience • The telco as an enterprise, and as a service provider

12. CIO Survey: IT budget split by functional area in 2011 What share of your overall IT and technology budget in 2011 is spent on the following system components? CRM, contact center, and 8% 15% 29% 25% 23% customer care systems Service assurance and network 8% 10% 27% 32% 24% management systems Services from systems integrator or 8% 9% 20% 29% 34% IT outsourcer 6% 15% 30% 32% 16% Billing systems 5% 13% 20% 23% 39% Data warehouse and storage systems 4% 15% 25% 29% 27% Customer provisioning systems 4% 9% 18% 38% 32% Business intelligence systems Internal and field-force workforce 4% 8% 18% 28% 43% management systems 3% 9% 27% 28% 34% Inventory management systems Internal networking and communications 3% 9% 13% 41% 35% infrastructure operations 1% 13% 13% 41% 33% Revenue assurance 1% 6% 20% 27% 46% Internal installation and maintenance 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% >30% 20% to 30% 10% to 20% 5% to 10% <5% • The functions directly impacting customer experience received the greatest share of IT spend in 2011. CRM, contact center, customer care, service assurance, network management, billing, and provisioning systems all featured at the top of the list.

13. CIO Survey: IT investment targets telco customer experience problem areas Within these domains, which are the most important investment areas? • The areas within telco IT that impact customer experience the most are billing problems and poor provisioning. As a result, both feature strongly in the list of investment priorities. • Within CRM, obtaining a single view of the customer is the most important objective for the majority of telcos. This also supports the need to move to the unified, cross channel view

14. Investing across all sales and support channels is key (1) • Having visibility into the entire customer journey regardless of channel • The ability to track the customer through a potentially complex labyrinth of interactions across multiple channels in a single session. • Understanding customer channel preferences, behavior and context. Phone Web Social Agent Preferences Behavior Context Store Callback IVR Web

15. Investing across all sales & support channels is key (2) Portals and web chat are increasingly important, but speaking with an agent, emails, IVRs and stores all feature prominently

16. Enterprises need to consider every aspect of the customer experience across the lifecycle… Engagement Engagement Marketing & Marketing & Customer Customer Provisioning Provisioning Service usage Service usage Billing Billing process process acquisition acquisition management management • • Customer management • • Configuration Configuration • Rev mgmt • • Product catalog • • Account management Account management • • CRM CRM • • charging & billing • • Product and price Product and price PCRF - • • Care, retention & Care, retention & • • Self help • - settlement plan comparison plan comparison loyalty programme loyalty programme Service activation • • Device mgmt mediation - • Mediation • • Network management • Customer • • Service assurance Service assurance & mgmt management • • Diagnostics and fault Diagnostics and fault resolution resolution TV, Internet, web portal, social media TV, Internet, web portal, press, Channel Channel press, billboards, High Street stores billboards, High Street stores Web, contact centers, social mediaHelp Forum, Web, call centres Web site, contact centers, post, banks Web site, call centres, post, banks

17. Customer behavior is evolving … Social Mobile Experience Customers have access to information from their peers. Customers can easily share opinions with the large digital communities and the world. Smart phones and social media are becoming pervasive. Mobile devices have dramatically changed the dynamic between the enterprise and the customer. Customer expectations of service, price and delivery are rapidly changing. Customers want access to support from every location and device.

18. Tomorrow’s priority is the ‘customer experience’ Which metrics are the most important in determining the success of your service & support organization? N = 103

19. Short-term (2012) Mid-term (2013-2015) CRM and social media monitoring are top investment priorities Which of the following technologies are you looking to implement or upgrade within your service and support organization in the short- or mid-term? Short-term priority CRM Surveys Analytics Social media Mid-term priority monitoring Case management Online chat Remote support 0% 10% 20% 30% 40% N = 103 Percentage of respondents

20. Pulling social information into the contact center • Track online customer behavior • Pull information back • Educate agents • Update the knowledge base • Alert customers of improvements But is there a danger we are training customers the wrong way?

21. Impact of mobile on service • A genuine mobile strategy will take into account: • the underlying data and call routing connections between a mobile application and a contact center or other self-service tool such as web chat or IVR • the process of authenticating a mobile user as an identified customer, • the shared costs (among customer care and marketing departments, among others) of deploying and maintaining service via different mobile contact channels • the KPIs that will indicate the success of a mobile care program Inbound customer service calls in developed markets 100% 80% Home landline 60% Office landline Non - smartphone Smartphone 40% PC and tablet (voice) By 2016, 36% of customer service 20% calls will be made from smartphones 0% 2011 2012 2013 2014 2015 2016

22. Level 4Transforming The smart, connected interactions (SCI) model Level 3Enhancing Level 2Supporting Level 1Basic Features Brochureware Transactional Engaging Transformational Mobile applications Basic mobile design Current design elements Leading-edge design elements No mobile-specific design Design User acceptance <2.5 stars 2.5–3.5 stars 3.5–4.5 stars >4.5 stars Two to three smartphone platforms, one tablet platform One smartphone platform Multiple platforms, rich mobile web All major devices and form factors Availability Two-way multi-modality Downstream multi-modality Voice Standard voice Enhanced voice Unified messaging with resource-dependent escalations Basic multichannel Unified messaging Basic email Multichannel Smart, connected interactions Context awareness Little or no context Basic callback Rich context with clickstream Seamless switching across channels Experience continuity One-off mobile application Aligned, loosely integrated Data and workflow sharing Realtime switching, lossless state transfer

23. Agenda • Drivers for innovation and transformation • Telco investments to improve the customer experience • The telco as an enterprise, and as a service provider

24. Telco actions to improve customer experience and service Software-driven, customer centric systems and business processes are required Product centric Customer centric Multiple logins, passwords, phone # to access information 1 login, 1 # Sales, service & info organized by product/accesstype Integrated account info and usage of solutions Software driven, agile service processes Hard-coded options and processes for services Consistent customer information available across channels Contact centers with limited RFT resolution ability, so multiple handoffs Retail outlets focus on sales Retail outlets for service and support Static FAQs on web sites controlled by operator Dynamic FAQs run by online communities and QA’ed by operator Good deals avail to new customers Good deals available to most valuable and existing customers.

25. Trends in telco enterprise services • Managed networks  intelligent networks • Data center • The network as a platform • Managed mobility services • M2M • Ubiquity - access • Collaboration/UC&C • Customer Experience Services • “Applications” • (including cloud)

26. How telcos are approaching cloud/SaaS Telco cloud offers Typical customers Examples Public cloud SME IaaS Virtual private cloud Large enterprise Private cloud Government Development tools PaaS Applications developers Business apps one-stop shop SME SaaS UC&C All businesses

27. Wrap-up • In the face of new competitive threats, telcos are moving up the ICT service stack, bundling services, and differentiating on customer experience. • The medium-term challenges for differentiating are integrating social media and ‘smart’ mobile interactions in a service strategy. • Customer experience delivery should be channel and device agnostic. • The more virtual the architecture, the more agile the delivery. • There is an opportunity to commercialize internal customer experience services and expertise.

28. Thank you • Clare McCarthy, Practice Leader, Operations • Evan Kirchheimer, Practice Leader, Enterprise • clare.mccarthy@ovum.com • evan.kirchheimer@ovum.com

29. References • Slide 4 - Global Services Deals Analysis 2H11: Value in the Middle • http://www.ovumkc.com/Products/Telecoms/Enterprise/Global-Services-Deals-Analysis-2H11-Value-in-the-Middle/SUMMARY • Slide 5 - This is part of a report which has not yet been published. • If you'd like to speak to the author, Thomas Reuner, he can be reached at Thomas.reuner@ovum.com. The report should be out next month. You can search by his name on our knowledge center. • Slide 6, 12, 13 - Ovum survey, Telco Business and Investment Trends for IT • http://www.ovumkc.com/Products/Telecoms/Telco-Operations/Telco-Business-and-Investment-Trends-for-IT/Ovum-Slide-Pack#id_112961 • Slides 18, 19 - These were from a consulting project we did which we have not yet published. It was a contact center director survey. I will see if I can source the deck. • Slides 21-22 - The Future of Customer Service in a Mobile World: Smart, Connected Interactions • http://www.ovumkc.com/Products/Telecoms/Customer-Experience-and-Interaction/The-Future-of-Customer-Service-in-a-Mobile-World-Smart-Connected-Interactions/SUMMARY

30. Outsourcing – where will telcos’ ‘core skills’ go? Source: Ovum

31. Outsourcing – it’s not just about the network “European telcos spent over $15bn on infrastructure and application services in 2011, and are on track to spend over $18bn by 2016. By 2016, half of that spend will be on application services.” Source: Ovum