MAKING THE MOST OF CONNECTED DEVICES - Amdocs

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MAKING THE MOST OF CONNECTED DEVICES - Amdocs

MAKING THE MOST OF

CONNECTED DEVICES

AMDOCS > CUSTOMER EXPERIENCE SYSTEMS INNOVATION


MAKING THE MOST OF CONNECTED DEVICES

WHAT’S DRIVING CONNECTED DEVICES?

M2M is certainly not a new field within the communications

industry and many service providers have offered M2M services

for the last decade. Over the last 2 years however there has been

a resurgence of interest in M2M and specifically connected

consumer electronic devices. Most leading service providers

have announced the formation of a dedicated business unit to

define and implement an M2M business strategy.

The reasons behind the renewed interest in connected devices

include:

> Ubiquitous connectivity: Wireless networks are now

ubiquitous across the globe and provide a ready

infrastructure for traditional and new devices. 2G, 3G and

now 4G networks provide national and global coverage and

this is being used by an increasing number of non-traditional

devices.

> Growth in connected consumer electronics: The inclusion

of embedded connectivity in consumer electronics allows

for the creation of products with an altogether new value

proposition that is born explicitly of the utility derived

from being connected. OEMs are actively looking to embed

connectivity in their devices to drive value and sales.

Good examples here include ereaders and tablets.

> Active promotion by governments: Government mandates

for the inclusion of emergency crash notification systems

in vehicles, smart metering solutions for households and

Intelligent Transportation System (ITS) initiatives have

created a guaranteed market for new M2M solutions.

> SPs search for new sources of revenues: Service providers are

well aware that voice and data services are commoditized and

the pressure is on to find new sources of revenues.

Connecting non-traditional devices (both M2M and

consumer electronics) is one way of doing this and they are

still best positioned to deliver the connectivity. The challenge

still exists however over what other value added services SPs

will be able to offer beyond simply connecting the devices.

> Customer demand: Amdocs has spoken about the connected

world for some time and it has become a de facto part of

the way consumers live today. Amazon, for example, recently

announced that they are selling more electronic Kindle

books than paperbacks. Customers are now connected across

a growing variety of devices and this is set to continue into

additional areas such as healthcare and automotive.

M2M

Connected

Devices

Content/

apps

Industry

specific,

Enterprise

driven

Industry

wide,

Consumer

driven

Human

interaction

Not

required,

no

awareness

Inherent

part of

the device

experience

Connectivity

Machine

focused,

narrowband,

batch

Consumer

focused,

broadband,

real-time

2


MAKING THE MOST OF CONNECTED DEVICES

UNDERSTANDING THE UNIQUE CHALLENGES OF

CONNECTED DEVICES

In this new connected ecosystem SPs will have several unique

challenges:

> Onboarding and connecting a variety of new devices - from

traditional M2M (such as vending machines or alarm

sensors) to connected consumer electronics such as eReaders

or tablets. Service providers will not have the luxury to

implement traditional retail life cycles for each new device

if they want to gain first mover status in the market. They

will need to work quickly and efficiently with partners to

launch new devices via a business to business (B2B) model.

> Creating and managing relationships with a new range of

partners. Firstly OEMs (original equipment manufacturers)

who now have the ability to become “service providers”

and resell connectivity as an inherent part of their offering.

Secondly, extended partners in the device ecosystem such as

application developers who have a pivotal role in driving

the adoption of new devices through applications that they

create.

> Since the nature of the business model may depend on the

potential value of the device being connected and sold,

service provider’s will need to be flexible in the type of

business models they support with each partner, from a

purely B2B relationship, through to B2B2C and ultimately

B2C as well.

WHERE DO SERVICE PROVIDERS FIT INTO THE

CONNECTED DEVICES VALUE CHAIN?

It is important to understand that the connected device value

chain is different from that of traditional telecom services. It

is more fragmented and complex with a number of players

taking part:

From the hardware side there are the OEMs and the wireless

chipset manufacturers. It is widely acknowledged that service

providers will not have much of a play in this area in terms

of direct revenues. What is important to note however is that

device manufacturers are gaining the capability to embed

connectivity within the device and sell this directly to consumers

via retailers, e.g. ereaders, connected media players, weight

scales, tablets,etc. This gives them the potential to reshape their

position within the device value chain and position themselves

more as a “service provider” than just a device manufacturer.

Putting the revenue from device sales aside, it is important to

point out that the largest share of the revenues in this value chain

will come from value added services and applications rather than

the connectivity itself. There are a wide range of players looking

to capitalize on this, from application developers to value added

service providers in verticals such as healthcare and security. The

challenge for service providers here is to formulate a strategy that

will allow them to move beyond connectivity and play a role in

this area as well. They will need to either buy, build or partner

in order to gain the capabilities necessary to offer value added

vertical services and applications.

3


MAKING THE MOST OF CONNECTED DEVICES

Where the device is sold to consumers there is obviously the

need to support the distribution, sales and service of the device.

Here too the role of service providers depends on the nature

and value of the device. Where the device has the potential to

enhance the brand of the service provider and drive additional

revenue it makes sense to co-brand, market and support the

device. Service providers can leverage their core retail capabilities

and experience to enable this, providing an attractive service to

smaller device manufacturers who may not have the resources to

take a connected product to a mass market. On the other hand,

it is not realistic to expect service providers to support a full

retail lifecycle for every new device, and they may instead look to

drive incremental revenue from additional connections on the

network. In this case they will leave the distribution and sales of

the device to the partner.

As far as connectivity is concerned it is clear that service

providers are best positioned to provide this but here too

though there are several questions that need to be tackled.

M2M has traditionally been viewed by service providers as a

niche area within their overall lines of business and in many

cases the services on offer such as fleet management or security

monitoring are actually provided by M2M partners. So while

connectivity is at the core of service provider capabilities they

have not always invested in building core M2M connectivity

platforms, services and business processes within the

organization and it is still a complex and time consuming

process to roll out new M2M services and devices. With the

growth of connected devices and embedded connectivity

service providers are now taking steps to ramp up their

capabilities to achieve rapid innovation and growth.

Device

Manufacturer

Connectivity

Module

Manufacturer

Apps /VAS

Distribution +

Support

Integration

Connected

devices

Platform

Connectivity

Provider

Connected Device Battleground

Application

developers/

VAS

providers

Retail/

ecommerce

System

Integrators

M2M

Platform

Vendors

SPs

Device & Module

Manufacturers

% of revenue

(Not including device)

~82% ~18%

4


MAKING THE MOST OF CONNECTED DEVICES

BUSINESS STRATEGIES TO MAKE THE MOST OF

CONNECTED DEVICES

There are a number of potential connected device business strategies

for service providers to adopt. The strategy will depend on the

potential value the device and partner hold for the service provider,

and the core competencies that the service provider can leverage.

Service providers could take a horizontal, market-wide approach,

becoming an enabler across any device, partner and vertical.

Alternately, they could look to provide a specific offering directly

to consumers in well targeted vertical segments. There is no onesize

fits all answer; service providers need to clearly define their

connected device strategy, choose the appropriate business model

and ensure they have the capabilities to implement it.

GOING HORIZONTAL

A horizontal approach to connected devices by definition is

not focused on any specific vertical, but rather on a single,

flexible infrastructure with generic appeal to target as many

potential devices and applications as possible. This approach

lends itself most naturally to a B2B business model.

Pros:

> Service provider remains highly focused on core

competency - connectivity and related services without need

to provide full support for consumer life cycle (sales,

ordering, support, billing, etc)

> Drive incremental revenues from new connected devices

> Can launch quickly with relatively simple rating plans

Cons:

> Generally lower ARPU than consumer models – need to work

efficiently with lean operations

> Complexity of working with multiple types of partners and

devices

> Revenue based primarily on wholesale connectivity which is

relatively small part of overall potential revenue potential in

value chain

CUSTOMER EXPERIENCE

RETAIL INTEGRATION

VALUE TO SERVICE PROVIDER

ENABLE INNOVATIVE APPLICATIONS

ENABLE VERTICAL

VAS / PROVIDERS

EXPOSE, MANAGE AND MONETIZE USER AND NETWORK DATA

SUPPORT FLEXIBLE BUSINESS MODELS FOR DEVICE RESELLERS

HORIZONTAL

ENABLERS

ENABLE WHOLESALE CONNECTIVITY FOR NEW DEVICES

5


MAKING THE MOST OF CONNECTED DEVICES

Key Success Factors for Horizontal Model rather than B2B

Model

> Partner onboarding will need to be handled quickly and with

low cost to enable rapid launching of new devices. Self service

for partners will become a crucial element across the entire

partner life cycle, from registration to self care.

> The type of rate plans and charging models offered to a

partner will have to match the nature of the service that the

partner intends to offer. For example, if the partner is selling

an emergency calling device that is only activated in the case of

an accident, pricing based on data consumed is meaningless.

SLA based quality of service would be more appropriate.

On the other hand, if the device is likely to consume a large

amount of data (e.g. in-car infotainment system) then pricing

per bandwidth or data consumed would be more relevant.

> Robust settlement will be required as the number of partners

grows as well the flexibility to handle various revenue share

models.

> Service providers will need to ensure that they empower

partners to manage most of the operational aspects of device

connectivity. For example, bulk ordering of SIMs, SIM status

queries, trouble ticketing, etc. This will be crucial in order to

reduce overheads and streamline processes while giving

partners more visibility of their devices on the network.

> There is also an opportunity for service providers to introduce

more advanced services as the number of partners and devices

on the network grows. Mechanisms will need to be put in place

that monitor partner device data consumption on an

aggregated as well as device level. This will prevent network

abuse by partners and ensure quality is maintained for the

consumer services that are provided on the network.

EXPANDING THE HORIZONTAL STRATEGY

Service providers can further extend the value they offer by

enabling partners to provide a differentiated experience to their

end customers. This will become an urgent need for device

resellers who may not have the built-in capabilities to service

their end users across retail processes such as sales, ordering,

billing, support, etc. A good example of this B2B2C model

is carrier billing which is becoming more widely used by VAS

providers who want to provide a simple experience to customers

when it comes to paying for service.

In addition, services providers are also starting to examine how

to drive value out of the data that connected devices are able

to expose. As new devices get connected service providers have

access to a wealth of data beyond the handset, and by surfacing

and exposing this data they can create new revenue streams

for partners such as application developers and value added

service providers.

6


MAKING THE MOST OF CONNECTED DEVICES

Pros:

> Drive additional revenue beyond connectivity by providing

VAS to partners

> Monetize existing BSS/OSS capabilities via on behalf of

services

> Monetize device, network and customer data through

enabling the creation of innovative applications and VAS

> Leverage existing customer information to offer bundled

offers and discounts across partner devices

Cons:

> Continued risk of being disintermediated from the consumer

(“dumb-pipe” syndrome)

> New business models still need to be tested and proved

> Need to customize support services for partner per vertical

> Lack of partner ecosystem and expertise

> As more partners become “service providers” OBO

(on behalf of) services will become a key success factor for

them. Google, for example, learned the hard way that

launching a new device requires the necessary business

support systems in order to deliver the required level

of service to customers. Depending on the partner’s core

competencies the OBO services offered to partners could

span several key areas such as storefront management,

ordering, billing, payment processing and customer support.

> Services will need to be offered in a lean, efficient manner,

taking advantage of cloud technologies for rapid deployment

> Service providers will also need to deepen their knowledge

and partnerships within the connected device ecosystem –

collaboration with partners will be crucial. Service providers

should look to become innovation funnels for new partners

and technology into the connected device ecosystem.

ENHANCE VERTICAL SERVICES

ENABLE INNOVATIVE APPLICATIONS

Key Success Factors

CAPTURE & AGGREGATE DATA SOURCES

NETWORK

AWARENESS

CUSTOMER

AWARENESS

DEVICE

AWARENESS

CONNECT DEVICES

7


MAKING THE MOST OF CONNECTED DEVICES

GOING VERTICAL - B2C

The most lucrative business model remains the direct to consumer

model which offers the greatest opportunity to grow revenue,

increase loyalty and differentiate the brand in the market. Here

too strategy is key since it impacts the systems and capabilities a

service provider will require. For example, if a service provider

chooses to offering a new connected consumer electronic (e.g.

ereader) bundled with a traditional handset; the impact on the

traditional retail life cycle is not massive. It is ultimately “just

another connected” device that is sold and supported by the service

provider. If however the strategy is to enter a specific vertical such

as healthcare, automotive or connected home, the resources,

knowledge services and solutions required are substantial.

Pros:

> Higher potential revenues per device than with pure reseller

models

> Opportunity to drive customer loyalty and differentiate with

new, innovative devices & services

> Opportunity to position company as market innovator and

leader by moving into new lines of business

> Reuse investment in existing BSS/OSS

Cons:

> Need to acquire knowledge, expertise and system capabilities

per vertical offering

> Complexity of integrating with non-telco systems

(e.g. healthcare or automotive)

> Lack of credibility in new lines of business/services

Key Success Factors for the B2C model

In order to succeed in vertical B2C models service providers will

need to be highly focused on the value added service they wish

to provide and the necessary knowledge and systems needed to

implement it. One of the challenges in today’s connected device

market is the huge array of potential verticals and services. It is not

always clear where service providers should play and what they

should target within the vertical. A clear business strategy will be

key to success.

> Service providers will need to micro-segment the market

vertical and target specific areas within the vertical. For

example, connected car could relate to monitoring of vehicle

performance, vehicle tracking for security purposes, in-car

infotainment, etc. Carefully targeting a specific area within

the vertical market will ensure that service providers have

a clear definition of their value proposition for the end user.

For example, Telenor is providing solutions to Nissan that

enable Nissan LEAF owners to check battery status and range

with mobile phones or PC. Vodafone on the other hand offers

enterprise customers Fleet Management solutions that allow

them to track and manage delivery vehicles. These are both

solutions within the same vertical but with a very different

customer and value proposition.

> Service providers will need to spend the required resources

gaining vertical expertise. Offering a vertical specific service

goes beyond the proposition of simply selling a new

connected device. By definition customers will be interested

in the services and support around the device and these will

be crucial to ensure success. Examples of this include Telus’

acquisition of Emergis for healthcare services and AT&T’s

acquisition of Xanboo for connected home.

> There are many synergies to be achieved by integrating new

devices into existing processes and assets, and integration

with existing retail systems will be a key success factor.

Consumers do not want to have multiple points of contact

for each device and service. Service providers that can

aggregate the consumer experience via a single portal, contact

center and bill will be best positioned to succeed. Examples

here include bundling telco & non-telco products together

for discounts or providing a consolidated customer bill for

traditional and non-telco services.

8


MAKING THE MOST OF CONNECTED DEVICES

IN SUMMARY

It is clear is that service providers have a rapidly growing

opportunity with a new generation of devices. The key steps to

making the most of the opportunity will be to start by defining

the right business strategy i.e. horizontal vs vertical or in some

cases both. Next, service providers must clearly define their

value proposition with regards to the device – is it about the

device, the connectivity, the device data or the services? Service

providers should then set out the business model that will best

suit their relationship with ecosystem partners such as OEMs and

application developers. This could be B2B, B2B2C or B2C. Finally

service providers need to define exactly what knowledge, systems

and processes should be in place to enable them to deliver quickly

and profitably on their chosen strategy.

9


MAKING THE MOST OF CONNECTED DEVICES

ABOUT AMDOCS

Amdocs is the market leader in customer experience systems innovation. The company combines business and

operational support systems, service delivery platforms, proven services, and deep industry expertise to enable

service providers and their customers to do more in the connected world. Amdocs’ offerings help service providers

explore new business models, differentiate through personalized customer experiences, and streamline operations.

A global company with revenue of $3.0 billion in fiscal 2010, Amdocs has over 19,000 employees and serves

customers in more than 60 countries worldwide. For more information, visit Amdocs at www.amdocs.com.

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For the most up-to-date contact information for all Amdocs offices worldwide, please visit our website at www.amdocs.com/corporate.asp

Copyright © 2011 Amdocs. All Rights Reserved. Reproduction or distribution other than for intended purposes is prohibited, without the prior written consent of Amdocs. The trademarks and service marks of Amdocs,

including the Amdocs mark and logo, Ensemble, Enabler, Clarify, Return on Relationship, Intelecable, Collabrent, Intentional Customer Experience, CES, Cramer, Qpass, SigValue, DST Innovis, JacobsRimell, ChangingWorlds,

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