Advisory Report: C ustomer Experience Management Part I: Identifying Market Drivers Report Date: Analyst: Service: Market: October

04, 2011 McGarvey, Joe Service Provider Infrastructure IP Services Infrastructure

Summary
Issue Like a sculpture in progress, customer experience management (CEM), w hich has been a topic of discussion in telecommunication circles for the past few years, is beginning to take a recognizable form. The principal concept behind CEM, that an operators competitive standing is highly dependent on the quality of the service it provides subscribers, is about as common sense and easy-to-grasp as it gets. Moving from the abstract to the concrete, how ever, is a different story. Accordingly, equipment vendors from multiple segments of the telecommunications landscape, including traditional netw ork equipment suppliers and OSS/BSS specialists, have been hammering aw ay over the past few quarters to shape compelling CEM solutions that enable operators to address w hat is arguably their most pressing concern keeping customers happy - effectively. Customer satisfaction, how ever, is an amorphous objective that can be measured in multiple w ays. Accordingly, CEM solutions vary, from supplier to supplier, in the scope of their objectives. A CEM solution w ith modest customer satisfaction goals, for example, could be trained on assisting operators in improving response time to trouble calls. At CEM solution at the ambitious end of the spectrum w ould impact nearly every aspect of the subscribers relationship w ith the netw ork. In addition to streamlining problem resolution, such a full-service CEM solution w ould ensure that subscribers are matched w ith the proper level of service quality and made aw are of relevant products and promotions. W hile CEM solutions that arrived on the market a few years ago w ere focused primarily on improving service assurance, the emerging batch of solutions expand CEM objectives to include the generation of new revenue as part of the keeping customers happy quotient. Given this backdrop, it should be no surprise that the current CEM marketplace is also a w ork in progress. W hile some competitors, such as those approaching CEM from the operations point of view , have been delivering solutions for the past few years, others, particularly traditional netw ork equipment suppliers, are new to the market, w ith some still a quarter or tw o aw ay from commercially introducing formal solutions. Despite the fact that the CEM market is evolving as this report is being w ritten, a discernable view of the competitive landscape is emerging, w hich includes assessments of the portfolios of early entrants, as w ell as an overview of the various approaches competitors are pursuing to distinguish their offerings in the market. Part III of this report w ill home in on the freshly emerging competitive landscape, identifying the various components that go into a CEM solution and how equipment suppliers are packaging those functions to enable operators to overcome the monumental challenges of competing in todays market. Those challenges facing operators and the chief objectives of CEM solutions are the primary subjects of Parts I and II of the report. Part II w ill examine the chief objectives operators are looking to realize from the adoption of a comprehensive CEM solution. The remainder of Part I w ill focus on the most relevant market drivers behind the emergence of the CEM solution category.

Perspective
Current Perspective CEM Market Drivers Its nearly impossible to exaggerate the degree to w hich the relatively recent explosion of broadband connectivity, first in the fixed realm and now moving into the mobile, has impacted the telecommunications operator community. This IP-enabled revolution has forever and profoundly altered the w ay carriers conduct business and the role they play in the communications value chain. Millions of connections have grow n to billions, w ith an increasing number of those connections tethered to devices other than phones held by humans. A handful of applications, primarily voice and text in the mobile w orld, coursing through the netw ork, are now millions, each potentially altering traffic patterns or user behavior and most originating from a third party. W hat w as once a modest selection of phones w ith voice-based user interfaces is now a varied assortment of intelligent platforms, the rough equivalent of a PC, including multiple operating systems and form factors, all of w hich must share the same services. Also a thing of the past are the neatly nailed up connections, one per session, w hich have given w ay to creativity unleashing, yet chaotically managed, IP-based sessions. And the rate of change has been nearly as dizzying as the transformation itself. If the discipline of genetic research, for example, had evolved at the same pace as the telecommunications industry is transforming, geneticists w ould have gone from observing pea plants to mapping DNA w ithin Gregor Mendels lifetime. The otherw orldly amount and pace of change in the telecommunications sphere has left operators reeling, as w ell as searching for a systemic and automated approach for harnessing this new operating environment, w hile at the same time supplying subscribers w ith unprecedented levels of customer care and personalized services. Accordingly, the most salient market conditions driving the CEM market are both pronounced and urgent: Operator Issue 1: Not the Same Old, Same Old Its nearly impossible these days not to bump into an anecdote illuminating the increasing irrelevance of

traditional key performance indicators (KPI) in measuring customer experience. That the netw ork is up and running w ithout tripping alarms is a form of service assurance w hose time has gone. Relying on fault management to assess a subscribers experience is the equivalent of an emergency room doctor evaluating patients based on a single diagnostic tool. Even a coma patient, after all, can present w ith normal heart and lung function. Operators that rely solely on netw ork and device performance as an indication of service quality have committed the equivalent of encircling the giraffe enclosure at the zoo w ith a tw o-foot fence. How CEM Solves it: A Complete Work Up A CEM solution is designed to examine every aspect of the subscriber experience. W hile poor netw ork performance is an obvious source of a less-than-optimal customer experience, it is not the only one. Operators need to move from a netw ork-oriented view point to a service-oriented one. Nearly all CEM solutions enable operators to detect issues at the service/application and device level, as w ell as ensure that subscribers are getting the services theyve contracted to received, at the proper quality level. Just like the ER doctor w ho has access to a battery of diagnostic tools, CEM solutions enable operators to do the equivalent of a complete w ork up on a single customer or group of customers. Operator Issue 2: Disintermediation The major side effect of operators moving their operations to the same protocol that governs the Internet is the removal of a formerly impenetrable demarcation betw een the operators netw orks and the thousands of services and applications resident on the Internet. W ith the shift to IP, operators become a natural pipe betw een billions of devices and third-party Internet-based services. The intelligence of that pipe, of course, is at the heart of the competitive struggle betw een operators and over-the-top (OTT) service providers. W ithout some sort of mechanism in the netw ork that enables operators to add intelligence to the services that traverse their netw orks, they risk being relegated to the role of transport specialists. How CEM Solves It: Visibility, Insight and Action CEM provides operators w ith a level of visibility into the manner in w hich subscribers are interacting w ith the netw ork that OTTs are unable to match. By collecting and correlating information about the netw ork, services, customer preferences, devices, billing and charging and location, operators are able to take actions that personalize relationships w ith each customer. CEM provides operators w ith the opportunity to create loyalty by quickly responding w hen problems occur or w hen an opportunity rises to present subscribers w ith new features or services. Operator Issue 3: Too Many Options The one thing consumers do not lack is choice. To stay competitive, operators need to offer subscribers a lengthy menu of services and pricing plans. Policy and charging control equipment brings flexibility to that menu, enabling subscribers to pick and choose a la carte items to create a unique bundle. The flipside of this flexibility is that the sheer quantity of options can be dizzying to subscribers, w ho are likely to be dissatisfied if the operator matches them up w ith a service plan that dont meet expectations, or if the operator is constantly bombarding its customers w ith offers that are inappropriately matched to the subscribers requirements. How CEM Solves it: Customer Insight Through CEM, operators can construct a vivid model of each customers habits and preferences. By collecting and correlating information from multiple customer data sources, as w ell as netw ork performance information, operators are able to suggest service plans that match the subscribers requirements and enable the operator to better utilize netw ork resources. A CEM solution allow s operators to target new campaigns only at subscribers that are likely to be interested. It also enables operators to offer impulse services that are based on customer insight, such as location, device and type of previous actions, that can be gathered in real time. Operator Issue 4: Stuck in a Silo In general, telecommunications carriers have divided up parts of their organization into self-contained silos. Marketing, billing and charging, customer care, back-office operations and netw ork infrastructure traditionally act independently. W hile this w as a manageable approach w hen carriers primarily offered tw o services and an inability to access the netw ork or a service made up most of the trouble calls, the complexity of todays netw ork and the high expectation of customers for immediate attention demand that these w alls be torn dow n. Customer care agents w ithout access to information about netw ork performance or customer billing and charging histories are ill-equipped to solve access or performance problems. A marketing department w ith no know ledge of the type and number of devices a user possesses is equally unprepared to assemble a relevant service offering. How CEM Solves it: Going Horizontal The second major functional pillar of a CEM solution (the other tw o being visibility and action) is the ability to correlate information gathered from different sources, providing operators w ith a holistic view of the customer and its interaction w ith the netw ork. W hether its through analytics, business processes or some other mechanism, CEM solutions create linkages across these different business units. This cohesion makes it possible for operators to detect or even predict customer service issues quickly. The CEM solutions ability to integrated previously segregated business units and departments is tightly aligned w ith the current trend among operators to break dow n longstanding barriers betw een their IT and netw ork business units. (See Chart: Uncovering Customer Insight for a list of information types that a CEM solution collects and correlates, as w ell as the source of that information.) Chart: Uncovering Customer Insight

Information Relevant to CEM Network Performance Service/application Usage

Information Source Performance monitoring, probes, fault management tools, analytics DPI equipment, content optimization gear, analytics

Device type and operation Past customer activity Customer profile Billing and charging
Operator Issue 5: Rising Customer Expectations

Device management, DPI equipment, analytics CEM, Business Intelligence tools SDM BSS tools, policy and charging equipment, analytics

As the complexity of the netw ork increases, w ith thousands of different applications and devices being added each year, so do customer expectations. W ith most consumers enjoying multiple provider options, they have become conditioned to expect instant gratification in terms of service performance and selection. Multiple studies indicated that the most demanding users are also the most likely to sw itch carriers if the level of service falls below their expectations. Exacerbating the problem is that subscribers are using connected devices more often and for more tasks, including w ork- and entertainment-related activities, than ever before. Consequently, customers are increasingly dependent on their connected devices, putting added pressure on operators to keep current customers happy. How CEM Solves it: One Giant Throat to Choke As the ow ner and provider of the netw ork, operators are the default suspect to blame if some aspect of the service isnt meeting customers expectation. W hile the operator is not ultimately responsible for defective devices or rogue applications, aw areness of the impact that new ly introduced devices or applications can have on the netw ork enables the operator to solve many customer problems, sometimes before they even occur. By correlating device and application information w ith netw ork performance, for example, operators are able to detect common configuration or softw are anomalies, as w ell as take actions to correct those problems, in some cases before the subscriber is even aw are they exist. Though providing tech support for potentially hundreds of millions of subscribers is a major consumer of resources, it also breeds customer loyalty.

Recommended Actions
Vendor Actions All competitors and w ould-be competitors in the CEM market need to seize the moment and make a declaration of support for CEM and formally introduce solutions. Even if competitors have yet to fully formulate a CEM solution, w hich w ill most likely cross multiple product families across the suppliers portfolio, they need to be able to describe and promote their strategy from a marketing perspective before the end of 2011. CEM competitors w ith solutions originating from their OSS/BSS properties need to consider purchasing netw ork-related attributes of CEM solutions, such as subscriber data management or policy control, in order to expand the scope of their solutions. This exercise w ill assist operators in expanding the scope of their CEM solutions from service fulfillment or customer care to include revenue-generating attributes. CEM solution providers starting on the netw ork side of the spectrum need bulk up their OSS/BSS credentials. These competitors should consider acquiring companies w ith rich histories in the netw ork performance or service fulfillment arena. All CEM solution providers need to educate operators on the need to establish linkages betw een operational business units. Solution providers need to demonstrate to operators that breaking dow n barriers betw een operational business units is a necessary and first step tow ard adoption of a CEM solution. CEM solution suppliers need to provide operators w ith a creditable estimate of potential operational savings connected w ith the adoption of a CEM solution. Competitors need to show potential customers w here CEM can reduce expenditures and potential value of those reductions. User Actions Operators need to appoint a single person or department to oversee CEM operation. Those duties can fall on either the CIO or CTO, but it w ould preferable to create a new position that puts a single individual in charge of CEM across the netw ork. Operators need to prioritize the construction of a CEM solution in relationship to an OSS optimization program. Operators, first, need to figure out if these are separate transformation or if they can be enacted in unison. Operators that simultaneously optimize their operational systems and introduce a CEM solution w ill lessen the expense and accelerate the adoption of a CEM solution. Operators need to adopt a CEM solution that enables information to be correlated across departments but also allow s each department to view the same information in a format that is familiar and optimized. Operators need to select only CEM solutions that enable netw ork, customer and service insight to be correlated in a manner that is relevant across operational departments. The customer care and the marketing departments, for example, should be able to view the same information through separate GUIs. Operators need to define new KPIs around CEM. Operators need to begin to identify KPIs in the customer experiencing realm, such as service quality or effectiveness of campaigns, to better judge customer satisfaction.

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