Hull & East Yorkshire

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1 Strategic report Market opportunities Hull & East Yorkshire Supporting customers to live and work in a connected world Maximising the value of our fibre investment Growth opportunities are based primarily on the substantial investment we have made in the deployment of full-fibre broadband across our Hull & East Yorkshire network. We plan to maximise those opportunities by continuing to increase take-up of our ultrafast Lightstream fibre services and by offering additional services that allow us to make returns on this investment. The main areas for growth are: > > Broadband and voice > > The in-home/office experience > > Mobility > > Cloud services > > Wholesale 1 Broadband and voice As we continue our deployment of full-fibre broadband to the remainder of our network, we are encouraging customers to migrate from standard broadband delivered over copper to our ultrafast fibre Lightstream services. We can see, through the insight captured to date, that those services provide better quality access to the internet as evidenced by higher customer satisfaction and lower fault rates. We have used customer insight to refresh our broadband portfolio and give customers greater flexibility to personalise their service by choosing a download speed and data allowance that suits their needs. Rather than having to pay for inclusive calls they may not use, customers buying from the new portfolio can opt for pay-as-you-go calls or select from a range of bolt-on call packages. 2 The in-home/office experience While our Lightstream services deliver ultrafast broadband to the property, we know that customers can receive a less than optimal broadband experience in the home or office as a result of factors affecting their Wi-Fi signal and setup. As well as providing self-help information to customers about what they can do to ensure the best possible Wi-Fi experience we have begun trialling services such as Wi-Fi health checks and signal boosting services that may offer future commercial opportunities while increasing customer satisfaction. 12 KCOM Group PLC Annual report and accounts 2017/18

2 For Hull s award-winning Atom Brewery, the internet is an essential means of spreading the word about its science-inspired beers, which include Schrodinger s Cat, Quantum State and Pulsar. In the three years since it was established Atom has expanded to supply customers in all four corners of the world. Last year alone it produced 34 beers and sold more than 230,000 pints to ale lovers as far afield as Australia and Lapland. Our customer base is predominantly millennials, aged from 25 to 40, who gather their information from social media like Instagram, Twitter and Facebook. That means we need to be able to access the internet 24/7 and we need it to be reliable. KCOM gives us that. Allan Rice Founder, Atom Brewery Strategic report Directors report Financial statements 3 Mobility Although the stand-alone mobile market is highly competitive and commoditised we believe there are opportunities for us to provide mobility services as an extension of our fibre network coverage to drive additional customer acquisition. We are in the early stages of exploring how we might develop a compelling and differentiated mobility proposition for customers in the region. While this work takes place, we will focus on expanding our current mobile offering to address the needs of our core customer segments. This will give us a solid platform from which to extend our capability and differentiate it by blurring the boundaries between the fixed data we provide customers over our fibre network and the mobile data they use while on the move. 4 Cloud services The high level of trust and deep relationships we enjoy with our business customers mean we are well positioned to support them in their transition to cloud communications services. Our target market for these services is businesses with employees, for whom subscription-based services are more attractive than on-premises services that require upfront investment. Lack of internal IT expertise within these businesses means the cloud services we offer need to be easy to understand, easy to buy and easy to manage. Currently we offer a cloud voice solution alongside Microsoft Office 365 and are working with partners including Microsoft and Cisco to develop other cloud propositions including a managed security tool. 5 Wholesale Our aim within the Hull & East Yorkshire wholesale market is to be the partner of choice for other providers by offering a range of access products that deliver best value. We have recently refreshed our Ethernet pricing and introduced new fibre access products to achieve this. Our future focus includes expanding our offering to include more flexible branch network solutions that allow our partners to implement more readily new services to their customers in the region. Refining our value proposition Driving Lightstream take-up and providing complementary services are key to exploiting our fibre investment and in order to maximise the benefits of these activities we are optimising the strategy in Hull & East Yorkshire. This will create a strong commercial platform for strengthening and expanding our portfolio with complementary value-added services. It will ensure we are in the best possible position to continue to satisfy customer needs and achieve growth. KCOM Group PLC Annual report and accounts 2017/18 13

3 Strategic report Market opportunities continued Enterprise Using technology to help customers solve tomorrow s complex problems Supporting organisations to navigate change Today s enterprises, both public and private sector, operate increasingly in an environment where the need to respond ever more quickly to rising expectations, competition and regulations is driving a need for the flexibility and adaptability to address continuous change. This compels enterprises to invest in technologies to support and accelerate digital transformation. We have the combination of capabilities and world leading partnerships required to take advantage of the fast-growing market for technology enabled business solutions. Our propositions are focused on two categories: > > Contact Centre as a Service > > Cloud services, incorporating cloud native innovation, migration services, identity management services, analytics and multi-cloud managed services 1 Contact Centre as a Service As customers increasingly expect seamless communication with organisations through both traditional and digital channels, enterprises are seeking to achieve this through the introduction of flexible, Contact Centre as a Service cloud platforms and omni-channel capabilities. Our strong omni-channel proposition and track record, combined with our technology partnerships, means we are well positioned to continue to win business in this market. 2 Cloud services Through our cloud expertise we help enterprises develop applications and the infrastructure behind them in a way that is faster, less costly and far more flexible than is possible with traditional IT services. Whether customers are moving from on-premises technology to the private cloud, from private cloud to hybrid cloud or from hybrid cloud to the public cloud, we can support them on their journey. 14 KCOM Group PLC Annual report and accounts 2017/18

4 NFU Mutual chose KCOM to create a new claims vendor portal platform and infrastructure within the Microsoft Azure public cloud. As well as better engagement with suppliers and improved communication with customers regarding the status of their claim, the new platform can be scaled quickly and easily to handle peaks and troughs in demand. Our new cloud-based system means that when a customer makes a claim, for example for a damaged windscreen, our process for our operations teams is smoother and allows for better communications with customers throughout their claims journey. Tim Mann CIO, NFU Mutual Strategic report Directors report Financial statements Our cloud propositions include: > > Cloud native innovation: we develop applications using features only available in the public cloud. Our current offering includes strategy and development, architecture, Platform as a Service and microservices; future propositions will include bespoke born-in-the-cloud applications. > > Migration services: our migration of traditionally hosted IT infrastructure to a cloud environment allows customers to make the most effective move to the public cloud at a pace to suit them. Our migration services include cloud architecture, cloud connectivity and individual workload migrations. > > Identity management services: we provide centralised sign-on for multiple and distributed systems, with identities and access rights stored centrally and securely. We deploy software from market-leading global partners to deliver voice biometrics and identity and access management on private or public cloud platforms. We anticipate that open banking and new regulations around data protection will increase demand for these services. > > Analytics and Internet of Things (IoT): using public cloud platform architecture we turn vast quantities of complex data into valuable business insights. Today we deliver large-scale platform analytics architecture and IoT projects; future developments include a template analytics platform toolkit that will enable us to create standard tools quickly and easily. > > Multi-cloud managed services: we already combine expertise in cloud platforms, on-premises platforms and connectivity to provide managed services including problem management and break/fix support. We are developing enhanced services such as cost optimisation and the provision of technical design authority services. Agile delivery Organisations increasingly need to be agile to meet the changing expectations of customers. Growth in the market for cloud services is being driven both by this and by the increasing complexity of projects and the lack of specialist in-house skills. In pursuing new business, the depth and breadth of our technology expertise means we are competitive with both cloud specialists and large professional services organisations, while in delivering client projects we are increasingly benefiting from our adoption of Agile methodologies. KCOM Group PLC Annual report and accounts 2017/18 15

5 Strategic report Market opportunities continued National Network Services Connectivity to support organisations on their technology journey Connectivity is key The connectivity solutions we deliver to customers in our National Network Services segment are critical to their business operations, underpinning in turn the services provided to their own customers and helping to create a platform for market differentiation and competitive advantage. Within this segment our opportunities for growth are focused in three areas: > > Managed Wide Area Networks > > Health and Social Care Network > > Call management 1 Managed Wide Area Networks (WANs) Our key target market for this proposition is organisations in the retail, charity, logistics and public sectors with connected sites, where we have proven capability and strong client references. The challenges faced by such organisations include the growing constraints on their networks as a result of cloud adoption and the increasing bandwidth usage that is being driven by the adoption of business applications and video. As well as reliable connectivity solutions, our offering to this market includes: > > The ability to integrate with third party networks and provide a single, end-to-end managed service. > > Software defined networking (SD WAN) technology, which allows us to offer more resilient and more flexible services that enable customers to increase bandwidth in line with demand. > > Intelligent edge services that allow network data to be analysed to give customers a deeper insight into how the network is being used. 16 KCOM Group PLC Annual report and accounts 2017/18

6 The RSPB is the largest nature conservation charity in the UK, working to preserve wildlife both in the United Kingdom and overseas. It chose KCOM to provide a managed wide area network connecting 190 sites, some in very remote locations, across the UK. With reliable connectivity in place, it made the decision to move to a KCOM hybrid cloud platform, providing the flexibility to make the most of videoconferencing services, improve internal communication and collaboration and reduce staff travel time. As our managed WAN provider, we trust KCOM with the end-to-end connectivity for 190 sites. We also trust its technology recommendations adopting hybrid cloud has improved our audio and video conferencing capability, which has had a positive impact on communication within the business. Luke Ludford Infrastructure Support Manager, RSPB Strategic report Directors report Financial statements 2 Health and Social Care Network (HSCN) HSCN is a new NHS Digital data network that has been designed to meet the needs of an integrated and evolving health and social care sector. Unlike the single-supplier network it is replacing, HSCN allows organisations including NHS trusts, pharmacies and GP surgeries to buy connectivity services from a choice of accredited suppliers within a competitive marketplace. These organisations tend to be cost-conscious and in need of simple solutions, reliable project management, seamless migration and in-life support. We are among a small number of providers so far that has achieved level 2 HSCN compliance and already have a number of opportunities in the pipeline. We are well-placed to use our WAN expertise to support health and care providers to do more than simply migrate their existing data connections to the new network. Our proposition is that by integrating customers HSCN requirements within a wider network strategy we can improve the resilience, performance and security of their IT infrastructure and ensure their network has the flexibility and capacity to support future needs. This proposition is enhanced by our cloud capability and our applications delivery experience. 3 Call management Our call management solutions enable complex call routing and multi-channel contact capabilities that allow organisations to manage the contact experience they deliver to customers. We have a strong track record in the provision of these services to the wholesale and reseller markets, where a key element of our offering is support and education on how their call management solution can best be deployed and shaped to meet the needs of their customers. We are increasingly seeing opportunities to cross-sell our call management solutions to existing direct customers and will continue to evolve our portfolio enabling us to offer services including unified communications, mobility, payment card industry compliant voice services and voice biometrics capability to wholesale, reseller and direct customers. Consultancy, delivery, service and support Across our three key National Network Services propositions our focus is on offering customers a service wrap that includes pre-sales consultancy and advice, strong project management and delivery capability, together with in-life service and support. This, combined with our ability to take advantage of the cloud and the integration expertise that sits within our Enterprise segment, enables us to offer added value to our customers, positioning us well to secure contract renewals as well as new and profitable business. KCOM Group PLC Annual report and accounts 2017/18 17