Customer Care. Market Review. Mark H Mortensen and Larry Goldman. October Program: Billing and Customer Care

Transcription

1 Market Review Mark H Mortensen and Larry Goldman October 2009 Program: Billing and 2009 Analysys Mason Ltd. All rights reserved worldwide.

2 Table of contents Table of contents Table of contents... 2 List of figures... 4 List of tables... 5 Executive summary... 6 Customer relationship management... 6 Subscriber management... 6 Customer interaction... 6 Overall market share... 9 Products and services market share... 9 SAP Product market shares Services market share Overall forecast Application segments Forecast by communications service Forecast by region CRM PO Box 1319 Sugar Grove, IL Phone: Fax: info@ossobserver.com Website: OSS Observer is part of Analysys Mason Ltd research@analysysmason.com Analysys Mason Ltd is registered in England and Wales Registration No Market share Forecast Forecast by communications service Forecast by region Subscriber management Market share Forecast Forecast by communications service Forecast by region Customer interaction Market share Forecast Forecast by communications service Analysys Mason Ltd. 2

3 Table of contents Forecast by region Drivers and inhibitors Business drivers Business inhibitors Drivers Competition in mature markets Emerging markets with high, predominately pre-paid, subscriber growth Content services Customer self-care Subscriber personalization Service convergence Inhibitors Worldwide economic conditions Regulation Subscriber saturation Infrastructure drivers Infrastructure Inhibitors Drivers Platform integration Inhibitors IT cost reduction In-house built systems Legacy environments Business environment Market definition Customer relationship management Subscriber management Customer interaction M&A in customer care Customer care vendors Key vendor profiles Amdocs Analysys Mason Ltd. 3

4 Table of contents AsiaInfo ATG Avaya BroadVision CBOSS Convergys Comverse CSG Ericsson Genesys Infor Intec Microsoft Oracle salesforce.com SAP Comparison of customer care vendors Recommendations Recommendations for CSPs Mobile CSPs in emerging markets Mobile CSPs in mature markets Wireline CSPs New technologies for all CSPs Recommendations for vendors List of figures Figure 1: Global customer care forecast... 8 Figure 2: Global customer care market share... 9 Figure 3: Customer care product revenue market share Figure 4: Customer care professional services market share Figure 5: Customer care forecast Figure 6: Customer care application segments forecast Analysys Mason Ltd. 4

5 Table of contents Figure 7: Customer care forecast by communications service Figure 8: Customer care forecast by region Figure 9: CRM market share Figure 10: CRM forecast Figure 11: CRM forecast by communications service Figure 12: CRM forecast by region Figure 13: Subscriber management market share Figure 14: Subscriber management forecast Figure 15: Subscriber management forecast by communications service Figure 16: Subscriber management forecast by region Figure 17: Customer interaction market share Figure 18: Customer interaction forecast Figure 19: Customer interaction forecast by communications service Figure 20: Customer interaction forecast by region Figure 21 Analysys Mason supplier market segmentation Figure 22 Interaction of customer care with billing, real-time charging, SDP, and service fulfillment Figure 23 CRM functions Figure 24: Subscriber management functions Figure 25 Customer interaction functions List of tables Table 1 M&A in customer care Table 2 Vendor Comparison Analysys Mason Ltd. 5

6 Executive summary Executive summary Customer care systems allow Communications Service Providers (CSPs) to offer services, take orders, and provide a full range of support, both human and automated, to their customers. CSPs have increased their spending on customer care systems and operations in the past five years as customers seek better service and CSPs attempt to decrease call center costs and expensive customer churn simultaneously. Customer care consists of three sub-segments: Customer relationship management Customer relationship management (CRM) provides sophisticated marketing, sales and operational support to the CSP agents who deal with the customer. CSPs, particularly in developed markets and mobile, are implementing these systems to provide campaign management to target their sales and marketing resources, guide their agents in dealings with customers to ensure the best customer experience (CE) in the face of continuingly complex service offerings, provide the optimal service and equipment bundled offering to the customer to maximize their wallet-share, and to provide a standardized, high quality CE to increase customer loyalty. They are being implemented either as integrated CRM systems from several key vendors encompassing a wide variety of functions, or as a collection of functionally-targeted CRM systems from multiple vendors, integrated together. Subscriber management To some extent, all CSPs use subscriber management features that come bundled with their billing system. In smaller CSPs, subscriber management directly supports care agents and direct customer interaction. In CSPs that use CRM, subscriber management has a much more limited role. Customer interaction CSPs are increasingly deploying customer interaction to reduce their customer care costs. These systems, provided by many specialist vendors, provide channels for customer self-service 2009 Analysys Mason Ltd. 6

7 Executive summary and direct machine-to-customer information. Interactive Voice Response (IVR), web portal and Smartphone app-based customer self-care systems, contact center systems, retail management systems, pre-paid top-up, and SMS and USSD systems all fall into this category. Mobile operators in emerging markets, with low-margin pre-paid customers dominating their business, are being particularly innovative in their use of customer interaction systems to radically decrease costs while providing at least an acceptable level of customer service. Each of these three sub-segments is reported separately in this report, with market share and five year forecast and by communications service type and geography Customer care systems continue to grow at about the rate of the CSP market, with a downturn in sales in 2008 and 2009 due to the unfavorable economic conditions. Analysys Mason expects that it will return to at least its previous growth rates in 2010 and beyond. Customer care will grow 6% CAGR from $1.86 billion in 2008 to $2.47 billion in 2013, with all sub-segments languishing for two years as mentioned above. The CRM sub-segment will grow strongly in the latter years as developing markets move to more sophisticated capabilities for a total CAGR of 6%. Customer interaction, which has been shown to reduce costs and increase customer loyalty, will smoothly accelerate for a more robust 9% CAGR. Subscriber management, which is usually implemented as an adjunct to billing systems, will grow at only 2%. CSPs will move away from investing there to more sophisticated, cross-industry CRM and to subscriber interaction solutions due to increasing competition. In prior years this report was combined with the market share and forecast information for the billing segment in the combined Billing and customer care market review. The billing market share and forecasts can now be found in the Billing market review by Larry Goldman and Peter Mottishaw. Product catalog, which used to be a part of rating and pricing in the billing segment, was moved to customer care in the 2008 report, where it is now reported as a part of CRM Analysys Mason Ltd. 7

8 $ Millions Executive summary Figure 1: Global customer care forecast $3,000 $2,500 $2,000 $1,500 $1,000 $500 $- CY2008 CY2009 CY2010 CY2011 CY2012 CY2013 Cust Care (CAGR 6%) $1,859 $1,856 $1,934 $2,074 $2,254 $2,471 Source: Analysys Mason 2009 Analysys Mason Ltd. 8

9 Overall market share Overall market share The top six customer care suppliers have 70% of the total $1.8 billion customer care market (figure 2), with two vendors dominating the market Amdocs and Oracle, both of whom have spent the last five years acquiring billing and customer care assets and aggressively building integrated offerings around them. Customer care is more consolidated than billing and most other BSS and OSS areas, but still has at nearly 50 suppliers commanding revenues of several million dollars, with many additional smaller, geographicallyfocused suppliers. One of these regionally-focused suppliers, AsiaInfo, has made the key vendors list for the first time as seen in figure 2. It has aggressively expanded with the mobile telecom market in China. Figure 2: Global customer care market share 2008 Total Revenue = $1,859 million AsiaInfo Ericsson ATG Infor Broadvision Intec CBOSS Microsoft CSG salesforce.com Other 30% Oracle 28% Comverse 3% Genesys 3% Avaya 3% SAP 4% Convergys 7% Amdocs 23% Source: Analysys Mason Products and services market share Oracle is the overall leader with 28% market share based on its strength in CRM. On the strength of Siebel CRM as well as other CRM products Oracle developed or acquired, it is the overall CRM leader in all industries. Amdocs has a 23% market share based heavily on the strength of subscriber management that is tied closely to its billing systems. It also has CRM capabilities based on its acquired Clarify products that it has been building on at a quick pace. Amdocs CRM is used 2009 Analysys Mason Ltd. 9

10 Overall market share independently by some CSPs and non-csp customers but most Amdocs customer care business is linked to its billing solutions. No other supplier has more than 7% market share. Convergys has 7% market share based most heavily on subscriber management linked to its strong position in billing. In the past few years Convergys has worked to leverage the expertise gained from outsourced customer care operations into stronger customer care offers. Convergys is a complex company offering a large number of products and services to CSPs. In our revenue estimates, we exclude their substantial outsourced customer care operation. We include the ICOMS cable MSO customer care and Infinys customer care. Infinys customer care, usually implemented with its billing system, is strong in Europe, APAC and CALA markets but has had limited success in North America. Convergys acquisition of Intervoice in 2008, a provider of IVR and speech applications and complementary services, has supported its market position in customer care, despite the decline in its traditional business. Comverse acquired Kenan (billing and ancillary customer care) from CSG in late 2005 and Netonomy (customer self-service, billing analysis, and POS solutions) in 2006 to become a leading customer care vendor. Comverse also provides IN-based pre-paid systems, which we exclude from our coverage and real-time charging, which we cover in service delivery platforms (see Service delivery platforms market review by Peter Mottishaw). SAP has 4% market share based on its position in CRM. SAP has a base of CSP customers, primarily in Europe. As the overall telecom software area consolidates, SAP s lack of telecom-specific software limits its opportunities for customer care revenue. It has strengthened its overall position with the acquisition of Business Objects in Avaya and Genesys (an Alcatel Lucent subsidiary) provide IVR systems that are widely used to provide customer self-care support. We count the software portion of IVR systems as part of our customer interaction segment. Avaya and Genesys are the clear leaders among IVR suppliers in the telecom sector. Each have 3% customer care market share Analysys Mason Ltd. 10

11 Overall market share Product market shares The contrasting approaches of Amdocs and Oracle are vividly illustrated in figures 3 and 4. Figure 3 shows the product-only market share, where Oracle is the dominant leader. Figure 4 shows the product-related services market share where Amdocs is equally dominant. Figure 3: Customer care product revenue market share Other 32% 2008 Product Revenue = $1,140 million Oracle 42% Genesys 4% Avaya 5% Amdocs 5% SAP 6% Convergys 6% Source: Analysys Mason Oracle s corporate strategy is to emphasize license product sales as the best way to create shareholder value. This overall corporate strategy applies to all industries. Oracle limits the amount of professional services it provides and partners strongly with many integrators. Oracle does provide some professional services, focusing on overall deployment strategies and on product-deployment assistance. Interestingly, Oracle s professional services revenue grew more rapidly in 2008 than its licensed software revenue. SAP has a corporate strategy even more focused than Oracle on selling software and avoiding professional services. This severely limits SAPs opportunity to expand in the telecom software business. It needs to find the right way to partner with other companies to combine its product software with other telecom software and the requisite services. Avaya and Genesys are both quite product focused. Avaya does no professional services. However, Genesys is a subsidiary of Alcatel-Lucent, which provides extensive telecom industry 2009 Analysys Mason Ltd. 11

12 Overall market share professional services. Alcatel-Lucent is doing an increasing number of Genesys-based customer care projects. Services market share Figure 4: Customer care professional services market share 2008 Prof Service Revenue = $719 million Other 27% Amdocs 50% CBOSS 2% salesforce.com 3% AsiaInfo 3% Oracle 7% Convergys 8% Source: Analysys Mason Amdocs strategy is to get the most available recurring revenue from its target telecom customers. This involves providing a total solution approach with Amdocs taking full responsibility for providing all the necessary services when a customer deploys a major system. This strategy is somewhat less true in the customer care segment, since Amdocs is seeking to sell its CRM solution to CSPs who use another vendor s billing system and hires an SI to do the integration. Amdocs typically signs multi-year contracts to provide software, installation, integration and conversion services. We believe that Amdocs discounts the cost of the software in order to maximize its opportunity to maintain services volumes and margins. This murky line between the software and related services makes it difficult to know what value customers actually place on the software. Convergys has a solid base of customer care, primarily subscriber management, related to its billing system deployments. Building on its extensive outsourced customer care experience, Convergys has invested in better customer interaction support and provided a growing amount of professional services along with its products Analysys Mason Ltd. 12

13 $ Millions Overall forecast Overall forecast Analysys Mason forecasts CSP spending on customer care will grow 6% CAGR through 2013 (figure 1), with a small decline in 2008 and 2009 due to the economic conditions, returning to keeping pace with overall CSP revenue growth in CSPs strongly value the improved support they provide to their customers and the automation that minimizes the cost of support. However, CSPs in developed countries have been investing heavily for the past five years so we do not expect dramatic increases from them. In developing countries with high pre-paid mobile focus and generally lower ARPU, customer care currently gets less focus and less investment than in developed countries. But this will begin to change in 2012 and beyond as they the emerging market CSPs begin to worry more about customer churn. Figure 5: Customer care forecast $3,000 $2,500 $2,000 $1,500 $1,000 $500 $- CY2008 CY2009 CY2010 CY2011 CY2012 CY2013 Cust Care (CAGR 6%) $1,859 $1,856 $1,934 $2,074 $2,254 $2,471 Source: Analysys Mason Application segments The fastest growing customer care application segment is customer interaction (figure 6). CSPs are investing to improve the fundamental interaction they have with customers through web self care, IVR and improvements to the contact center support. They continue to invest in CRM, but new massive CRM projects have gone out of fashion. After the recession ends, CRM will grow at the rate of overall services growth until 2012 when it will accelerate as developing market CSPs begin their move to the more sophisticated CRM capabilities. At that time, they may be integrating stand-alone 2009 Analysys Mason Ltd. 13

14 $ millions Overall forecast CRM functions into their existing structures instead of doing largescale re-systemization. Subscriber management will grow more slowly than other segments, but some CSPs will continue to depend primarily on billing systems based subscriber management rather than shifting to CRM. Customer interaction has 9% CAGR as CSPs put more emphasis on various self-care solutions that will lower their costs and improve customer service, if done right. Customer interaction support varies from IVR to web self care to mobile handset functions such as Short Message Service (SMS) and GMS s Unstructured Supplementary Service Data (USSD). Figure 6: Customer care application segments forecast $1,200 $1,000 $800 $600 $400 $200 $- CY2008 CY2009 CY2010 CY2011 CY2012 CY2013 CRM (CAGR 6%) $750 $744 $774 $832 $911 $1,006 Subscriber Mgt (CAGR 2%) $575 $552 $554 $582 $613 $646 Cust Interaction (CAGR 9%) $534 $560 $605 $661 $731 $818 Source: Analysys Mason Forecast by communications service Spending for traditional PSTN support will continue to decline dramatically as CSPs shift investment to support new services growth (figure 7). Nevertheless, CSPs will continue spending nearly $200 million in 2012 to support and enhance existing PSTN support Analysys Mason Ltd. 14

15 Overall forecast In emerging markets there is some limited new investment in PSTN customer care. Mobile is by far the largest service segment and gets the greatest customer care spending. At 9% CAGR, mobile customer care spending growth is in line with our forecasted overall mobile services growth (see Communications service provider market review by Roz Roseboro). Mobile CSPs in developed markets are working to improve customer care but have already invested substantially, so we anticipate a minor growth rate. We anticipate higher rates in emerging markets, leading to an overall 9% growth rate. Nevertheless, mobile customer care is nearly half of the overall market opportunity. Residential broadband will also grow 8% CAGR, driven by the introduction of new services. Residential broadband already gets a disproportionately high percentage of customer care spending when compared with mobile. Mobile revenues are three times residential broadband revenues but mobile customer care spending is only two times residential broadband. Triple play opportunities, massive fiber investments and very high customer acquisition efforts by tier-1 CSPs have led to major customer care investments over the past few years that will continue through the forecast period. The Business services area is a very small part of customer care spending, but vendors focused on this area will see a 12% CAGR. CSPs, especially in developed markets, are putting more emphasis on better call center support and excellent self-care for large enterprises and SMB/SME Analysys Mason Ltd. 15

16 $ Millions Overall forecast Figure 7: Customer care forecast by communications service $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $- CY2008 CY2009 CY2010 CY2011 CY2012 CY2013 Mobile (CAGR 9%) $905 $936 $1,000 $1,113 $1,229 $1,365 PSTN (CAGR -12%) $370 $311 $268 $226 $193 $192 Business (CAGR 12%) $131 $149 $168 $190 $219 $235 Res BB (CAGR 8%) $454 $461 $497 $546 $614 $673 Source: Analysys Mason Forecast by region North America (NA) has less than a third of total service revenue but currently gets a disproportionately large 37% of customer care spending. Other regions have had more growth and will catch up in customer care, but customer care spending growth in NA keeps pace with them with a 6% CAGR (figure 8), driven by new service introductions. Europe, Middle East and Africa (EMEA) are forecast at a 7% CAGR. Asia Pacific (APAC) and Central and Latin America (CALA) are both forecast at 6% CAGR. These regions have not received the degree of customer care investment made in NA and are therefore working to catch up. Historically, there has been less emphasis on customer care in many developing market areas of CALA and APAC regions especially in the CRM area. Although in the later years of the forecast, we expect a shift more towards 2009 Analysys Mason Ltd. 16

17 Overall forecast CRM. In the interim, the CSPs, especially mobile operators, have some significant challenges. Spending for traditional PSTN support will continue to decline dramatically as CSPs shift investment to support new services growth (figure 7). Nevertheless, CSPs will continue spending nearly $200 million in 2012 to support and enhance existing PSTN support. In emerging markets there is some limited new investment in PSTN customer care. Mobile is by far the largest service segment and gets the greatest customer care spending. At 9% CAGR, mobile customer care spending growth is in line with our forecasted overall mobile services growth (see Communications service provider market review by Roz Roseboro). Mobile CSPs in developed markets are working to improve customer care but have already invested substantially, so we anticipate a minor growth rate. We anticipate higher rates in emerging markets, leading to an overall 9% growth rate. Nevertheless, mobile customer care is nearly half of the overall market opportunity. Residential broadband will also grow 8% CAGR, driven by the introduction of new services. Residential broadband already gets a disproportionately high percentage of customer care spending when compared with mobile. Mobile revenues are three times residential broadband revenues but mobile customer care spending is only two times residential broadband. Triple play opportunities, massive fiber investments and very high customer acquisition efforts by tier-1 CSPs have led to major customer care investments over the past few years that will continue through the forecast period. The Business services area is a very small part of customer care spending, but vendors focused on this area will see a 12% CAGR. CSPs, especially in developed markets, are putting more emphasis on better call center support and excellent self-care for large enterprises and SMB/SME. Currently, low-cost providers of pre-paid mobile services, which dominate the developing markets in CALA, EMEA, and APAC, are implementing specific customer interaction solutions in innovative ways to provide good, if not excellent, service. However, in the later years of the forecast, we expect a shift more towards CRM. Substantial challenges continue to exist in the mobile sales 2009 Analysys Mason Ltd. 17

18 $ Millions Overall forecast channels that depend heavily on resellers. Customer care solutions to help standardize and optimize the packaging and sales processes across resellers will be an area of future investment. Figure 8: Customer care forecast by region $1,200 $1,000 $800 $600 $400 $200 $- CY2008 CY2009 CY2010 CY2011 CY2012 CY2013 NA (CAGR 5%) $725 $721 $747 $796 $860 $938 CALA (CAGR 7%) $80 $81 $85 $91 $100 $111 EMEA (CAGR 6%) $747 $743 $775 $835 $909 $997 APAC (CAGR 7%) $308 $312 $327 $352 $385 $425 Source: Analysys Mason 2009 Analysys Mason Ltd. 18

19 CRM CRM CRM systems provide automation for making offers to customers, targeting specific groups with sales campaigns, maintaining product catalogs and helping customer service representatives (CSR s) handle customer requests. Tier-1 CSPs are heavily committed to using CRM to manage complex service bundles for very large, diverse customer bases. Smaller CSPs, especially in developing markets, are not yet introducing CRM into their operations, but will in the later years of the forecast. CRM is sometimes thought to embody all of customer care, but we choose to make a clear distinction of CRM from telecom-specific subscriber management and customer interaction systems. Those distinctions are sometimes hard to delineate - some CRM deployments will have subscriber management and customer interaction features built into them. Moreover, some CSPs are beginning to build on their current subscriber management base, integrating specific CRM features from specialized vendors. Market share Major transformation projects that have fueled the growth of CRM in recently have become rare. CSPs have been adopting a more tactical approach, implementing focused functions that solve near term problems, rather than large customer care infrastructure deals. Oracle dominates the telecom CRM market with 47% market share (figure 9). Oracle Siebel CRM is the default choice by CSPs looking for full-featured, strategic CRM upon which to base their customer care automation strategy. A large part of Oracle s dominating market share comes from adding Siebel CRM and PeopleSoft CRM to its existing CRM in 2005 and Oracle wisely chose to make Siebel CRM the strategic target for the future, working to migrate customers off of the other products and onto the flagship. Amdocs comes behind Oracle with a 20% share. Amdocs CRM is based on its acquisition of Clarify in Amdocs has some CRM customers that do not use Amdocs billing, but almost all new Amdocs CRM customers also use Amdocs billing products. The tight linkage of those market successes is reflected in Amdocs efforts to integrate Amdocs CRM with Amdocs Revenue 2009 Analysys Mason Ltd. 19

20 CRM Management (billing product line) for the past several years. Amdocs has also worked to integrate its CRM into its service fulfillment products to provide flow-through activation at the back end. The entire Amdocs product line is being marketed as Customer Experience Systems, a term that most of the rest of the market defines much more narrowly. Amdocs has suffered from the drop in large transformation deals, in which it excels, than several of the other vendors. SAP, with 9% market share is the only other notable CRM vendor. SAP has a solid base in Europe and some other regions with a CRM product that is more widely used in other industries. SAP is the last major CRM supplier that does not have a linkage to its own billing system. Infor (formerly known as SSA Global) is a mid-tier enterprise software vendor whose position in telecom CRM comes from its 2005 acquisition of Epiphany. It is the most common alternative to the big CRM suppliers, but Infor is pushing a broad range of enterprise software and is less focused on telecom sales than was Epiphany. Its recent OEM arrangement with Comverse, however, will serve them both well in the marketplace. Microsoft software is widely used by groups trying to establish its own support with a minimum of IT complexity. We view the Microsoft Dynamic CRM less as a strategic system, and more as a way for CSP IT shops to deploy specific types of CRM support, such as outbound promotions, quickly and easily. The strategic focus and approach to the use of Microsoft CRM and other platforms is almost completely orthogonal to the approach of choosing and using Oracle Siebel CRM with its rich functionality. As with Microsoft, salesforce.com has a limited role among CSPs. The appeal of outsourced CRM is strong for small CSPs that want the benefits of CRM with the minimum headaches. These users are willing to give up much of the potential CRM benefits in order to have basic CRM functions implemented quickly and with the least risk and effort, but substantial planning and configuration of the solution must be done, limiting its acceptance. Salesforce.com is most successful among tier-3 CSPs in NA Analysys Mason Ltd. 20

21 CRM Aside from these identified leaders, there are other specialist CRM suppliers noted in figure 9. CSPs choose them to provide a specific, specialty CRM function rather than deploying a major CRM suite or sometimes to complement an existing CRM deployment. Some CSPs still prefer to control the development of their customer care, integrating some of these specialist CRM products into what is an internally-developed customer care system. Figure 9: CRM market share 2008 CRM Revenue = $750 million Infor 3% SAP 10% Other 14% salesforce.com 3% Microsoft 3% Chordiant Comverse Convergys egain NetSuite Onyx Pegasystems Pivitol Sterling Commerce Tribold Oracle 47% Amdocs 20% Source: Analysys Mason Forecast CRM, the largest application segment in customer care, will grow the same 6% CAGR as the overall customer care area (figure 10). Spending on CRM is as the heart of tier-1 and many tier-2 CSP s strategy to use automation to improve overall customer support. However, many tier-2 and most smaller CSPs currently eschew CRM in favor of simpler subscriber management approaches. We anticipate that these CSPs will implement more CRM functions in the later years of the forecast as they face increased competition and tackle the problem of customer churn Analysys Mason Ltd. 21

22 $ millions CRM Figure 10: CRM forecast $1,200 $1,000 $800 $600 $400 $200 $- CY2008 CY2009 CY2010 CY2011 CY2012 CY2013 CRM (CAGR 6%) $750 $744 $774 $832 $911 $1,006 Source: Analysys Mason Forecast by communications service The forecast for CRM spending growth by communications service (figure 11) largely mimics the overall customer care area explained in conjunction with figure 7. CSPs are dramatically reducing PSTN spending to free up money for more investment in growing areas. The business services segment has growth and is receiving more attention, but is still not an important CRM focus. Services provided to broad-based retail customer bases get the focus for CRM spending, which will grow slightly more rapidly than revenue for these services. Mobile services already get the bulk of CRM spending and will grow rapidly through the forecast period. Mobile services are where CSPs believe they can build the richest and most complete overall customer relationship. They are using the power of CRM to position complex service bundles, make segmented offers, formulate sales campaigns and track their overall success. CSPs investments in CRM place them squarely in the middle of customer care and enhancement of the overall CE, leading to investments that build the power of traditional CRM functionality and link the CRM system to underlying billing and fulfillment systems Analysys Mason Ltd. 22

23 $ millions CRM Residential broadband services get a similar level of attention from CSPs but the more limited number of subscribers and revenue lessens the overall size of residential broadband CRM. Support for triple play, especially a range of IPTV and other video services require expansion of the existing CRM deployments. Figure 11: CRM forecast by communications service $700 $600 $500 $400 $300 $200 $100 $- CRM CY2008 CY2009 CY2010 CY2011 CY2012 CY2013 Mobile (CAGR 10%) $375 $391 $418 $474 $528 $594 PSTN (CAGR -13%) $143 $119 $101 $83 $73 $70 Business (CAGR 11%) $45 $48 $54 $58 $73 $75 Res BB (CAGR 7%) $188 $186 $201 $216 $237 $262 Source: Analysys Mason Forecast by region North American CSPs had the greatest focus on CRM over the past few years and the market has a disproportionate share of CRM spending relative to the services revenue. EMEA will grow slightly faster than NA (figure 12). CALA and APAC growth is similar at 6% CAGR but the base of CRM spending is lower in developing markets and it will stay lower. CRM spending is mostly focused in high-arpu markets with significant subscription rather than pre-paid business Analysys Mason Ltd. 23

24 $ Millions CRM Figure 12: CRM forecast by region CRM $500 $450 $400 $350 $300 $250 $200 $150 $100 $50 $- CRM CY2008 CY2009 CY2010 CY2011 CY2012 CY2013 NA (CAGR 6%) $279 $276 $284 $304 $331 $364 CALA (CAGR 6%) $32 $32 $33 $35 $39 $43 EMEA (CAGR 7%) $320 $317 $333 $359 $395 $439 APAC (CAGR 6%) $120 $120 $125 $133 $145 $160 Source: Analysys Mason 2009 Analysys Mason Ltd. 24

25 Subscriber management Subscriber management Subscriber management systems are customer care systems designed specifically to support communications services. They are normally provided as adjuncts to commercial billing systems to support product definition, ordering, billing inquiry and basic support. All the subscriber management leaders are major billing suppliers. All rating and pricing suppliers also provide some subscriber management. Nearly all CSPs deploy some form of subscriber management. In smaller CSPs, subscriber management directly supports care agents and direct customer interaction. In CSPs that use CRM, subscriber management has a much more limited role. Market share The global subscriber management market segment was $571 M in 2008 (figure 12). Amdocs is the leader with 35% market share. Convergys and Oracle comprise the second tier providers with 11% and 10% respectively. AsiaInfo, Comverse and CSG, each with 4% make up the rest of the top six suppliers. These market shares match those of the rating and pricing market shares. Figure 13: Subscriber management market share 2008 Subscriber Mgt Revenue = $575 million CBOSS Cerillion Comarch Ericsson ETI Software Highdeal Intec Orga Systems Redknee USHA Comm Other 32% Amdocs 35% AsiaInfo 3% CSG 4% Comverse 4% Oracle 10% Convergys 12% Source: Analysys Mason 2009 Analysys Mason Ltd. 25

26 $ millions Subscriber management Forecast Overall growth in subscriber management (figure 14) lags global services revenue growth, with a dip due to the global recession, which dampened large billing projects globally. In the later years, growth in subscriber management comes from balancing the market growth of subscriber management in CSPs in developing markets due to increasing number of subscribers against these CSPs inevitable maturation path of implementing more CRM functionality. Figure 14: Subscriber management forecast $700 $600 $500 $400 $300 $200 $100 $- CY2008 CY2009 CY2010 CY2011 CY2012 CY2013 Subs Mgt (CAGR 2%) $575 $552 $554 $582 $613 $646 Source: Analysys Mason Forecast by communications service Figure 15 shows the shift of subscriber management spending away from PSTN to other services. The strongest growth is in business services, where CSPs are more likely to deploy specialized software to support business customers and steer away from the more mass market oriented CRM systems. Residential broadband and mobile services demonstrate reasonable growth in subscriber management as CSPs invest in the basic support to make customer care agents more productive and responsive to customers, especially in billing inquiry related tasks Analysys Mason Ltd. 26

27 $ millions Subscriber management Figure 15: Subscriber management forecast by communications service $400 $350 $300 $250 $200 $150 $100 $50 $- Subs Mgt CY2008 CY2009 CY2010 CY2011 CY2012 CY2013 Mobile (CAGR 4%) $279 $276 $285 $308 $328 $346 PSTN (CAGR -11%) $115 $97 $83 $70 $61 $65 Business (CAGR 7%) $43 $44 $47 $52 $58 $61 Res BB (CAGR 5%) $138 $135 $138 $151 $165 $175 Source: Analysys Mason Forecast by region The tier-1 dominated North American market has the least focus on subscriber management (figure 16), growing into the more sophisticated CRM systems or supplementing their subscriber management platforms with additional best of breed specialized CRM functions. This leads to the essentially flat market for subscriber management in the North American market. Growing parts of EMEA, CALA, and the APAC markets favor subscriber management and focus less on CRM. This will begin to move more to CRM in the latter years of the forecast period. The tier-1 CSPs in Western Europe and developed parts of APAC put more emphasis on CRM, dampening the demand for subscriber management Analysys Mason Ltd. 27

28 $ Millions Subscriber management Figure 16: Subscriber management forecast by region $300 $250 $200 $150 $100 $50 $- Subs Mgt CY2008 CY2009 CY2010 CY2011 CY2012 CY2013 NA (CAGR -1%) $215 $200 $198 $201 $203 $205 CALA (CAGR 7%) $26 $26 $28 $29 $32 $36 EMEA (CAGR 3%) $226 $217 $215 $228 $242 $256 APAC (CAGR 7%) $108 $109 $113 $124 $136 $150 Source: Analysys Mason 2009 Analysys Mason Ltd. 28

29 Customer interaction Customer interaction Customer interaction systems provide a variety of means for customers to interact with CSP support functions. CSPs can provide multiple methods for their customers to access the same underlying CRM and subscriber management systems. Customer interaction systems include web self care, IVR systems, contact center systems, retail point of sale, SMS, and mobile USSD and similar systems that CSPs deploy as a front end to automatically respond to customers and limit the time they take from care agents. CSPs motivation in deploying these systems is primarily call center cost reduction. Customer interaction is the one segment within billing and customer care where investments are primarily driven by operating cost reduction. The customer interaction market is quite fragmented, with many specialist providers. This is an area where CSPs develop a lot of their own software solutions or work with integrators for customized solutions. The substantial hardware sales associated with many of these systems is not counted in our market estimates only the software. Market share Oracle is the overall market leader in customer interaction (figure 17) built heavily on their market position with CRM. Amdocs is second. These two leaders positions generally reflect the strength of their overall position in other parts of customer care. In contrast Avaya and Genesys are specialist IVR suppliers. Note that we do not count IVR hardware revenues but only what we determine are the appropriate software revenues from these vendors. Convergys is among the leaders with strong self care and contact center capabilities generally linked to its subscriber management position. It achieved growth in 2008 as it acquired IVR supplier Intervoice, which more than made up for a drop in its traditional subscriber management business. Genesys, an Alcatel- Lucent subsidiary, is a specialist in IVR, with an overall customer interaction platform. ATG is a specialist in web self care whose software is widely used along with custom-developed customer interaction systems. New this year to the list of providers is AsiaInfo, who provides integrated OSS, including customer care, to the China market Analysys Mason Ltd. 29

30 Customer interaction Figure 17: Customer interaction market share 2008 Customer Interaction Revenue = $534 million AsiaInfo Broadvision Comverse CSG Ericsson iisy Intec Irdeto Kana Rightnow Other 29% Oracle 23% ATG 5% Genesys 10% Amdocs 13% Avaya Convergys 10% 10% Source: Analysys Mason Forecast Customer interaction will grow 9% CAGR (figure 18) globally. The growth is primarily driven by CSP s push to lower the operational cost of customer care while providing as many options as possible for their customers Analysys Mason Ltd. 30

31 $ millions Customer interaction Figure 18: Customer interaction forecast $900 $800 $700 $600 $500 $400 $300 $200 $100 $- CY2008 CY2009 CY2010 CY2011 CY2012 CY2013 Cust Interaction (CAGR 9%) $534 $560 $605 $661 $731 $818 Source: Analysys Mason Forecast by communications service As with all other segments, CSPs are shifting customer interaction spending away from PSTN to other services (figure 19). Past investments in PSTN automation have given as much benefit as CSPs are likely to get. Business services, particularly support for data services sold to small and medium businesses, are increasing strongly, but on such a small base that the revenue is not significant compared to mobile and residential broadband. Because of the inherent computer accessibility of residential broadband customers, that segment is getting a major investment in web-based customer self care and encouragement for users to switch to that mode for all routine support, such as bill payment and inquiry. It is also getting contact center and IVR support as triple play deployments and CSP-provided home networking dramatically increase the complexity of services and the needed support. Mobile CSPs are implementing significant web self care and mobile app-based self care support along with SMS and USSD responses and IVR support, especially in developed markets where a wide 2009 Analysys Mason Ltd. 31

32 $ millions Customer interaction variety of new services are offered. Mobile broadband expands the prospects of more direct interaction through the mobile device. In developing countries with very low ARPU and dominated by prepaid services and distribution by independent agents, CSPs often provide very little customer care. Even IVR is too expensive. USSD and SMS codes to generate specific inquiries, primarily for balance management, are the favored mobile support mechanisms in those environments. Figure 19: Customer interaction forecast by communications service $450 $400 $350 $300 $250 $200 $150 $100 $50 $- Cust Interaction CY2008 CY2009 CY2010 CY2011 CY2012 CY2013 Mobile (CAGR 11%) $251 $269 $297 $330 $373 $425 PSTN (CAGR -13%) $112 $95 $85 $73 $58 $57 Business (CAGR 18%) $43 $56 $67 $79 $88 $98 Res BB (CAGR 13%) $128 $140 $157 $178 $212 $237 Source: Analysys Mason Forecast by region NA is the region investing most heavily in automation to drive cost out of customer care. The result is the highest current spending and the continuing highest growth rate. Customer interaction spending in NA continues out of proportion with overall service revenues as mobile CSPs seek to enhance the customer experience and increase the ARPU with a host of new services, service bundles and smart phones. Western Europe has similar motivations. Developing markets are more focused on mobile SMS and USSD and limited web self care and less on contact center or IVR solutions. CALA and APAC have the least growth because they offer the least direct 2009 Analysys Mason Ltd. 32

33 $ Millions Customer interaction support to customers, who are most likely mobile pre-paid customers who purchased through a dealer. Figure 20: Customer interaction forecast by region $400 $350 $300 $250 $200 $150 $100 $50 $- Cust Interaction CY2008 CY2009 CY2010 CY2011 CY2012 CY2013 NA (CAGR 10%) $231 $245 $265 $291 $326 $369 CALA (CAGR 8%) $22 $23 $25 $27 $29 $32 EMEA (CAGR 9%) $201 $209 $227 $248 $273 $303 APAC (CAGR 8%) $80 $83 $89 $95 $104 $115 Source: Analysys Mason 2009 Analysys Mason Ltd. 33

34 Drivers and inhibitors Drivers and inhibitors The value of billing and customer care systems is in helping CSPs market and provide a range of services quickly and efficiently, support their customers and collect revenues. This involves offering services, taking orders, building customer relationships, collecting revenue from customers and managing the relationships with partner service providers. Quite a number of factors drive CSPs to spend more for commercial billing and customer care automation while some factors inhibit them. These factors continue to be similar to those we have reported in recent years. Business drivers Competition Emerging markets Content services Customer self-care Personalization Convergence Business inhibitors Economic conditions Regulation Subscriber saturation Drivers Competition in mature markets A more competitive environment is the greatest driver for CSP spending on customer care systems. In mobile and residential broadband, CSPs are competing more directly than ever before Analysys Mason Ltd. 34

35 Drivers and inhibitors Cable MSO s offering VoIP compete with traditional Telco s who are adding broadcast or IPTV. In most markets, mobile CSPs are gaining customers from wireline CSPs, but are losing customers to competing mobile carriers with comparable coverage areas. Especially in Western Europe and Japan where there is complete subscriber saturation, competitive moves are the only way to gain subscribers. China is the only major market in which competition is not yet an important factor. CSPs in developed markets are more focused than ever on preventing churn in their own customers in mobile and residential broadband services. Much of the investment in customer care is driven by this effort to cut down on churn that can come from poor CE. CSPs generally believe they are in a growth business and their investment strategies are driven by that belief rather than an attempt to optimize their current business for the maximum profit. Investment decisions are made primarily to support winning new customers and offering new services. Beginning in 2010, we expect most CSPs to address the competitive environment by investing in significant new operations and network infrastructure and introducing new services enabled by that infrastructure. Their customer care investments are heavily tied to that driving factor. Return on investment is important, but it is not the driving factor. Rather, the best support of new growth with the least disruption and risk are more commonly the driving factor in commercial software purchase decisions. In the latter years of the forecast period, we expect competition to come into play in what are now the emerging markets, with a commensurate interest in customer care, especially CRM and subscriber interaction. Emerging markets with high, predominately pre-paid, subscriber growth In emerging markets, particularly the Middle East, Africa, Latin America and the non-japanese Asian markets, CSPs strong subscriber growth provides the promise of future revenues. To keep up 2009 Analysys Mason Ltd. 35

36 Drivers and inhibitors with the high demand for basic and advanced services, CSPs are adding improved customer care. These are the real green-field and total solution-type opportunities in the market. Many of these CSPs have very limited customer care systems that do not support the volume of new subscribers and services. CSPs want entirely new systems, but are concerned about disrupting their fast-growing operations. In many of these markets, CSPs do not value CRM but rather want systems clearly and simply tied to the services they are supporting. This is opening new markets and expanding business for regionally-focused vendors already established in those markets. While these opportunities do not have the degree of total transformation that might happen in more established markets, they are the place where the most significant transformations are going to happen. Some emerging market CSPs believe they can put in place modern telecom software systems and processes that will give them a global advantage over more established CSPs that are reluctant to change. Others are adding targeted sophisticated CRM functionality to their operations based on simpler subscriber management systems. CSPs that cater to low ARPU customers, especially prepaid mobile, need to be incredibly cost conscious. Some of these CSPs are implementing innovative customer self-care systems to keep their costs low. Content services CSPs are continuing to add content services to mobile and residential broadband. To support this they are putting in more data network infrastructure and new content servers while establishing linkages with content providers. Current customer care systems rarely provide good content service support. Support for content services rarely leads to customer care transformation projects. Most well-established CSPs are developing and obtaining systems that work as an adjunct to their established systems. These adjunct systems provide subscriber management, rating, partner management, real-time charging and sometimes other functions like product catalogs. CSPs are taking the burden of integrating these adjunct systems for new customers and revenue rather than taking the risk of disrupting existing support. Those with CRM and sophisticated pricing systems enhance those 2009 Analysys Mason Ltd. 36

37 Drivers and inhibitors umbrella functions but leave the content support heavy lifting to specific-purpose systems. CSPs in emerging markets with little customer care support are including content support in the new systems to support high subscriber growth. These emerging market CSPs have a small number of customers for such services but are nevertheless laying the foundation for future services. Customer self-care CSPs are investing in customer self-care primarily to lower customer care operations costs, but the more sophisticated CSPs recognize that, if done correctly, self-care can greatly increase customer loyalty and provide higher ARPU from additional services because of an enhanced CE. The greatest emphasis in self-care is on billing inquiry, handling bill presentment and payment, and taking orders for new service. Self-care is supported by IVR systems, mobile phone self care and web-based self-care. When deciding on customer selfcare offerings, improving customer service is part of the equation but the biggest driver is call center staff cost reduction. These drivers lead to spending on the customer interaction systems that support self-care as well as enhancements in CRM, subscriber management, rating and pricing and service fulfillment. A lot of the spending is for integration of the customer interaction system with supporting billing and customer care. Much self-care driven spending is handled by CSP IT departments, especially creating webbased support, limiting the degree of commercial spending growth. Subscriber personalization Traditionally CSPs have offered standardized services to all customers for a limited number of services. In many cases, their products and pricing were regulated by government laws or agency rules. Consequently, they did not invest in systems that would allow them to personalize services. Over the past five years, privatization, deregulation and competition led CSPs to invest in better ways to offer personalized service. The most obvious investments were in CRM, which will continue to drive CRM spending. The need is to offer personalized services and 2009 Analysys Mason Ltd. 37

38 Drivers and inhibitors support those services after they are accepted. This is leading CSPs to invest in a wide range of telecom software. Subscriber personalization leads to more complex technical support. CSPs have started to improve automated support the technical workforce, but mostly with in-house developed systems. As individual subscriber personalization becomes more extensive, CSP s will use more commercial software. This includes an area sometimes referred to as customer experience management (CEM), which we evaluate as part of workforce automation, which is covered in the Service assurance market review and highlighted in the Customer experience management outlook, both by Patrick Kelly. Service convergence Service convergence involves multiple CSP services over a single subscriber connection. CSPs are offering many more services in this converged service mode. Service convergence drives more CRM spending. Inhibitors Worldwide economic conditions The global recession has not affected overall consumer telecom spending as much as many other industries. Communications is considered a necessity for consumers especially mobile and can be a substitute for business travel. CSPs have continued their capital investment programs at a relatively even pace, although certain high-profile network and billing and OSS transformation projects were put on hold in Analysys Mason believes that overall revenue by OSS vendors took a small hit in 2008 vs. our projections of last year. The instabilities in the economies mid-year yielded a small reduction in customer care system sales during 2008 due to the reaction times of CSPs and the announcement that the recession had began in December The expected decrease in the growth of customer care system sales to CSPs in 2009 comes mostly from a deferral of non-revenue affecting expenditures, including large billing transformation projects that are particularly coupled to the subscriber management sub-segment. If the recession ends, as expected, by the beginning of 2010, Analysys Mason expects vendor sales to return to near 2008 levels, with 2009 Analysys Mason Ltd. 38

39 Drivers and inhibitors customer care revenue growth following close to their pre-2009 trend lines. Regulation Regulation benefits some CSPs and hurts others. In general it encourages competition, enhancing the impact of competition mentioned above. Regulator actions and threats to force incumbents to share new access infrastructure inhibits investment in new broadband infrastructure and delays system deployment. This regulatory impact is greatest in Western Europe. Some regulatory requirements simply place a reporting burden on CSPs, such as Sarbanes Oxley or data retention regulations. Subscriber saturation PSTN services in most markets are so saturated that competition from mobile and VoIP for basic voice subscribers is driving down the number of PSTN access lines in use in nearly all markets except a few emerging market countries. The effect of this relentless decline is to eliminate new spending for PSTN-based services. Recently mobile saturation in Western Europe, Japan, Korea and Taiwan has created an environment where major CSPs are seeing a net decline in the number of mobile subscribers. The effect of mobile saturation is different than in PSTN. However, mobile saturation leads to more push for mobile substitution for PSTN in an effort to get existing mobile subscribers to use more mobile minutes. Mobile saturation is causing CSPs to invest more to get existing customers to use advanced services and to make sure CSPs get the revenue to which they are entitled. Subscriber saturation drives increased spending in CRM and other customer care that will help prevent churn. It also leads to more CRM functionality focused on the business segment, which is seen as a growing opportunity. Mobile subscriber saturation also dampens CSPs willingness to invest in general, as they carefully assess what will help them grow. While there is an impetus to increase spending in some areas, mobile subscriber saturation also leads to general budget tightening and inhibits telecom software spending to some extent Analysys Mason Ltd. 39

40 Drivers and inhibitors Infrastructure drivers Platform integration Infrastructure Inhibitors IT cost reduction In-house built systems Legacy environments Drivers Platform integration Major vendors are integrating the pieces of billing and customer care and linking them with service fulfillment and service assurance. This makes systems deployment easier for CSPs and will accelerate the pace of new systems deployment to some extent. However, note the factor of legacy systems in inhibiting new spending as mentioned below. Despite the benefits of betterintegrated systems, the difficulty of real-world deployment will limit the amount that CSPs actually drive additional spending. Inhibitors IT cost reduction Telecom software has become a big area of spending for CSPs. They look for ways to keep these costs down especially by forcing price competition among vendors and using outsourced IT. This does not lead to less telecom software, but the related pricing pressures reduce overall spending. This is an especially strong issue in developing markets where CSPs may forego some major systems and be willing to accept products with less customization than has traditionally been expected by CSPs Analysys Mason Ltd. 40

41 Drivers and inhibitors In-house built systems CSPs internal IT departments have traditionally had a strong influence on development and maintenance of all telecom software. While nearly all CSPs except NTT and Verizon embrace the use of commercial telecom software (, internal IT groups still play a big part in reducing the amount of spending available to commercial suppliers. Internal IT groups limit the adoption of new commercial innovations because they implement their own versions to support new needs that do not have proven commercial solutions. The customer care area is a good example many mature market CSPs invested large sums in internal developments of custom systems. Legacy environments Legacy environments are the greatest inhibitor to telecom software spending. Today s shiny new system is tomorrow s legacy environment. Tier-1 CSPs have hundreds of systems in place, put there to meet specific needs in specific timeframes at specific costs. Usually new systems can meet the old needs while addressing new needs. However, using the new system requires operations planning, data conversion and retraining. There is always a risk that the conversion will be incomplete. When deploying systems to support new services, CSPs are reluctant to convert older services to the new system. The conversion takes time, costs money and creates risk. Instead it is much easier to put in a system specifically to support the new service. This approach limits the number of CSP transformation projects and leads to more operational silos. CSPs have become more reluctant to overtly displace legacy systems and have taken an approach of planned obsolescence. Nevertheless, new systems quickly become legacy systems and frequently undermine the overall planned obsolescence strategy Analysys Mason Ltd. 41

42 Business environment Business environment While vendors are offering increasingly capable customer care products that handle nearly all the normal CSP customer care requirements, CSPs have difficulty adopting these systems. CSPs also have difficulty converting existing systems, have dispersed decision making and insist on local modifications to off the shelf systems. This CSP behavior limits the ability of CSPs to benefit from commercially available software and limits the market opportunity for vendors. CSPs have too many customer care systems, a fact that they readily admit. Most have a region, product or service-specific view with no comprehensive view of how many services a customer has purchased or how these services are being used. This complete lack of visibility creates problems in supporting the customer and limits the ability of the CSP to effectively market new services that would yield favorable take rates. Most CSPs have a highly decentralized approach to managing existing services. They have applied this approach to supporting new services such as high speed data. Traditionally, a CSP would build a system to handle all customer care for a particular service, usually designed around technology and regulatory requirements. CSPs used these systems to implement and track regulatory compliance in customer support. They tended to be highly complex, requiring a great deal of training for customer care agents to understand and learn the required codes. Each service is supported by a different set of systems which limits the ability of the CSP to achieve a unified view of its customers and the services they consume. In the decentralized model, organizational silos exist to support each service with the goal of bringing it to market quickly. Each silo has its own processes and systems to interface with the customer. This includes billing, activation, and support. Under the decentralized model, limited capital is available to support new service initiatives and it creates an environment that has a high operating cost. Since the decentralized approach also fails to provide the CSP with a unified view of the customer across services, it is difficult to create 2009 Analysys Mason Ltd. 42

43 Business environment targeted and compelling service bundles. As a result, CSPs fail to create a higher value customer experience. AT&T, BT, KPN, Sprint, Telecom Italia, Telstra and TELUS are leading initiatives towards more unified models. This greater focus on more integrated systems is part of a broader initiative to focus on creating a better CE. This reflects an effort to move beyond integration as a goal, to integration that can be found in creating a better customer experience. CEM is now an industry buzzword. In an effort to give some understanding to the substance of this trend, Analysys Mason published a Customer experience management outlook in While there is something of a trend to more integrated systems, most CSPs still have fragmented approaches. There are legitimate historic reasons for this fragmentation, but it is perpetuated by a short-term, get-out-the-next-service mindset. Most CSPs have not traditionally invested in billing and customer care to meet their future needs for a wide range of converged services, but this is changing. In the larger CSPs, thousands of systems are in place. This originated from departmentalized organizations aligned to support network technology domains not services. The lack of federated data and visibility into each consumer s use of a service increases customer dissatisfaction and leads to higher cost in the service creation and customer acquisition phases and post-sales support. The unified business operational model requires more coordination between departments and promotes the sharing of resources and systems for the entire business unit to provide an integrated view of customers and services. The transition towards a unified model lowers operational costs and frees funds to support next generation services. In the unified model approach, a transformation of the business is necessary. This includes realignment of the organization and software system consolidation. More capital investment is available to the CSP due to less duplication of resources and systems. The benefit of the unified model also provides greater focus on the customer and visibility of newer services. Migration of the organization towards a unified model will provide a predictable, 2009 Analysys Mason Ltd. 43

44 Business environment repeatable customer experience in managing next generation services. However, the unified model requires cooperation among different groups who have competing goals. These groups often will not sacrifice features or timeframes in meeting their specific needs in order to get the longer-term benefits of the unified model. The result is a natural opposition to standardized, unified approaches that leads to continued fragmentation in actual deployed billing and customer care systems. The North American and Western European markets have the most competitive environments for CSP services. These markets have generated the strongest demand for customer care and commercial billing systems for IP services. Other parts of EMEA and emerging markets in Asia and CALA experience less competition and generally lower expectations for customer service. They have limited customer care investments, but have begun deployment of real-time charging and customer interaction systems in business data and mobile segments where competition is strongest. The vendor environment has become quite mature, with several leading providers of customer care systems emerging from the consolidation of many smaller companies, followed by integration of the acquired products into more fully integrated offerings. However, customer care products have required a tremendous amount of configuration and customization to fit the needs of CSPs who have attempted to differentiate themselves with their customer care, leading to a large component of product-related services. The need for these services has severely limited the applicability of CRM, in particular in the emerging markets. Recently, vendors have begun offering pre-configured solutions that seek to reduce the amount of services and the time required to implement these new systems. There are still a tremendous number of smaller vendors, more than many other areas of telecom software, who specialize in certain functions or in certain markets and who continue to thrive in the marketplace. But the growing interest by developed market CSPs in reducing the number of suppliers and reducing the number of systems has led to more and more market consolidation in the hands of the major players. As CSPs are more willing to source 2009 Analysys Mason Ltd. 44

45 Business environment major systems from a single supplier, industry pressure increases for consolation of suppliers and integration of systems. The great challenge for the integrated products is for the separate application areas to be pre-integrated to work easily together while also working on their own. Even when CSPs accept the integrated solution approach, they nearly always need to implement the applications one step at a time. Therefore, the separate applications of the integrated suites must work on their own and facilitate integration with CSP legacy systems as part of the process to get overall integrated solution acceptance. Another significant business environment issue is the way CSPs choose to handle the necessary integration services for billing and care implementation. Some choose to use their own IT staff. Others choose a completely independent integration firm. Some choose an integration firm recommended by their primary applications supplier. Still others choose an application supplier that will provide the full set of services along with the applications. Among the leading suppliers, Oracle is the most focused on providing only the applications and integration software while leaving the integration services to others. Amdocs is the most focused on providing both the software and the related integration services; independent integrators are rarely involved in Amdocs billing and care implementations. Nearly all the other leading suppliers provide a significant amount of services but are also likely to work with independent integration suppliers Analysys Mason Ltd. 45

46 Market definition Market definition Analysys Mason identifies 25 functional categories of OSS investment in the telecom market. Figure 21 below illustrates the full set of these categories and the way they are grouped into segments. Analysys Mason yearly publishes the market share and five year forecast for each of the five segments (as well as consolidated market share information). The Customer care segment reported here includes CRM, subscriber management, and customer interaction. In 2007, we shifted the workforce automation segment out of customer care to service assurance. This reflects our evaluation that most technical problem resolution care functions are driven by decisions in network operations. While, some CSPs customer care organizations are responsible for trouble ticketing and problem resolution tools, we concluded that these workforce automation solutions are most often controlled by the organization that deals with other service assurance systems. In 2008, we are adding centralized master catalogs into the CRM sub-segment of customer care, representing their increasing use in the industry to centralize the data from all product and service catalogs, simplifying and speeding the introduction of new services into the CSPs portfolio Analysys Mason Ltd. 46

47 Market definition Figure 21 Analysys Mason supplier market segmentation Service delivery platforms Billing Customer care Service fulfilment Service assurance Real-time charging Content management Telecoms application servers Rating and pricing Partner and interconnect Business optimisation Mediation Customer interaction Customer relationship management Subscriber management Order management Inventory management Activation Engineering tools Service management Fault and event management Performance monitoring Workforce automation Probe systems Mobile device management Mobile Network management systems Residential broadband Business data services PSTN Middleware Source: Analysys Mason Figure 22 below depicts some of the interaction among the billing and customer care components along with some key supporting elements. Customer care, comprising CRM, subscriber management, and customer interaction is shown interacting with customers via self-care methods (such as IVR and self-care web portals), customer service agents in call centers, and other agents. These systems interact primarily with subscriber, billing, and product data, systems whose data are maintained by other major systems or a commercial enterprise data manager or custom-built data manager. Customer care systems also interact with other back office systems such as order management in the service fulfillment segment for instantiating orders Analysys Mason Ltd. 47

48 Market definition Figure 22 Interaction of customer care with billing, real-time charging, SDP, and service fulfillment Customer relationship management CRM software allows businesses to assemble, analyze, and present large sets of data to manage their customer relationship more efficiently. CRM application software helps customer service agents provide the best product and service offers, track service requests, initiate repair requests, respond intelligently and completely to customer queries, and provide the status of problems. It allows marketing to understand purchasing patterns and the effectiveness of new product and service campaigns and provides optimized information to the customer service agent to help them sell the best package of services and supporting hardware to the customers. CRM is the central repository of customer data that is utilized by sales, marketing, customer service, and finance groups. The category also includes the product catalog, which contains the master copy of the offerings made to the customer. Formerly, the product catalog was included in the rating and pricing sub-segment of the billing market Analysys Mason Ltd. 48

49 Market definition Figure 23 CRM functions Subscriber management Subscriber management software is service-specific in the process of establishing customer setup and support. It is coded to the constraints of a specific service, which makes it more difficult to augment when new services are introduced on the network. Subscriber management systems embody the specific services available to customers, the constraints on those services and the means of supporting those services. Before there was CRM, subscriber management provided nearly all customer care support. The advent of CRM lessens the role of subscriber management. Today and in the future, CRM systems will focus on the customer and allow CSPs to present to the customer or customer care agent as complete a view as possible of all services used and available. CRM systems have also taken over such common, customer-centric functions as credit verification. Most subscriber management software is developed by the CSPs themselves Analysys Mason Ltd. 49

50 Market definition Figure 24: Subscriber management functions Customer interaction Customer interaction software automates the initial point of contact between the customer and the CSP. Customer interaction includes IVR, web self service, contact center, point of sale, SMS and USSD support. Customer interaction software includes machine-tomachine, person-to-person, and person-to-machine communication. CSPs are increasingly using many channels to allow customers to interact in the manner and at the time they want. At the same time, most of the spending decisions on customer interaction revolve around reducing call center staff costs Analysys Mason Ltd. 50

51 Market definition Figure 25 Customer interaction functions 2009 Analysys Mason Ltd. 51