Telco Needs a New Approach for the Coming Era of Cloud and Digital Services

Every decade or so, the telco industry reinvents itself. With 5G, we are about to experience a fundamental transformation in what it means to provide connected services to consumers and businesses alike. While this new era will be defined by the connection of everything, more deeply than ever before, it is striking to observe that business support systems (BSS) have failed to keep up with the pace of change. Indeed, these so-called “back-office” systems operate and perform similar functions, in similar ways, to “billing systems” developed for the first generation of mobile services, says Marc Price, CTO of MATRIXX Software.

It is time for a change if service providers are to gain the ability to dynamically assign fair value for transactional services, aligned more closely with end-user value. While services have evolved with expanding network capabilities, operators’ cost-centric resource consumption models have not.

Until now, the telecom industry has largely sustained a utility-based/cost plus pricing model. Limited by both the rigidity of legacy BSS and the one-size fits all nature of current network architectures, today’s operators offer little by way of product differentiation or value-added services. With limited abilities to distinguish one service from another, low-cost providers in nearly every market have driven a race to the bottom. For end-users, that has meant being stuck with commercial models disconnected from the value of consumer services.

To fully take advantage of 5G requires a significant evolution away from today’s BSS with its focus on internal cost measures alone. At its core, this latest evolution is not simply a faster or more responsive network, but rather a launching pad for disruptive innovators to target specific market segments with an ever-expanding array of products and services.

Enabled by a cloud-based architecture, edge capabilities, and open APIs, telcos have a new opportunity to re-align business models. Evolving ecosystems with coordinated services from operators and enterprises provide an opportunity to spur new thinking by delivering competitive services, dynamically priced to unlock value.

A new paradigm is required to optimize profits while minimizing costs in the era of cloud and digital services. The effectiveness and ROI for business systems will be measured not simply by the sunk cost in building, maintaining, and supporting these systems, but also in the revenue captured from presently unoptimized value creation.

As 5G’s reach brings an increasing number of connected devices into its ecosystem, “business intelligence” will be a key differentiator fueling the ability to harness value creation. With connected devices enabling new levels of insight regarding retail behavior, device performance, product lifecycle, purchase renewal and so much more, commerce models built on services leveraging connectivity and data which pretty much means everything will be primed for expansion.

Equally transformative, these emerging services will abandon the static terms and conditions that ruled previously, instead pricing based on fair terms that have more meaning to the retail and wholesale customers engaged in a purchase decision. While most industries price this way, with fluctuation based on dynamic conditions for both the buyer and the seller, telco operators are only now catching up… and with new 5G services arriving, now is the time to capitalize and align new pricing models!

Delivering a Value Machine for Modern Times 

For business support systems to enable the transformation of operators into value machines, they will need to support new commercial models based on a combination of purchase price, inherent value of insights over time and rapid adaptation to fast-changing market conditions. Whereas custom solutions were once the norm, synergies in value assignment and facilitating exchanges regardless of industry will drive down costs, essential to providing a return on investment.

Commonalities for the Modern Value Machine Include: 

Harnessing Cloud: While sunk costs were defensible for first and second-generation business support systems, the variable nature of emerging business models demands cloud-centric business support systems to manage modern exchanges of value. Solutions must be cloud-agnostic; locking into any one cloud or cloud vendor is as fraught with danger as turning over one’s business to a sole supplier.

Dynamic Pricing: To achieve real-time dynamic pricing, the BSS must be able to ingest rapidly changing attributes from multiple sources and apply them instantly. Small changes in pricing can have a ripple effect on product catalogs, offer systems, care systems and billing. A coordinated and thoughtful approach is needed to introduce modern dynamic commerce solutions designed to manage this pace of change.

Extensible and Efficient: The value machine must ingest data, assess that data for decision making and turn it into value. It must have well-defined open APIs to enable the introduction of new systems and data streams from different vendors. When architected correctly, costs are kept low and predictable, despite an ever-changing environment.

We are already seeing operators applying these dynamic pricing principles based on factors such as customer segment, service mix and, even, which competitor they are currently targeting. The resulting new approach to value creation is changing how providers are commercialising existing offerings, as well as new prospects like augmented reality in stadiums, bandwidth coverage for pop-up retail commerce, and dynamic needs like commercial construction.

The simple truth is that the billing system as we know it has evolved very little in the past 25 years. Where and how it is implemented has changed, but its fundamental set of capabilities has remained static, built for industries that had yet to develop differentiated products and segmented markets. Now that capabilities to differentiate are here, the billing system is well overdue for a replacement, in order for operators to automate the exchange of value in a more sophisticated supply chain.

For those operators looking to establish themselves as value machines, the time for action is now.

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NOTE: This post was adapted from an article that appeared in Vanilla Plus, November 1, 2022.