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Wednesday, May 31, 2006

Can 'pre-IMS' achieve 85% of IMS benefits?

How ‘pre-IMS’ personalization lifted ARPU by 50% at O2 Germany

The Canadian software firm Redknee (
www.redknee.com) is one of IMS Insider’s favourite vendors. They know the telco business extremely well and are focused on supporting short-term revenue maximisation through real-time rating and personalisation. The case study below shows how end customers will pay for services if they are seen as ‘valuable’, which means: a.) convenient, b.) simple, c.) intuitive to use.

Redknee firmly believe that operators can be better retailers if they bill on a real-time transaction basis. We’re seeing too many telcos ‘throwing in the towel’ by offering flat rate subscription-based bundles. For some customers this creates an unnecessary barrier to service take up and, for others who do subscribe, it encourages over-consumption of the service.

Part of the problem is that many billing systems today are not open and flexible. As we describe in the Main section of the IMS Insider Monthly Report this month (subscribe at www.ims-insider.com), operators would be better served by opening up their API’s to deliver a suite of exciting services rather than looking for the ‘killer app’ and the stove-piped systems to support it.

So, the starting point is to get user profile information in order. Redknee’s software (their Unified Personalisation Server provides an intelligent abstraction layer) enables operators to distil, aggregate and federate data from multiple data warehouses (HLR, HSS etc) and support this activity with policy management tools that include internal SLAs and privacy controls.

O2 was the 4th entrant in Germany but saw an opportunity to penetrate the enterprise market by offering a multi-SIM service. Competitors could offer dual-SIMs (for handset and laptop data card, for example), but high end enterprise users found they had a need for up to 6 SIMs given the multiple home and work devices they used.

Research showed that users were interested in a service that allowed them to do the following:

- Easily personalise the routing profile of their calls and data (ie. If a call comes from X, deliver it to my Y device).
- Have a single bill (rather than the multiple per-SIM bills that most mobile users still get today).
- Have greater transparency of cost.

Redknee provided a simple solution that enabled these wishes. O2 Germany found significant demand for the service when it was launched. They also found that these multi-SIM customers bought more high end data services, delivered 50% more ARPU to O2 than normal business customers and – as you’d expect with so many devices linked by a single bill, intelligent routing and much better service availability – stayed much, much more loyal. As a result the ROI was significantly quicker than expected, partly due to the unexpected take up of the service by non-corporate customers (20% of the total in fact).

Now, the telling point is that this project started in 2003 – pre 3G, let alone IMS. By all key measures the service was a huge success. The service can be significantly enhanced by pervasive 3G - allowing the service to integrate with presence servers and link to SIP based devices – and O2 are now investigating streaming IP content using the same model.

As you can expect, telco marketing execs love this story. The challenge, though, is cultural and organisational. Technical people are often wary of stories like this. They’ve experimented with lots of ‘IN services’ and don’t believe it’s easy to implement. And enterprise sales teams have not traditionally been equipped to sell this type of ‘complex’ proposition to their customers.

But, with an increasing interest in the enterprise and SME markets and with ‘IN gateways’ becoming more popular with new SDP platform design, we can see this type of case study becoming more and more relevant.

What we think is interesting about this example is that the Multi-SIM product aligns with the consistent core winning "meta strategy" of telecom, namely distribution. It makes service available in more of the customer's "outlets" which, in this case, are devices. It's a complement to increased network coverage, for example.

The one bill and ease of use are "absence of barriers to adoption" and thus fall on the "total cost" side, rather than the "value creation side". Again, the winners are often not those with the fanciest product, but rather those with the greatest net benefit to the user, which means paying as much attention to how the product is adopted as what it does (cf. Skype).

Redknee will say that 85% of the benefits of IMS can be delivered Pre-(without?)-IMS. If this is correct, what does this mean for IMS investment strategy?

We'll be gathering more examples of 'pre-IMS' and 'alternaives to IMS' in the lead up to the IMS Services Forum on 4th and 5th October in London. Watch this space for more on this subject…

The Editor, IMS Insider

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