Is service personalisation the answer?

The actions taken by the telecom industry have mostly been around cost cutting, both in terms of opex and capex, and that has not resulted in breaking the curve. Too few activities has been centered around revenue growth, such as focused activities in personalization, customer experience, segmentation, targeted offerings that become part of or drive ecosystems. These activities are essential if you want to break the curve; thus, it is time to gear up for growth… I am very surprised that very few, if any, service providers today collect and analyze data, create dynamic targeted offerings based on real-time insights, and do that per segment or individual.”
Lars Sandstrom
, here.

I have two completely opposite and conflicting perspectives on the pervading wisdom of personalised services (including segmentation of one and targeted offerings) in the telecoms industry.

Telcos tend to be large organisations. If I invest in a large organisation it’s because the business model is simple, repeatable and has a moat (as Warren Buffett likes to say). Personalisation is contra to two of those three mantras – personalisation makes our OSS/BSS far more complicated and hence less repeatable (unless we build in lots of automations, which BTW, are inherently more complex).

I’m more interested in reliable and enduring profitability than just revenue growth (not that I’m discounting the search for revenue growth of course). The complexity of personalisation leads to significant increases in systems costs. As such, you’d want to be really sure that personalisation is going to give an even larger up-tick in revenues (ie ROI). Seems like a big gamble to me.

For my traditional telco services, I don’t want personalised, dynamic offers that I have to evaluate and make decisions on regularly. I want set and forget (mostly). It’s a bit like my electricity – I don’t want to constantly choose between green electricity, blue electricity, red electricity – I just want my appliances to work when I turn on the switch and not have bill shock at the end of the month / quarter. In telco, it’s not just green / blue / red. We seem to want to create the millions of shades of the rainbow, which is a nightmare for OSS/BSS implementers.

I can see the argument however for personalisation in what I’ll call the over-the-top services (let’s include content and apps as well). Telcos tend to be much better suited to building the platforms that support the whole long tail than selecting individual winners (except perhaps supply of popular content like sport broadcasts, etc).

So, if I’m looking for a cool, challenging project or to sell some products or services (you’ll notice that the quote above is on a supplier’s blog BTW), then I’ll definitely recommend personalisation. But if I want my telco customers to be reliably profitable…

Am I taking a short-term view on this? Is personalisation going to be expected by all end-users in future, leaving providers with no choice but to go down this path??

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4 thoughts on “Is service personalisation the answer?

  1. It’s a big topic to condense down to a blog post comment, but I’ll take a stab.
    I agree that investors are generally looking to large telcos for the reliability of their cash flows and dividends, and expectations for growth are limited. However, even to maintain cash flows (in real terms) will require some innovation and new service offering given the tendency for price declines in mature products/services.
    Do personalized/segmented/targeted offers require significant increases in systems costs? Relative to maintenance costs of legacy systems they do but not relative to the revenue of the entire business. OSS/BSS represents around 2-3% of revenue and takes up around 10% of capex. Incremental changes to components of the overall OSS/BSS are unlikely to impact costs significantly though whether they deliver a RoI greater than the cost of capital obviously depends on execution.
    I agree that offering different colored electricity makes no sense though I’m sure marketing folk in that industry feel they have ways to differentiate. But telecom services are different to electricity. For consumer telecom services you do not get the equivalent of a guaranteed 240V and 50Hz with 24/7 availability. You get up to 240V, 40-60 Hz and 95-99% availability (dropped calls, etc).
    Are there too many trivial service options that confuse the customer? Sure. And periodically marketing does a tidy up to rationalize the list and attract consumers that are confused by rivals’ deliberately confusing offers. Then they gradually add more of their own offer variants until the next rationalization. OSS/BSS needs to support this; it exists to serve the business, not the other way round.
    Net/net: yes telcos need to offer personalized/segmented/targeted services. Our challenge is to figure out how to do that cost effectively such that the RoI is > cost of capital.

  2. I love it! Thanks for taking the time to write a well founded and persuasive retort James!

    Have you come across (or read about) any personalisation projects that have delivered a RoI greater than the cost of capital in your travels? I’m happy to admit that my set-and-forget mindset might not be representative of the market.

    Where did you identify the “OSS/BSS represents around 2-3%” statistic? I’d love to find out more about the direct / indirect contributions attributed to OSS/BSS in that number. It’s a number that I’d love to see increased to justify greater spend on OSS/BSS.

  3. I haven’t got any RoI stats on personalization projects I’m afraid.
    Veon have said that their IT/OSS/BSS costs were 3% of revenue and their target was to reduce to 2%. I’ve seen similar figures from other operators.
    Vodafone break out their IT (inc OSS/BSS) capex from network etc in their 6 monthly reports. It is around 10% of total capex.

  4. Hi James

    Oh, I mis-read. I thought you were saying OSS contributed 3% to revenues rather than costing 3% of revenues.

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