June 10, 2016

What Millennials Want that Your Systems Can't Deliver:

Flexibility at a Whole New Level

Stratecast Analysis by

Karl Whitelock

Stratecast Perspectives & Insight for Executives (SPIE)

Volume 16, Number 21

SPIE #21, June 2016 © Stratecast | Frost & Sullivan, 2016 Page 2

Source: Matrixx Software

What Millennials Want That Your Systems Can’t Deliver: Flexibility at a Whole New Level

Introduction1

When it comes to the customer services market, we are all consumers—large business, small business and individuals. For people with a smartphone, survival in this digital age is defined by total dependence on a fast data connection with Internet access, usually via a mobile device or some combination of mobile and a fixed-line connection. We expect 24 X 7 service availability, high throughput capacity, personal security, total reliability—voice, text or data messages from us to others and back again—and dependability of the apps we use to keep our digital lifestyles current. No group better defines these wants than the Millennial generation, which has now outstripped Baby Boomers as the largest population demographic in, at least, the US.2

Millennials—people age 18-34—are the first crop of digital natives. Smartphones have been around for most of their adult lives, and they barely remember a time when the Internet was not available. Millennials have received more formal education than any other generation, but are burdened with the highest unemployment rate. They are almost the largest spending group for goods and services, and they are the largest group of online shoppers. Yet, CSPs do not yet know the best way to serve their network usage needs or address their buying behaviors.

Millennials typically own a mobile phone, which they identify as their “personal device.” They rely more on mobile technology than any other demographic group. This fact continues to change the go-to-market strategies of multiple industries, including banking, entertainment, financial services, healthcare services, hospitality, retail shopping, and transportation. They are more likely to cut the cord with subscription cable in favor of streaming video to a smartphone or TV, from the likes of Netflix, Hulu, or Amazon. So, where does that leave the rest of the communications industry?

Millennials expect their mobile devices and communication services to match the experiences they now receive from their Internet-based interactions. They are usually frustrated whenever they need to “deal with” their communication services provider (CSP), mainly because most CSPs cannot address the always-on, always-available, and real-time service demands of today’s digital economy.

1 In preparing this report, Stratecast conducted interviews with representatives of the following companies:

Vlocity – Dan Ford, Vice President and General Manager Vlocity Communications and Media

MATRIXX Software – Jennifer Kyriakakis, Vice President Marketing

MATRIXX Software – Arturo Pereyra, Senior Director, Product Marketing

MATRIXX Software – Oisin O'Connor, Director Product Marketing

Please note that the insights and opinions expressed in this assessment are those of Stratecast, and have been developed through the Stratecast research and analysis process. These expressed insights and opinions do not necessarily reflect the views of the company executives interviewed.

2 See Pew Research Report, Millennials Overtake Baby Boomers as America's Largest Generation, April 25, 2016.

SPIE #21, June 2016 © Stratecast | Frost & Sullivan, 2016 Page 3

As CSPs evolve to digital services providers (DSPs),3 change in existing business processes and the way automated systems must work to address customer needs is the order of the day. This report uses the demand characteristics of millennials as a model for identifying how CSPs should expand their business management solutions to better meet the personal engagement needs of their customers. With the evolution to DSPs in various stages of planning and implementation, this report also explains how one solution supplier partnership—MATRIXX Software and Vlocity—delivers CSPs the real-time tools that are essential for providing a “Millennialized” customer experience.

Globally, Smartphones are Improving Our Digital Lifestyle

All customers, not just millennials, want a digital lifestyle experience. Why? Quality of life improves when a mobile app can be accessed and information is provided by just a keystroke or two. Shown in Figure 1, smartphone ownership is rapidly expanding in all global markets, including the emerging economies of Africa, SE Asia, and the Middle East. Adoption of a digital lifestyle continues to be dominated by Millennials, which is a demographic that most businesses are paying close attention to as new business models take shape.

Figure 1: Percent of Adults Who Report Owning a Smartphone4

Source: Pew Research Center, Stratecast

Despite vast smartphone adoption and Millennial’s relentless adoption of the digital lifestyle, smartphone customer frustration is increasing. CSPs, moving to DSP status, must address the limitations that existing systems and business processes are placing on the customer experience.

3 For a thorough definition of what constitutes a DSP, the key traits that define them, and a summary of the Operations, Orchestration, Data Analytics and Monetization (ODAM) functions that enable them, see Stratecast SPIE report 2016-16: What is a Digital Service Provider? Hint: There is More Than a Single Answer, April 29, 2016.

4 Pew Research Center Report, Smartphone Ownership and Internet Usage Continues to Climb in Emerging Economies, Feb 2016.

Age 18-34 Age 35+

Country Total % % %

Argentina 48 71 35

Australia 77 95 70

Brazil 41 61 26

Canada 67 94 58

Chile 65 86 50

China 58 85 43

France 49 85 35

Germany 60 92 50

India 17 27 9

Indonesia 21 39 7

Italy 60 88 52

Japan 39 77 31

Malaysia 65 88 46

Russia 45 76 29

S. Korea 88 100 83

Spain 71 91 64

UK 68 91 60

US 72 92 65

Vietnam 35 56 17

SPIE #21, June 2016 © Stratecast | Frost & Sullivan, 2016 Page 4

Today’s Business Reality: Customers are Frustrated

As competitive forces within the mobile services market expand, and as customers do business with Internet-based retailers in all industries, consumers of communication services—especially Millennials—are frustrated by:

Pricing plans using gigabyte (GB) usage tiers – which easily can be exceeded, especially with smartphones and tablets that are now enabled by advanced network technologies with throughput rates approaching fixed broadband.

Limited or non-existent dashboard-like notifications of usage relative to pricing-plan commitments – which, when information is lacking, causes consumers to hold back on what they want to do with their devices. Some CSPs are better than others about providing usage volume notifications or tracking apps; but many provide little ongoing usage detail.

Insufficient self-service capabilities matching the speed and simplicity conveyed by Internet-based retailers – to enable consumers to configure how tablets and smartphones can be used, along with how others within the customer’s realm of accountability can use their devices.

Lack of individualization or flexible customization of service offerings, pricing plans, and payment methods – which leaves consumers to seek competitive options that better meet their needs. Such actions lower the opportunity for CSPs to build brand allegiance.

Perhaps most importantly, CSPs have little real-time feedback on how well their services “hit the mark” with their customers. They also lack the ability to create new service offerings within their existing systems and processes at the rate Internet-based competitors respond to market conditions.

Is Real-Time Responsiveness the Key to Differentiation?

None of the above mentioned customer issues or CSP challenges are new. These concepts have been discussed for 3-4 years now; yet, little has changed in the approach for addressing these needs. Customers universally ask why their mobile network operator cannot offer services through the same type of customer interaction mechanism that Internet-based retailers do, and at the speed of the Internet as well. For postpaid customers, why can’t unused data volumes, which they have paid for, be carried to the next billing period, consistently across all network operators? Why aren’t all CSPs rewarding customers for their loyalty to their business?

Many consumers would rather endure a trip to the dentist than dedicate the time to work with their service provider to:

Upgrade to a new device or resolve workability problems with a device

Resolve an overage charge (bill shock) billing problem, explain their unique payment situation, or detail their long-term usage needs

Satisfy service quality issues when expectations are not met

Customers simply want a better user experience, based on their expectations from working with Internet retailers and eCommerce providers.

SPIE #21, June 2016 © Stratecast | Frost & Sullivan, 2016 Page 5

Page 5© 2016 Stratecast | Frost & Sullivan, all rights reserved. Proprietary

and Confidential to Stratecast.

State of Most CSPs’ Installed Systems and Processes: Scores of

Systems from Different Suppliers and Hundreds of Minimally Flexible

Processes Tasked to Address On-going Business and Network Change

There are other concerns as well. Must all customers subscribe to the same data plan offerings? Are pick-and-choose service options something of a nirvana that cannot be reached for the vast global consumer services market? Will Quality of Service (QoS)-based, dynamic pricing offers ever become a business reality? Are there alternative ways to pay the bill for service access beyond a pre-defined tiered pricing plan or a prepaid bucket of network data usage? If so, can it be applied individually, rather than the broad brush approach that is so common today? Does sponsored data truly mean that customers can receive monetary assistance from others to partially defray their cost for network usage? Can customer-defined controls be made applicable across any network connection, especially when parents are concerned with the level of device and app usage engaged by their children? What about usage and payment controls that could be offered to both business customers and consumers—specifically, pricing based on device type combined with controllable factors such as time-of-day or which websites are visited?

From a CSP perspective, meeting customer concerns, and getting more competitive to maintain customer satisfaction really means differentiation. Differentiation means responsiveness to changing market conditions at Internet speed—not the speed of traditional IT (weeks and months). It means delivering more customer choice, both in services offered and in how customers select and pay for those services. Differentiation also means delivering individualization, rather than providing a handful of service plans that must be used by all. For example, as a way to differentiate based on mobile network service quality, customers can now receive 4G LTE mobile service in certain markets directly from Google, which uses the best network strength from one of three different carriers with which Google participates as a mobile virtual network operator (MVNO).

These factors of differentiation translate into a robust set of real-time or near real-time business needs tied to improving the customer experience through agility and flexibility.

Installed Systems Lack Market Responsiveness

From their earliest beginnings, CSP systems have been divided into functionality sets tied to various business processes. Concerns about these systems today are centered in several areas:

Installed systems were never designed to provide free-flow, real-time customer interaction.

The purpose-built functionality of existing systems, the multi-vendor environment in which these systems are deployed, and the process-driven integration of these systems makes business change for even simple customer needs a costly, time-consuming endeavor.

Internal work teams lack insight about service-level successes and customer disappointments.

Work flow processes and supporting systems cannot react at the speed required to satisfy competitive repositioning when a rapid market response is needed.

When business change is rampant, a lack of configurable systems and flexible processes leads to a failure to capitalize on rapidly emerging customer opportunities—which often requires simultaneous updates across all systems, from all suppliers—despite the attempts of disparate systems’ suppliers to keep pace with change.

SPIE #21, June 2016 © Stratecast | Frost & Sullivan, 2016 Page 6

Agility and flexibility is simply not practical in a multi-vendor and multi-system integrated architecture. Timely change management and system redefinition often fall short of expectations, especially when modifications across multi-vendor functions require market-speed flexibility.

Real-time functions and services are required for customers to interact, and for CSPs to monitor and understand end-user behavior. This requirement includes processes such as real-time self-service and real-time, policy-enabled charging. Real-time end-user interaction is also required for contextual customer notifications and optimal offer conversion. Noted in Figure 2, this user-engagement capability is a critical gap, which limits the competitiveness of most mobile carriers in comparison to their Internet services competitors.

Figure 2: Existing ODAM Environment Cannot Effectively Meet Today’s Business Needs

Source: Stratecast

While customer interaction must occur at a human-based perception of real time, the orchestration of virtual network functions combined with physical network architectures, or control of customer usage through strictly defined policies, needs to occur at a machine-level definition of real time. In both cases, existing operations and monetization systems are less than adequate for the task at hand. This inadequacy will become even more apparent as virtualized network functions are incorporated into physical network architectures.

New CSP network and business opportunities are emerging faster, while needed operations and monetization system changes are slowed by the complex environment of installed systems, like those shown by Figure 2. In addition, new needs addressed by real-time data analytics and network orchestration functions widen the “gap” between what services are today and what they can truly become in the near future.

Cloud-based solutions, as shown below in Figure 3, are a rapidly evolving means for moving from a CSP’s systems architecture of the past to a market-responsive and customer-centric new business solution environment. Not all operations and monetization systems need to be updated at once, especially network monitoring and management systems. However, updating select business-impacting control and IT operations systems can produce a massive change in business results; and will, consequently, provide an increase in CSP demand for more updated systems.

SPIE #21, June 2016 © Stratecast | Frost & Sullivan, 2016 Page 7

Cloud-based, real-time services enablement architecture is comprised of various software modules that display solution flexibility when market conditions change or customer service preferences transform. Some of the ways that cloud-based solutions can better satisfy customer demand include: data plan extensions when limits are nearing exhaustion, or service offers involving gift or reward options. Such changes in service plans must happen in minutes or hours after discovery, to be most effective; while allocation of reward or gifting options between customers must occur instantly. In addition, this approach reduces the need for custom software development. It also sharply decreases the time-to-market required by more traditional approaches.

Figure 3: Cloud-Based Overlay to Installed Business Management Systems

Source: Stratecast

Cloud-based solutions deliver customers an advanced mobile services experience. They are commercially available and have been launched already in several markets. These solutions are supplied by a small number of companies that focus on the cloud-based service enablement business model. Stratecast believes that CSPs should be looking for a means to rapidly engage the market with new service offerings, with the quickest time to market, and for the lowest initial investment. A cloud-based solution enablement option holds great promise.

CSPs Can Differentiate on Customer Experience

The digital experience continues to evolve. Real-time customer service must become a business reality, and the right solutions must enable customers with an Internet-like experience. Go Digital™ offers a hybrid-cloud alternative to traditional BSS solutions by combining MATRIXX Software,5 Vlocity,6 and the Salesforce multi-tenant cloud. When installed within a CSP’s business solutions

5 MATRIXX Software is a privately held, independent software supplier located in Mountain View, California. It was founded in 2008 by a team of communications industry veterans with deep roots in real-time applications. MATRIXX provides a next generation digital commerce platform to rapidly configure and deploy new products and services that can be sold, delivered, and serviced through mobile and digital channels. 6 Vlocity is a privately held, software supplier located in San Francisco, California; Salesforce and Accenture are strategic

partners and investors. Vlocity Communications is a suite of omni-channel sales, marketing, service, enterprise product catalog, CPQ, contract management, order management and analytics applications built natively and additively on the Salesforce1 Platform. Engineered specifically for communications service providers, Vlocity Communications conforms to TM-Forum industry standards, and flexibly integrates with third-party systems through pre-built APIs and Web services. Vlocity also provides Industry Cloud software to the Insurance, Health Insurance and Public Sector industries.

Cloud-Based ODAM

Systems and Processes

Needs of Today’s Customer-Centric

Business Environment

SPIE #21, June 2016 © Stratecast | Frost & Sullivan, 2016 Page 8

environment, it enables numerous consumer-friendly service options. For example, the solution enables customers to engage in the purchase of a service or service options through a seamless omni-channel experience that includes a mobile app, visit to a retail store, engagement through a Web interface, or even a call to the care center. Figure 4 outlines the mobile app function.

Figure 4: The Go Digital Omni-Channel Customer Interface

Source: MATRIXX Software, Vlocity

Additional examples of how customers are enabled through the Go Digital solution include:

Try, buy, and manage digital services through a self-service select, review, and purchase process

Purchase selected service options using different pricing methods, including credit card transactions

Initiate and complete self-care updates or changes to a service option or pricing offer; not as individual selections from a menu or list, but as a customized and individualized combination of service options enabled by customer-activated “sliders” to define whatever level of text, voice and data is wanted

Track usage of any service in real-time compared with contracted balances

Add roaming options, whenever needed, based on smart alerts or planned endeavors

SPIE #21, June 2016 © Stratecast | Frost & Sullivan, 2016 Page 9

Consume services in small increments, according to need, based on app usage or categories of generated network traffic; e.g. video, email, app usage, or even voice

Share selected balances with friends concerning both network-based services such as voice, text and data, as well as partner-supplied capabilities including storage capacity, entertainment content, and potentially apps at some point in the future

Receive smart alerts that allow single-click purchasing of top-ups or new service offers when balances are low

From a CSP perspective, the solution platform provides several key features, as shown in Figure 5.

Figure 5: MATRIXX – Vlocity “Go Digital” Functional Architecture

Source: MATRIXX Software, Vlocity

These features include:

Support for mobile self-care, Web self-care, and contact center channels through an omni-channel experience for customers

Enterprise product catalog supports rapid definition and launch of new bundles and offers

Omni-channel guided selling enabled by a pre-built library of telecom industry processes and Configure-Price-Quote (CPQ) engine

Omni-channel guided service and billing inquiry management enabled by pre-built library of telecom industry processes

Order management supports decomposition and orchestration of customer orders

Real-time balances with sharing and roll-up for multiple users, configurable alerts, and notifications

SPIE #21, June 2016 © Stratecast | Frost & Sullivan, 2016 Page 10

Payment gateway interface to external payment gateways for PayNow payments via credit or debit card transactions

Revenue management for data and voice using a 3GPP-compliant online charging system (OCS) and policy & charging rules function (PCRF) that performs charging, rating, balance management and policy management functions as a common unified product

Hybrid-cloud solution based on Salesforce multi-tenant cloud platform

The Go Digital platform allows all customer interactions to be processed and managed in real time, including network service consumption, purchases, top-ups and similar self-care actions. This approach enables consumer-services DSPs to deliver precise information to the customer through all digital channels, provide customer notifications whenever needed, and enable ongoing engagement with the customer. The platform incorporates a unified data model based on the TM Forum’s shared information data (SID) model. This approach allows workflow configuration and data exchange between applications without complex systems integration.

What Customers Have Achieved Already

During the 2016 Mobile World Congress in Barcelona, the Go Digital team met with more than 20 different CSPs that are in the process of transforming their existing business operations into consumer-focused DSPs. Nearly all of these organizations have since executed technical workshops, with several now conducting proofs of concept and delivering production pilots. MATRIXX explained that Go Digital is a 3-6 month alternative greenfield approach for quickly launching digital brands.

Most CSPs today understand the benefits that can be achieved by transforming to a DSP. Results to date with a strategic MATRIXX client, based in the Asia Pacific (APAC) region, include:

20% average revenue per user (ARPU) increase from new services and smart up-sell

80% reduction in the time to market development cycle for new product offers

40% decrease in care costs through use of a self-care app, additional process automation, and lower call handling times

23 percentage point improvement in net promoter score (NPS), from customers in data disputes, through real-time alerts, self-care app, and reduced overage charges

For another Tier 1 network operator within the APAC region, the Go Digital solution created an online customer experience through real-time self-care, cost control and transparency, personalized product promotion, and provisioning. This resulted in a 90% decrease in time to market for new products. At the same time, customer volumes for the operator rose by 10%.

A third CSP, with operations focused in Europe, achieved a 400% increase in mobile roamer traffic by mitigating users’ expense uncertainty through the offering of time-based, self-service packages and spend controls. This is a noteworthy example on how arming consumers with the means to self-control spending reduces the potential of bill shock, and subsequently contributes to more service usage, rather than less.

SPIE #21, June 2016 © Stratecast | Frost & Sullivan, 2016 Page 11

Karl M. Whitelock

Global Director Strategy – Operations, Orchestration, Data Analytics and Monetization (ODAM)

Stratecast | Frost & Sullivan

kwhitelock@stratecast.com

Stratecast The Last Word

As an alternative to a CSP network service package, talk has been going on for the last 3-4 years about competitive service offerings from Apple, Facebook, Google, and Microsoft. Have network operators improved the customer experience very much over this time period? Not really; however, the network services marketplace just got more competitive via one of these over-the-top providers. Google now offers a program called “Project Fi” that supports only two models of Android smartphones: the Nexus 5X and 6P. For customers using this service, the smartphone routes first to a Wi-Fi network (as do most other smartphone brands); and then, when Wi-Fi signal strength is low, it hops to the best 4G LTE signal it can find from either the Sprint, T-Mobile USA, or US Cellular LTE networks. This is a first-of-its-kind approach to improving the mobile customer network service experience.

Google provides this service at a comparable price relative to any one of the four big carriers’ voice, text and data packages within the US. However, the device continuously “roams” across three carrier networks and multitudes of Wi-Fi hotspots, searching for the best signal strength, in an attempt to provide a better customer experience. Is Google happy with the results? Well, it is experimenting; but the important point to note is that Google is doing something via three MVNO pathways. Will this new approach appeal to customers at large? It likely will if: 1) the service is made available to a wide range of personal devices; 2) the customer service experience is improved; and 3) improvement is made from a usage billing perspective. Is Google’s Project Fi a viable alternative to the flexible pricing and service enablement functions discussed in this report? Not at all; but still keep in mind that an OTT services provider is now doing business within the hallowed walls of the network operator fiefdom.

Stratecast believes that the MATRIXX Software – Vlocity Go Digital solution is addressing a major weakness of the global communications industry, whose 400+ network operators are in various stages of “understanding” that business as usual is no longer possible. The transformation to DSP is taking on many characteristics, with some providers firmly focused on the consumer market, while others are expanding to include various aspects of the large business and enterprise sector in their respective new business strategies.

Offering an Internet-like experience to customers for CPQ and delivery of network services, combined with partner contributions, is now a focal point for global CSPs. The quick to market, easy to define, new service delivery approach that the Go Digital platform enables can help CSPs reach DSP status, which will hold more appeal to the Millennials that are changing the go-to-market face of so many industries. However, is this transformation too late in the race to maintain customer mindshare over aggressive over-the-top competitors such as Google’s Project Fi? Not yet, but …

SPIE #21, June 2016 © Stratecast | Frost & Sullivan, 2016 Page 12

About Stratecast

Stratecast collaborates with our clients to reach smart business decisions in the rapidly evolving and hyper-competitive Information and Communications Technology markets. Leveraging a mix of action-oriented subscription research and customized consulting engagements, Stratecast delivers knowledge and perspective that is only attainable through years of real-world experience in an industry where customers are collaborators; today’s partners are tomorrow’s competitors; and agility and innovation are essential elements for success. Contact your Stratecast Account Executive to engage our experience to assist you in attaining your growth objectives.

About Frost & Sullivan

Frost & Sullivan, the Growth Partnership Company, works in collaboration with clients to leverage visionary innovation that addresses the global challenges and related growth opportunities that will make or break today’s market participants. For more than 50 years, we have been developing growth strategies for the Global 1000, emerging businesses, the public sector and the investment community. Is your organization prepared for the next profound wave of industry convergence, disruptive technologies, increasing competitive intensity, Mega Trends, breakthrough best practices, changing customer dynamics and emerging economies? For more information about Frost & Sullivan’s Growth Partnership Services, visit http://www.frost.com.

CONTACT US

For more information, visit www.stratecast.com, dial 877-463-7678, or email inquiries@stratecast.com.

About ODAM

The processes and tools that communications service providers (CSPs) have utilized to run their businesses have changed over time. More than a half-century ago, CSP network and business management processes were manual (OAM&P). As CSPs evolved over the years, so did the operations support systems (OSS) and business support systems (BSS) that address CSP business and network management needs. In recent years, the lines between OSS and BSS have become less clear, with much overlap. In addition, the roles in which OSS and BSS operate have expanded beyond traditional boundaries. As such, Stratecast now uses the term Operations, Orchestration, Data Analytics & Monetization (ODAM) to encompass both the traditional OSS and BSS functions and the new areas in which business and operations management must now work together, including virtualized networks and telecom data analysis.