When should an MVNO invest in technology - Whitepaper preview

Whitepaper

/When should an MVNO invest in technology?

Table of Contents

Introduction…………………………………………………………………………………………………………………………………………………...3

Types of MVNO entrepreneurs……………………………………………………………………………………………………………………………..4

Level of marketing knowledge……………………………………………………………………………………………………………………………...5

Level of technology knowledge ……………………………………………………………………………………………………………………………6

Technology/Marketing knowledge matrix …………………………………………………………………………………………………………………7

The Rookie……………………………………………………………………………………………………………………………………………………8

The Market Expert …………………………………………………………………………………………………………………………………………10

The Technologist …………………………………………………………………………………………………………………………………………...11

The Sophisticated ………………………………………………………………………………………………………………………………………….13

Conclusions ………………………………………………………………………………………………………………………………………………...14

Introduction

MVNO is a risky business. It requires

thorough telecom landscape knowledge,

as well as an excellent marketing strategy

to access a specific segment and become

successful.

More than 50% of the MVNOs around the

world fail in the first year from launch. This

may sound discouraging, however, the

number of new MVNO initiatives and also

the number of users subscribing to MVNO

services increases every year. The

business model can work out well, there

are plenty of examples of successful and

flourishing MVNOs, but it is heavily

dependent on the investment in

technology, marketing and operational

support. Through this white paper we aim

to share with you the recommended

approach while considering investing in

technology.

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When should an MVNO invest in

technology?

page 3

Types of MVNO entrepreneurs

We, at Computaris, are often approached

by various organizations being interested

in starting an MVNO business or already

running MVNOs that look at further

investments in technology. Many are

asking directly about the technical

capabilities and pricing. We translate such

requests in two scenarios: either they are

in the learning phase or they are so

advanced in their business case

implementation that the only need is to

select a technology and then kick off. As

average, most of them are very early in the

learning phase.

As mentioned in the introduction, an

MVNO business start-up requires

knowledge in three main areas: marketing,

technology and operational efficiency.

Cost-wise, marketing and technology

usually weight more on CAPEX while the

operational efficiency is related to OPEX.

Many customers would like to move as

much cost as possible under the OPEX,

hoping that the revenues generated from

the business will pay for that. Of course,

smaller CAPEX is more attractive to

investors inclined to invest in a potentially

risky MVNO business.

We usually assess the MVNO customers

interested to acquire technology from two

perspectives: Marketing and Technology.

We do this because based on such

assessment, we know that they will need a

different type of approach in the pre-

implementation phase and we can help

them differently.

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technology?

Level of marketing knowledge

The MVNO may know very well their target

market segment or they can be quite

vague about that. The vagueness may be

caused either by some level of secrecy or

by simply not having decided yet which

segment will be addressed. If the latter, a

good advice for the MVNO representatives

would be to make sure they have a clear

strategy: segmentation, communication

channels, distribution network, and

realistic costs. Clear strategy overthrows

technology investment in the case of an

MVNO business. A low level of knowledge

on the marketing side must be an alarm

signal for any party involved.

But there are MVNO representatives with

a high level of knowledge on the marketing

side. For instance in case of ethnical

MVNOs, they know their audience’s

habits, the places they prefer, the unique

selling proposition, the services which may

impact their target audience. They may

even know how much budget should be

allocated for communication and the level

of incentives to be paid to the dealers

selling their product.

Usually there are no extremes; the level of

marketing knowledge can be at any point

between low and high. This can be

assessed by the MVNO itself by simple

questions such as:

• How large is our target market?

• What is the realistic market share we

can achieve from our target market?

• Which is the most efficient

communication channel to reach them?

• What are the costs associated to our

communication strategy?

• Is our target audience already

addressed with similar services by other

MVNOs?

• How can we differentiate? Why will

anyone buy our product?

• Who will sell? Why would they sell my

product?

• How much is the cost of selling to these

potential users?

If you are considering investing in an

MVNO, ask yourself the above questions.

Try marking from 1 to 10 for the level of

certainty in your answers. If you do not

know the answers with certainty you may

need to look for some help from a

business consultancy company or do your

homework better.

Perhaps you just have a good idea but you

do not know yet how this will work out. You

still want to try it out, obviously by

investing as little money as possible. From

our previous experience, without a clear

marketing strategy MVNOs have very

good chances to fail. You may be lucky or

simply visionary and this may work out

well but sooner or later you still need to

answer those questions. The sooner the

better for the long term benefit of your

business.

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technology?

Level of technology knowledge

Under technology knowledge we should

capture on one hand architectures with

systems, interfaces, redundancy and

business processes on another hand. A

person may excel in either architectures or

in processes. Excelling in both may require

an entire team focusing on technology. We

believe that technology is important but it

is less important than marketing. It is rare

that the success in business will come

from the technology alone. Many times the

technology can be outsourced but the

execution of the marketing strategy must

remain in-house.

The level of knowledge about the

technological aspects may influence

however the business strategy. It is worth

asking yourself the following questions:

• What basic services shall we launch?

Are all the services really needed?

• Which Mobile Network Operator will

host us?

• Will it be a loose or deep integration? •

• Do we have skilled engineers to operate

the adopted technology?

• Does our product require many

changes? How many and of what

magnitude?

• What other non-standard telco services

shall we offer?

• How flexible should the system be? Are

we ready to pay extra for extra

flexibility?

The confidence level with which you

answer these questions will determine the

validity of the strategy you adopt for

technology. If you are unsure on some

answers then you should also expect a

high cost fluctuation during and after the

process of specifications definition. Some

needs can be in conflict sometimes: the

need for low investment but also a need

for high flexibility, while flexibility brings

additional costs by nature. The sooner you

know how your technology will evolve the

better for your visibility on how much

investment you need to make in

technology.

A clear marketing strategy could help you

evaluate from the beginning if such high

flexibility is more than just a “nice to have”

expectation that could materialize in

significantly increased initial cost without a

real need in terms of future service offering

to backup such investment.

In any case the platform that you would

choose should prove to have a good level

of openness. Standard APIs or well

documented frameworks will allow the

MVNO’s staff to develop further services.

This brings some comfort regarding the

further evolution of the platform.

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Technology/marketing knowledge matrix

Depending on the levels of knowledge on

technology or marketing the MVNOs need

various types of help. We allowed

ourselves to create some categories

based on MVNOs level of knowledge in

marketing and technology. Depending on

these categories the MVNO should have

different priorities.

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The Rookie

The Rookie has a low level of knowledge

on both technology and marketing. Most

probably the business case is in an

inception phase still. The requests for

technology sound like: “Tell me what you

have and for how much money”. Based on

the answer the Rookie will create a

business case to present to potential

investors.

If you feel that you may fit into this

category then you should be aware of the

risks. Beware that a technology vendor

can make a budgetary estimation based

on previous experience in other

deployments. But the tricky thing is that

the deployments are very much different

one from the other and in the end the

pricing can significantly vary.

The best for the Rookie is to look for an

offer from an MVNE or MVNA. The

MVNEs can support most of the required

features of an MVNO and most

importantly: it is already running. The

involved financials put more weight on the

OPEX costs proportional with the number

of final users. Therefore a model of pay-

as-you-grow is more accessible. Of

course, there would be a setup fee as well.

The setup fee would cover for the MVNE’s

effort to set everything up for the new

MVNO and it is also regarded as a proof

that the MVNO is being seriously

committed to this business.

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Speaking about commitment, the MVNE or

MVNA will still like to understand the

business model and the likelihood that the

MVNO will generate as many end users as

possible. So this means again marketing.

The level of knowledge on the addressed

market segment must become high as

well.

There are countries in which the MVNEs

are not present yet. In such case there is

still the option to start just a Brand MVNO

through a direct agreement with an MNO.

This should be explored as well before

commencing a massive investment in

technology. On the other hand, if there is

no MVNE on a market that may mean that

the MNOs are reluctant to get involved

with MVNOs. So, be prepared to talk about

how your MVNO’s offering is not

cannibalizing the MNO’s market. For such

discussion you need the marketing

expertise again.

So “the Rookie” should eventually become

a “The Market Expert” before signing an

agreement with an MVNE/MVNA or an

MNO. If struggling on the marketing side,

The Rookie may get the assistance from a

business consultant. The business

consultant could define the business case

by looking at:

• target segments (e.g. subscribers

profile and numbers, revenue)

• positioning (e.g. ethnical, low-cost,

roaming, loyalty based)

• service portfolio (e.g. value added

services, content, related services to

telecom)

• distribution strategy (e.g. online, retail

network)

• handset strategy (e.g. SIM only,

subsidization)

• offer definition (e.g. pricing, billing,

payments)

• competition analysis (e.g.

differentiators)

• communication (e.g. TV, online,

specialized channels) This analysis would

result in a good outlook on the MVNO’s

marketing.

This analysis would result in a good

outlook on the MVNO’s marketing. This

document as a whole or parts of it would

provide excellent inputs to MVNO’s

management investors, technology partner

and the MVNE or MNO partners.

The next step would be to create the

business models based on assumptions

for revenues, CAPEX and OPEX. Now it

would be good to have the input from a

potential technology partner, be it an

MVNE, the MNO itself or an OSS/BSS

vendor.

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The Market Expert

In this category we have either MVNOs

already launched on the market or future

MVNOs with a well-shaped marketing

knowledge but no advanced knowledge on

the technology side. And perhaps it is not

even needed because this is handled

either by an MNO or by an MVNE.

When and why should such an MVNO look

for technology expertise? Running an

MVNO on an MVNE/ MNO has its own

advantages especially related to a smooth

start with a lower up-front investment. But

on the other hand it may lead to some

limitations in flexibility once the business

needs to diversify.

For example our customers already

running MVNOs decided to look for an

investment in technology for the following

reasons:

• To launch value added services faster

An MVNO with its own IT team and a

direct vendor relationship enjoys a faster

time to market. Exceptions exist, but

generally the MNOs or the MVNEs may be

reluctant to implement a small feature

especially when this is very specific to just

one of the hosted MVNOs.

• To design faster their own tariffs

Changing a tariff in your own systems can

be much faster than asking for a change at

the MNO or the MVNE. This may be a

good reason to have your own rating

system at least. On the other hand, the

MVNO should evaluate the need of such

flexibility based on the expectations for

change in the future. As previously

mentioned, higher flexibility it’s correlated

with higher costs and you should carefully

evaluate if it’s worth the price.

• To get a better control on users

When the technology is outsourced the

view on the subscriber’s activities may be

in a slower motion or at a lower degree of

detail compared to when the MVNO has

got its own system. If the MVNO owns the

data and the analysis tools, then the IT

can offer better reports, detect trends for

SIM activations, top-ups, service usage

and calculate various business indicators.

• To run campaigns to win-back or drive

revenue

This requires a certain level of control on

the systems used for campaign

management and fulfillment. Own systems

can facilitate the campaigns from inception

through to final performance reporting.

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• To get control on the cash flow - When relying on a MNO or MVNA usually the cash-flow from the users goes via these parties before reaching the MVNO’s accounts. An MVNO that owns the billing and the invoicing system or voucher management system will handle the payments from the users and drive the payments towards the MNO.

An already existing MVNO has concrete data about the market, a more accurate view on revenues and better forecasting capabilities therefore can better tailor a perfect-match technology architecture to cover its needs and more accurately budget the needed technology investment. Also, they understand the real technical needs resulting from the limitations faced in the other model (working with the MNO or the MVNE). To find an offer for OSS/BSS stack the best is to compile a requirement document to obtain information about how vendors cover your needs.

For the Business Support functions the MVNO may want to be informed about:

• Management of dealers, incentives and commissions

• Customer management and care

• Business intelligence

• Product definition and service provisioning

• Billing and payment management

• Loyalty management

• Reconciliation on the usage with the base MNO

• Fraud management

For the integration with the network:

• Voice, data, SMS control

• Network monitoring system

• Network elements such as SMSC, HLR, GGSN

• Device management

Obtaining inputs from several vendors, understanding their offerings well with advantages and disadvantages, and taking a good decision on the implementation,

paves the way to becoming a sophisticated MVNO.

The Technologist

The Technologist has a very good knowledge on the technology but lacks some knowledge about the market. Usually this is the case when the initiative comes from technical departments or is managed by technical departments. We will not repeat the obvious advice to build the so much needed marketing knowledge, the same recommendations apply as in the case of the Rookie. The technologist might fall in other traps:

The MVNO’s systems and processes differ in complexity from those of an MNO. MNOs have technical departments handling processes and systems in a coordinated manner. Hundreds of people need coordination and, for instance, TM Forum does a great job to define architectures, processes and in the end to set a vocabulary to be understood in the same way by everyone involved. But an MVNO has only a few technical people. The specialization is wider for a typical MVNO’s technical person.

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Not everything is important. The

MVNOs must focus on the bare bone

features that make the money. For

instance the voice mail is standard for an

MNO but for an MVNO this is perhaps not

very important. Same for a WAP Gateway.

Many examples can be found. Nowadays

the systems offering this type of, let’s say,

legacy services have become very cheap.

But is it worth to spend any penny on

them? How much do they generate? Are

they a good fit for the MVNO?

Various vendors solve the same

problems differently but similarly well.

The technologist may be trapped in a

specific way of thinking generated by the

experience from a previous life. This does

not make the vendors’ approaches wrong.

An MVNO vendor cannot excel in

everything. In the MNO’s world having

various vendors in the same IT network is

normal. In MVNO’s world there are many

vendors offering everything in a box. What

is the real strength of such offering? A

vendor cannot excel in everything from

business intelligence to the voice call

control. Some vendors employ partner’s

best of breed components to be equally

good at more levels. But this may come

with a price as well. Worth checking.

Once getting the Marketing knowledge and

overtaking these technical traps, The

Technologist is on the right track to start-

up an MVNO and become “the

sophisticated”.

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The Sophisticated

If you – the reader – fit into this category

and you have read this paper this far, let

me thank you. I am honored. Your

organization is an evolved MVNO and

knows well its own market and the

technology needs. You’ve probably tried

everything and you already know what is

sensitive for your market. You found the

limitations of your current systems and you

are probably looking for more flexibility that

would enable you to evolve. Or perhaps

you are facing some end of support for

some of your systems, therefore consider

looking on the market for better

alternatives, new vendors for your systems

or sub-systems.

On the technical side, the sophisticated is

in a very good position to create detailed

requirements and evaluation criteria.

Precise specification means receiving

quotations closer to the final price.

The Sophisticated needs flexibility. A

closed rigid box doing everything is not a

good fit anymore. Open APIs and

frameworks allowing extensions of the

services or easier integration with existing

or future systems becomes a must.

The Sophisticated may be very happy with

its current platform but the need is just for

new services such as:

• Integration with other business verticals:

insurance, retail, banking, etc.

• More efficient loyalty campaign

management

• More flexible pricing and rating

• Instant Messaging, VOIP, RCS, Mobile

TV, Remittance

• Portal selling other goods or services

• Content management

… and this list may continue infinitely.

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Conclusions

Obtaining market intelligence and shaping

a strong marketing strategy should have

the highest priority for any MVNO. This is

necessary for the sake of your business

successful future but also because the

marketing strategy will impact the choice

of technology. A too wide offering of

products and services needs a wider

technology platform, therefore a more

expensive one.

The MVNO must make sure that the

chosen technology platform is flexible

enough to allow the development of new

products and services fast enough to keep

the pace with the market fast evolution,

consumers wants and needs. MVNOs

should have a vision in regards to this

market evolution and marketing is

responsible for defining the MVNO’s needs

in terms of technology platform flexibility.

The operational efficiency has also its own

impact when choosing a technology

platform, but it comes second as priority.

To conclude, depending on the category to

which an MVNO belongs to, according to

this paper, the MVNO will have some

priorities before choosing the most suitable

technology to their business needs. This

table tries to list some probable scenarios.

It is, however, not a definitive list but might

be close to your personal situation:

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Conclusions

Consideration The Rookie The Market Expert

TheTechnologist

The Sophisticated

Already running MVNO? Most probably

considering a start-up

Yes. On MVNE or as a

brand MVNO on top of

MNO or not yet started

Probably. Not or it is an

MVNE

Yes. On MVNE or own

platform connected to

MNO

How to deploy MVNO Become first a market

expert

On MVNE/MVNA or

brand MVNO on MNO

Own platform after

getting market knowledge

Own platform

Main priority Acquire market

knowledge, let

technology wait a bit

Assess need for

investment in own

technology

Acquire market

knowledge

Improve the platform for

better services

How a technology vendor

can help

Technical education and

budgetary offer

Technical education and

budgetary offer

Cell text incompliance

matrix and budgetary

offer

Compliance matrix and

budgetary offer

Budgetary offer’s

accuracy

Factor: 1-5 Factor: 1-3 Factor: 1-2 Factor: 1-1.5

Main technical impact on

budgetary quotation

Network elements,

prepaid/postpaid, VAS,

integration with MNO

Network elements,

integration with MNO

VAS, product definition Traffic estimation

Main factors to consider

for decision to invest in

technology

Acquire marketing

knowledge first

More cost effective

functional limits, cash

flow considerations,

operational synergy

No fun with the current

technology, operational

efficiency, missing

support, need for more

open platform

Current platform’s end of

support, TTM for new

products/services, need

for ownership on

subscriber data,

operational efficiency

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technology?

Key take-aways

Prioritize. Marketing first, operational

efficiency second, technology third. Make

sure they all go hand in hand.

Double check if any technology platform

is open enough to allow variations and

adapt to your business evolution.

Focus on defining clear requirements.

Any technical or budgetary deviations can

impact both you and your vendor; For

instance the integration with the MNO

impact the budgetary offer massively due

to the involvement of Network Elements

Ask vendors for specific workshops

prior to choosing the ”best offer”; you

might be seduced by an initial low cost

offering that could prove to be too costly

on the long run, when having to adapt it to

your business evolution

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technology?

Computaris in the MVNO/MVNE context

We have extensive experience in

MVNO/MVNE solutions

implementations and provide a complete

range of services from technical

consultancy, MVNO systems integration

into MNO’s network, technical consultancy

and design for the MNO through to E2E

projects (from business requirements to

acceptance testing and project

governance), professional services and

testing. Furthermore we also offer our own

MVNO/E suite, which has pioneered the

rating market, anticipating the need for

convergent, flexible and high-performance

pricing and rating for new emerging

services such as VoIP, IPTV, mobile data

and on-demand services; Our MVNO core

is implemented in diverse networks

worldwide, providing a convergent, carrier-

grade pricing, rating, charging and billing

solution.

Over the last 10+ years we have been

involved in a broad range of MVNO and

MVNE projects on all continents, from

brand MVNOs to heavy MVNE projects

involving development of core network

elements. In total, our expert team has

been involved in 15+ MVNO/MVNE related

projects. Recently we fully replaced the

legacy infrastructure of a large MVNO

customer in 9 months, delivering various

different systems and migrating all

customers to a unified, more advanced

platform. The delivery included IN-SCP,

Diameter signaling platform, rating &

charging , voucher management system,

integration layer, CRM and provisioning,

self care, IVR, reporting, loyalty and churn,

network monitoring system and SMSC.

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technology?

About

The author

Bogdan Danila is responsible for the

consultancy and system integration

Business Unit of Computaris.

He started his career in telecom in 1998 at

Ericsson and joined Computaris in 2002.

Throughout the years he held various

positions from Software Engineer to Head

of Development, leading a large number of

telecom and software delivery projects and

being involved in the company’s

management at various levels.

Bogdan is a graduate of the Faculty of

Automatic Control and Computer Science,

Politehnica University of Bucharest, he

holds an MBA with finance specialisation

from the Bucharest School of Management

and Ottawa University and a diploma in

Company Direction from the UK Institute of

Directors.

For more information please visit

www.computaris.com.

Got any questions? Contact us:

Tel: +44 20 7193 9189

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Email: [email protected]

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/Thankyou!

/[+44]20.7193.9189www.computaris.com