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Customer Experience Management: A Business Imperative beyond a Technology Solution

Insights: CEM has gone beyond being a pure concept, or niche idea. CSPs now have dedicated and highly structured CEM initiatives. The primary (near-term) objectives associated to CEM are about top-line growth. The specific drivers for CEM today include Churn Reduction and Quality of Service Improvement. While measurement of KPIs is a cornerstone of CEM, it is a key area that CSPs need to improve. The successful evolution of CEM relies on CSPs successfully tackling challenges on 3 fronts: Strategy; Organization/ People; and Process/ Technology. The opportunity exists for vendors to proactively help shape CSPs CEM strategies and initiatives through insights into best practices but greater alignment on key issues is required. CEM is generally believed to be critical to the longterm survival of CSPs. Driven by both CSPs and vendors, CEM will continue to evolve in sophistication and reach; it may also act as a catalyst for muchneeded CSP business transformation.

Customer Experience Management

Customer Experience Management (CEM) has, over the last 6-8 years, become a major talking point in the Telecom industry, as well as a number of other industries, including Financial Services, Retail and even the Public Sector. The widespread focus that CEM has received in Telecom from both the Communication Service Provider (CSP) and vendor communities is, however, far from being homogeneous. For some, CEM is a software/ technology-based solution; for others, it is a business concept that is more about an organizational transformation process; for others it is a re-invigoration (or, an extension) of CRM; and, for others, it is a passing vendor-driven fad which will no doubt be superceded by another fad sooner or later. By and large, however, the industry seems to understand what CEM is meant to do for CSPs. CEM is meant to: drive a greater level of customer-focus; engender operational efficiencies; generate new revenue streams; and help maximize profits. These are of course easy generic statements to make and are relatively meaningless unless CEM can be concretely defined (there is no single definition today) and unless there is a clear understanding as to what CSPs are doing to leverage CEM. Our belief, at Frost & Sullivan, is that CEM is certainly more than a fad. We also believe it is more than a technology-enabled solution. We believe that CEM is one of the primary axes for CSP transformation and growth. This is because CEM embodies the challenges and opportunities that are reflective of how telecom markets the world over can be characterized today, or where they are naturally headed, including: saturation; hyper competition; commoditization of core business; proliferation of value-added services and devices; destabilization of the traditional value chain; and increasing sophistication of the end-customer. Based on these external drivers, CSP transformation is not a question of if?, it is a question of how soon?. CEM is, therefore, a philosophy that acts as a catalyst for change because it addresses two fundamental business issues: (a) How does a CSP best align to the evolving expectations of the external market; and (b) How does a CSP need to re-organize internally to support that focus? In September of 2009, Frost & Sullivan embarked on a study of the European market to look at CEM through the eyes of CSPs and vendors. Our aim was to elicit sufficient feedback to be able to: suggest what an industry definition could look like; identify the key drivers and objectives for CEM; define some of the common issues and challenges; as well as, establish where some of the synergies or lack thereof, exist between views held by CSPs and vendors. This Whitepaper is based on the outputs of this study, which resulted from interviews with Executives and Senior Managers of 14 CSPs and 14 vendors.

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Customer Experience Management Defining CEM

It is commonly said that CEM lacks an industry definition and our study confirms this point. In fact, of the 28 companies we interviewed, 60% were unable to provide a definition at all, let alone provide a specific corporate definition. The majority of the remaining 40% provided personal definitions and these definitions varied quite significantly. As an interesting sidenote, only 2 CSPs are to be found in this category. Early on in the interviewing process, we wanted to test the reactions against a research definition of CEM (figure 1). 75% of respondents agreed with the research definition, while a further 18% strongly agreed with it. Nonetheless, respondents gave incredibly valuable (and oft fragmented) insight beyond this point. The interviews were also designed to solicit open feedback. In response to this, we found some points where alignment in relation to the CEM concept exists. This is particularly the case in relation to the use of some key words, including: Measurement and Analysis Management Touch-points/ Interaction Holistic/ End-to-end Methodology and Process Improvement Journey ROI/ Profitability Voice of Customer (customer centricity) Direct/ Indirect Drivers

Page 02 of 13

It is interesting to note that, even in the case of open feedback, technology itself fails to make a frontline appearance. The insight that we gained from this part of the study is that CEM is perceived to be a business-oriented concept. Based on the analysis of open feedback to the research definition, we have concluded that the right way to define CEM is in relation to 3 components, namely its: 1. 2. 3. Scope Activities Results/ Impact

While our proposed output (Figure 1) does not constitute a short, elevator pitch-style definition, it does provide significant clarity at various levels over what CEM is meant to be about and what it is oriented towards. Defining an elevator pitch for CEM will, nonetheless, be necessary as companies seek to implement and rollout initiatives. This is because specific CEM definitions need to reflect corporate priorities, objectives, measures and culture.

Figure 1: from Research Definition to Proposed Definition

Research Definition This was tested in the research
The discipline, methodology and/ or process used to comprehensively manage a customers crosschannel exposure, interaction and transaction with a company, product, brand or service.

Based on feedback and inputs the proposed definition is divided into 3 components
1. The scope: The discipline, methodology and process used to 2. The activities: Comprehensively understand, measure and manage a customers cross-channel and touch-point exposure, interaction and transaction with a company, product, brand or service 3. The results/ impact: To facilitate success through a competitive value proposition and more profitable customer relationship.

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Customer Experience Management The Current State of the Market

Our sample of CSPs included companies in Western Europe, Eastern Europe and one in Africa covering mobile, fixed, converged and cable operators. With such a variety of companies, it was revealing to find that all except 1 had already adopted CEM at some level. With reference to Figure 2: of the 13 CSPs, 11 already have CEM initiatives up and running. The remaining 2 CSPs are planning on having CEM initiatives in place within <1 year and >1 year, respectively (N.B. >1 year, according to the interview referred to a relatively short period of time of up to 3 years). The majority of the initiatives are, therefore, at the early stages of their lifecycles, namely: Strategy Planning Implementation

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Figure 2: Prevalence of CEM Initiatives in European CSPs Studied

Of those that responded, all have (or will have) a dedicated CEM program Planning >1 Year - 7% Planning <1 Year - 7% Roll out 28% Almost 60% of these initiatives are still in early development phases In-life management 13%

Strategy 13% Planning 13%

Yes - 86%
Source: Frost & Sullivan European CEM Study 2009 N = 13

Implementation 33%
Source: Frost & Sullivan European CEM Study 2009 N = 13

Figure 3: Commitment vs. Structure Analysis of CEM Initiatives

Commitment Level
It is a Board-level priority because it is closely linked with business success and real business issues.

Board-level Priority

Nonetheless, CSPs clearly feel (as illustrated in Figure 3) that CEM initiatives have gone beyond a pure Concept Stage of evolution. This tells us that the CEM concept has gained traction internally, sometimes winning the interest (and commitment) of senior level executives and Board members. Another relevant point regarding the degree of acceptance and status that CEM has been afforded is inherent in the internal sponsorship/ ownership structure of the initiatives. CEM is commonly owned horizontally (across departments), thereby avoiding being tied into a specific team, or department. These teams are transversal because (as an interviewee put it), it is everyones responsibility to deliver on CEM.

6
It is across all touch-points.

CrossFunctional Initiative

Our program is very narrow and very customer driven. In general it evolved from talking to the client about improving quality on specific issues, but now it is on hold.

Without Board-level support CEM simply will not work. Since it is about changing processes and corporate culture you need senior management to be successful.

Niche Area Being Developed

We started a few years ago where it was mainly me and my department preaching to everyone. Now it has become a senior director-level priority which has helped in getting actual traction.

Concept Stage of Evolution

Source: Frost & Sullivan European CEM Study 2009 N = 12

Structure Level

There is strong reluctance to create specific departments because it is easy to become siloed and that would be a risk to the long term viability of CEM. If CEM is specifically run out of one of the existing functional groups, then it is seen as, their project, in the words of another interviewee. It should also be noted that the teams proximity to customer operations is seen as important due to the primary orientation for CEM initiatives today.

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Drivers The study found that the primary drivers for CEM adoption today relate to: Churn reduction Quality (of service) Improvement

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These issues typically stem from conflicting priorities, contradictory measures of performance and personal incentives and long vs. short term results focus. Ultimately, this is about CSPs behaving like product, not service, companies. In the context of a CEM initiative, which is not a product and which inherently relies on collaboration and information-sharing, silo focus presents real challenges. Similarly, differing perspectives on organizational vs. divisional or team goals can cause friction between executive and operational management teams. This type of misalignment can lead to conflicting Key Performance Indicators. In many ways it is precisely a focus on CEM that can help throw light on these organizational issues. However, CEM can rapidly take centre stage from a political perspective within organizations, where there is an inherent lack of desire on behalf of management teams to have it be a vehicle for casting light on operational shortcomings. It is worth noting that other important barriers that our research identified include (descending order of priority): System capability Internal skills Corporate culture Internal processes Short term financial focus

Other drivers included: process improvement; competitive differentiation and ability to harness higher quality data. Although CSPs will almost universally speak of the ultimate impact of CEM on corporate profitability through its potential impact on both key levers, Revenue and Cost, they will typically assert that in the short term, the focus is on Revenue Growth/ Enhancement. The Cost Reduction potential of CEM is also widely acknowledged and, while objectives like Churn Reduction would certainly also affect costs, CSPs think this second type of benefit is most likely to be realized in the middle to long term. This view is based on the notion that operational effectiveness through CEMs impact on processes can only be gained through experience and today, as stated earlier in this paper, CEM initiatives are still in their early stages of development. Other important drivers for CEM adoption are linked to issues such as competitive differentiation, which are largely seen as being motivated by increasingly saturated and competitive markets, where price, coverage and standard quality (will) no longer suffice.

The next stage of competitive evolution, say CSPs, relates to the ability to understand customers at a micro-segment (extended to the individual) level. This level of insight would enable CSPs to both target customers with completely customized offers and enable them to manage their relationships through a detailed understanding of personal needs, preferences and expectations. The key areas that are in-focus for CEM programs today are front-end, related directly to the customer, including: Customer activation Customer behavior Customer interaction Customer retention Customer Service initiatives Improved monitoring Network fault management Service provisioning

These areas clearly relate to the drivers for adoption (i.e. the objectives for having a CEM initiative): churn reduction and quality (of service) improvement. Restraints The key barriers to CEM adoption have been CSPs silo focus and misalignment between strategic direction and operational priorities. The silo focus is a long-standing issue in the CSP environment, which often causes issues between teams, or divisions, such as: R&D and Product Development; Sales and Marketing; and Corporate Strategy and Sales.

The last point on this list is rather interesting in that CEM does require a strategic investment mentality i.e. a belief in longer term benefits.

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Customer Experience Management CEM Initiatives in Focus

Beyond differences in definitions, objectives, drivers and restraints, CEM practices also vary in relation to design. CEM Initiative Models Through our research, we have been able to identify 6 distinct models for CEM initiatives. These models are illustrated in Figure 4. The sample size of respondents was too narrow to determine if any of these types of models dominates as a best practice at present. However, the variety of approaches, certainly point to limited experience in the industry and suggest that, from a top-level perspective, CSPs are still experimenting with different operating models to determine what works best. CEM Initiative Management We were able to identify strong levels of consistency in relation to the rigor with which CEM initiatives are managed. All CEM initiatives are highly structured and closely measured in their own right - - ROI is considered crucial; refer to Figure 5.

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Figure 4: Distinct Design Models for CEM Initiatives

Model 1: Discrete Team
Where the budget is held: CEM, allocated by Board Who leads: CEM Team Reporting Structure: Directly to Board, or CxO Office

Model 2: Customer/ Service Operations Management

Where the budget is held: Split between product and sales Who leads: Operational service Reporting Structure: Sales & Product Leadership Teams

Model 3: CRM
Where the budget is held: Marketing, CRM Who leads: CRM Team Reporting Structure: Board

Model 4: Strategy, Development & Intelligence

Where the budget is held: Strategy or Finance Who leads: Strategy Office or CFO Office Reporting Structure: Cross-company Steering Group

Model 5: Marketing
Where the budget is held: Marketing Who leads: Sales Reporting Structure: Sales & Marketing Organisation
Source: Frost & Sullivan European CEM Study 2009

Model 6: IT
Where the budget is held: IT department Who leads: IT Reporting Structure: Chief Information Officer

Figure 5: CEM Initiative Assessment

Element Budget Prevalence Comments All CSPs with a dedicated CEM initiative report having budget allocated However, in some cases these are relatively recent allocation (<1 year) Most CSPs report having clear plans with milestones However, in most cases these are relatively short term in terms of outlook (i.e. 12-24 months) While most CSPs report having KPIs against their CEM initiatives, many feel these are not completely comprehensive, or well thought out Most CSPs have specific targets that the CEM initiative is measured against these were necessary to secure budget Most CSPs had to submit a full business case for their CEM initiative and this is likely to be annual requirement

Milestones

Key Performance Indicators

Benefit Targets

Full Business Case

Source: Frost & Sullivan European CEM Study 2009

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Customer Experience Management

Measuring ROI To measure ROI, there are plenty of KPIs that CSPs track and these vary greatly in terms of their specific focus. There is one example of a midsized CSP operating in Eastern Europe that tracks over 100 KPIs. Among the top 12 KPIs that the study highlighted as mainstream, 2 in particular stand out: Customer satisfaction/ loyalty index Churn

Page 06 of 13
These points go some way to supporting the perspective that CEM is meant to be an end-to-end initiative, which does consider all touch-points with customers (direct and indirect), as the Experience is in fact the sum total of all those touchpoints. Our study, unsurprisingly, further confirmed this perspective as CSPs confirmed that IT and HR are two specific support functions that are considered very important to support CEM in achieving its goals. IT is considered important to CEM because it handles the underlying infrastructure that allows for seamless sharing of information and data within the organization. The importance of HR is explained because it owns many of the important people-related enablers for CEM, including training, career development and compensation. HR is also an integral function in driving cultural change successfully.

We ascribe these weaknesses in relation to KPIs to two inter-related root causes: 1. 2. CEM initiatives are still in early development stages CSPs like many other organizations struggle with effective KPI designs in general

Process Focus As Figure 6 highlights, the top processes that are in-focus for CEM initiatives are Customer Services (particularly Contact Centers), Service Activation and Billing. This focus aligns well with the main KPIs and the main objectives laid down for CEM initiatives by CSPs. The chart clearly shows that CSPs also consider off-network elements to be within scope for CEM, e.g.: retail outlets and publicity/ marketing.

According to our study, the next most popular KPIs relate to process efficiency and cost reduction, but these are distinctly less prevalent than the 2 key ones mentioned previously. We did note, however, that there seemed to be little focus on understanding how KPIs should relate to each other. In a CSP, any system of KPI design should logically relate hierarchically from top to bottom and between teams/ divisions/ units, i.e. from left to right. We also noted limited understanding of lead indicators (measures such as number of complaints, which can be directly impacted through, for example, specific process changes) and lag indicators (measures such as revenue, which cannot be directly impacted), which are another important design characteristic that appears to be largely absent from CEM initiatives today.

Figure 6: CEM Initiative Focus on Processes

11

Comments
9

These prioritized areas highlight the importance of revenue generation as a source of benefit for CEM. Managing Customer Services in a cost-effective manner is also key.

-1 te These two weaknesses in how KPIs en tC c a are set up, lead to the conclusion that nt Co e/ most CSPs are at present unlikely to c i rv Se be able to measure ROI from CEM er om st either effectively or correctly. Cu

r i ce rv Se

io at ti v Ac

ll Bi

g in Re i ta

ut lO

ts le ul Fa

em ag an tM

t en Te ch

o pp Su

rt em ag an M el ev

t en bl Pu ic

ti n ke ar /M ity

i ce rv Se

Source: Frost & Sullivan European CEM Study 2009

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Customer Experience Management

OSS/ BSS Components Only slightly more than 50% of respondents could identify one or more ways in which BSS supports CEM, when asked an open question. Similarly, only 1 CSP was able to name OSS processes that support CEM. The following list represents some of the main points of impact for CEM that CSPs identified: Customer Response Management Sales Activation and Order Handling Service Assurance Service Quality Management Provisioning Billing Contact Center Campaign Marketing

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This observation may also point to a lack of overall understanding. Irrespective of the explanation, this is an area that needs further attention and one where vendors can work closely with CSPs on.

The fact that CSPs were only able to provide clear views when prompted may signal that CSPs are most commonly: At too early a stage in their work to fully understand the areas that CEM can impact and be impacted by Thinking about CEM from a different perspective first i.e. Business results, not technology domains

100%

Figure 7: Importance Rating of Function for CEM .

Very Important Useful

80%

Not Important No opinion

60%

40%

Yet when prompted to rank from a specific list of functions, CSPs clearly identified Service Quality, Call Centers and Business Intelligence as the most important functions for CEM. Certainly in the case of Service Quality and Call Centers, we can see strong alignment with the aforementioned priorities for CEM and the key business drivers for adoption. The focus on Business Intelligence is not surprising either given the important of KPIs and measurement. .

20%

t y k k rs er ul lit or e or lem te Us Fa ua tw en d- tion rob tion etw anc k e Q r n P N m N u o e E ula ll C l c n a i o w r i t s C rv rfo es Sim Re Ne Se Pe ob Pr Source: Frost & Sullivan European CEM Study 2009 N = 11

0%

/ g n gt gt ice ing n tio M llin rv em Bi va ap ctio er c Se i i h t d v S e & Ac Or De e t sp rk ck In wo ice rv t Pa Se Ne

s es sin ce Bu igen l l te In

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Customer Experience Management Looking Ahead

In order to understand how CEM is likely to evolve, we looked at critical challenges that the initiatives face. CSPs gave feedback in relation to 5 main areas when thinking of short-term challenges: 1. Strategy
Dealing with behavior typical of a product (not service) company Remaining focused while dealing with short term issues in a fast-moving market

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Against these categories of challenges, we have been able to define a set of lessons learnt for CEM initiatives going forward. These are: Strategy Once an objective has been defined, stay focused on it Understanding growth levers is critical distinguish between critical ones and niceto-haves Drive CEM with a strong financial mandate people are more likely to listen

2.

Organization
Lacking a business owner Lacking experience (not tried-and-tested) Collaborating across silos

3.

Process
Inherently poor at solving problems Prioritization between conflicting objectives

Organization/ People Get leadership buy-in from the start Be aware that some people have a vested interest in being against CEM Get different functions within the organization to work smoothly

4.

People
Requirement to gain consensus from many stakeholders Senior management yet to fully buy-in Attaining a change mentality

5.

Technology
Technical infrastructure: dealing with the variety of information sources

Process/ Technology Prepare to manage in a real-time business Implementation is more complex than you might think (and more than vendors often admit)

Longer term challenges appear to be less well defined, though they can still be classed under 3 main headings: 1. Strategy
Changing to a service-driven culture/ organization Competition will focus more on customer experience

2. 3.

Organization Technology

Finding a sustainable operating model

Continued proliferation of technology makes delivering a consistent and high quality customer experience difficult

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Customer Experience Management

Against the backdrop of challenges, we have assessed how CSPs see the evolution of CEM within their organizations over the short and mid/ long term (Figure 8). In the short term it is evident that, beyond creating a CEM strategy that aligns to corporate, CSPs are looking to apply CEM to both operational (process) oriented issues to seek efficiency gains and to revenue oriented opportunities, including ARPU maximization and cross/ up-selling of multiple services. Figure 8: CEM Evolution
Short term priorities appear to relate internally/ operationally

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Moving from CEM as an internal concept to help drive business with customers, to a concept that will help customers and the customers customers (i.e. developing a service model around CEM)

In the mid/ long term, CSPs are looking to tackle more strategic challenges and opportunities. The nature of these more ambitious views varies from company to company and can include: International rollout of best practices Cross pollination of best practices between divisions Recognition as a leader in CEM

The disparity in long term views suggests that there may be an opportunity for best practices to be shared between CSPs for mutual learning and benefit.

Mid/ long term are less well defined and span across more operational and strategic developments

Standardization and optimization of processes How to leverage analytics throughout the organization Prioritizing which issues we need to address Determine key levers for customer service improvement System simplification and integration Process definition Figuring out which processes, products and services drive ARPU Increase proportion of customers using multiple services Promote internal change better customer understanding

Going beyond our processes to help our customers improve theirs (B2B) Digitization and automation of processes Must achieve organizational transformation Rollout to subsidiaries Rollout to other divisions (e.g. Wholesale) To be #1 in Customer Experience by the end of 2012 To focus on customer retention, rather than (re-) acquisition

Source: Frost & Sullivan European CEM Study 2009

The level of ambition for development in the mid/ long term is, however, matched by level of importance that CSPs attribute to CEM. The vast majority of CSPs studied state that CEM is between Very Important and Critical to the future success of their organization (Figure 9). Frost & Sullivan expects, therefore, that CEM practices and initiatives will continue to grow and develop in terms prevalence and sophistication.

Figure 9: Importance of CEM

Importance of CEM
Question: How important is CEM to the future success of your organization?

Critical

Comments
Very important

Relatively important

We need to get customers more involved. Competition is getting tougher and in our market things change quickly. CEM has the potential to address margins through both revenue enhancement and cost efficiencies.

Not important

0 1 2 3 4 5 6 7 8 9 10

Source: Frost & Sullivan European CEM Study 2009 N = 13

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Customer Experience Management Vendor Perception Gap Analysis

Page 10 of 13

With minor adjustments, our interviews with vendors followed a similar structure to those done with CSPs. This has allowed us to compare and contrast perspectives between both sets of respondents. In some cases we found interesting consistencies (or points of alignment). For example:
Focus on churn reduction as a key objective for CEM Important technical challenges: integration of front/ back office and real-time information flows are critical Primary processes that are in-scope (Customer Service, Service Activation and Billing according to vendors) match CSPs perspectives Primary OSS/ BSS relationships (Call Center, Business Intelligence and Problem Resolution according to vendors) align with CSP views

However, there are a number of areas of misalignment. For example:

Vendors communicate extensively about the importance of having a Board-level focus: Executive buy-in and sponsorship are important factors for CEM, but the Board of most CSP is not (yet) the primary stakeholder for CEM The tendency to elaborate on this group as a center of attention may detract from understanding the operational stakeholders For the Board, there will need to be complete transparency in the business case (CEM-driven benefits) at a revenue and margin level and at a meaningful quantum

Seldom do vendors communicate the full importance of strategy and organization: Vendors seem to focus their communication extensively on information, analysis, process improvement and other lower-level operational issues Clearly these focal areas are important to CSPs and are ultimately important enablers for transformation However, there is limited focus on communicating an understanding of the vision for business transformation even if, in some cases, vendors are able to articulate the point

Vendors often position cost reduction as a key objective for CEM: Cost reduction will always be a part of any initiative whether strategic or operational However, this study suggests that this may not be a primary dimension for CEM at this time The focus at present is on churn and quality improvement (both of which do of course also impact costs)

Vendors tend to fail to convey a strong sense of prioritization of how/ where CEM should be applied within a CSP: Vendors seem to communicate an all things to all people message in relation to CEM While this has its benefits and aligns to the concept that CEM is end-to-end and holistic, it also has its issues CSPs consciously need to prioritize where CEM is going to be oriented now and in the future even if this varies from company to company There is some clarity over the short term and vendors should align to this The longer term is less clear; vendors need to help customers prioritize, based on best practices and experience

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It is interesting to note building on the last point of misalignment between vendors and CSPs that this lack of prioritization coming from vendors may also be a part of the reason why CSPs exhibit limited clarity on OSS/BSS. It is important to remember that CEM started (and still is) a vendor-driven development (albeit inspired by CSP challenges). It is Frost & Sullivans belief that vendors have an opportunity to lead CSPs through the CEM journey, from initial adoption to rollout and in-life management. Through our interviews with vendors, we have been able to isolate 8 types of challenges associated to implementation and rollout of CEM. These challenges, which are critical to understand in order for vendors to lead CSPs, are summarized in Figure 10. In Figure 11, we have presented some of the key future trends that vendors believe will impact CEM. Our key take-away from this analysis is that the future of CEM remains incredibly fluid and that vendors need to take a proactive approach to helping CSPs navigate through the commercial and technical complexities inherent in Managing the Customers Experience.

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Figure 10: A Vendor Perspective on Challenges in Implementing and Rolling Out CEM
Challenges
The Horizontal Challenge: The Solution Challenge: The Sustainability Challenge: The Implementation Challenge: The Strategy Challenge: The CRM Challenge: The Stakeholder Challenge: The Expectations Challenge: Getting CSP to operate outside traditional silos Being able to customize for each CSP Enabling CSPs to benefit fully from CEM Projects can be big; losing sight of objectives is easy with so many conflicting stakeholders Fundamentally lacking a long term view that is broken down into bite-size chunks Getting pinned down as another CRM initiative Dealing with the conflicting agendas of the CIO, CTO, CFO, etc. Hype about CEM means CSPs expect immediate results, which are not always feasible

Source: Frost & Sullivan European CEM Study 2009

Figure 11: Trends Impacting CEM Vendors Views

Social Networking It is already important, but will become more sophisticated. We need to understand more about how it is used in order to analyse it properly. Not only will this change how we deliver our services, it will change how CSPs deliver theirs.

SaaS and Cloud Computing

Mobility

The mobile lifestyle will put pressure on CSPs to react and provide appropriate services. Time criticality of delivery will be key and we need to understand this better. CSPs have been used to dictating things. They are having to move toward a more dynamic market, where openness could threaten retention rates and ARPU. Managing the user experience across various devices including smartphones, netbooks, laptops, etc. will be of major importance to CSPs. Communications technology is becoming an integral part of life. Consumers are gaining in negotiating power. Social media enables people to share opinions and opportunities. Consumers are better informed about suppliers than ever. From service definition to customer care; this requires great insight into individual behavior and preferences. This also enables early churn prediction. It requires open information sharing across different units - - in real-time. The trend is for network planning to be more business (rather than technology) driven. Rather than spending on network rollout for coverage and compliance, CSPs want to extend/ improve their networks based on a detailed understanding of the end-customers on the network.
Source: Frost & Sullivan European CEM Study 2009

Open Standards

Continued Device Proliferation

End-User Sophistication

Mass Individualization

Micro Segmentation

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Customer Experience Management Conclusions

Page 12 of 13

CEM is already a widely adopted concept. The popularity of the concept corresponds to the amount of activity related to it. CEM has, in many cases, developed beyond the Conceptual and Niche stages of development most commonly, it is now found as a crossfunctional (and funded) initiative though less often, CEM has also been adopted a Board-level priority. CEM is typically aligned to highly strategic objectives, including Churn Reduction and Quality (of service) Improvement. This provides strong indications that most CSPs aim to drive revenue through CEM. This expectation aligns with the belief that CEM is integral to the long term survival of CSPs. Nonetheless, CSPs are also focused on the fact that CEM can help drive down operational costs though this is seen as a mid/ longer term objective, signaling that rationalization of process is only possible once an individual CSP has amassed sufficient experience to reap the benefits of efficiency. Yet, when outlining short and mid/ longer term development plans for CEM, most CSPs focus the short term on process improvement and other operational aspects. This may give an insight into a perceived time lag between effort and payback. CSPs will require support to gain this experience; the starting point will be in determining how to best leverage the full capabilities available through existing CEM implementations from other organizations. CEMs barriers (in relation to adoption, implementation and rollout as well as benefit realization) are related to the classic functional silos that CSPs are structured in relation to. There are often competing objectives and misaligned measures of performance between different departments, which creates friction. Organizationally, this issue manifests itself horizontally and vertically (i.e. between departments and from Executive to Operational leadership). This is a major development area and one in which CSPs can work alongside vendors that have strong consulting capabilities to capitalize on best practices even from other industries where CEM has been deployed. Despite the challenges and as noted before CEM initiatives have flourished. These initiatives tend to be set up through the backing of a clear business plan, business case and roadmap, with associated milestones and KPIs. Many of these dedicated CEM initiatives are still in their infancy, to be found in the first 3 stages of development: Strategy, Design and Implementation. In fact, some of these initiatives have literally gone live in the last 12 months. As such, initiatives are typically still focused on certain domains, having prioritized where the impact will be greater. Typically, these areas are front-end (customer-facing) domains, particularly Customer Service (Contact Centre), Service Activation and Billing. This is despite the view that CEM should have an all-encompassing (end-toend) focus in relation to a customers interaction with the CSP. Given the complexities and the long term nature of the work, it is imperative that CSPs remain focused on the core objectives laid out in the business plan trying to do too much too soon is a risky proposition for any initiative that is still trying to prove its value to the organization. There is every indication, however, that CEM will continue to grow in relevance and importance to the Telecom industry. Over the coming 2-3 years, Frost & Sullivan fully anticipates that a growing number of CSPs will put in place dedicated CEM initiatives and, that those that already have, will extend the scope of their work to encompass other functional areas and drive real operational and strategic changes. As such, we expect the industry will evolve a number of standard operating models for CEM and that best practices will be codified in a way that is not yet done today. This will necessarily be accompanied by a standardization of industry definitions. As CEM initiatives go through the lifecycle stages, until they eventually become fully embedded into CSPs strategies and operational ways of working, they will face a wide variety of challenges. Some of these challenges will be extremely difficult to address and require nothing less than organizational transformation. One such challenge relates to the notion that CSPs behave like product companies largely due to their structure and setup (in the widest sense, including: organization, process, people, technology), whereas CEM is premised on the notion of a service-focused organization. Addressing these challenges will require cooperation between industry players, particularly to share best practices and lessons learnt, including CSPs and vendors.

2009 HP

Communications & Media Solutions

In collaboration with

About Frost & Sullivan

Frost & Sullivan, the Growth Partnership Company, enables clients to accelerate growth and achieve best-in-class positions in growth, innovation and leadership. The company's Growth Partnership Service provides the CEO and the CEO's Growth Team with disciplined research and best practice models to drive the generation, evaluation and implementation of powerful growth strategies. Frost & Sullivan leverages over 45 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from 40 offices on six continents. To join our Growth Partnership, please visit http://www.frost.com.

About HP

As the communications and media industries continue to evolve, HP remains a reliable partner for managing change. HP applies its knowledge from more than 35 years of extensive industry experience through the HP Communications and Media Solutions (CMS) organization. In close cooperation with our valued solutions partners, CMS assists the worlds top communications and media companies in transforming their customers experiences and exceeding business objectives. To achieve this, we draw upon a foundation of people, processes, and technology. Through this three-pronged approach, HP manages the complete design, delivery, and deployment of services and software-rich solutions, including Service Delivery Infrastructure and Applications, RealTime Business Support Systems, Next Generation Operations Support Systems, and Digital Media. Every HP solution leverages proven global expertise from our Solution Consulting Services, Solution Delivery Services and Solution Management Services organizations to help companies get the most from their IT investments. To learn more, visit www.hp.com/cms. .

2009 HP

Communications & Media Solutions