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IMS Magazine
April 2007 — Volume 2 / Number 2
IMS Feature Article

Cut to the Chase: Making Money from IMS

By David McNierney and Gregory Welch

 

As is often the case with a new technology, a primary focus of IMS implementations is The IP Multimedia Subsystem  (News - Alert) is perhaps best described as an enabler— a framework that gives service providers the infrastructure for delivering enhanced communications and lifestyle services. While a portfolio of next-generation services can certainly be provided without the use of IMS, the architecture promises to improve the efficiency of the service implementation lifecycle. Service providers without an IMS are often forced to build a duplicate supporting infrastructure for each new service offering. IMS provides many reusable service enablers that can help reduce the timeframes and lower the costs of service rollouts.achieving a quick and substantial return on investment. Companies considering IMS are faced with a Catch-22: an ROI is needed to justify the investment, yet it is impossible to determine the ROI without first building the IMS.However, history has proven that ROI is just one of the values to consider in the business model — over the last decade, some of the most revolutionary next-generation services were not the result of exhaustive ROI analyses, but of unbridled innovation. Larry Page and Sergey Brin had no clear idea what the revenue opportunity would be when creating Google (News - Alert) in 1996. The same can be said for Skype, YouTube, MySpace and many other highly successful IP-based service providers. But then again, Larry Page and Sergey Brin didn’t have the burden that most incumbent service providers have of facing Wall Street each quarter.

Motivating Factors
Business drivers for adopting IMS are generally the same across the industry, as companies tend to have the same goals and motivations. The first step in making money from IMS is to build a business case — for this, a return to the basics is often best. Revisiting marketing’s fundamental “Four Ps”— product, price, place and promotion — enables a company to refocus on its essential keys to success: who they are, what they are selling, and who they are selling it to.

Cost savings may be considered a factor in implementing IMS — however, while the cost savings approach may help in securing the initial funding to get the IMS up and running, cost savings alone will not satisfy long-term business goals that must also address service and revenue growth. Service acceleration should factor more heavily into the IMS implementation decision, as the ability to quickly and effectively bring new products online will improve a company’s competitiveness over the long run.

A timely release of new technology may provide a company with an incremental lead of a few percent over its competition. However, as the company successfully continues to execute with each new technology, it retains this market lead and incrementally captures more. It is difficult, if not impossible, to capture the entire marketplace in one fell swoop — but with today’s “hyper-competitive” communications service environment, successful companies are the ones that stay ahead of the curve.


Companies must also consider the market forces, brought on by the availability of ubiquitous broadband, that are causing price erosion. Service providers are struggling not only to retain existing customers, but also to increase revenues from them. Internet companies such as Vonage (News - Alert) , iTunes, Google and MySpace are providing Over The Top (OTT) applications and forcing traditional service providers into the role of the “dumb pipe provider.”With IMS, providers can remove commoditization. from broadband by allowing innovation to drive cuttingedge premium services that can compete with the OTT providers.

The Killer App
One question that service providers investing in IMS frequently ask is,“What killer applications will provide the revenue stream that would justify the implementation of an IMS?”Not surprisingly, the elusive “Killer App” means different things to different companies. At a recent IMS event, a panel discussing the Killer App issue soon came to the consensus that the Killer App is really the ability to consume any service whenever, wherever and however you want.

In today’s environment there may be no single Killer App and service providers should realize that it is a non-starter to wait for one. Many cool new services — such as ring tones — start off as strong differentiators for the service providers that bring them to
market first, but often have relatively short shelf lives or are differentiators for only a limited time. As the services and products lifecycles are faster than before, competitors quickly copy whatever some other company invents. Innovative industry leaders must continue to rapidly implement new and better services in order to enjoy customer loyalty and revenue gains from their innovations.

Innovation: The Killer Approach
IMS promises to facilitate service experimentation and innovation.However, for this to happen, service providers need to stay in tune with what is happening in the broader market, without losing sight of the value of targeting niche demographics with specific combinations of services.

Telecom providers are finding that before they can begin making money from IMS, they need to empower their marketing organizations with an innovative spirit and the freedom to experiment with services to determine what works. By empowering marketing organizations and fostering an entrepreneurial spirit, network operators can discover new and sustainable IMS-based revenue streams.

Revenue Streams
One challenge with IMS today is the lack of evident IMSenabled revenue streams. Once a company decides to focus on increasing revenue, it needs to be resourceful in determining what revenue streams can be tapped into and what services can be seen as potential revenue opportunities. A recent transformation in the philosophy of determining revenue streams is that the consumer of the service is no longer considered the sole source of revenues — many Internet companies have moved from customer-based revenues to those based on advertising and other third-party sponsorship.

According to Mac Taylor, CEO of research firm The Moriana Group (News - Alert) , innovative service bundles will be used to serve new market segments in both a pre-IMS and IMS context. These include fixed-mobile convergence (3G, local, long distance, data); personalized service bundles (multimedia call services, messaging services, data,VPN, content delivery and handsetbased applications); context-aware services that shift services to optimal device based on subscribers presence, location, and profile; seamless billing across all network domains (e.g., circuit switched domain, Internet,WLAN); personally selectable and configurable rate plans (individual, family, or group-based); and corporate or departmental level rate plans with controllable acceptable usage policies.

As another example, a telecom company losing customers to a lower-priced provider might want to offer to match the discount provider’s price with a lower class of its service but also make its higher-quality service available on a per-call basis. An IMS-based service could make it possible to offer the subscriber control of the level of quality: a basic service may be fine for personal calls, while a higher quality is available for business calls, at an additional cost. It pays for a company to experiment with such innovative service programs. If they prove to be unsuccessful they can simply not be adopted.

Indeed, multiple new services that monetize subscriber control of the network are emerging. One provider is currently offering parents the opportunity to control access to bandwidth in the home, collecting several services into a bundle known as “Parental Allowances.”This is a creative way for a network operator to provide parents with control of all aspects of a network session — from blocking adult websites to limiting the total time a child spends on the web. Another such offering, known as “Bandwidth on Demand,” gives the user the option to temporarily increase the bandwidth of the network connection, for example, while playing a media-intensive, high-interaction game. Service providers may charge for each time the bandwidth boost is utilized or just charge a monthly fee for the ability to use the boost feature a certain number of times per month.

Perspective is Key
In the converging worlds of telecom, digital media and technology, Telcos and Cablecos providers face the real possibility of being relegated to simple “bitpipe” utility status, much like the electric company. If viewed in the proper context, IMS can give operators the leverage they need to continue their customer-facing roles as service providers.

IMS should be considered in terms of marketing rather than technology. It delivers the rapid deployment, bundling and control of services that generate revenues from customers, as well as from non-traditional income sources such as third parties and advertising.With initial IMS deployments in place, operators need to shift their focus from cutting costs to developing superior experiences that will surpass the YouTubes, Skypes and iTunes of the multi-service world.

David McNierney is Vice President of Market Development at Highdeal (www.highdeal.com). Gregory Welch, Sr. is Architect /Strategic Planner at BusinessEdge Solutions, Inc. (www.businessedge.com)

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