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Feature Article
July 2001


Beyond Technology: A Guide For Next-Generation Service Providers


While unified communications (UC) services are creating a host of new revenue opportunities for next-generation service providers, the challenge for many has been generating the end-user demand that is required for them to drive significant revenue streams and increase profitability through UC offerings. In order to succeed, service providers must break out of the traditional service provider attitude of "if we build it, they will come" and learn how to market, package, sell, and support their UC service offerings.

The telecommunications industry is going through a tremendous transition including rapid changes in technology, more sophisticated and demanding users, and competitive threats. Rapid evolutions in the Internet and wireless technologies are creating new alternatives for person-to-person communications and information access/delivery. As a result, service providers must reevaluate the way that they do business and respond to the changes by providing differentiated services that meet the constantly changing requirements of customers, which are evolving rapidly as the demands of work, family, and community create competing spheres of influence. In addition, the challenging economy is quickly consolidating the number of competitors vying for consumer and business telecommunications dollars. Those that remain will be fierce competitors who need flexible and cost-efficient services platforms that reduce acquisition and support costs while providing a base for building a strong and lasting bridge to their target customers for delivery of high-value, profitable services.

Unified communications (UC) is the convergence of traditional voice telephony communications and e-mail applications. Although it originally started out within the legacy enterprise e-mail and voice mail environments as "unified messaging," UC has quickly become the focal point for all public Internet-based multimedia and cross-media communications. The UC market consists of platforms, services, and user communication devices that allow the different modes of communications (i.e., wireline and wireless voice calls, e-mail, voice mail, fax, and Instant Messaging) to interoperate seamlessly from the user�s perspective, sharing resources (e.g., a common, multimedia message mailbox, directory services, and user interfaces). All the market projections suggest that "unified communications" will eventually be real big. Why? Because they are talking about things that are already big becoming even bigger, i.e., telephone communications, increasing Internet e-mail traffic, and wireless communications. Because of the ease of interoperability of all modes of communications, the whole will actually become larger than the sum of its parts.

The Internet and wireless communications technologies are pushing traditional telephone and paging services towards a converged world of cross-media messaging, on multi-modal wired and wireless devices. This is not only true for real-time person-to-person communications, but is also applicable for all forms of voice and data transfer such as personalized information delivery from enterprise and Web-based applications.

What is driving the market towards UC? The key drivers of UC services are the commoditization of wireless services and multimedia telephones, along with Internet telephony or VoIP. Service providers have long known that subscribers want "one-stop" service, and UC is no exception. Next-generation communications providers will offer highly personalized communication services, local and long distance, as well as cross-media messaging and cross-modal communications. Users, especially consumers, will not be satisfied with separate point solutions, but will want comprehensive service options that they can use selectively when they need them. Users will pay for features that save them time or allow them to do things they normally couldn�t do any other way. Service providers, on the other hand, have learned that "free" services are rarely a good business model for profitability and long-term viability.

The telecommunications market is still in transition, suspended over the chasm that separates the early adopters from the large-scale adopters of UC services. The technology and standards necessary for widespread adoption of UC services are evolving quickly, and in many cases are still in final stages of development. The migration from legacy point solutions for voice, e-mail, and fax messaging to a consolidated IP-based communications platform takes time and money; and the market is still learning how to successfully promote and exploit the benefits of "always on" access to people and information. But, even though everything is not completely finished, it is important for service providers to fully understand the steps they can take now to help cross the chasm. These include:

  1. Gain a full understanding of what technology is available now and where the technology is going in the near future.
  2. Deploy an appropriate architecture for UC services that enables the service providers to deliver true UC services in a cost effective, scalable environment that can accommodate rapid changes in market segments, user demands, and advances in best of breed technologies.
  3. Learn and execute the fundamentals of market research, customer segmentation, packaging, pricing, targeted marketing, aggressive sales/channel strategies, and customer support.

To succeed in the highly competitive battle for customer "ownership," service providers need to gain access to partners who understand and have existing relationships with targeted market segments. If they choose to fundamentally "change their stripes," service providers themselves need to take on the characteristics of highly skilled marketing companies that know how to develop targeted product offerings. Targeted offerings help service providers reduce customer acquisition costs, develop brand recognition and loyalty, increase market penetration beyond the anemic ten percent for point solutions, and substantially reduce customer churn.

Service providers can use UC service offerings to take on the characteristics of great consumer and business brands. This can only be achieved by "painting the target," that is, putting a face on both the customer as well as the market segment. There are many large market segments that can be effectively targeted for UC services. The following two examples illustrate the approach.

This is the label that is given to information and communication services available in a vehicle. It has been well confirmed by various market studies that mobile users are the most likely candidates to benefit from the features of UM/UC. JP Morgan found that over 45 percent of U.S. mobile calls originate from the car with over 50 percent of U.S. wireless minutes consumed while driving.

In addition to basic safety and security features, telematics includes wireless communications and UC services including messaging, calling services, entertainment, access to navigation services, and information access and delivery. Voice activation and delivery through text-to-speech and speech recognition technologies will also be key since a number of states have already moved to require hands- and eyes-free access to the limited services that exist today. Telematics services provide a needed entry point for service providers to brand and deliver valuable wireless UC services in volume. In addition, new/leased and rented vehicles provide a constantly new pool of tens of millions of potential telematics users.

Realtors in the U.S. number in excess of 750,000 and they spend over $600M in wireless services each year. Realtors are a part of a vertical market that has particular needs for wireless communications and UC services, including "find me, connect me" services to insure real-time contact with clients, cross-media message delivery and forwarding, call answering and call return, and the ability to exchange signed documents immediately.

From the perspective of information delivery, realtors may want to be selectively notified of new listings that come on the market, as well as changes in the interest rates. All of these needs can be combined into a set of features that a service provider can price to meet both the functionality and the usage needs of this market segment

Although service providers should target UC service offerings to different market segments and individual user profiles, it is still critical to sell UC services on an individual basis. Unlike traditional telephone services that are location-restricted, the combination of wireless access and UC options means that every individual user within an enterprise, a community, or a residence is a prospective subscriber for their own service package.

Much like personalized Web portals have become ubiquitous, UC users want to determine their own communications needs and preferences and have the freedom to pick, choose, add, or remove a service offering as their communication requirements change. Individual family members, who share a common residence phone number, want to choose their own personalized services that are tied to their personal wireless numbers. Realtors and/or brokers, executives, managers, and individual corporate contributors want to be able to personalize and customize their services within a defined menu of service options.

The increased range of service options that UC offers to subscribers also lends itself to incremental revenue opportunities by service upselling on an individual user basis within different market segments. This approach enables a minimum starter set of familiar functions and features to be offered at an attractive price, followed by trial upgrades to introduce the user to new capabilities that they are not familiar with.

UC services can generate revenue for service providers based either on functionality, increased usage time, or both. The fact that there are more new communication management functions, in addition to actual communications (messaging, calling services, etc.), means that service usage time will be much higher. For this reason, it is critical that any cost-generating activities be fully controllable by whoever is responsible for paying the service charges. Detailed usage reporting is not only necessary, but is also an optional service for subscribers who have to bill their time and expenses to other parties (e.g., consultants, lawyers, accountants, etc).

If done right, UC can provide next-generation service providers with an efficient way to drive revenue streams, increase profitability, and increase customer satisfaction. Being successful is more than deploying a service. Service providers must actively deploy, market, and sell UC products and services that are open, flexible, and scalable to support the multimedia and cross-media communications that users and enterprises demand.

Dick Hyatt is director of marketing, Internet Communications Software Group, at Cisco Systems Inc. Cisco Systems provides network solutions for every market from service providers to consumers.

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