2015 global stratecast value – added services enabling ...oss/bss • non-interoperability of...

2015

2015 Global Stratecast Value – Added Services Enabling Technology Leadership Award

BEST PRACTICES RESEARCH

© Stratecast | Frost & Sullivan 2015 2 “We Accelerate Growth”

Contents

Background and Company Performance ..................................................................... 3

Introduction .................................................................................................... 3

Industry Challenges .......................................................................................... 5

Award Recipient ............................................................................................... 6

Technology Leverage and Customer Impact of Huawei ........................................... 6

Conclusion ..................................................................................................... 10

Significance of Enabling Technology Leadership ........................................................ 11

Understanding Enabling Technology Leadership ........................................................ 11

Key Benchmarking Criteria............................................................................... 12

Best Practice Award Analysis for Award Recipient ...................................................... 12

Decision Support Scorecard ............................................................................. 12

Technology Leverage ...................................................................................... 13

Customer Impact ........................................................................................... 14

Decision Support Matrix .................................................................................. 14

The Intersection between 360-Degree Research and Best Practices Awards .................. 16

Research Methodology .................................................................................... 16

Best Practices Recognition: 10 Steps to Researching, Identifying, and Recognizing Best Practices ............................................................................................................. 17

About Stratecast .................................................................................................. 18

About Frost & Sullivan .......................................................................................... 18



Background and Company Performance Introduction - VAS Brings an Improved Customer Experience

Value-added services (VAS) within the Communications Service Provider (CSP)

marketplace consist of various network and partner-provided functions. The most common

of these include: SMS, MMS, Email, Intelligent Network, mobile data, voice-mail and Web

access. More complex services combine network capabilities such as call status, call

control, messaging delivery, location and presence with partner-developed apps to offer

customers an enriched service experience.

One example of a partner-enhanced VAS network service involves a large Asia Pacific

mobile operator that delivers its customers the means to access personal transportation

services without divulging their actual mobile number. Through a smartphone app, a

customer provides their current and destination locations. The network, communicating to

the customer and transportation driver through a service platform supporting the app,

provides both the would-be customer and the transportation driver with a virtual phone

number so that the parties can communicate without knowing each other’s’ real number.

Upon arrival at the agreed-upon destination and processing of the payment, the virtual

number is deactivated. The service platform then instructs the network to return this

number to a virtual number "pool" for reuse. There are many other examples of CSPs in

different regions of the world engaging their customers with a growing number of

enhanced voice, text and Web-enabled services.

A major challenge with the global VAS market is that enhanced communications services

are not new and must rely on ancillary equipment to the voice call, text message flow, or

data access path, in order to operate. These services have been available for several

years, and for most CSPs the delivery and support of such services have added many

platforms and operations solutions to an already complex network and business

management environment.

An increasing concern beyond multiple VAS platforms, is the turn-up and delivery of

complex new services involving partner-supplied capabilities. In most cases, these

services involve an array of new toolsets and software from multiple network technology

and operations management suppliers. Such complexity is driving up operational costs,

and diminishing visibility for internal CSP work teams, making it difficult to track which

services are successful, which cost the most to operate and which need to be re-vectored

to better meet customer needs. It is not uncommon for a CSP to have several different

VAS platforms and operations teams addressing the day-to-day requirements of these

services, with little insight concerning service usage levels and revenue generation

capabilities. Yet, VAS offerings continue in many global regions due to the level of

differentiation and revenue-generating opportunities they create.



Lastly, the acceleration of new network technologies by way of Network Functions

Virtualization (NFV) and Software-Defined Networks (SDN), are adding more components

to an already complicated network and operations architecture. These new components

broaden the number of new service options CSPs can deliver. The downside to virtual

networks, and there is always a downside, is that their deployment alongside presently

installed network technology will continue together in a hybrid operations and

monetization environment for many years to come. As a result, VAS business and

operations management environment just got more complicated.

Managed CSP Operations Reduces Complexity and Cost

As previously stated, cost and margin improvement continues to be a major concern with

CSPs in all global geographies. To maintain control of network operations, partner

engagement and business management functions, an increasingly popular CSP trend is to

outsource network operations, service management, and even some business functions.

In this light, suppliers with experience in working with multiple CSPs, and a proven

portfolio of VAS solutions, can alleviate complexity and often reduce operation costs,

which are outcomes CSPs desperately seek.

In a Stratecast report released in early 2015,1 leading providers of managed operations

services, including Huawei, were featured for their success and strategies in addressing

the large opportunity in front of them. This opportunity, presented by cost reduction

options for solution consolidation and by emerging technologies such as NFV, SDN, the

Internet of Things and small cell technologies, to name a few, has caused many previously

"software or hardware only" suppliers to go deeper with their customers in delivering risk-

sharing, end-to-end "business and operations" solutions.

The evolution of managed operations services within the CSP marketplace is best

summarized by the following figure.

1 Stratecast report OSSCS 16-01, Managed CSP Operations Services Poised for a New Era of

Growth, January 2015.



The chart refers to emerging opportunities in managed operations services and uses

Managed M2M (machine-to-machine) as a case in point. The opportunity is much larger

than M2M. The Huawei VAS Cloud highlighted in this award document is one example of

how suppliers and CSPs can work together to seize the bigger opportunity in Managed

Services. This opportunity even stretches to include CSP interaction with the various

supplier partners that now define the evolving communications market.

Ongoing CSP Operations and Business Management Challenges

In an era where revenue from traditional voice and messaging services is shrinking,

Stratecast believes that opportunities for creating and delivering revenue-generating,

value-added services are being missed by the global CSP market at large due to several

factors. Chief among them is the inability of traditional network infrastructure and support

systems to address today's growth in data volume and service complexity from current

and new business models. Another limiting factor is the on-demand nature of service

consumption and lack of systems flexibility to address real-time data management needs.

Other factors contributing to these unfavorable circumstances and the inability to capture

new business opportunities include:

• Inflexible monetization capabilities

• Inability to support third-party infrastructure and applications

• Lack of real-time service delivery and control

• Limited ability to provide customers with self-serve options and consumption

tracking features

• Incompatibility with open-source solutions

• Static networking architectures that do not easily scale

• Silos of dedicated, single-purpose network elements, IT infrastructure and

OSS/BSS

• Non-interoperability of various network elements and service nodes

• Lack of automation across the service fulfillment and assurance functions

• Difficulty moving legacy services into cloud

Together, these roadblocks contribute to an inefficient, impractical and financially

unacceptable time-to-market and profitability potential for new services. Without radical

change to the way services are created, delivered and managed, CSPs will degrade their

capacity to compete, and in so doing, lose their ability to lead.

The toughest part of addressing these challenges is that such problems cannot be

overcome in isolation. CSPs must address them all at once. They must drastically cut the

time it takes to bring new services to market. They must lower the cost of defining and

delivering new services even while investing in greater capacity. They must simplify the

management of these services through increased automation or leveraging managed

services, or perhaps both. They must also transform to meet the needs of today's digital



services marketplace, and do it at a pace that is much faster than the months and even

years it took to define transformation initiatives in the past. In short, CSPs need a way to

modernize their network functions and operations capabilities, "yesterday."

The Huawei VAS Cloud Solution

Based in Shenzhen, China, Huawei Technologies is a private information and

communications technology (ICT) provider. Founded in 1987, Huawei has grown from a

small local company to a global organization, with 2014 revenue of approximately US

$46.5 billion. In addition to network equipment and network-based solutions, Huawei

offers a range of operations and monetization solutions to satisfy network operations in

general, as well as business solutions aimed at the consumer and enterprise markets. The

company reports that its monetization solutions are addressing the communications needs

of approximately one-third of the global population across 170 countries, through more

than 400 CSPs.

Huawei also has a strong services component within its solution portfolio. In addition to its

professional services and system integration offerings, Huawei is among the leaders in

managed network operations services and managed services operations. As networks

continue to evolve toward cloud and virtualization, Huawei is continuing to lead with

solutions for these new architectures and the services and applications that run on them.

For example, Huawei has seized an opportunity in a relatively new area of managed

services: the managed services operations center (SOC). The company has pushed ahead

of others in this space. Huawei helped to build and assist in operating over 20 Service

Operations Centers. Some of these SOC engagements are with China Unicom in Shanghai,

China Mobile in Hangzhou, Saudi Telecom, XL in Indonesia, PCCW in Hong Kong, TDC in

Denmark, Nextel and Iusacell in Mexico, and Etisalat in Egypt. The SOC was not part of

the VAS Cloud evaluation but it did contribute to the overall view of Huawei as an

innovator in supporting CSPs with both technology and services. However, VAS Cloud is a

strong indicator that managed services has a bright future.

Huawei recently announced plans to invest an additional $1 billion in its cloud services

business. One of the drivers for this investment has been the success the company has

found in moving its VAS platform to a cloud-based model (VAS Cloud) and subsequent

success helping CSPs transform their businesses by moving services onto the new cloud

platform.

The VAS Cloud Solution helps CSPs break down the silos of support infrastructure built for

each service and the correspondingly redundant and costly system integration efforts

required to make it work. The new platform consolidates services into a single cloud

environment that re-uses network and IT components and reduces integration

requirements. VAS Cloud also reconstructs the service architecture, making it more

flexible and more open. CSPs need to deliver many more value-added services in order to



generate new revenue and cannot do so with existing delivery, design, and support

processes.

Huawei VAS solutions already support seven of the top 10, and 36 of the top 50, CSPs in

the world. Together Huawei VAS solutions serves more than 200 CSPs. Major customers

for the VAS Cloud version of the Solution include: Vodafone, Telefonica, Orange, MTN,

STC, and China Mobile and others. Huawei considers these companies to be among its

strategic partners. Many other leading CSPs have already begun to transition services to

Huawei's VAS Cloud Solution.

Technology Leverage and Customer Impact of Huawei

The 2015 Stratecast Global Value-Added Service Enabling Technology Leadership Award is

judged based on ten criteria detailed later in this document; five criteria associated with

Technology Leverage and five criteria centered on Customer Impact.

The following analysis addresses a selection of the ten criteria. The data behind the

examinations comes from extensive discussion with Huawei and its primary competitors

with the VAS and Managed Network Services marketplace.

Commitment to Innovation and Creativity

Huawei is not the only supplier helping CSPs address their challenges in growing revenue

with new services. Nor is Huawei alone in drawing on emerging cloud technologies to

develop solutions. However, Huawei has aggressively taken a services approach to the

challenge rather than the network hardware and software infrastructure approach of its

competitors. This strategy has allowed Huawei to engage CSP pain points for specific

services much earlier than its competitors and therefore develop the much needed

expertise in transitioning its CSP customers to the cloud.

Huawei also exhibited innovation and creativity in the development of its Generic Service

Broker (GSB). Knowing CSPs and even some application and content providers would be

operating from their own clouds, the need for a service broker that can validate services

and communications between them would be important to a cloud-based VAS platform.

The company developed its GSB for VAS Cloud solution to facilitate communication

between clouds in the same conceptual manner that earlier versions of the GSB did when

brokering services between different network types. For example, the PSTN and IMS-

based wireless networks, and between protocols such as those in Session Initiation

Protocol (SIP) services and Intelligent Network services.

Stage Gate Efficiency

There are two ways to think about the stage-gate process: (1) enabling the staging of

applications and services that are ready to be delivered by the CSP, and (2) preparing the



CSP to operate with more agility and efficiency so they can stage new services. Huawei

has proven success in both categories as will be seen in the next two areas of analysis:

Commercialization Success and Application Diversity.

Huawei has shown it can help CSPs stage new value-added services with the success of its

initial VAS platform. It has now taken the next step by staging those applications from the

cloud along with the hardware and software infrastructure associated with the services.

But first, CSPs must address many cumbersome processes, systems, and network

configurations before they can attempt to stage services. This is another very important

component to the VAS Cloud service from Huawei. VAS Cloud, in conjunction with Huawei

Managed Services, has helped many CSPs consolidate network and service infrastructures

to eliminate silos of business and operations management functionality.

Huawei’s focus on using individual services as an impetus to consolidation has helped the

company and its CSP customers reduce costs and get more lean and agile. Through this

focus, Huawei has also helped its customers prepare for a future in which they are the

primary supplier of content and services—and not just a networking company.

Commercialization Success and Customer Impact

Huawei has had notable success with its initial VAS solution. Its VAS platform is deployed

at Vodafone, Telefonica, France Telecom, MTN, STC, and China Mobile, as well as other

CSPs. A primary reason for acknowledging Huawei with an award concerning its VAS Cloud

Solution is the swift progress the company has made in transitioning several of these

organizations to Huawei's VAS Cloud solution. In most cases, the primary business driver

has been cost control using a cloud-based architecture to consolidate multiple VAS

platforms to a more simplified operations environment. A sampling of CSPs that have

adopted and transitioned to the Huawei VAS Cloud solution include: Telefonica, Orange,

China Mobile, MTN and others.

Huawei’s managed services revenues have grown by an average of 60% year-over-year

the last three years, and managed services are a significant part of the VAS Cloud

offering. Huawei has quickly become one of the leaders in the managed services space,

thanks in large part to its focus on services. A small sample of Huawei’s managed services

customers include:

• MTN Group service providers in Ghana, Cameroon, Guinea and Benin

• Telefonica, across Latin America

• T-Mobile in the Netherlands

• STC in Saudi Arabia

• O2 in the UK

• Sunrise in Switzerland



This leaves the company with many potential candidates for transitioning to VAS Cloud.

Huawei also explained to Stratecast the status of several upcoming contracts for

transitioning CSP services to the VAS Cloud. Due to the nature of such work efforts and

the level of differentiation that the VAS Cloud solution provides in competitive markets,

the organizations involved remain anonymous.

Regarding the impact of service network consolidation, Huawei has significantly reduced

the amount of VAS infrastructure used by many of its CSP customers. For some, this

action has resulted in those CSPs gaining the ability to launch new services more

effectively through the VAS Cloud. At Orange for example, Huawei has migrated 87% of

Orange’s 215 VAS applications to the VAS Cloud solution after reducing the number of

data centers Orange needed to operate these services from 12 to 2. Huawei’s competitors

have had similar success in reducing data centers, network infrastructure and OSS/BSS,

however, migrating this many applications to the cloud stands out in the marketplace.

Application Diversity

The reason for moving CSP services to the cloud is to enable support for several services

and applications from the same infrastructure. Rather than silos of individual support

structures for each service, Huawei supports a diverse set of applications using common

infrastructure and support services. Diversity is also realized through the multi-vendor

support inherent in cloud services where many vendor solutions are used across a service.

Huawei has outpaced its rivals in the ability to onboard third-party services and

applications that work with other CSP services. The widest set of diverse applications will

soon be found in the third-party application area. Through open application interfaces,

Huawei has enabled third–party applications such as Ali Number, which is a pseudo

number service that protects user information on the Alibaba e-commerce platform and

prevents true user information from being stolen. There are already a million users per

week using the application, 300,000 of which access the service through the App Store.

Other VAS services include anti-harassment applications, location services, messaging,

Enterprise VPN, Cloud PBX and Call Shine, which is like a video version of a personalized

ring tone. Call Shine enables the called party to respond to incoming calls with a pop-up

window that contains a personalized message that plays until the call is answered. The

application has been implemented on VAS Cloud at Telefonica and nine companies within

China Mobile Communications Corporation (CMCC.) These services all come from diverse

sources: the CSP, third-party developers and joint development with Huawei.



Conclusion

Huawei quickly executed on its plan to focus on services as the driver for both network

service consolidation and cloud enablement. This helped the company leverage its strong

managed services expertise and customer base to guide CSPs in their transition to cloud.

This transition was initially done one service at a time then gradually through an

accelerated process, once confidence in the VAS Cloud service was established and its

benefits realized.

Huawei has shown that network and OSS/BSS transformation must go hand-in-hand with

any major migration of networks and services. In other words, the cloud alone cannot fix

all of the inefficiencies in a legacy telecom network, but together cloud-based value-added

services delivered and supported by a more agile and efficient network infrastructure can

keep CSPs competitive for the long run. By focusing on VAS rather than infrastructure

alone, Huawei has become a leader in cloud-based service delivery and support.

With its strong overall performance, Stratecast is proud to bestow the 2015 Global

Stratecast Value-Added Services Enabling Technology Leadership Award to Huawei.



Significance of Enabling Technology Leadership Ultimately, growth in any organization depends upon customers purchasing from your

company, and then making the decision to return time and again. In a sense, then,

everything is truly about the customer—and making those customers happy is the

cornerstone of any long-term successful growth strategy. To achieve these goals through

technology leadership, an organization must be best-in-class in three key areas:

understanding demand, nurturing the brand, and differentiating from the competition.

Understanding Enabling Technology Leadership Product quality (driven by innovative technology) is the foundation of delivering customer

value. When complemented by an equally rigorous focus on the customer, companies can

begin to differentiate themselves from the competition. From awareness, to consideration,

to purchase, to follow-up support, best-practice organizations deliver a unique and

enjoyable experience that gives customers confidence in the company, its products, and

its integrity.



Key Benchmarking Criteria

For the Enabling Technology Leadership Award, Stratecast | Frost & Sullivan analysts

independently evaluated two key factors—Technology Leverage and Customer Impact—

according to the criteria identified below.

Technology Leverage

Criterion 1: Commitment to Innovation

Criterion 2: Commitment to Creativity

Criterion 3: Stage Gate Efficiency

Criterion 4: Commercialization Success

Criterion 5: Application Diversity

Customer Impact

Criterion 1: Price/Performance Value

Criterion 2: Customer Purchase Experience

Criterion 3: Customer Ownership Experience

Criterion 4: Customer Service Experience

Criterion 5: Brand Equity Best Practice Award Analysis for Huawei

Decision Support Scorecard

To support its evaluation of best practices across multiple business performance

categories, Stratecast | Frost & Sullivan employs a customized Decision Support

Scorecard. This tool allows our research and consulting teams to objectively analyze

performance, according to the key benchmarking criteria listed in the previous section,

and to assign ratings on that basis. The tool follows a 10-point scale that allows for

nuances in performance evaluation; ratings guidelines are illustrated below.

Ratings Guidelines

The Decision Support Scorecard is organized by Technology Leverage and Customer

Impact (i.e., the overarching categories for all 10 benchmarking criteria; the definitions

for each criteria are provided beneath the scorecard). The research team confirms the

veracity of this weighted scorecard through sensitivity analysis, which confirms that small



changes to the ratings for a specific criterion do not lead to a significant change in the

overall relative rankings of the companies.

The results of this analysis are shown below. To remain unbiased and to protect the

interests of all organizations reviewed, we have chosen to refer to the other key players

as Competitor 2 and Competitor 3.

Decision Support Scorecard for Enabling Technology Leadership Award

Measurement of 1–10 (1 = poor; 10 = excellent)

Enabling Technology Leadership

Technology

Leverage

Customer

Impact

Average

Rating

Huawei 9.6 8.2 8.9

Competitor 2 8.0 7.0 7.5

Competitor 3 7.0 7.0 7.0

Technology Leverage

Criterion 1: Commitment to Innovation

Requirement: Conscious, ongoing adoption of emerging technologies that enables new

product development and enhances product performances

Criterion 2: Commitment to Creativity

Requirement: Technology is leveraged to push the limits of form and function, in the

pursuit of “white space” innovation

Criterion 3: Stage Gate Efficiency

Requirement: Adoption of technology to enhance the stage gate process for launching new

products and solutions

Criterion 4: Commercialization Success

Requirement: A proven track record of taking new technologies to market with a high rate

of success

Criterion 5: Application Diversity

Requirement: The development and/or integration of technologies that serve multiple

applications and can be embraced in multiple environments



Customer Impact

Criterion 1: Price/Performance Value

Requirement: Products or services offer the best value for the price, compared to similar

offerings in the market

Criterion 2: Customer Purchase Experience

Requirement: Customers feel like they are buying the most optimal solution that

addresses both their unique needs and their unique constraints

Criterion 3: Customer Ownership Experience

Requirement: Customers are proud to own the company’s product or service, and have a

positive experience throughout the life of the product or service

Criterion 4: Customer Service Experience

Requirement: Customer service is accessible, fast, stress-free, and of high quality

Criterion 5: Brand Equity

Requirement: Customers have a positive view of the brand and exhibit high brand loyalty

Decision Support Matrix

Once all companies have been evaluated according to the Decision Support Scorecard,

analysts can then position the candidates on the matrix shown below, enabling them to

visualize which companies are truly breakthrough and which ones are not yet operating at

best-in-class levels.



Decision Support matrix for Enabling Technology Leadership Award



The Intersection between 360-Degree Research and Best Practices Awards

Research Methodology

Stratecast | Frost & Sullivan’s 360-degree

research methodology represents the

analytical rigor of our research process. It

offers a 360-degree-view of industry

challenges, trends, and issues by integrating

all 7 of Stratecast | Frost & Sullivan's

research methodologies. Too often,

companies make important growth decisions

based on a narrow understanding of their

environment, leading to errors of both

omission and commission. Successful

growth strategies are founded on a thorough

understanding of market, technical,

economic, financial, customer, best

practices, and demographic analyses. The

integration of these research disciplines into

the 360-degree research methodology

provides an evaluation platform for

benchmarking industry players and for

identifying those performing at best-in-class levels.

360-DEGREE RESEARCH: SEEING ORDER IN THE CHAOS



Best Practices Recognition: 10 Steps to Researching, Identifying, and Recognizing Best Practices

Stratecast | Frost & Sullivan Awards follow a 10-step process to evaluate award

candidates and assess their fit with select best practice criteria. The reputation and

integrity of the Awards are based on close adherence to this process.

STEP OBJECTIVE KEY ACTIVITIES OUTPUT

1 Monitor, target, and screen

Identify award recipient candidates from around the globe

• Conduct in-depth industry research

• Identify emerging sectors • Scan multiple geographies

Pipeline of candidates who potentially meet all best-practice criteria

2 Perform 360-degree research

Perform comprehensive, 360-degree research on all candidates in the pipeline

• Interview thought leaders and industry practitioners

• Assess candidates’ fit with best-practice criteria

• Rank all candidates

Matrix positioning all candidates’ performance relative to one another

3

Invite thought leadership in best practices

Perform in-depth examination of all candidates

• Confirm best-practice criteria

• Examine eligibility of all candidates

• Identify any information gaps

Detailed profiles of all ranked candidates

4

Initiate research director review

Conduct an unbiased evaluation of all candidate profiles

• Brainstorm ranking options • Invite multiple perspectives

on candidates’ performance • Update candidate profiles

Final prioritization of all eligible candidates and companion best-practice positioning paper

5

Assemble panel of industry experts

Present findings to an expert panel of industry thought leaders

• Share findings • Strengthen cases for

candidate eligibility • Prioritize candidates

Refined list of prioritized award candidates

6

Conduct global industry review

Build consensus on award candidates’ eligibility

• Hold global team meeting to review all candidates

• Pressure-test fit with criteria • Confirm inclusion of all

eligible candidates

Final list of eligible award candidates, representing success stories worldwide

7 Perform quality check

Develop official award consideration materials

• Perform final performance benchmarking activities

• Write nominations • Perform quality review

High-quality, accurate, and creative presentation of nominees’ successes

8

Reconnect with panel of industry experts

Finalize the selection of the best-practice award recipient

• Review analysis with panel • Build consensus • Select winner

Decision on which company performs best against all best-practice criteria

9 Communicate recognition

Inform award recipient of award recognition

• Present award to the CEO • Inspire the organization for

continued success • Celebrate the recipient’s

performance

Announcement of award and plan for how recipient can use the award to enhance the brand

10 Take strategic action

Share award news with stakeholders and customers

• Coordinate media outreach • Design a marketing plan • Assess award’s role in future

strategic planning

Widespread awareness of recipient’s award status among investors, media personnel, and employees



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, 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 almost 50 years of experience in

partnering with Global 1000 companies, emerging businesses and the investment

community from 31 offices on six continents. To join our Growth Partnership, please visit

http://www.frost.com.

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