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Billing-as-a-service benefits beat the capex burden and constraints of in-house systems

Redknee

Redknee

July 21, 2015

Chris Newton-Smith, the vice president of marketing at Redknee, which has just signed up US MVNO EcoMobile to its cloud-based billing and customer care solution, tells George Malim the pay-as-you-grow, success-based model is appealing to CSPs of all types.

As communications service providers (CSPs) turn to cloud-based IT, often provided on a software-as-a-service (SaaS) basis, some are willing to trust on-demand IT to support services as business critical as billing and charging. Few of the largest CSPs are prepared to jump with both feet into the cloud era when it comes to these systems, but they are willing to engage with them to support specific offerings, or in areas of their business where the accelerated time-to-market offered by cloud systems is appealing.

“I tend to divide the market for cloud and SaaSbased billing and charging systems into a few different categories,” explains Chris Newton-Smith, the vice president of marketing at Redknee. “From a retail perspective, tier one and tier two CSPs have a different approach than tier two and three MVNOs. Larger CSPs want to maintain full control over their core retail businesses, but the others, particularly new entrants, see the benefits of cloud and SaaS services.”

Newton-Smith sees two key areas of appeal for these types of CSPs. “With a lower capex, it is easier to get up and running more quickly, allowing these service providers to focus more on marketing and sales,” he says. “In the retail sector, there is a split between larger and smaller CSPs, but even the larger ones are adopting some of the technologies behind cloud and SaaS. After all, these same technologies are driving the overall trend towards virtualisation, where even the largest CSPs are gaining some of the benefits of a cloud system.”

Chris Newton

Chris Newton Smith, the vice president of marketing at Redknee

It’s when we move away from the large CSPs’ traditional heartland – away from their core retail business – that they begin to show a greater willingness to adopt cloud and SaaS systems. “Other areas of the business, such as wholesale, B2B, machine-to-machine (M2M), hosting MVNOs, and even parts of the enterprise market, are all areas in which CSPs are very open to SaaS models,” adds Newton-Smith. “You can see the trend towards delivery of IT services as a cloud offering in the broader enterprise IT market, but for network operators, the challenge is how to interact in real-time with the other core systems. The technical challenge is surmountable, but issues such as service level agreements, real-time integration and network attributes need to be taken into account.”

Cloud for adjunct systems

“For larger service providers, their primary interest in SaaS comes when they realise they can’t do certain things with their existing systems, such as introduce a new service or address a new market quickly enough,” he explains. “CSPs of all sizes and in many markets use our system because, upon evaluating their in-house systems, they realise that the time and costs involved would be too high for the business case they are pursuing to actually work. Even for a very large CSP it can make sense to move towards a SaaS approach.”

Elimination of capex is the clear headline attraction here, but Newton-Smith identifies a series of other benefits for CSPs, regardless of their market segment. “CSPs like seeing a system up and running in the cloud; they like the pay-as-you-grow, success-based model, and they like that they can start prototyping services and launch them to market very quickly,” he says. “In addition, the risks associated with cloud based solutions are significantly lower. A new CSP focused on sales and marketing doesn’t want the financial risk of building a complete IT stack.”

“Such players often don’t have the necessary experience – especially if they’re an entrant from an industry outside of telco, like many MNVOs,” he adds. “Worse, in some markets, they can’t even find the necessary skills. The workforce just isn’t there. In the US or Europe it’s quite easy, although highly competitive, to get the right people, but in other markets it can be difficult to recruit people with the right sets of skills, so the idea of using cloud based billing and charging as a way to improve operations and share resources is appealing. It means you don’t need the same staff in place in every point of presence.”

Even where the skills are available to set up and operate in-house systems, there’s a potential cost for CSPs to pay in terms of lost focus on their prime business goals. “The issue of focus is important,” explains Newton-Smith. “CSPs are looking to focus their efforts on activities that provide their business with greatest amount of opportunity, but replicating billing and charging functionality doesn’t achieve that. They really want to focus on sales, new services and their go to market plans.”

“SaaS gives them the opportunity to free up resources to focus on what’s important to the business,” he adds. “The added benefits are that they know the system will be continuously upgraded and it has to adhere to service level agreements.”

Taking the IT headaches away and moving towards a service-based model resonates well with the mood of most CSPs. “They want to innovate and experiment and bring new services to market, but if they have to make a large IT investment to do so, it becomes a high risk approach,” Newton-Smith says. “SaaS gives them the means to try new things without committing to a large upfront expense, and that is what’s driving cloud and SaaS adoption.”

Newton-Smith adds that for those concerned about ceding control of such critical systems to an IT service provider that this doesn’t have to be a permanent state. “It makes sense to go with a cloud or SaaS approach first because you always have the opportunity to bring things back in-house if the business case justifies it,” he explains.

In addition, he thinks many of the cultural, technical and regulatory barriers are starting to recede. “There is a cultural aspect to deciding whether or not to deploy a cloud system, but it’s not the prime issue, which is really more about understanding what your starting point is,” he says. “Some CSPs have been in business for decades and have built up extensive IT assets and they want to get the most out of these assets as possible. Some look at SaaS systems as just another set of partners to manage and another system to invest in that you can’t even see.”

“CSPs have understandable caution to issues such as data protection, which is why they’re testing cloud and SaaS in areas adjacent to their core businesses,” he adds. “These barriers will decrease over time, and if there’s a good business reason, CSPs will make the investments required. It requires time and experience for people to become familiar with these models, but the drivers are there for more uptake of cloud and SaaS – after all, on a personal level, we’re all familiar with and using cloud services now.”

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About Redknee:
Redknee monetizes today's digital world. We provide a complete portfolio of mission-critical monetization and subscriber management solutions, including real-time billing, charging, policy and customer care modules, which allow Communications Service Providers to charge for things in new and innovative ways and create a unique user experience. Available on premise, cloud-based, or as a Software-as-a-Service, Redknee's low-risk, flexible solutions power more than 250 businesses across the globe. Established in 1999, Redknee Solutions Inc. (TSX: RKN) is the parent of the wholly-owned operating subsidiary Redknee Inc. and its various subsidiaries.

References to Redknee refer to the combined operations of those entities. For more information about Redknee and its solutions, please go to www.redknee.com.

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