Tag: chatbots

AI & automation for telcos: Mapping the financial value

This is an update to STL Partners report A3 for telcos: Mapping the financial value, published in May 2020, which estimated the financial value of automation, AI and analytics (A3) through bottom up analysis of potential capex/opex savings or revenue uplift from integrating A3 into 150+ processes across a telco’s core operations.

The value is measured on an annual basis in dollar terms and as a proportion of total revenue for a “standard telecoms operator”. Access to the full methodology and definition of a standard telco is available in the report Appendix.

We categorise the value of automation, AI and analytics (A3) in telecoms across operational area, as well as type and purpose of A3 technology. Our graphic below summarises the value of A3 across the following six types of technology:

  1. Making sense of complex data: Analytics and machine learning used to understand large, mostly structured data sets, looking for patterns to diagnose problems and predict/prescribe resolutions.
  2. Automating processes: Intelligent automation and RPA to enable decision making, orchestration and task completion within telco processes.
  3. Personalising customer interactions: Analytics and machine learning used to understand customer data, create segmentation, identify triggers and prescribe actions to be taken.
  4. Support business planning: Analytics and machine learning used in forecasting and optimisation exercises.
  5. Augmenting human capabilities: AI solutions such as natural language processing and text analytics used to understand human intent or sentiment, to support interactions between customers or employees and telco systems.
  6. Frontier AI solutions: A number of individual AI solutions which have particular, specialist uses within a telco.

For further detail on this categorisation methodology, see STL Partners report The telco A3 application map

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What’s new in 2022

The colouring of the use case categories in the graphic below remains largely unchanged from May 2020. Some uses of A3 were reasonably mature in that timeframe and already rolled out in a typical telco, so their value was already well understood.

We estimate that the most valuable use case categories, primarily in networks and operations, deliver over $50 millions in annual benefits – and sometimes up to hundreds of millions. Throughout this report we express the value in dollar terms and as a percentage of savings within each domain. This is because while $50 million is clearly a significant sum, it accounts for just 0.33% of total revenues for our standard operator, so showing values for unique use case categories as a proportion of total revenues undermines the potential value A3 can add to individual teams, and in turn contribute to significant aggregate value across an operator.

Overview of the financial value of A3

financual-value-A3

Source: STL Partners, Charlotte Patrick Consult

In our May 2020 research, many of the more sophisticated uses of A3 were understood in theory but yet to be implemented. Researching these various newer uses cases throughout 2021 has revealed that many are now, at least partly, rolled out (although some are still waiting for cleaner data or more orchestration capabilities).

However, there were a few new case studies with financial benefits that necessitated more than small changes to the 2020 financial value calculations. Summarising the changes illustrated in the graphic above:

  • ​The most noticeable change in uptake for A3 was in the BSS domain. Vendors and telcos were not discussing much beyond RPA and basic analytics in 2020, but there are now a whole range of potential uses for ML (typically in the box labelled “Revenue management” in the graphic above). The question of how much additional financial value to assign to this is interesting – some of the A3 will ensure that the rating and charging systems can cope with the additional volume and complexity around 5G and IoT billing, so an allocation of revenue uplift has been assigned. However, this revenue benefit only accounts for around 6% of the additional $83 million in value from A3 in networks and operations estimated in this update.
  • We have added partner management as a new use case category, within operations. This is to allow A3 value to be added as telcos work with more partners and in new ecosystems, and accounts for 6% of additional value in networks and operations in this update.
  • An increase in the assumed value of A3 within marketing programs, owing to the addition of ML to improve the design of new offers.
  • The value of a previous use case category labelled “Troubleshooting” has been subsumed into “Unassisted channels”, as telcos find it difficult to implement troubleshooting tools for customers.
  • Some increase in financial benefit around customer chatbots and field services, due to new case studies showing financial value.

Our report includes a section for each of the first three columns of the graphic above (Networks and operations, customer channels, marketing and sales). The final column (other functions) doesn’t currently have financial calculations underpinning it as values are thought to be insubstantial in comparison to the first three columns.

Table of contents

  • Executive summary
  • Overview of the financial value of automation, AI and analytics (A3)
  • Financial value by business unit
    • BSS, OSS and networks
    • Customer channels
    • Sales and marketing
  • Appendix
    • Methodology for Calculating Financial Value
    • Augmented Analytics Capabilities

Related Research

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A3 in customer experience: Possibilities for personalisation

The value of A3 in customer experience

This report considers the financial value to a telco of using A3 technologies (analytics, automation and AI) to improve customer experience. It examines the key area which underpins much of this financial value – customer support channels – considering the trends in this area and how the area might change in future, shaping the requirement for A3.

Calculating the value of improving customer experience is complex: it can be difficult to identify the specific action that improved a customer’s perception of their experience, and then to assess the impact of this improvement on their subsequent behaviour.

While it is difficult to draw causal links between telcos’ A3 activities and customer perceptions and behaviours, there are still some clearly measurable financial benefits from these investments. We estimate this value by leveraging our broader analysis of the financial value of A3 in telecoms, and then zooming in on the specific pockets of value which relate to improved customer experience (e.g. churn reduction).

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The diagram below illustrates that there are two parts of the customer journey where A3 will add most value to customer experience:

  1. The performance of the network, services, devices and applications is increasingly dependent on automation and intelligence, with the introduction of 5G and cloud-native operations. Without A3 capabilities it will be difficult to meet quality of service standards, understand customer-affecting issues and turn up new services at speed.
  2. The contact centre remains one of the largest influencers of customer experience and one of the biggest users of automation, with the digital channels increasing in importance during the pandemic. Understanding the customer and the agent’s needs and providing information about issues the customer is experiencing to both parties are areas where more A3 should be used in future.

Where is the financial benefit of adding A3 within a typical telco customer journey?

A3 customer experience

Source: STL Partners, Charlotte Patrick Consult

As per this diagram, many of the most valuable uses for A3 are in the contact centre and digital channels. Improvements in customer experience will be tied with trends in both. These priority trends and potential A3 solutions are outlined the following two tables:
• The first shows contact centre priorities,
• The second shows priorities for the digital channels.

Priorities in the contact centre

A3 Contact centre

Priorities in the digital channel

A3 Digital channel

Table of Contents

  • Executive Summary
  • The value of A3 in customer experience
  • Use of A3 to improve customer experience
  • The most important uses of A3 for improving the customer experience
    • Complex data
    • Personalisation
    • Planning
    • Human-machine interaction
    • AI point solution
  • Conclusion
  • Appendix: Methodology for calculating financial value
  • Index

Related Research:

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Telco A3: Skilling up for the long term

Telcos must master automation, analytics and AI (A3) skills to remain competitive

A3 will permeate all aspects of telcos’ and their customers’ operations, improving efficiency, customer experience, and the speed of innovation. Therefore, whether a telecoms operator is focused on its core connectivity business, or seeking to build new value beyond connectivity, developing widespread understanding of value of A3 and disseminating fundamental automation and AI skills across the organisation should be a core strategic goal. Our surveys on industry priorities suggest that operators recognise this need, and automation and AI are correspondingly rising up the agenda.

Expected technology priority change by organisation type, May 2020

technology investment priorities telecoms May 2020

*Updated January 2021 survey results will be published soon. Source: STL Partners survey, 222 respondents.

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Key findings on operators’ A3 strategies

Based on deep dive interviews with 8 telcos, as well as insights from 8 more telcos gathered from previous research programmes.

  • Less advanced telcos are creating a set of basic structures and procedures, as well as beginning to develop a single view of the customer
  • Having a single version of the truth appears to be an ongoing issue for all – alongside continued work on data quality
  • As full end-to-end automation is not a realistic goal for the next few years, interviewees were seeking to prioritise the right journeys to be automated in the short term
  • Reskilling and education of staff was an area of importance for many but not all
  • Just one company had less ambitious data-related aims due to the specialist nature of their services and smaller size of the company – saying that they worked with data on an as-needed basis and had no plans to develop dedicated data science headcount

Preparing for the future: There are four areas where A3 will impact telcos’ businesses

four A3 areas impacting telcos

Source: Charlotte Patrick Consult, STL Partners

In this report we outline the skills and capabilities telcos will need in order to navigate these changes. We break out these skills into four layers:

  1. The basic skillset: What operators need to remain competitive over the short term
  2. The next 5 years: The skills virtually all telcos will need to build or acquire to remain competitive in the medium term (exceptions include small or specialist telcos, or those in less competitive markets)
  3. The next 10 years: The skills and organisational changes telcos will need to achieve within a 10 year timeframe to remain competitive in the long term
  4. Beyond connectivity (5–10 year horizon): This includes A3 skills that telcos will need to be successful strategic partners for customers and suppliers, and to thrive in ecosystem business models. These will be essential for telcos seeking to play a coordination role in IoT, edge, or industry ecosystems.

Table of contents

  • Executive Summary
  • Telcos’ current strategic direction
    • Deep dive into 8 operator strategies
    • Overview of 8 more operator strategies
  • How A3 technologies are evolving
    • Deep dive into 40 A3 applications that will impact telcos’ businesses
    • Internal capabilities
    • Customer requirements
    • Technology changes
    • Organisational change
  • A timeline of telco A3 skills evolution
    • The basic skillset
    • The next 5 years
    • The next 10 years
    • Beyond connectivity

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A3 for telcos: Mapping the financial value

What is analytics, AI and automation worth to telecoms operators?

This report is the second in a two-part series mapping the process and assessing the financial value of automation, analytics and artificial intelligence (AI) in telecoms. In the first report, The value of analytics, automation and AI for telcos – Part 1: The telco A3 application map, we outlined which type of technology was best suited to which processes across a telco’s operations.

In this report, we assess the financial value of each of the operational areas, in dollar terms, for an average telco. Based on our assessment of operator financials and operational KPIs, the figure below outlines our assumptions on the characteristics of an “average” telco used as the basis for our financial modelling. The characteristics of this telco are as shown below, with a slight skew towards developed market operator characteristics since this is currently where most industry proof points used in our modelling have been implemented.

The characteristics of an average telco

characteristics of an average telco

Source: STL Partners, Charlotte Patrick Consult

The first report in the series analysed how each A3 technology could be applied similarly across different functional units of a telecoms operator, e.g. machine learning or automation each have similar processes in network management, channel management and sales and marketing.

Evaluating AI and automation use cases in four domains

To measure financial impact, this report returns to a traditional breakdown of value by functional unit within the telco, breaking down into four key areas:

  1. Network operations: Network deployment, management and maintenance, and revenue management
  2. Fraud: Including services, online, and internal fraud risks
  3. Customer care: Including all assisted and unassisted channels
  4. Marketing and sales: Understanding customers, managing products, marketing programs, lead management and sales processes.

Through an assessment of nearly 150 individual process areas across a telecoms operator’s core operations, we estimate that A3 can deliver the average telco more than $1 billion dollars in value per year, through a combination of revenue uplift and opex and capex savings, equivalent to 7% of total annual revenues.

As illustrated below, core network operations management accounts for by far the greatest proportion of the value.

The relative value of automation, AI and analytics across telco operations

The relative value of AI, automation and analytics across telco operations

Source: STL Partners, Charlotte Patrick Consult

This likely still underrepresents the total, long term potential value of A3 to telcos, since this first iteration does not model the value of A3 processes in areas less unique to telecoms, including supply chain, finance, IT and HR. No doubt that even within the core area of operations, there are potential process areas that have yet to be discovered or proven, and which we have overlooked in our initial attempt to model the value of A3 to telcos. Meanwhile, this is focused purely on telco’s internal operations so also excludes any potential revenue uplift from new A3-enabled services, such as data monetisation or development of AI-as-a-service type solutions.

That said, operators cannot implement all of these processes at once. The enormous challenge of restructuring processes to be more automated and data-centric, putting in place the data management and analytics capabilities, training employees and acquiring new skills, among many others, means that while many leading telcos are well on their way to capturing this value in some areas, very few – if any – have implemented A3 across all process areas. As a benchmark, Telefónica is an industry leader in leveraging automation and AI to improve operational efficiency, and in 2019 it reported total operational savings of €429mn across the entire group. While this is primarily focused on customer facing channels, so likely excludes the value of A3 in many network operations processes, for instance energy efficiency which is delivering significant value to Telefónica and others, it suggests there remains lots of value still to capture.

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Methodology

The financial modelling for the value of A3 was done through an individual assessment of each of the 150+ process areas to understand the main activities within that area of operations, and how automation, analytics and/or machine learning and other AI technologies could be used within those activities. From there, we assess the value of integrating these technologies to existing operational functions to make them more efficient and effective. This means that we do not attribute any additional value to telcos from implementing new technologies that include A3 as a core element of their functionality, e.g. a multi-domain service orchestrator, implemented as part of software-defined networking.

Our bottom up assessment of each process is also validated through real-world proof points from operators or vendors. This means that more speculative areas of A3 application in operators are calculated to offer relatively limited value. As more proof points emerge, we will incorporate them into future iterations.

Table of contents

  • Executive Summary
    • Where is the largest financial benefit from A3?
    • What should telcos prioritise in the short term?
    • How long will it take for telcos to realise this value?
    • What next?
  • Introduction
    • Methodology
  • Breaking down the value of A3 by operational area
    • Network, OSS and BSS
    • Fraud management
    • Care and commercial channels
    • Marketing and sales
  • Conclusions and recommendations

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