DEM: a way for companies to fulfill their digital transformation

White Paper

DEM: a way for companies to fulfill their digital transformation

In this white paper1. Executive Summary.... ....................................................... 3

2. Introduction ...........................................................................5

3. Context: industries are undergoing transformation, but are aware that Information Systems and internal processes need to be up to the challenge ....................6

3.1 Why do companies need to transform? ..........6

3.2 Companies are aware that information systems and internal processes need to be up to the challenge ......................................................................8

4. Focus on Digital Ecosystem Management use cases ...............................................................................................9

4.1 Digital breakthrough drives many uses cases in various industries ..........................................................9

4.2 From annual statements to (near) real-time information .......................................................................10

4.3 We used to sell big metallic boxes... we want now to sell services ........................................................12

4.4 Retail and CPG use cases ....................................13

5. DEM: a way for companies to fulfill their digital transformation ........................................................................14

5.1 What is Digital Ecosystem Management ....14

5.2 What is it made of? ...............................................15

5.3 Focus on technical aspect - what are the building blocks of the DEM? ......................................17

6. Whose market is it? ..........................................................19

6.1 A 100 billion € market in 2020 with opportunities for different types of platform suppliers .............................................................................19

6.2 Who will address this untapped market? .....19

6.3 What platform providers should do to win the DEM battle? ..............................................................20

6.4 Focus on British Telecom (BT) case.................22

7. Contacts ................................................................................25

8. Figure summary .................................................................26

Executive Summary 3

Executive Summary

One key feature of the most successful players in the digital era has been their ability to disrupt businesses through a platform-based model. This means they have been able to transform into aggregators in order to develop, connect and manage a various ecosystem of aggregated actors including buyers, sellers and third-party partners like developers or service providers, to innovate and create new offers, like Amazon marketplace or Apple with its ITunes platform did. In fact, according to Massachusetts Institute of Technology, in 2013, 14 of the top 30 global brands by market capitalization were platform-oriented companies. And according to IDC, there will be more than 100 new digital industry platforms from non-tech companies as early as 2016.

However, as digital platform model tends to become the new standard of digital transformation success, businesses increasingly need more flexibility by partnering more comprehensively with other industry and cross-industry businesses in order to produce an agile and constantly evolving set of products and bundles of services that deliver increased value to customers. This is where a Digital Ecosystem Management becomes relevant. The idea is to be able to propose to aggregate these products and services to offer tailor-made bundles to the customers. While digital platform based newcomers have disrupted numerous established companies during the past 10 years, new flexible digital platforms will fuel the acceleration of disruption during the next three to five years, leaving less and less time for established companies to react to change.

In fact, digital is driving many uses cases in various industries focused around digital ecosystem management issues. For example, automotive industry is currently trying to shift from a traditional business model of supplying cars to a new business model of offering in-car bundled digital services. Another interesting example is the digitalization of utilities industry. This digitalization will have a huge impact on the business model of utilities players, automating the way of doing meter-reading, enabling the creation of new services thanks to the data collected, and creating opportunities to propose bundled offers with an ecosystem of partners. As well, retail and CPG players are also experiencing their digital transformation and we already find a few interesting initiatives from these players using digital to foster different business models, shifting for example from a B2B2C business model to a B2C business model, to address new markets, through a digital platform and an ecosystem logic.

So time is counted but becoming a digital business is a long process, and building a digital industry platforms and developing an ecosystem combined offerings strategy is a far much longer multiyear process. Consequently, the creation, delivery and monetization of such combined offerings requires new industry-specific and cross-industry business models and IT systems with capabilities that cover a much more integrated business flow from service design, catalogue and order management over CRM, billing and financials for multiple organisations. In this frame, the use of an existing DEM platform is a must, providing companies with the possibility to accelerate the transformation of their businesses by creating, orchestrating and monetizing new services through the cloud.

DEM market is a huge opportunity and the market potential from now until 2020 is estimated at approximately 100 bln € . And if IT oriented companies are the most natural players we think about to seize opportunities in the digital ecosystem management business, we are convinced that telecom operators can in particular make a legitimate breakthrough in this market. In fact, telecom players are not only evolving in an old and mature market, looking today with some anxiety for new growth territories for their future through digital, but they are already used to provide customer service, to manage complex IT platforms, represents a trusted brand for the customers, and are already proposing a range of digital services like cloud computing, mobile financial and M2M related services. Turning into a platform-based model to become a digital service providers with their own products and bundle them with an ecosystem of partners may be a solution to achieve successfully their digital transformation.

4 Executive Summary

Introduction

Businesses are facing a new “moment of truth” and new challenges as more agile, digital-born competitors quickly adopt new technologies to re-define expectations of customer experience. A digital revolution that started with online sale of products like books and games is now extending into services with Airbnb and Uber as only the tip of the iceberg. The typical corporate response has been to invest more in digital marketing and customer channels – an app or social media presence for example. However this falls short of the level of organizational change needed in order to deliver the speed and agility necessary to meet customer and market expectations.

Digital transformation can be defined as the process of improving an organization’s performance through digital technology to serve what consumers are expecting. Digital is providing user-centric access to anything whenever and wherever needed and in whatever format is required. Today’s web, social and mobile technologies, cloud computing and big data analytics are combining to deliver unprecedented and far-reaching impact on every aspect of our business and personal lives.

Although large established firms are truly different from digital entrants, many are starting to transform their business successfully through digital technology. Companies face common pressures from customers, employees and competitors to begin or speed up their digital transformation. Digital is often transforming the business model, making it shift from a B2B to a B2C model, or on the opposite from a B2C to a B2B model or enlarging it into a business-to-business-to-consumer (B2B2X).

Hence, the challenge is about using digital to make deeper changes in the value chain from product and service development to fulfilment. In most cases, this starts with learning to work with an ecosystem of partners to co-create and enrich service offerings, then rapidly mass-personalize and recommend them to customers. This requires new digital foundations to handle complexity and repeatability in bringing together ecosystem partners to develop new coherent service bundles.

Introduction 5

ContextIndustries are undergoing transformation, but are aware that Information Systems and internal processes need to be up to the challenge

Why do companies need to transform?Companies need to undergo digital transformation as their businesses and operations are being disrupted with the advent of specific technologies. Moreover, in many industries, barriers to enter markets are being disrupted, leading to organizations losing their competitive edge, and in some cases even risking their survival. There are several impacts inferred by digital technologies, enabling competitors to match offering to market expectations.

As shown in Figure 1, impacts inferred by digital transformation can fall into three categories. Business model related impacts, operations related impacts, and customer experience related impacts.

FIGURE 1: IMPACTS INFERRED BY DIGITAL TECHNOLOGIES

Shifting from supplying products to o ering services

Necessity to deliver a faster Time-to-Market

Ability to grasp cost saving opportunities

Ability to reach all customer touch points

Ability to provide the best customer experience in

adequacy with changing end-user behavior and new

market trends

Shifting from traditional services to Cloud services

Fostering di erent business models: B2B - B2C - B2B2X

Adjusting from service providing to ecosystem service

aggregating

Handling real-time information

Business model related

Customer experience related

Operations related

6 Context

Business model related impacts • Ability to shift from supplying products to offering services. Companies are

introducing digital services that complement traditional offerings. This often translates to service provision for some manufacturers. A lot of industries are dealing with this impact, in particular those affected by the Internet of Things (IoT). Car makers like General Motors (OnStar), Renault (R Link) or BMW (BMW ConnectedDrive) for instance are looking to move beyond vehicle manufacturing and deliver value-added services, such as traffic information tied to GPS navigation, infotainment, connectivity…

• Capacity to foster different business models, such B2B and B2C relationships within the same organization. Many companies, used to a B2B model, find themselves dealing with end-users thanks to digital technologies, thus inferring the advent of B2C model. For example, fast moving consumer goods companies like L’Oreal are slowly evolving to a model where they are directly addressing end-users as clients. A grocery firm is staying true to its traditional business, but using digital to transform a new growth business. “After two years, our e-commerce platform is bringing us 20 percent of our new clients and our traditional clients are consuming 13 percent more on average”2

• Ability to shift from traditional services to cloud services. Software makers like SAP and Oracle are transitioning to cloud and subscription based offering

• Capacity to handle real-time information and adjust services accordingly. Utility companies’ transition from traditional/manual metering to smart metering like Thames Water or E.on, enable the availability of (near) real-time consumption information

• Adjusting from service providing to ecosystem service aggregating, where companies drive more and more revenues from APIs-Generated services, like Salesforce or Twitter do.

Operations related impacts• Necessity to deliver a faster Time-to-Market. Fast time-to-market is in the DNA

of digital-born competitors, due to their types of businesses and agile organizations. Other industries spend a lot of investment (time and finance) in research and development, and launch their final product at a specific targeted time. This is due to the nature of the business primarily, but internal information systems are also a factor. Many studies have shown that IT departments of several industries were not able to develop applications fast enough for the business

• Ability to grasp cost saving opportunities. With digital technologies there are many cost saving opportunities, whether it is for external matters (after sales services are much more cost efficient on the web than via call centers) or internal operations (audio and videoconferencing technologies, for example, can be justified on travel cost savings).

Customer experience related impacts• Ability to reach all customer touch points. Customer service is expected to be

seamless, as consumers expect to reach their suppliers anytime everywhere. Companies are expected to deploy a multi-channel strategy, and guarantee cross-channel coherence to adapt to customer profiles. Customer autonomy is also an important expectation, as consumers increasingly wish to undertake different customer journey milestones via “selfcare”: be it an item or a service purchase or an order modification. This is an element which is emphasized with digital-born competitors: consumers can purchase items on Amazon and amend orders at any time

2Source : MIT Center for Digital Business / Capgemini, “Digital Transformation: A Roadmap for Billion-Dollar Organizations”, 2011

Context 7

• Ability to provide the best customer experience in adequacy with changing end-user behavior and new market trends. End-users’ behavior are changing: people are connected, on the move and always looking for a better experience with their services provider (plug and play services, financially interesting, etc.). With the digital ecosystem, many companies find themselves with a lot of customer information, which should trigger them to more adaptation to customer needs.

Abovementioned impacts pinpoint that many industries are facing a new reality, and that inherent complex market dynamics create urgent need for digital transformation. The Oil & Gas industry is a good example. The industry has been facing recent price declines. However, companies must avoid the temptation simply to cut costs until the price slump ends. Digital transformation comes as a “blessing in disguise”. To maximize operational efficiency, Oil & Gas companies must address the “data deluge”—much of it increasingly generated by the Internet of Things (IoT): the networked connection of people, process, data, and objects. The industry has a unique opportunity to combine these drilling-technology advances with digital, IoT-driven technologies to deliver new levels of business and operational efficiency. By becoming “digital technology companies,” Oil & Gas firms can, for example, further improve rig uptime and oil recovery rates, reduce oil spillage, boost employee productivity, and shrink costs. However, the digital transformation requires thorough adoption of IoT, throughout the Oil & Gas value chain.3

In addition, not undertaking digital transformation has proven to be lethal in particular industries. Failure to keep up can result in rapid loss of market share. This is best demonstrated by the Kodak case study. In 1999, the New York Times quoted that “Kodak regarded digital photography as an enemy that would kill the chemical-based film and paper business that fueled Kodak’s sales and profits for years”. The company did not manage to transform adequately to provide a customer experience correlated to changing customer needs and market trends. This has subsequently led to weakened position in its market, against competitors willing to fully undertake digital transformation.

Finally, in a quick-changing digital world, products and services suppliers need to become part of a dynamic ecosystem, to be able to create and offer tailor-made bundles to the customers.

Companies are aware that information systems and internal processes need to be up to the challengeAs digital technologies (mobile apps, social media and OTT services) are indispensable tools for consumers and enterprises’ day-to-day activities, companies must rely on adequate internal systems to augment their presence through digital media in order to stay competitive and relevant to their evolving digital customers.

There are several key success factors for a powerful digital transformation: clearly defined digital strategy, reliable performance monitoring indicators, top-down drive and sponsorship, etc. However, the presence of the right infrastructure - Information Systems and applications, internal processes - is a crucial pillar for digital transformation success. Many companies believe they lack of the infrastructure to align with digital strategies.

• Only 19% of executives believe they have the right technology to execute their digital strategy4

3Source : Cisco, « A New Reality for Oil & Gas », 20154Source : Forrester/Russell Reynolds Digital Business executive5Source : Canopy, « How to grow revenue and increase competitiveness through digital transformation, 2014

8 Context

• 41% of executives say they can’t on-board customers quickly enough due to poor responsiveness of IT tools

• 64% of executives admitted that a lack of cloud investment was holding back vital digital projects5.

Focus on Digital Ecosystem Management use casesDigital breakthrough drives many uses cases in various industries Digital is driving many uses cases in various industries focused around digital ecosystem management issues like shown in Figure 2 below :

FIGURE 2: EXAMPLE OF USES CASES FOCUSED AROUND CLOUD BILLING AND THIRD PARTY SERVICE ORCHESTRATION CAPABILITIES

Bundling IoT devices and applications for both end-users and enterprise clients

Infusing third party applications in wearable devices

Connected in-car services billing (tra�c app, infotainment,...)

Implementation, onboarding and management of third party connected services

Managing multiple customers portfolio and subscriptions (water, electricity, digital

services,...)

Connected home services billing (connected CCTV, home automation devices)

Meter readings, invoicing, payment tracking, and money collection handling interaction with IT

business partners

Gathering medical data, diagnosis, public health findings and data collected from healthcare

connected devices on one platform to leverage on digital to improve quality of life, disease

management and critical patient care

Bundling company`s own goods with third party goods and associated services on one platform

for both consumers and professionals

Bundling third party products and associated services on one platform for end-users and

professionals

Bundling internal banking services (account management, loans, investments, insurance,

security, etc.) and non-banking services on one platform for end-users and professionals

Bundling insurance and non-insurance services on one platform for end-users and professionals

Bundling company`s own media contents and services with third party media contents and

services for end-users

Bundling multiple hotels/properties o�ers with tourism and business travel services for end-us-

ers and professionals

Bundling smart meters, IoT devices and applica-tions to deliver global services for public authori-ties to improve the quality of urban services and

citizens` quality of life

Consumer electronics Automotive Home automation

Utilities Healthcare CPG (Consumer Packaged Goods) industry

Retail Bank Insurance

Media Hospitality Smart city

Focus on Digital Ecosystem Management use cases 9

Such use cases generate new platform needs in order to build, orchestrate and monetize new services. Patterns vary on this subject, depending on the company’s nature.

Pattern #1: Digital entrants have fast and flexible business models that require strong partnering and billing functionalities

• New entrants have strong digital needs because they compete in a global market where new products are made and can die in a very short time

• They are often too small to acquire classical expensive solutions that are not adapted to their needs: indeed, standard platforms are not flexible enough to allow to simply bundle and bill new services.

Pattern #2: legacy companies are looking for ways to reduce cost and stiffness of their billing services

• Non-digital companies are feeling pressured to reduce overhead and enhance customer satisfaction

• Their current legacy business support systems is often complex, costly, and above all, it is frequent that it is not adapted to push new digital services.

The following paragraphs focus on three especially relevant use cases related to the utilities, automotive and retail & CPG industries.

From annual statements to (near) real-time informationDigitalization of utilities industry will have a huge impact on the business model of utilities players, automating the way of doing meter-reading, enabling the creation of new services thanks to the data collected, and creating opportunities to propose bundled offers with an ecosystem of partners, as described in the Figure 3 below.

FIGURE 3 : EVOLUTION AND IMPACTS OF DIGITAL ON UTILITIES FIELD

Utilities traditional

meters

Manual data collection and

analysis

Traditional services

Traditional utilities o�ers

(electricity, water, gas)

Safety services, elder care

services, etc

Smart lighting, Flooding

management, etc.

Multi-Play o�ers (electricity, water,

gas, internet, phone, TV)

GTC / GTB Smart City

Utilities smart meters setup

Automatic data aggregation and analysis

Traditional + New services

Internet research

Mobile research

Automatic data collection and

analysis

Traditional + new services

Today

Private individuals and professionals

Private individuals Public authorities Private individuals Public authorities Professionals

Short term future

Smart metersAutomatic + Real time data collection

New services

Traditional metersManual data collection

Smart meters + Other connected devicesAggregation of data

Digital Ecosystem Management

Middle/ Long term future

Home connected

devices

Utilities smart meters

Car connected

devices

10 Focus on Digital Ecosystem Management use cases

Today, private individuals and professionals are subscribing traditional utilities offers (electricity, water, gas) to utilities players. Both are equipped with traditional meters, which allow utilities players to follow their consumption. The data of these meters is collected manually by some agents, who need to go out and check every meter of every client one by one.

In a short term future, the setup of smart meters will allow utilities players to collect automatically (near) real-time data of consumption of their clients enabling the creation of a range of new utilities services based on this huge amount of data.

• Smart meters of companies like Thames Water will soon be set up at private individual’s homes. Compared to the former meters, smart meters will automatically download electricity, gas or water consumption data every 30 minutes / day instead of manual collection every 6 months. In this frame, Thames Water is about to set up its water smart meters. Consequently, a huge amount of data consumption will be collected from these connected devices. The challenge for utilities players will be to leverage this data to create and manage a range of new services. For example, we can easily imagine the creation of safety services (giving an alert when the consumption growing abnormally during holidays) or elderly care services (giving an alert when there is no energy consumption during two consecutive days at an elder’s home), but a lot of new other offers can still be imagined

• At a local level, utilities’ smart meters will be one of the main players of the development of “smart cities”. In a context of budget restriction, smart meters represent a great opportunity not only for the local authorities to reduce costs and resource consumption of their cities, but also to improve quality and performance of urban services like lighting, and better prevent and manage city related incidents like flooding for example.

In a middle / long term future, utilities smart meters data will be aggregated with other connected devices data in order to provide a range of bundled services to their clients. The ability to manage an ecosystem of relevant partners will be one of the most important key factor of success. In this frame, the development of smart cities global offers will probably accelerate the creation of tailor-made bundles of utilities related and associated services :

• In fact, in a middle / long term future, utilities related services will not be valuable enough for the clients. The data related to the energy consumption will have to be aggregated with other data sources coming from other connected devices, internet research, mobile research or cars, to become more valuable and provide global new aggregated services to private individuals, companies and public authorities. That means being able to co-create new services between a range of partners. For example, we can imagine a global smart city service offer to the public authorities. In this frame, utilities players could act as a digital multi-service providers, aggregating the data coming from its devices and data from partner’s devices, to propose for example global smart city service offer or multi-play offers including on the same bill utilities services (gas, water, electricity) and telecommunication services (internet, TV, phone)

• However, some big competitors are already on the move. For example, Google is today ahead its competitors in this field and is today already able to collect data from home thanks to Nest, from mobile phone thanks to Android, from internet research thanks to Google search engine and from car thanks to Google car and IBM is proposing to the public authorities some global smart city services. Consequently, the path will not be easy for the utilities players and they will have moreover to take up two challenges: they should be able to manage an ecosystem of relevant partners to be able to co-create and propose bundled offers to their customers and be able to manage and do the billing of various and intricate subscription-based services offers.


We used to sell big metallic boxes… we want now to sell servicesAutomotive is a very interesting example of an industry currently trying to shift from a traditional business model of supplying cars to a new business model of offering in-car bundled digital services, as presented in Figure 4 below :

FIGURE 4 : PROSPECTIVE SCENARIO OF CAR MAKERS ROLE IN CONNECTED CARS

Change is in the air. Car makers understand they have to develop a totally different philosophy in order to meet the new mobility requirements and to complete their digital transformation. They are facing today two important concerns for their future: deliver a perfect customer care for all the services and adapt it according the use to ensure a high rate of customer satisfaction and shift to a new business model and create new services to capture new stream of revenues.

Traditionally, car makers do not control the main part of customer relationship because car dealers do, and they are very little used to sell services, except through its financial branch, selling a few financial services, insurances, extension of warranty and maintenance contract. Today, automotive field is also undergoing its digital transformation and that is why we hear a lot today about “connected cars”. In fact, the battlefield is now shifting from technical aspects of car to its communication system, and all car makers have been developing a car multimedia system, based either on Apple Car Play / Google Android Auto, or Mirror Link, or a proprietary system, in order to propose a range of in-car services to their customers.

Tomorrow, in a perfect scenario, in which car makers control the car communication system, we can imagine they will propose a range of services including:

• Services the internal financial bank is selling today: financial services, insurance and maintenance contracts and warranty extension

• New services created internally related to the car multimedia system: infotainment services, conciergerie, car sharing, navigation, safety, connectivity, etc.

• Ancillary services with an ecosystem of partners like external infotainment services, carpooling, car sharing or real time road information, etc.

Car manufacturing Car manufacturing and In-car digital services provider Digital Ecosystem Management

Bundled services

Today

Car maker Financial branch

Financial branch

Multiple partners

Financial servicesInsurancesExtension of warrantyMaintenance contract

Financial servicesInsurancesExtension of warrantyMaintenance contract

Infotainment servicesConciergerieCar sharingNavigationSafetyConnectivity

CarpoolingCar SharingReal-time road information

Future

Building cars Sells financial services Builds cars

Car dealers

Sells cars

Collects and analyses data

Sells data

Insurance, mutual funds,

etc.

Sells financial services

Sells new services

Proposes ancillary services

Car dealers

Sells cars

Car maker

12 Focus on Digital Ecosystem Management use cases

• Driver data analysis services for insurance, mutual funds players.

However, the communication system battle promises to be rude in terms of OS but not only because car makers will have to take up several other challenges to be successful:

• Billing challenge : shift from a transaction based model (car purchase) to a subscription based or usage based billing, meaning managing a customer base, monitoring customer usage data and be able to bill customer usage

• Partners’ ecosystem management challenge: be able to propose relevant and appropriate in-car services, and particularly be able to propose new services through the management of a third-party developers’ community and ancillary services through the implementation of strategic partnerships with third-party companies.

In that sense car manufacturers need to be supported by the appropriate tools in order to secure these new revenue streams.

Retail and CPG use casesBrick and mortar retail players are also experiencing their digital transformation. Today, even if their strategic priority is definitely trying to make converge brick & mortar and web channels, and how to leverage digital technologies like connected devices and big data to enhance customer experience, we already find several interesting initiatives from retailers shifting from only supplying products to also offering services and fostering different business models to address new markets, through a digital platform and an ecosystem logic.

For example, Leroy Merlin is partnering with Frizbiz6 to offer new services to their consumers by enabling connections on the Frizbiz digital platform with a community of private individual people offering their DIY skills through. For example, their customers can “rent” someone else’s skills to assemble a piece of furniture, to do the painting of the kitchen or to mow the grass. In this way, Leroy Merlin is leveraging through the digital platform the skills of an external community of people to extend their business offer.

Saint Gobain Distribution (former Point P) is an other example of active player, who already created several digital marketplaces: one to propose private individuals and companies construction related equipments and tools and an other one to make connections between private individuals and construction entrepreneurs. Saint Gobain seems to have set a strategic ambition towards this approach and digital platform related activities should represent 10 to 15% of the global turnover in a few years7.

We can expect in a middle / long term view among retail players the development and acceleration of this kind of digital platform with an ecosystem management logic. First, this development of such digital platforms will be centered around providing retail products, like Trocathlon or Outiz.fr. Retail players will little by little propose their own services and then partners’ services to gain more revenues in the future. And we can imagine in the future the opportunity for these players to propose bundled offers to their customers. For example, we can easily picture Saint Gobain’s digital platform to evolve to bundled and tailor-made services’ offers of construction entrepreneurs services for private individuals according to their needs (need 1 : architect + electricity + plumber; need 2 : kitchen building + painting).

As well, CPG players are also experiencing their digital transformation. In fact, if we take the example of L’Oreal, their digital transformation is currently making them shift from a B2B2C business model to a B2C business model, by selling directly 6http://www.breizh-info.com/34329/actualite-economique/leroy-merlin-et-frizbiz-vers-un-uber-du-bricolage-les-artisans-en-colere/7http://www.lsa-conso.fr/au-dela-des-produits-point-p-mise-sur-les-services-digitaux,223554


products to the final consumers instead of using the traditional channel of retailers. And even if trying to create a platform-based business with an ecosystem of strategic partners is not a hot issue today, some insights make us imagine some prospective initiatives that may be led by these actors in the future. For example, we can imagine tomorrow that L’Oreal may manage an ecosystem of partners to sell bundled packages of internal and external products and services related to hairstyling, by partnering with hairdressers or beauty by partnering with aestheticians or massage centers.

However, like utilities and automotive use cases, this digital transformation will need to be supported by the appropriate tools of billing and offers’ bundling of partners’ ecosystem in order to secure these new revenue streams.

DEM: a way for companies to fulfill their digital transformationWhat is Digital Ecosystem Management?Digital Ecosystem Management (DEM) solutions provide companies with the possibility to transform their businesses by creating, orchestrating and monetizing new services through the cloud, as shown in the Figure 5 below.

FIGURE 5 : DEM PLATFORM’S SERVICE CAPABILITIES

Aggregator

O�ce

SERVICE AGGREGATOR B2B & B2C END-CUSTOMERS

DEM Engine

1

3 MONETIZATION

FINANCE

BILLING

PRODUCTS CUSTOMERS ORDERS

AGGREGATION

2

Telco Content & Media Utilities Finances Retailers HealthcareTelco

ORCHESTRATION

14 DEM: a way for companies to fulfill their digital transformation

8http://www.telecomossbss.com/what-is-bss/

What is it made of? As previously seen through the use cases, digital transformation is affecting at different level business models, companies’ operations and customer experience of various industries. However, in most cases, digital ecosystem management becomes relevant to help fulfilling the digital transformation, in order to be able to work with an ecosystem of partners to co-create and enrich service offerings and then rapidly mass-personalize and recommend them to customers.

But what are the prerequisites to be able to build and manage in an agile way a digital ecosystem of partners and theirs products and services ? The main prerequisite is to guarantee the flexibility and agility of five core business processes : billing, products and services catalogue, customer database, orders and finance.

This is where a Digital Ecosystem Management platform becomes relevant.

A DEM platform is a cloud-based business support services (BSS) information systems solution which assist companies in all its business processes. BSS8 are the set of systems and functions interconnected together to grant the monetization of a communication service provider (CSP), assets and it also allows the CSP to collect his money in time and charge for services as per the contract agreement with the end users (prepaid, postpaid, hybrid…). BSS are used mainly to store customer related information and are involved in transactions required to get these kind of information. BSS support four processes: product management, order management, revenue management and customer management, that can be found again in a DEM platform. Formerly mainly used by the telecom operators, any service provider of any industries can today take advantage of BSS.

Contrary to many beliefs, DEM platform is not only a billing system, it goes beyond that: it assists companies from quoting processes to billing processes, given the new challenges inferred by digital transformation, as shown in the Figure 6 below.

FIGURE 6 : CORE FUNCTIONALITIES THAT A DEM PLATFORM CAN EASILY SUPPORT

Digital Ecosystem Management core challenges Core functionalities

DEM Engine

( Complex )Billing capabilities

Catalogue of products and

services

Customer database

Finance capabilities

Orders capabilities


Shifting from supplying products to o�ering services


Fostering di�erent business models : B2B/B2C/B2B2X


• 1/ Creation / Aggregation – capabilities to enable collation of services and systems, for example, linking cloud-based analytics engines with both external data sources and customer data to deliver recommendations

• 2/ Orchestration – the ability to on-board new partners and then execute multiple service requests as an ensemble, managing operational requirements, business rules and constraints as well as service delivery as a unified whole

• 3/ Monetization – the automation of account management, service catalogues, transactions and usage monitoring (and subsequent billing) of any given service bundle.

DEM: a way for companies to fulfill their digital transformation 15

Through its capabilities, DEM platforms accompany enterprises in their business processes from product and customer management to billing for the existing service tariffs as well as future transactional and on-demand services, apps, content, resources, and even analyzed data/information tariffs.

In order to create, orchestrate and monetize existing and new services through the cloud, key elements of Digital Service Capabilities include:

• Product catalogue capabilities allowing companies to flexibly manage products, services, and bundles through all phases of their lifecycle. Companies should be able to proceed with pricing and product categorization processes, whether it concerns its legacy services or new generation ones

• Customer management capabilities allowing companies to enhance customer experience and capitalize on improved customer relations. Companies should be able to have an end-to-end customer view and to manage all customer information available and in particular take into account all the information received by new digital services

• Order management capabilities allowing companies to optimize and streamline order management and fulfillment

• Billing capabilities allowing companies to proceed with flexible billing and monetization

• Finance capabilities allowing companies to efficiently manage and control its cash flow, taxes and exchange rates, bad debts management.

Beyond these core functionalities, a DEM platform also allows companies to provide customer empowerment, to foster different multi-tenants B2B2x ecosystem, to reach a high degree of automation and to be able to manage real-time, as shown in the dark red part of Figure 7 below.

Here are the main additional functionalities that a DEM platform can provide :

• Multi-channel capabilities and customer empowerment : provide customer empowerment and focus on customer experience, with simple, instant, transparent, anytime, anywhere, on any device self-care features and functions for customers and personalize services according to customer specificities (preferred channels for example)

• Multi-tenant B2B2x ecosystem and multi-party business models : handle an exponential increase in complexity in its service offering by plugging any partner as a tenant of the platform, foster a multi-channel capability and different multi-party business models (revenue share with partners, sell-through, etc.) as well as new revenue streams. Consequently, any partner is able to bundle its offer with other products or services supplied by other partners or is able to supply its products or services in wholesale to other partners who will

FIGURE 7 : ADDITIONAL FUNCTIONALITIES THAT A DEM PLATFORM CAN SUPPORT

Digital Ecosystem Management core challenges

Core functionalities Additional functionalities

DEM Engine

Shift from supplying products to o ering services

( Complex )Billing capabilities

Catalogue of products and

services

Customer database

Finance capabilities

Orders capabilities

Customer empowerment

Multi-tenant B2B2X ecosystem

High degree of automation

Flexibility and real-time

Fostering di erent business models : B2B/B2C/B2B2X




Digital Ecosystem Management additional

challenges

Handling real-time information

Adjusting from service providing to ecosystem service aggregating

Necessity to deliver a faster Time-to-Market

Ability to provide the best customer experience in adequacy with changing

end-user


Focus on technical aspect - what are the building blocks of the DEM? While a comprehensive technology blueprint for a platform building is beyond the scope of this white paper, it is useful to examine some of the key technology building blocks:

A product catalogue module must allow companies to flexibly manage products, and services:

• In today’s digital era, companies need to possess the agility and speed to bring new products, services and bundles to the market quickly and to react instantly to changing customer requirements

• Therefore the innovation of digital services is a highly important requirement for businesses, as is the ability to easily modify products and services to keep up with new and rapidly emerging user demands and pressure from competitors

• Product management module must allow the management of different types of catalogs, covering Retail Product Catalogue, Wholesale Product Catalogue and Service Catalogue functionalities. The module should enable to deliver an agile and constantly evolving set of products, as well as bundles of services with fast time-to-market.

A customer management module must allow companies to fully master its customer data in order to deliver first class customer experience.

• In the changing and highly competitive business environment of services industries, efficient and effective customer management is critical to create and maintain a sustainable customer base. There are several crucial customer management functionalities

• Customer Information Management functionality is a must-have: 360° customer view, customer profile management and history, processing status of customer orders, billing and payment arrangements, etc. Such a functionality enables companies to really understand and know their customer, as it allows for the straightforward management of the customer relationship throughout its lifecycle, from acquisition through to enhancement and retention

• Case Management functionality is a means of communication between the company and its customers, functioning as an instrument for solving any issues that might appear on the customer’s side. Case Management tracks customer support interactions including active and closed enquiries, support requests, tickets and complaints

• Product & Service Inventory functionality should offer a consolidated customer inventory and presents a detailed profile of what your customers have purchased.

An order Management module must allow an efficient order capture and order management process, as it is an essential part of the customer experience.

• take care of creating bundles. If a company has traditionally only provided one service, but is now looking to promote a greater range of tailored services, then it needs to achieve a high degree of automation and integration in its back office as well as hand-offs to partner systems

• High degree of automation : optimize processes, via the automation of specific services that usually required dedicated resources

• Flexibility and real-time : optimize processes, via the automation of specific services that usually required dedicated resources.


• Service & Resource Fulfilment takes the decomposed product/service orders and fulfils the order towards the service delivery platforms.

A billing module must allow companies to monetize its product and services offering according to operated business models

• A billing solution that enables flexible billing and monetization of convergent services is a fundamental cornerstone of every successful business today. Billing capabilities must be designed to fully support all services and payment types. There are several crucial billing functionalities

• Billing Data Mediation covers the process of collecting and handling customers’ usage data from different usage data feeds, for any type of service

• Convergent Charging & Rating functionality is responsible for calculating customers’ usage record charges of certain services, taking allowances into consideration and triggering actions whenever certain thresholds or limits are reached

• Bill Calculation, Invoicing and Formatting are together responsible for creating the invoice at the end of the billing period.

A finance module must allow companies to manage and control cash flow taxes and exchange rates, bad debts management:

• A major issue for service providers is the need to reconcile invoices and payments across substantial customer bases. Several crucial functionalities should be covered

• Receivables Management functionality handles the processing of customer’s financial transactions and matches these transactions with the invoices issued to them

• Dispute & Adjustment Management functionality provides the necessary functionality to identify, track and assign an appropriate final dispute settlement to contested charges

• Collection Management handles customer accounts that have outstanding balances

• Taxes and exchange rates management in case of international business

• Bad debts management for unpaid cases.

• Optimized order management should be catalog-driven to allow companies to efficiently manage the end-to-end order lifecycle. There are several crucial order management functionalities

• Order capture functionality is the process of capturing customers’ order information from the start of customer negotiation through to the point of order placement

• Order management functionality handles the end-to-end process of customers’ requests for services. An order should encapsulate any service request, either to create a new service, or modify/terminate an existing one. The catalogue-driven Order Management should decompose each offer into individual services and track the entire process of service activation, be it completely automated end-to-end or requiring manual steps during the fulfilment process


A 100 billion € market in 2020 with opportunities for different types of platform suppliers Digital industry platforms and ecosystems are fueling the next wave of breakthrough innovation and disruptive growth. Platform based companies are increasingly capturing more of the digital economy’s opportunities for strong growth and profitability. Accelerating advances in cloud and mobility not only are eliminating the technology and cost barriers associated with such platforms, but also are opening up this new playing field to enterprises across industries and geographies.

Digital is full of business opportunities : indeed, there are huge opportunities to grasp in order to supply and assist companies in augmenting their digital capabilities in order to stay competitive and address market challenges. DEM is for instance a huge opportunity. The market potential from now until 2020 is estimated at approximately 100 bln €9. And many types of suppliers position themselves in this market, i.e. providing and deploying DEM software, infrastructure and IT services for companies.

Market figures are promising, a market study has pinpointed that approximately 40% of the executives surveyed are using industry platforms to integrate data and applications with digital business partners and collaborate.10

Who will address this untapped market?IT oriented companies would be the most natural players we think about to seize opportunities in the digital ecosystem management business. In fact, software companies and business systems integrators already possess valuable assets, large capabilities and accumulated a lot of experience in IT integration project experience, business support solutions deployment, etc. . So we can easily imagine IT oriented companies becoming digital services providers with their own digital products and services and using their own competencies or via partnerships.

However, working in a traditional way with IT oriented companies and using their ERP solutions often means high costs and long time-to-market for the clients. And time and reactivity are two key variables to be able to compete digital-born competitors and answer clients expectations.

Consequently, we are convinced this new and constantly evolving market presents also great opportunities for new “platform providers” able to propose SaaS solutions. In fact, by providing a SaaS platform solution, the deployment will be done much quicker and will be far less expensive than ERP solutions by relying on an existing technical base. Moreover, using SaaS solution matches perfectly with the logic of ecosystem development : the more companies will be plugged on the platform, the richer the ecosystem will be and the more the different companies will collaborate and cross their offers amongst themselves.

Whose market is it?

9Source : Markets and Markets, August 2013 and BearingPoint analysis, 201510Source : Accenture, « Accenture Technology Vision 2015 Survey », 2015


As seen in the different use cases (paragraph 4.), players from various industries like telecom operators, utilities players, retail or CPG players, bank or insurance players, health labs, etc. have today the opportunity to move into these markets by becoming digital services providers with their own digital products and services using their own competencies or via partnerships, like shown in the Figure 8 below.

For example in the telecom industry, becoming a platform provider seems to be a golden opportunity for telecom operators. First, Operators are today looking for new territories of growth in the digital economy. Then, operators are used to this kind of investment model, that is to say to pay a huge starting investment and then generate recurring revenues. And finally, there are no risks of cannibalization on other businesses.

Besides, telecom operators already possess some assets and capabilities making us think that they could be one of the relevant platform providers in the field of digital business support services solutions : B2C cloud storage, IaaD and PaaS for SMEs, enterprises and large accounts, end-to-end business support system, billing capabilities.

Moreover, digital platform providers can expect quick and significant return on investment by becoming digital service providers. We estimate that a starting investment between 5 and 10M€ would create revenues up to several hundreds of millions euros.

What platform providers should do to win the DEM battle?As seen in the previous paragraph, platform providers of various industries will probably be victorious in the DEM battle. But to do so, first they have to make evolve their billing and IT systems, which are often complex and not agile enough to be opened to third parties. And as this capability to be opened to third parties is critical to enable B2B2X services in a repeatable economic approach, they have to rely on an “off the shelf” solution in addition to existing systems, as shown in Figure 9.

FIGURE 8 : PLATFORM PROVIDER AS DIGITAL SERVICES PROVIDER

DIGITAL BUNDLED SERVICES ENABLEMENT PLATFORM

Mobility Provider

Digital Service Provider

eHealthSmart Utility Etc

Platform Provider

Smart Meter Water Connected devices

Manufacturers Insurance 3rd party appsCloud Storage

O�er 2O�er 3Etc


In choosing or creating a DEM platform, platform providers should guarantee a certain number of key success factors to ensure their solutions will be “best in class”:

• Multi-tenancy: the architecture of a successful DEM platform must allow it to run multiple tenants on a single platform, each having access to the full range of the platform’s functionalities. The tenants should not only operate their businesses individually but should also be able to interact with other tenants on the platform by making services available to each other. This enables an ecosystem of partners

• Scalability: a “pay-as-you-grow” pricing scheme with a wide range of OPEX based business models to its clients: usage-based, freemium, flat rate or hybrid models

• Flexible / real-time: client can add services on the fly as billing system is always up to date

• Easy integration: DEM solution must coexist with existing systems through well-defined interfaces, allowing for step-wise migration

• Openness: platform must provide the possibility for collaboration with 3rd party service providers with wide range of available business models

• Cost efficient: platform must be a financially interesting solution, mainly opex-based – no more upfront investment required from the client

• Auto-managed: no need to dedicate people/time to operate the system (no more day-to-day operations or maintenance issues).

• Fast time-to-market: the client can deliver and monetize services quickly.

Then, there will be more profits for the first newcomers, who will be able to create a solid ecosystem of partners. And we all know that the value of a platform is growing when the base of connected partners and clients is increasing.

FIGURE 9 : INSERTION OF A NEW CLOUD PLATFORM WITHIN OPERATORS’ ECOSYSTEM

Existing operator IT system

New Cloud platform (PaaS)

Corporation

Current customers

Potential customers

Aggregator

Start-ups


Focus on British Telecom (BT) case BT Global Services is one of the leading cloud service providers today with data centers around the world. BT wanted to sell a sophisticated mix of cloud computing capabilities to enterprises allowing them to customise what services they could buy and how they consumed them. This created a very complex array of commercial and technical challenges to address.

After trying many different approaches over many years BT has successfully deployed a DEM platform in BT’s Cloud infrastructure within 9 months that orchestrates, delivers and monetizes BT’s cloud services (compute, apps & storage). In this case, R6 Infonova DEM platform is at the heart of the project.

After that, BT also realised R6 could be extended to support multiple other enterprises with their own digital business activities, either as suppliers of services into the platform, for BT to resell, or acting as a ‘tenant’ on BT’s platform to sell their own services to their own customers. BT’s ecosystem grew quickly starting by BT Global Services own needs and integrating progressively different services providers and aggregators, as shown in Figure 10 below :

The first ‘tenants’ to benefit from BT’s aggregated services were utilities payers. In fact, new regulatory frameworks have been rolled out in the UK forcing water and utility companies to separate their enterprise and their residential businesses, implying new IT system implementation for all of them. Leveraging BT cloud Digital Ecosystem Management services would enable them to divide TCO by 4 compared to classical IT system integration and operation on premise.

On a high level basis, taking into consideration around 50 utilities companies that would have spent 30 M€ over 5 years, this represents:

• 1.1 B€ savings for the water and utility companies to adopt Digital Ecosystem Management offers

• 375 M€ incremental business for BT.

FIGURE 10 : EVOLUTION OF BT’S R6 INFONOVA DEM PLATFORM IMPLEMENTATION PROJECT

BT Global Services deploys a DEM platform (R6) in its own cloud to

cover its own IT needs

1st step

SERVICE AGGREGATOR

SERVICE AGGREGATOR

END CUSTOMERS

END CUSTOMERS

2nd step 3rd step

BT Global Services allows a first service provider to bundle its service with BT`s in order to enrich its

value proposition

BT Global Services is able to propose a multi-tenant B2B2X ecosystem allowing customers to build new

services with the ones available in the cloud

DEM Engine

PLATFORM & BUSINESS MANAGEMENT

Telco Cloud Computing

Printing servicesPrinting services

Printing services

Printing services

Utility suppliers Water suppliers

Utility suppliers Water suppliers

DEM Engine


Telco Cloud Computing

DEM Engine


Dedicated bundle

Dedicated bundle


Today, BT is hosting multiple ‘tenants’ from different industries (for example utilities, business services, commerce, government), allowing them to take advantage of their cloud platform’s service orchestration and monetisation capabilities to sell existing and new bundles of products and services to their customers in new and compelling ways.

This BT case demonstrates that telco players are able to offer a viable alternative to traditional IT vendors. This leverages the telco’s expertise in complex service management and monetisation, and uses new ‘as-a-service’ consumption and payment models.


Editorial committee : Henri Tcheng, Sylvain Chevallier, Jean-Michel Huet, Sébastien Coffe

Graphic Design : Andreea Mihalache

24 Editorial committee

RemerciementsContacts

Contacts

Europe & FranceHenri [email protected]+ 33 6 09 24 2460

Nordics Mika Niemela [email protected]+358 407 52 00 27

France & BelgiumSylvain [email protected]+33 1 5886 5673

Romania Christian Gurny [email protected]+40 21 315 25 46

Africa & FranceJean-Michel [email protected]+ 33 (0)6 21 72 78 44

Russia Konstantin Popov [email protected]+7 985 97 04 392

AustriaGerhard [email protected]+43 664 37 69 488

SingaporeDirk Ulrich [email protected]+49 174 302 6940

ChinaYvon [email protected]+86 185 1611 0608

SwitzerlandVahan [email protected]+41 79 404 6439

GermanyMarkus [email protected]+49 173 6690 964

UAERiku [email protected]+971 56 3507025

IrelandEric [email protected]+ 353 1 418 1116

United KingdomAngus [email protected]+44 20 7337 3220

ItalyRabih [email protected]+33 1 5886 5194

USAMark [email protected]+1 31224776503

NetherlandsMarc [email protected]+31 6 11 95 5959

Contacts 25

Contacts

Figure summary1. Figure 1: Impacts inferred by digital technologies.... .......................................................................... 6

2. Figure 2: Examples of uses cases focused around cloud billing and third party service orchestration capabilities ...................................................................................9

3. Figure 3: Evolution and impacts of digital on utilities field ..............................................................................10

4. Figure 4: Prospective scenario of car makers role in connected cars ...................................................................12

5. Figure 5 : DEM platform’s Service Capabilities .....14

6. Figure 6: Core functionalities that a DEM platform can easily support ...............................................15

7. Figure 7: Additional functionalities that a DEM platform can support ............................................................16

8. Figure 8: Platform provider as digital services provider ...................................................................................... 20

9. Figure 9: Insertion of a new cloud platform within operators’ ecosystem ...........................................................21

10. Figure 10: Evolution of BT’s R6 Infonova DEM platform implementation project ...................................22

26 Figure summary

About BearingPointBearingPoint consultants understand that the world of business changes constantly and that the resulting complexities demand intelligent and adaptive solutions. Our clients, whether in commercial or financial industries or in government, experience real results when they work with us. We combine industry, operational and technology skills with relevant proprietary and other assets in order to tailor solutions for each client’s individual challenges. This adaptive approach is at the heart of our culture and has led to long-standing relationships with many of the world’s leading companies and organizations. Our global consulting network of more than 10,000 people serves clients in over 75 countries and engages with them for measurable results and long-lasting success.

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