The head of SAP’s Telecom Industry business has urged operators in “saturated” markets to wean themselves off using ARPU as a key performance indicator.
Stephen Gatien believes margin is becoming “much more important” than revenue and revealed that several European operators are working with SAP in an attempt to reach the “Holy Grail” of subscriber level profitability.
To do so, they are using a beta version of SAP’s Big Data Margin Assurance (BDMA) solution, which the vendor unveiled at Mobile World Congress this week.
Speaking to European Communications in Barcelona, Gatien says: “A customer that spends €60 per month becomes irrelevant if their margin is 0-1 percent.
“It’s better to have a customer that spends €30 per month but has a margin of 20 percent.”
The Margin Assurance product analyses data sources and sets them against over 220 use cases that SAP and its operator partners have developed.
Gatien outlined two use cases, both of which are designed for enterprise customers.
The most interesting of the two is related to what Gatien terms “discount stacking”.
In short, he says the way in which operators manage business customers can be quite fragmented.
Depending on what service they are looking to acquire, enterprises will talk to different operator sales teams.
Problems arise given these teams are incentivised in different ways, but all of them will go “as high as they dare” when it comes to offering a discount.
Gatien says: “That works fine when you are in a silo but when you look at it holistically and aggregate all the discounts [with BDMA], it might come to a point where you are doing all of this for zero profitability.”
The exec claims that the proof of concepts that SAP and its partners have trialed have suggested potential annual savings in the “double digit millions”.
“We’re trying to dust off the image of profitability, make it treated like a key subscriber metric,” Gatien says.
But he admits: “[BDMA] is not an innovation on its own, but the ability to do it fast and reliably in a pre-defined solution set is unique.”
A key challenge is getting access to the right data at source, and SAP is working with the TM Forum and operators to create a standardised big data model to ensure consistency.
Vodafone is one of the operators working with SAP.
Thomas Holtmanns, Vodafone director, Finance Operations Germany and Global Margin Assurance, says: “The ability to understand granular customer profitability, specifically which customers are profitable or unprofitable and why, is a game changer for our industry.”
Gatien says BDMA will work for operators’ retail market as well, but the focus is on enterprise currently.
Read more on European Communications.