The market dynamics of the dynamic pricing market

Recently, Ovum was briefed by Digitata, a Mauritian vendor that operates in the dynamic pricing/dynamic discounting space. The fact that Digitata is relatively unknown in the wider telecoms industry is indicative of the company’s situation, and some general features of the position occupied by small network-solution vendors.

In some ways, Digitata’s positioning is similar to that of Tango Telecom, another small player that battles against the large, established vendors in the dynamic pricing space. While there is little doubt surrounding Digitata’s technical proficiency, its ability to independently implement its solutions and partner with others will be the keys to its future evolution and growth.

For operators, scale is about continuity as much as economies of production

Digitata grew out of an early dynamic discounting trial conducted by MTN in 2006. The trial itself did not lead to implementation as the concept of dynamic discounting ran into internal organizational obstacles at MTN. However, the team that devised the solution went on to create Digitata, bringing in investors and refining the technology. The solution was then launched by MTN’s subsidiaries in Swaziland and Guinea-Bissau.

 MTN was reluctant to launch Digitata’s solution in South Africa as it saw the vendor as a small and potentially vulnerable company that it did not want to rely too heavily upon. Instead, MTN suggested a relationship with Ericsson, which also offered its own dynamic discounting solution (for more information, see Ovum’s report Dynamic Pricing: Yield Management Solutions and Strategies.)

Although Digitata has a complete solution, its primary route to market is through other, larger vendors. It continues to work with Ericsson and Oracle, where it integrates with the latter’s billing system. It has also integrated its solution with Huawei, Alcatel-Lucent, PTI, Technotree, and ZTE. Digitata is currently involved in 28 deployments of its solution around the world (representing approximately 50 million mobile users) of which 22 are solely based on Digitata’s own technology. However, despite the fact that the company retains a direct route to market, very few of these deployments are customers of Digitata itself, including MTN Swaziland, and Globalcom in Nigeria, Ghana, and Benin. Digitata is also involved in a number of partner-based deployments in Asia, and has conducted a number of successful trials in South America.

Digitata’s offering is fit for purpose and well positioned to meet operators’ needs

In most respects, Digitata’s offering is much like those of other vendors. It takes the same inputs from the network and a provisioning portal, and it allows the same types of discounting and communication of discounts, especially through cell broadcasts. The vendor does a good job of defining and describing different kinds of discount frameworks, including pre-notified “hourly predicted discounts”, near-realtime “stochastic discounts”, and marketing-led surprise “bonanza discounts”. Overall, its description of its products and offerings is both comprehensive and clear, placing an emphasis on marketing and strategy rather than on technical detail.

The company makes much of its technical and commercial flexibility. It supports a number of different architectures so that its solution can interface with the network at either the mobile switching center or via the Intelligent Network platform. Commercially, it supports both a software license and a managed service model, meaning that operators can choose to pay on a per-subscriber, per-month basis. However, all but two of its customers have chosen to go down the software purchase route to date.

Operators need more than just a box to implement and maintain dynamic pricing

As is the case with other dynamic discounting vendors, Digitata is quick to stress that there is more to introducing a successful dynamic pricing solution than simply installing and configuring the platform. It provides support in defining discounting policies, and a simulator that allows operators to model the effect of different discount offerings, whether they are oriented towards increasing revenues and ARPU, optimizing network load, growing the customer base, or building loyalty. However, while operators have professed to be interested in the long-term focus of growing their subscriber bases and building customer loyalty, their actual choices have usually focused on increasing revenues and ARPU.

Digitata also stresses the importance of creating a viable solution for data, which is essential if dynamic discounting is to gain traction in mature markets. The vendor claims that it has already developed a single-vendor solution for data, and that a more vendor-independent solution will be available later in 2012. Ovum agrees that a purely voice-based dynamic discounting solution is unlikely to attract operators in mature markets, but we are yet to be convinced that it will be possible to communicate the principles of dynamic data pricing to users.