Addressing Competitiveness Gaps

IT renewal programs and services address the lacunae that exists in the telecom sector, to ensure efficiency, cost reduction, rich customer experience, et al

Increasingly, operators are looking to launch new services for driving revenues while optimizing current systems in order to reduce their cost structure. The need to launch new services has a direct impact on operations and IT infrastructure: As operators need to upgrade their IT systems for supporting an expanded service portfolio. In order to address these growing requirements, operators are launching comprehensive renewal transformation programs that involve a shift from the current bespoke processes to standardized processes supported by packaged solutions and out-ofthe-box IT implementations.

The reasons why operators are launching IT renewal programs are as follows:

Transition to Faster Time-to-market Strategy

Telcos are under constant pressure from fast-moving internet players that are not only threatening their core revenue streams, but are also doing it in a fundamentally different manner. We see this in how telcos have traditionally developed product features. Internet players have

perfected an approach where they first release products in beta, and then incrementally and rapidly add product features to it. This approach helps them incorporate user feedback rapidly back into the system. For instance, Google’s most popular services, including Gmail and Google Talk, had the beta label for over 5 years; during this time Google made multiple rapid iterations of product features, while still having a strong base product available to consumers. On the other hand, telco product testing and launch typically takes months and product iterations subsequent to launch are usually few. This is changing in recent times. For instance, Telefónica, which acquired social networking site Tuenti in August 2010, rapidly launched a low-cost invitation-only Mobile Virtual Network Operator (MVNO) using the brand by December 2010. The need for a rapid turnaround in terms of launching services is putting increasing pressure on the IT systems.

Removing Superfluous Costs

Another major challenge for the telecom operators is coping with the rising cost of maintaining the IT systems. In comparison to other sectors, players in the telecom sector already spend a significant amount on information technology (see Figure 1). Estimatedly, global telcos spend on the IT systems has increased from around $71 bn in 2008 to over $86 bn by 2014. Such rising costs of IT are forcing operators to take a closer look at ways and means to control it. Growing costs of operations are forcing operators to look at new models

Multiple Systems and Platforms: Hinderance to Growth Over the years, telco IT systems have grown into multiple disparate platforms for a variety of reasons. Most of the major telecom operators have grown to their current market position after a series of mergers and acquisitions. Each such transaction brings with it its own set of existing IT platforms that are rarely integrated back into the parent company’s IT systems. Hence this results in an operator running several versions of the same system within the organization. Similarly, many product lines within an operator typically ran in a silo fashion, implementing their own IT systems that rarely integrated seamlessly with other product lines. This also led to a situation where multiple IT systems began to co-exist and were developed independently.

COTS: Lack of Maturity

involving infrastructure sharing and network outsourcing. Multiple telcos have also initiated cost-rationalization programs in order to ensure that they use the recent financial slowdown as a good driver for removing superfluous costs. Another problem leading to the fragmented nature of IT systems is the lack of maturity in commercial off-the-shelf solutions (COTS). Traditionally, COTS solutions allowed only a limited amount of customization, which

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did not permit operators to fully benefit by installing these systems. Moreover, process standardization was a significant challenge for the telecom operators, given the lack of established and accepted industry standards for IT architectures. Such proliferation has resulted in IT systems becoming unwieldy in time.

Divide between IT Systems and Business Environment

In a scenario where most developed markets are nearing saturation, the industry is seeing a steady move towards consolidation and a renewed push towards improving the customer experience. Furthermore, with the increasing role of customer experience in retaining customers, operators are now exploring new channels for customer care. The growing adoption of the internet is driving operators to launch web based self-service channels to augment the existing channels such as contact centers and retail stores.

While the business environment is seeing a substantial shift, the operations and underlying IT systems and processes have seldom been upgraded at the same pace. Considering the broad environ- mental changes in recent years, most operators are fast reaching the limits in terms of time-to-market and total cost of ownership of integrating new services, channels, processes, and/or system stacks. This often results in a misalignment between the business needs and IT systems and opens a

competitiveness gap for the operators (see Figure 2)

Uniform Rich Customer Experience: The Need of the Hour

A growing challenge for the telcos is to ensure a consistently high level of customization across all customer experience channels. With growing customer touch points, operators are looking to create a uniformly rich customer experience. For instance, in the US, AT&T allows consumers to control data plan subscription to their ipads directly through an application on their device. Operators are looking to create such frictionless processes that therefore require highly flexible IT systems.

Marching towards Structural Transformations

Of late, there has been an increasing trend towards convergence of service offerings where telcos deliver multiple services over the same access connection. Customers appear to be increasingly com- fortable in having a single operator for voice, internet, and TV services. For instance, Virgin Media reported that more than 60% of its cable customers received broadband internet, television, and fixedline telephony services in 2009. Moreover, operators are now moving towards a single network for all services. The emergence of Next Generation Network (NGN) is allowing operators to converge their mobile and fixedline networks. Such convergence of different networks enables operators to reduce the cost of maintenance, while providing enough flexibility to offer a wide array of services.

While operators are addressing the need for network and service convergence, most operators are not structurally transforming their business support systems to respond effectively to these changes. Instead, they are showing a preference for evolutionary and focused tactics. Most telcos have typically launched new channels, partners, products, or services by adding new IT stacks ‘on top’ of legacy billing and customer care systems without real efforts at portfolio cleaning. Such initiatives are increasing the complexity in managing the existing processes and systems of an operator. This is resulting in compelling operators towards IT transformation in order to bring their IT systems up- to- date with the rapidly changing operational requirements (see Figure 3).

Custom-made Solutions: Imposing High Costs

A number of operators, including the US major AT&T, which relied on custom-made IT systems, have traditionally faced high costs for IT development and maintenance. With margins coming under pressure, operators are now looking to transform their IT systems from current custom-made solutions to lower cost systems. COTS solutions offer significant cost advantages over custom-made solutions, due to research, development, and maintenance costs being spread over a large number of implementations. Large vendors such as Amdocs, Oracle, and Comverse are ensuring a strong supply of COTS solutions in the market. Although the maturity of different business support systems/operations support systems (BSS/OSS) components vary, some of them such as billing and Enterprise Resource Planning (ERP) have reached a high degree of maturity in terms of the level of functionality provided by different vendors and adoption by various operators (see Figure 4). For instance, billing solutions from various vendors today cover all aspects of rating, mediation, and partner settlement.

However the market still lacks the availability of complete suites of various BSS/OSS components from a single vendor, driving operators to prefer best-of-breed solutions that combine components from different vendors. Consequently, some vendors, including Amdocs and Oracle, are now focusing on developing end-to-end solutions providing all BSS and OSS components required by the operators.

Considering these evolutions, most operators are embarking on IT transformation programs. However in these implementations the main challenge is to create a comprehensive business plan and business case, besides addressing the IT complexity that is required to manage in the course of the transformation. The authors are vice president; principal consultant; and manager, TME strategy lab with Capgemini Consulting Telecom Media & Entertainment

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