The world of telecommunications service providers is being rapidly transformed through the convergence of disparate networks into a single IP based network. This transformation is throwing up a number of opportunities for service providers. However, these opportunities bring with them their own unique set of challenges. To succeed in a converging telecom world, service providers will need to:
Financial performance pressures and convergence opportunities have fueled industry consolidation around the world. Service providers are expanding into new geographies, consolidating business units or acquiring other providers. When companies merge, they expect to leverage greater opportunities and significantly lower costs. However, combining hitherto separate operations poses significant operational and integration challenges.
Post-merger companies need to integrate multiple, previously distinct business processes for customers, suppliers and partners. These include product and service definitions, prices, contract terms, managing the merged sales force, ordering, order management, customer support, and go-to-market approaches.
Increasing opportunities have sparked intensifying competition. With intensifying competition and potential loss of business, telecom providers are increasingly focusing attention on customer and revenue retention. With recent years’ relaxation of the regulatory environment (such as number portability), users may easily change providers, making customer retention more important than ever.
Differentiation has to be achieved through targeted branding, service propositions and customer service, rather than purely through pricing and technology differentiation. Efficient customer account handling, order management and billing processes enhance the customer experience. The opposite encourages customer churn.
Driven by near-term gains, recent cost reduction initiatives by the telecom industry have focused on reducing sales, general and administrative (SG&A) costs, rather than costs of goods sold (COGS). These initiatives stopped short of transforming underlying cost structures. As a result, inflexible operations and silo structures have remained in place, allowing process breakdowns, costly maintenance and customer dissatisfaction to continue.
With a more positive industry outlook, the time is right to address business process and cost management issues. The challenge here is to control operating expenses without affecting revenue growth. The end goal is to improve operating performance, by focusing resources on critical value-creating functions while partnering or outsourcing non-differentiating capabilities.
