Outsourcing has the potential to save costs and improve service for telecom operators. Head of Outsourced Operations for software vendor Martin Dawes Systems (MDS), Andy Peers, argues that the future of outsourcing looks bright and that the company’s new managed service offering has the potential to significantly improve billing and subscriber management services for operators and save costs in the process.
A number of North American telecom operators have recently ditched the customised solutions they built themselves and decided to outsource the customer management and billing functions. The reason is primarily economic, but operators also believe that by reducing their operations and business support systems infrastructure, they will be left with more resources to concentrate on the things they do best; deliver telecom services.
In Europe, as in the US, there was a tendency among operators in the bygone telecom boom of the 1990s to build their own systems. Seemingly regardless of the financial implications it seemed, a number of operators embarked on IT-driven projects to build the ultimate customer care and billing solution, based on component vendor systems and involving complex and expensive integration projects.
These projects ran to hundreds of millions pounds and never met deadlines or budgets. I’m struggling to think of any of these projects that actually made it and delivered the benefits originally promised. Part of the problem was that, typically, the benefits were poorly defined.
Wake up call
European operators are starting to realise that they cannot neglect their billing and customer management systems if they are to stand a chance of riding this storm and winning in an increasingly competitive environment. Operators have experienced a period of drastic cost cutting in order to get their balance sheets into shape following the excesses of the late nineties. Costs are being cut across all areas of operational and capital expenditure, including headcount and systems replacement.
Compared to their American counterparts, European operators have been more reluctant to adopt outsourcing for non-core business activities. However, an industry survey from Chorleywood Publications suggests that this cultural difference is in the process of changing and that operators here, too, are waking up to the potential benefits of outsourcing (Billing Plus, May 23, 2003 page 8).
In the current economic climate, budgets continue to be constrained and there is an increasing need for operators to be innovative and launch new products and services quickly. The demand for improved service levels combined with a re-focus on core business and pressure to reduce costs, mean that operators are increasingly considering the following outsourcing models:
1. Facilities management, including the outsourcing of the planning, designing, and managing of buildings, equipment and systems: CRM, Billing, Call Centre, payment processing and all third party connections.
A facilities management agreement is a key enabler for companies looking to penetrate new markets. For example banks and retail organisations looking to launch as an MVNO will need the experience, expertise and capacity provided via a facilities management agreement.
2. Service bureaus, including the outsourcing of service functions, such as billing or certain niche services: mobile, fixed line and internet.
3. Build-operate-transfer solutions, which involves the initial outsourcing of functions to a vendor, before folding the service back in-house
4. Joint ventures, which are separate outsourcing initiatives involving both operators and vendors
Key drivers
The current interest in outsourcing reflects economic pressures. Operators are tightening their belts and looking at activities where they can reduce expense and improve the customer experience.
The move towards outsourcing also reflects the difficulty operators face when trying to integrate separate legacy billing systems to ensure information can be exchanged efficiently. Operators have developed a large number of different applications in-house and are finding it hard to achieve a single view of the customer.
But, while operators are interested in the strategic outsourcing of non-core activities, there is still concern over the loss of control and lack of confidence in vendors and their ability to carry out functions as effectively as the operators themselves.
Vendors therefore have a responsibility to educate the market in terms of outsourcing benefits, including access to expertise, flexibility of service offerings, operational efficiencies and cost savings.
The telco market in general has entered a period of dramatic change signified by mass-market consolidation. Operators have bought up, and continue to buy, databases in order to increase subscriber numbers. A consequence of this is the operator inherits a number of disparate systems. To improve control and efficiencies a key objective for the operator is to migrate these customers to one central base. Capacity and skill set make this a much harder objective to achieve and migrations are a prime area where a outsourcing partner help achieve this objective quickly and with limited time and resource requirement from the operator.
Expertise
When outsourcing services, operators must be convinced that they have got access to experience and expertise from companies they can trust. It is vital that operators are confident that their customers are being managed by a team of people who know the operator business, understand the challenges and enable the organisation to meet its business objectives.
Managed service offerings should be designed as end-to-end solutions which are capable of handling a combination of mobile, fixed line and Internet services and provide customers with one bill for all services. Customers should have access to a team of telecom/IT experts, which are dedicated to managing the hardware, software, system administration and day-to-day operations of the billing and subscriber management solutions on their behalf.
Clients should also expect managed service providers to take charge of the fundamental interfaces required for service provision. This includes all third party connections, interfaces and relationships with the networks, print bureaus, banks, clearing houses, credit referencing agencies and call centre partners.
Flexibility
Outsourcing is ideal for operators who are struggling to gain the freedom they need to be innovative and competitive when packaging communication service and tariffs. However, it is important that flexibility is built into outsourcing partnerships to suit operators’ current needs and future requirements.
Take the managed service offering as an example. While operators could choose to outsource the billing and subscriber management process for their complete customer base and all types of services, this may not always be practical. But managed services can be designed to accommodate this, and allow operators to use the managed service for selected services or customer segments.
This can be particularly attractive to operators who need to launch services in a short timescale. Enhancing an existing billing and subscriber management service in-house typically takes between 18-36 months, while managed services can be up and running and connecting customers in less than eight weeks.
Managed service offerings can also provide flexibility by offering a build-operate- transfer solution, which means that there is the option for companies to fold the service back in-house when internal processes have been brought up to speed to accommodate it.
Efficiency
Outsourcing has the potential to free up time for companies to concentrate on core business and developing its future. Companies may also reap the rewards of additional efficiencies — such as a streamlining and standardisation of procedures and rationalisation — which can bring about tangible savings.
In terms of managed services, there should be no need to change existing systems, which means that customers can benefit from increased efficiency through low implementation time/costs and a much reduced capital expenditure requirement. Customers will benefit from further efficiencies by transferring the responsibilities for the day-to-day running of specific elements or all of the customers’ billing and subscriber management operations to the managed service providers. This will enable customers to free up management time, reduce staffing costs and lower operational costs.
The real strength of outsourcing is that operators can leverage the experience of companies and share the development costs with many other clients. Removing in-house software development means there is no need for expensive and uncertain investments and customisation, with its requirement for large internal capital resources. Outsourcing results in lower costs and higher revenues, and more services can be developed more quickly.
No compromise necessary
Success in outsourcing is about long-term partnership. By understanding how to meet a customers’ specific needs — both now and in the future — and applying the right mix of people, processes and technology, vendors can help facilitate higher levels of service quality and offer customers the increasing flexibility they need.
Quality outsourcing partnerships allow operators to focus their attention on developing their business, secure in the knowledge that the back office is taken care of and that their customers will get a quality service based on the highest industry standards.
In this challenging climate, with increased focus on the bottom line, it is essential for operators to improve the cost effectiveness of their service offerings. At the same time there can be no compromise on the level of service their customers receive if they are to remain competitive and develop in their market.
As operators in the US have demonstrated, outsourcing has the potential to improve operator performance in a competitive market. Deregulation in Europe, harmonisation of regulation between EU member states, the introduction of the Euro and cross-border mergers and acquisitions have led to increased competition here. At MDS, we are seeing signs indicating that European operators are more open to outsourcing, and are confident that the customer care and billing outsourcing market in Europe is set to take off over the next few years.