Wednesday, July 11, 2007

How Opting for Outsourcing Helps Telcos Put their Customers First


Telecoms operators today are increasingly interested in exploring the benefits of outsourcing their CRM and billing systems to third party solutions providers. Cambridge-based research company, Analysys expects the Western European market for outsourcing technology and customer services by telecoms operators to show 6 percent annual growth between 2005 and 2010, rising from EUR5.9 billion to EUR8.0 billion.

Cerillion’s on-the-show floor survey carried out at the 3GSM World Congress in February this year found that 50 percent of respondents thought operators were more open-minded about outsourced billing than a year before. Just 15 percent said they were less so.

To underline this optimistic mood, major new contracts are regularly reported in the media. In recent times, one of the most notable was the March 2007 announcement by IBM Global Services that it had won a 10-year deal with Indian operator, Idea Cellular. Under the terms of the agreement, IBM is helping to handle services like billing, revenue assurance, credit collection and subscriber management.

A Diverse Market

One of the significant advantages of the managed service approach for CRM and billing systems is that it can bring benefits to a wide range of operators, working on a broad range of projects. An operator undergoing a large-scale business transformation project, for example, may benefit from a managed service approach to ensure it remains competitive and retains the ability to launch new products and services for the duration of that project.

A telco looking to establish itself in an emerging market, may seek to put a managed service into operation during the period where it is focused on bringing new people on board and training them up, before ultimately transitioning to a licensed implementation.

Putting the Customer First

This emphasis on the customer is important. After all, customers are ultimately the ones paying to allow operators the luxury of owning their own business support systems. It is often overlooked, but arguably the most important single benefit operators can achieve from outsourcing their systems is the cost saving that can be passed onto customers.

When purchasing new systems, operators will typically incur significant upfront capital expenses before they begin to reap benefits from the solution. With a managed service model, the entry barrier is much lower. While the operator will still have operational costs to take into account, those costs will usually be much lower and more predictable than with a traditional fully implemented solution.

Reaping the Rewards

But it is not only customers who have to foot the bill for operators indulging in the luxury of managing their own systems. On top of the obvious capex and opex charges, operators may be missing out on a range of other business improvements which the managed service model provides.

One key benefit they could achieve by migrating to a managed service model is the ability to commit their technology provider to a service level agreement (SLA) with agreed turnaround times for implementing new products and incident resolution, for example.

Such contracts formalise the way that billing and CRM systems are run and, by so doing, enable operators to gauge how quickly system changes and additions can be made. In contrast, the IT department within a large telco business will typically have no specific SLAs in place with any other part of the organisation and often no fixed review process either.

Operators working in emerging markets can also benefit by obtaining access to scarce skilled resource directly rather than facing the headache of trying to recruit people locally with the requisite skills. Telco start-ups in all regions can often also benefit in a similar way.

Bright Future in Prospect

The future for outsourcing of CRM and billing systems is looking increasingly positive. As Simon Sherrington, author of a recent Analysys report on outsourcing, points out: “Outsourcing has become an important weapon in a telecoms operator’s strategic arsenal. An effective and well-managed outsourcing scheme can deliver flexibility, reduce time to market for new services, and help to deliver profit growth for shareholders.”

There is also clear evidence that outsourcing can help operators to achieve significant cost savings.