By Bengt Nordström, CEO of telecoms industry consultants Northstream
Group mobile operators have enjoyed huge profits from built-up global operations. However, this cannot be relied on anymore due to the saturation of mobile markets.
It is generally believed that larger operations deliver scale and synergy; and steel operators for increased competition. Some scale advantages do exist, but these benefits vanish in complicated organisational structures.
The operational model requires change and in 2014 this will be achieved, among others, through full-scale outsourcing.
In more profitable days, operators have had higher staff and offered bigger salaries - albeit with faltering cost management and bureaucracy. With growth this is manageable, but it becomes very harmful when the market is tough. This can see larger operators being out-paced by leaner, more efficient brands with no legacy elements.
Players must focus on being less complex, more agile and more customer focused. A smaller organisation with less staff is exposed to clients more regularly; ensuring a more informed response to their requirements. This is achieved through rebalancing staff and capital to the client focused side of the business and raising reliance on outsourced partners.
Many have contracted business out to vendors, but failed to derive cost savings or efficiencies. Their outsourcing has not been extensive, nor thought through enough.
A full-scale outsourced model should feature 100 full-time employees. Management should be high calibre professionals, who embrace the model, and focus on customers. They must manage the business – not staff – through solid cost control and the efficient management of high quality data.
Operators should only select vendors as partners if they believe they will be effective long-term allies that can deliver continuous improvement.
The challenge of change
Challenges in movingto an outsourced model come from legacy practices and established organisational culture. These will jar with the principles of a more efficient model and spark internal resistance to change.
Operators have come to see vendors as a commodity that can be swapped in or out – based on price. With an outsourced model, operators must change that perception.
Staff competencies must also change and a success factor for outsourcing, although counter intuitive, is that the subject matter experts are outsourced. The remaining staff must take more general competence profiles. This results in the outsourced partner being managed on business and customer perception benchmarks; and less on the distinctions of a particular operator function.
A full-scale outsourced model leverages partner management around shared vision and values on a long-term basis. There are actually less relationships and interfaces than with the in-house model, with selective and balanced control points and service based contracts. This promotes a higher level of operational excellence, in which an operator can gain from simpler and faster operational processes.
Keep the faith
There will be a desire to return to the previous system - but this should be resisted. To ensure success, the leadership and staff must be culture bearers for the model. Select employees because they fit new role descriptions, not because they were previously valuable subject matter experts.
Moreover, set clear strategy and objectives and define the scope for outsourcing to enable partners to hit maximum scale and efficiency.
An operator must study the full scale of its operation to consider what should, or should not be, outsourced. To ensure partner efficiency, price models should be agreed that incentivise effectiveness. The operator must also ensure partner collaboration – not competition.
Partners must rise to this challenge, possessing the ability to drive transformation with best practice and powerful support.
Ultimately, implementing an outsourced model implies fundamental change. The transition must be followed by true transformation for all involved. It is not something for the faint hearted.
However, moving from being an administrative giant to efficient governance, via partnerships, is the only way to build towards a profitable future in a highly competitive market.