Reducing revenue leakage and maximising profits is the nirvana of every operator in the market. So, what are they doing to achieve this goal? John Maclean investigates
According to the experts the future is starting to look rosy again for the global and European telecoms markets. Gartner reports that revenue decline is slowing for the top North American telcos, while in Western Europe, the EITO (European Information Technology Observatory) expects the industry's rate of growth to increase from 2004 to 2005.
Although the picture is certainly looking less bleak, Gartner also reports that worldwide, the BSS and OSS markets will only see incremental and uneven recovery until telcos resume sustainable profitability. But surely, the BSS and OSS markets should be recovering ahead of telco profitability? As the market eases, telcos are looking to pick up the pace in launching new services and deploying new technologies. But a complete inversion of investment priorities, focusing on new services rather than back office processes, could in the long term produce precisely the results that they are trying to avoid. Profitability will come by maintaining the focus on the back office to give a strong set of customer facing processes, upon which new services and offerings can be delivered -- quickly, effectively and profitably.
In order to achieve profitability, telcos need, principally, to ensure that they minimise the time and cost associated with turning customer orders into cash. The less it costs a telco to provision and service a customer effectively, the greater chance it has of keeping valued customers and of making a profit. For example, as a Western European mobile operator recently commented: "Our financial figures are now in the top five of the operators in Europe. We automated our order management process within the past two and a half years and this has totally helped the system compared with the manual processes of the past."
This quote came from a recent research study by Analysys, which highlighted that despite many recent improvements in order-to-cash processes, most telcos acknowledge there is still significant work to do to fully optimise the order to cash lifecycle.
Analysys surveyed over 40 telecoms operators in Europe and North America; a staggering 80 per cent of respondents admitted that further order management improvements are essential if they are to achieve better financial results and competitive differentiation. Fifty per cent of telecoms operators, and within this, all bar one of the large operators, are without a single common process for order taking across all lines of business.
One in three of the operators that had met obstacles in improving order to cash processes had to stop or delay critical product launches -- a highly detrimental factor in the quest for profitability in a competitive marketplace. Operators looking to jump start their market expansion plans need to ensure faster time-to-market, especially as the pressure intensifies to introduce new services and tariffs.
With profitability as the ultimate target and order management the means of getting there, there are also a number of goals to be achieved along the way. Namely, in the Analysys research, half of the operators surveyed cited improved cash flow, better service, increased customer satisfaction and revenue growth as benefits made possible when the obstacles to improved order management are removed.
Hurdles to clear
Analysys outlines two main hurdles to achieving these goals. These are the sheer complexity of the order management processes that need to be overhauled, and the impact of seemingly irreplaceable legacy systems that still remain the backbone of telcos' IT infrastructures.
The issue with the order management business processes themselves is that they are becoming increasingly complex as telecoms businesses become more diverse, nimble and affected by rapid market change. Issues like constant development of new services to keep competitive edge and a high rate of market consolidation, mean that the market landscape for telcos is constantly evolving. Despite their increasing complexity, processes need to be effective, resilient and efficient in order to deliver profitability.
The complexity of IT systems and difficulty in customising legacy IT systems is blatantly clear from the survey. 29 per cent of telcos are trying to hard wire critical systems needed across order management to create an integrated process. While this may serve today's needs, hard wiring usually means that there is little option for change. How will these telcos fair in the future, when their order management processes, and probably the systems needed to support them, have changed beyond all recognition?
Only one in five operators has invested in integration tools with standard technology interfaces, despite that fact that these systems offer a more future proof route to profitability because they are based on open standards that allow any combination of systems to be integrated.
Lip service to industry standards?
The Analysys survey shows an increase in the awareness of industry standards such as the TeleManagement Forum's (TMF) Enhanced Telecom Operations Map (eTOM), which provides a blueprint for successful business, processes like order management. But while 60 per cent of large and medium sized operators are tracking and analysing these standards for ways to create value in order management, only five per cent are actually developing order management solutions using the industry standards. Over the next few years, the market needs to follow these early adopters who have successfully made order management improvements using standards based solutions.
One early standards adopter is R (formerly R Cable), one of the fastest-growing telecommunications companies in Spain. In early 2004, R decided to take the standards based approach to order management by implementing Vitria:OrderAccelerator, a solution based on the TMF's eTOM framework, which streamlines and automates manual, order-related business process flows across OSS and BSS systems.
The decision by R to standardise on an order management platform was based on the desire to run the entire process of customer subscriptions and services provisioning from one place. It is integrating information flow between the web, its customer relationship management platform, service activation systems, on-site workforce systems, network inventory system, its Interactive Voice Response facility, and billing system in a single environment.
"The strong competition in the telecommunications sector requires a sustained effort to provide the best levels of operating efficiency and service," comments Antonio GÃ³mez, Systems, Organisation and Quality Manager at R. "Vitria addresses specific issues that have a direct impact on efficiency and quality through the automation of processes and the integration of information flows inside the company. By offering visibility of customer details and services across the organisation, Vitria also helps us reduce costs and improve service."
The revenue impact
An earlier study by Analysys, in February 2004, showed that, with revenues overall growing more slowly, management of existing revenues has become increasingly important. Under the global title of 'revenue assurance', this has become an absolutely essential project for operators. The study showed that of the top six causes of revenue loss, three were in the area of order management and processing, namely 'Poor Processes and Procedures', 'Poor Systems Integration' and 'Applying New products and Services'.
Even more surprising was the gap between assumed revenue loss and likely real revenue loss. In Western and Central/Eastern Europe an acceptable loss level was around 1 per cent of revenue. However, the research suggested that the actual loss level was probably well over 7 per cent. This was unlikely to be due to complacency but more the result of vertical organisational structures, and a resultant inability to recognise the real causes of revenue loss, and more importantly, put in place effective measures to reduce them.
In today's climate, lost revenue is close to being a crime and it is vital that operators focus on eliminating it before getting carried away with the front-end technology. It will be of no long-term value to have launched the most leading-edge services if, at the same time, an operator is leaking more revenue at the back.
A two-pronged attack
It is clear that although the improved overall climate for operators is permitting some renewed opportunity to launch new technology based services such as 3G in mobile and VoIP in fixed, the biggest risk is if they de-focus on the back office. A strong and determined effort to 'sort out' order management, and its associated processes and procedures, will have the triple benefits of reducing costs, stemming some key sources of revenue loss and, most importantly, allow the more effective and timely launch of new and exciting service offerings.
John Maclean is Telecoms Marketing Director EMEA at Vitria, and can contacted via tel: +44 (0)1628 421852;