Tags Posts tagged with "Opex"

Opex

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While pressures on cost and margins with traditional services remain, fast emerging services are bringing in new risks and demands for new skills to manage them. Telcos are now looking for Managed Services engagements as a key differentiator in the emerging world.

 Telco’s are at the cross roads today – on one side they are pushing boundaries in a saturated and commoditized market to garner revenues and improve margins, whilst on the other they are pressurised to innovate and cater to the demands of the ubiquitous connectivity and data enabled services. Telco’s do not have a choice, but to act, to remain relevant in the market place with the changing landscape, new challenges and competition. With telco’s looking inwards for business optimisation – focusing primarily on the profitability of the business and monitoring the operational state of the business – what are the key trends shaping the industry and opportunity landscape ?

 Opportunities to remain relevant and successful in the new world order are plenty. Some of the initiatives are fairly quick to implement, while others require long term dedication and focus. Let us look at 3 key areas of opportunities in BSS for any telco.

  • OpEx control – Improving margins: The immediate and short-term opportunity for telcos is to control OpEx and improve margins on an already stressed traditional revenue streams. However, how do operators overcome the challenges facing them at two different levels – (a) skills upgrade (b) shortage of talented resources internally, and start improving their margins?
  • CapEx control – Improving RoIC: In the medium term, telcos are going to invest heavily in new and emerging technologies. The common conundrum corporate heads face are related to (a) successfully managing risks that comes with anything new (b) utilising the available critical capacity of technology & resources (c) responding timely & appropriately to market in face of competition and consumer expectations. How does Managed services help in providing the necessary capabilities to improve RoIC?
  • Economy of scale – Fuel growth: In the medium-longer term, telco leaders are going to look beyond their operating boundaries ; Industry consolidation, overseas M&A, new sources of revenue like PaaS/IaaS/SaaS for MVNOs or group op-co’s will be a key ingredient to the revenue growth. Is Managed services a viable solution to manage strategic and compliance risks?

Click here and download our latest newsletter in collaboration with Gartner for answers to the critical questions facing the industry leaders.

 

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Let’s say that you’re ready to take the plunge and  launch a business optimization project to make the world a better place.  You’re convinced that the benefits of the project will be quite compelling.  Who could argue the value of reducing revenue leakage, mitigating fraud risk or recovering stranded network assets?   There’s only one thing standing between you and your dream of making a significant impact to the bottom line—a winning business case!

In times past, the decision to pursue a new project was generally driven by a combination of need and budget.   If there was a manifest need, and appropriate budget had been allocated, then it was generally a matter of stack-ranking solution alternatives and picking a winner.   Ah, for the good old days…  today’s reality is that Opex and Capex are tightly managed and projects need to sink or swim based on rigorously scrutinized financial metrics such as NPV, ROI and Payback Period.    Business optimization projects that remove costs from operations, improve the leverage of Capex dollars or manage risk more effectively tend to score quite favorably against these metrics compared to many other candidate projects competing for enterprise budget allocation.

Which brings us back to the business case.    Years ago, when I worked for a major North American operator, the business cases I developed to get IT projects over the line were founded on “guestimates”.  Remember those?   They were cool because everyone knew that once the budgeting exercise was done, and the project approved, no one was going to come back and hold you accountable.   Remember what I said about the good old days?   In today’s business climate, defending a business case is akin to defending a master’s thesis.

In our Managed Services practice, I have spent a lot of time coaching clients on their business cases.  Before you read this as “here’s how to overstate the case to bump it to the head of the line,” think again.  Executives and finance departments are too savvy.  Plus, overstating a case ultimately serves no one’s interest.  My approach is to gather the best possible information to produce a solid and realistic case.  Look at the business case as a tool—it can help ensure that you are pointing scarce resources in the right direction and may indicate that your original direction needs to be changed.

Based on my experience, a well-constructed business case should:

  • Illustrate not simply costs and benefits but the expected timing of each.   It may be just as important to understand how long the project will be generating negative cash as the 3-year NPV.
  • Garner buy-in.  No, not just from the executive committee who will evaluate the project, but from the impacted stakeholders.   Do the groups most impacted by your projected Opex or Capex savings agree with your assumptions?  When they line up behind you, they can be a powerful force to help promote the benefits of the project.
  • Avoid “MBA math”, i.e. a small percentage of a large number is still a large number—look what we can save you!   Benefit calculations need to be specific, as granular as possible and have defensible and traceable assumptions– ideally using data sampling techniques or a limited-scope assessment.
  • Use a WACC (Weighted-Average Cost of Capital) that is approved by Finance for calculating discounted cash flows.
  • I could go on, but you get the idea…

Once you have completed a draft of the business case, there are other questions I suggest you consider, including:

  • Do I have Opex or Capex dollars to spend?
  • Does the project need to be self-funded?
  • How is the case improved if there is limited up-front investment or if I spread out my payments?
  • Do I need an operational assessment to derive my business case assumptions?
  • Will my solution and/or services partner stand behind the numbers in the business case and offer to put some “skin-in-the-game”?

Admittedly, these are leading questions.  Managed Services can influence the answers to these questions in a significant way and may just give you the flexibility you need to get the business case, and your project, over the line!

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