Tags Posts tagged with "outsourcing"

outsourcing

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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 deal with the difficult one first – Managed Services and outsourcing is here to stay and grow. So, what does this have to do with kids? Well nothing direct, except that kids can help resolve one of the biggest barriers to outsourcing – asking for HELP!

One thing I often notice, while meeting some of the prospects, is their reluctance to ask for help. The acknowledgement comes blatantly or subtly – there is a need to improve. The pressure of efficiency, productivity, reducing costs (or justifying with equal or exceeding returns) is mounting up on each one of them.  So, why hesitate to ask for help when there is a need? The top 3 inhibiting reasons are:

a)      Asking for help is considered a sign of weakness/failure

b)      Trust deficiency in the person who offers help

c)      Waiting for someone else to do it, so I cannot go wrong

There have been many management theories propounding kids’ psychology. Without surprise, it holds well when it comes to breaking these barriers too. Let me explain how, with typical kids’ perspective and how business could go about doing it.

Asking for help is a sign of weakness/failure

  • Kids view: Why? Why? Why? The ubiquitous question that drives every parent crazy is a Childs’ natural way to learn the world around her and develop cognitive skills. The kid sees it as an opportunity to be inquisitive, seek assistance (from someone who knows), learn something new and expand their horizon. The child doesn’t hesitate to ask for help  in its quest to face the world
  • Business way: Today while businesses appreciate hard work and diligence, they expect efficiency. Asking for help is a sure-fire way to achieve it. Seeking assistance is a fun way to solve a problem together and learn something new

  Trust deficiency

  • Kids view: Kids learn whom to trust and who not, either from the parents or slowly over a period of time
  • Business way: If past experience is something to go with and the trusted partner has delivered before, then entrust them with a new challenge. Else, if you are just starting, then start small, build confidence, before entrusting with bigger responsibilities

 Waiting for someone else to do it

  • Kids view: Walk into a classroom and ask for volunteers to try out something new – you will be amazed to see the numbers of tiny hands go up. Kids yearn for new things
  • Business way: Years of conditioning to be extremely risk averse has led to this state of mind. A well-planned and executed engagement will manage & mitigate the risks. Besides, many businesses have seen success the outsourcing way – there is enough precedence available. Go and get one for your benefit

After all, kids do continue to teach us a vital lesson or two…

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What makes a Telco settle for less? Is it the budget, fear of survival in a highly competitive market or knowledge and skill issues?

Bangladesh recently opened up the Interconnect landscape with 21 new ICX and 22 new IGW licensees entering the fray. This, without doubt, has fragmented the entire Interconnect market and has put significant pressure on the incumbents (to fight emerging competition) and for the new telcos (to have a viable business case for break even and eventually survive).

In a recently concluded InterConnect Conference at Bangladesh hosted by Subex, I had the opportunity to interact with a wide range of audience – CXOs, consultants & IT personnel. While it was acknowledged that a billing system is important to start the operations and convert “usage” to “cash”, it was evident from the discussions, that price was the driving factor in deciding a billing platform and to that end operators were scouting for “low cost” billing systems or looking at developing it in-house. Severe cash-flow issues, as the roll-out along with statutory payments to the regulator for obtaining and maintaining the license, was proving to be very costly. Hence cash-flow and total cost of ownership (TCO) were the main contributing factors to look at a low-cost billing option. The new telcos, in addition, were also exposed to the following risks:

  • Survival : Accurate and prompt billing will be a significant differentiating factor in the highly competitive market
  • Agility : As competition intensifies they need to be flexible to adapt to market needs and offer innovative products and services at the shortest possible time
  • Revenue leakages : Bangladesh as a market is highly prone to fraud and as per the regulator more than 10% of the revenue is lost due to illegal bypass

So, how are the telcos going to remain agile, competitive and eventually break-even at the shortest possible time? Do they have to settle for less and allow the forces of the market to dictate the future?

Subex unveiled a cloud offering for the Interconnect operators in the roadshow. It gives the best of both the worlds – low cost and superior technology, and help the telcos be ready for the future. The cloud model mitigates the business risks and provides the following benefits to the ICX and IGW:

  • Low cost of deployment & operations : With a TCO less than 30% of a licensed/in-house model and completely managed by experts, and CapEx requirement lesser by 50-60%
  • Low commitment : Volume based pricing to fit the business needs and scale as the business grows
  • Minimal risks : Easy sign-on and sign-off to the cloud model
  • Ready to launch: Pre-configured application requiring minimal customization (about 20%) to suit telco specific needs
  • Minimal domain knowledge: With service provider completely managing the core activities, knowledge and resource requirements from Telco are minimal. They are already constrained with resources and those can be used for growing their business
  • Flexibility : The cloud model can very easily extend into Revenue assurance, Fraud Management, Analytics for future

Naturally the excitement was evident when such an option was presented to the telco representatives. The only objection was around security (which was expected) and security is very easily addressable with the right technology and stringent processes.The “best-in-class” solution is available on a “best-in-class” service model which suits the pocket and addresses the business risks. It was time for the operators to go back and “relook” at their business case.

After all, when they have a great option, why do they have to settle for less?

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Could privatization of Air India have saved this day? Should the government be running a business? Should it have left the business to people with the necessary skills and expertise? It is argued that privatization, which is a part of disinvestment process, results in better use of resources and efficient allocation. Around the world, many instances of businesses that have thrived after government relinquishing control are common place (there is also the other side that have not taken off well due to various other critical success factors not being met).Nevertheless, increasingly, governments are taking the role of regulators and not producers.

Is it not a similar situation being observed in Telecom industry? From a situation where the Telco’s produced (or managed) everything themselves, they are shifting their focus to building brand equity, customer satisfaction and user experience. Thus, telco’s are deciding how their eco-system needs to shape and work to achieve their goals (regulators), while a partner is delivering the required results (producers). Some of the strategic outsourcing engagements in India (Bharti and IBM for example) are very good examples of a thriving partnership. What was common place for networks is now spreading its tentacles to B/OSS.

Of course, many Telco’s are in a quandary on where to fit in functions like Revenue Assurance & Fraud Management – firstly, does it come under tactical operations or strategic business? One RA business head that I know of in the region has been tasked, by the CFO, with a specific KRA of increasing revenue by “x%” from the existing customer base in the current FY. Many more are likely to follow suit in the coming years (refer to KPMG Global RA survey 2012). The profile of RA/FM is changing – in addition to protecting revenues; they are involved in the areas of enhancement & managing revenues. Hence, the answer to the question above – RA/FM are both tactical (producing the desired results) and strategic (supporting the strategic initiatives of the organization).

Now what would be the right strategy – should I outsource or not? There is no one answer that is right. The only right answer is “what suits you”, depending on the organizational social & cultural makeup, risk appetite and the scale of economic issues. When I meet my customers, we work with multiple options and eventually decide on the best fit. Here are a few possibilities that could be looked at:

  • Pilot program (minimal scope, few people, short duration etc) for the risk averse
  • Bonus / Gain share to ensure accountability from vendors
  • Part outsourcing the tactical part and retaining strategic initiatives (remember one main challenge is to retain resources for career progression reasons. This would be an opportunity to give them the much needed upward movement into a new area)

No matter what the option chosen, it is important that it works for both the partners in meeting the common goals.

And, I hope Air India takes off well again – they have better leg-room and delicious food compared to other airlines in the sector.

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