The most visible aspect of a carrier’s business is, naturally enough, the services that it provides to customers, and the network that carries those services. What goes on behind the scenes in a carrier’s back office is not commonly the cause of headline-grabbing excitement.
But the drive to maximise profitability in a challenging economic climate is creating a new back office imperative that is proving to be every bit as critical as the latest network upgrade or product launch. After years of relative back office neglect, and the piecemeal implementation of a myriad of standalone solutions, carriers are now starting to put a lot of extra effort into the transformation of their internal processes. By making them as streamlined and efficient as possible, the argument goes, signifcant and measurable savings can quickly show through to the bottom line.
“The profile of the back office environment has dramatically risen, with firms starting to recognise it as the engine room of the business,” explains Elizabeth Gooch, CEO of back office optimisation vendor eg Solutions. “It’s where all the processing, accounting, order fulfilment, administration, document management and other vital tasks are carried out. Even though this is not seen by the customer, the back office is one of the most important aspects of the business and one that has a direct bearing on business efficiency, which then has a knock-on effect to the customer.”
Traditionally, says Gooch, the carrier back office has relied on data-heavy manual processing techniques, which are simply no longer capable of delivering the goods. She picks one example: “While workforce management tools have existed, these have traditionally been geared to the front office, with the assumption that what works for one must work for the other,” she says. “This is a misconception that prevents the back-office operating effectively.”
Gooch believes that telcos are now turning to more advanced automation tools and technologies, although the results are sometimes mixed: “Unfortunately, these firms are being sold tools which are, in most cases, generic and do not meet the requirements they originally specified,” she warns. “It’s important to realise that the demands of the back office are unique at each and every firm, and therefore only dedicated back office optimisation [BOO] systems can be used to overcome these challenges.”
The systems specialist urges users to work with BOO vendors to understand the particular business issues that need to be addressed. “An effective system will have a central reporting hub that pulls together all the various work items into a single place in order to give a view of every task or transaction. A comprehensive performance management tool allows staff to be assessed across all levels of the business. Workflow items should be sorted and presented in the order needed for a task to be completed. Firms that take time to investigate and source technology that has been purpose built will allow businesses to reap the benefits of an effective back office.”
Vic Bozzo, SVP of worldwide sales and marketing with back office software vendor Telarix, is inclined to agree with Gooch’s analysis of the disjointed approach that too often dictates a telco’s back office provisions. “Pretty much every industry has a form of electronic data exchange, except much of the telecoms sector,” he says. “In telecoms, everything is still run very unilaterally. Carriers run a myriad of solutions in the back office, cobbled together. This is because it’s rare for one vendor to provide the whole spectrum of billing, financial settlement, rate management and everything in between. It can take days, even weeks, to finalise a commercial arrangement. Carriers have got to find a way to convert to a more real-time scenario. Data between suppliers and customers needs to proliferate electronically.”
To this end, says Bozzo, Telarix has been popularising iXLink, an open business information exchange service for the telecoms industry, pioneered in the first instance by Deutsche Telekom ICSS but now in use with others. “It reduces the costs and complexities associated with interconnection, including the purchase and sales processes, international dial code management, billing, invoice validation, and settlement,” enthuses Bozzo. He says more than 500 carriers worldwide are now using iXLink to exchange business information automatically with other service providers.
Telarix is also a backer of the Global Business Exchange for Telecom (GBET), a carrier-led association created to channel ideas and best practices centred around the electronic exchange of business information. The initiative aims to help carriers reduce costs, maximise revenue and better manage present and future challenges.
“Some of the issues GBET is currently targeting include financial settlements and billing, automating the translation of data, reconciliation to pricing protocol, automated bilateral settlements, and complex deal management,” says Bozzo. “Money saved is the real upside, I’d say. The carrier industry has been mired in wave after wave of cost cutting for years, but by just processing data better you’re saving cost right there. The cost of doing this is far outweighed by the savings. You get uplift too from finding new revenue opportunities you couldn’t expose before.”
So why is the carrier sector so late to such innovations that are the bread and butter of other industry verticals? “Because the wholesale divisions of carriers have not been built historically to support the retail divisions,” believes Bozzo.
“They are now starting to look both at their own margins and at how they support retail too. Wholesale is not a separate unit any more, and this creates a mood of change. It’s harder now to manage things on a manual basis than it was. There’s a number of carriers driving this new momentum – Verizon, TeliaSonera, PCCW, iBasis.”
Sanjay Kumar, industry vice president of communications and media with Progress Software, says that carriers often are failing to transform their back office – but not because they don’t want to: “I’ve been told by more than one carrier that if they replaced every application in their back office in one go, the cost would bust them,” he says. “We provide a way to take better advantage of some existing systems while allowing some new ones to be deployed. We provide a degree of integration across existing separate systems that allows a degree of relationship between them to develop. We break what have traditionally been siloes.”
Guy Reiffer, VP marketing with vendor MACH, is certain that a network of outsourcing relationships may provide the ultimate back office elixir: “Operators now have the opportunity to outsource the full range of interconnect billing, roaming and partner settlement processes through a wholesale partner management proposition, which still allows them to retain full commercial control of their business,” he says. “This kind of managed service focusses on billing functions that would previously have been performed by an in-house software implementation. It frees the operator from cost and ongoing software maintenance worries, to focus on the commercial relationships with its interconnect, roaming and content partners, to make sure that it has the best rates, best routes and is achieving its revenue and profit objectives.”
This could also be of value in tackling the issue of fraud, believes Reiffer: “Telecoms operators face a very real challenge when it comes to the management of fraud and the protection of revenue,” he says. “However, shrinking margins dictate that this is not a problem operators can simply throw money at in their efforts to address it. Instead, every invested penny must be justified. As such, telcos are looking for means of driving down capital and operational costs, all while keeping fraud in check. By more closely aligning their fraud management and revenue assurance functions, operators can ensure that their overall revenue protection systems are capable of dealing with global threats. This alignment makes absolute sense for operators from both a cost and efficiency standpoint. These two can be integrated with a third silo, wholesale partner settlement, as this makes for an even more efficient and effective back office revenue protection stack. This platform can become the basis for operators’ business optimisation activity, used to identify opportunities to enhance revenue, reduce cost, eliminate fraud and maximise profitability.”
Central to any sort of drive to transform the carrier back office is the complex discipline of managing billing, claims Dan Adams, a partner with consulting firm Accenture’s global telecoms practice.
“Telecoms carriers are constantly looking at how they can enhance the billing process,” he says. Customer billing is now largely automated, but the key roadmaps for carriers now lie in three main areas. These are the billing of content providers like Amazon rather than end consumers; centralised billing for multinational corporates, such as providing one bill for 20 countries; and e-invoicing, which is essentially all about ensuring full VAT compliance electronic billing without manual intervention or approval.”
The rise of what Adams calls the ‘mega-carrier’ has led, he says, to synergies across countries being implemented: “We are now seeing vendor-managed inventory across multiple countries, with most mega-carriers running centralised procurement for their high cost items. We’ve also seen the setup of shared service centres in central Europe and India to support back office operations, like HR, finance and procurement – across multiple countries – taking advantage of labour arbitrage and economies of scale.”
Some service providers are starting to focus not just on the billing process but also to the automation of order management and customer care processes, believes David Chambers, director of OSS solution marketing for Amdocs.
“From a billing perspective, automation of the billing process enables SPs to merge real-time plans with offline plans,” he says. “This enables real-time capabilities such as notifications and real-time promotions for post-paid customers, for example. This can also be used to create hybrid customers. For example, a customer may want to use post-paid plans when at work, but pre-paid plans when at home.”
From the order management perspective it is also important that there is an automation of order fulfilment, says Chambers: “This is especially true in a transformation process that involves consolidation of multiple systems that run different types of services such as fixed and mobile, voice, data and entertainment. The automation of the fulfilment process enables SPs to have a reliable process, achieve cost efficiencies related to the streamlining of the technicians’ work, reduce order fallout significantly, and cut error levels, customer support costs and time-to-market schedules.”
Rob Smith, director of global market development, with vendor MDS, agrees that better customer service should be the ultimate end product of any back office transformation process, both for carriers and their service provider customers: “From the conversations we’ve had with communications service providers [CSPs], we’ve found that automation is a key component of the wider plan to improve time-to-value cross the deployment process,” he explains. “A key part of this process is for vendors to open up their architectures and offer additional web services, which will provide increased accessibility and functionality for business customers. We’ve also started to see that CSPs are viewing business analytics as integral to the billing process, providing valuable insight and monitoring of service assurance and fraud levels. For CSPs, it is essential to be able to respond to fraudulent activity in real-time, and business intelligence integrated with automated billing enables a consolidated automated billing process which provides the most possible value to CSPs and end customers.”
Service providers, he says, are now seeking to unify the view of the customer with their products and services across new and legacy systems: “This means that it is essential for any software to be able to integrate with wider third-party software for rapid and light touch integration.”
Any back office solution that helps to retain customers and enrich the customer relationship is likely to offer swift returns, says Timo Laaksonen, chief commercial officer with Finnish vendor Tecnotree. “We evangelise to operators what a flexible sort of business they should be,” he says. “There aren’t all that many new subscribers out there to be found, so you’ve got to find new ways to exploit the spending of existing subscribers. You might want to be selling them other services they might be interested in, not just your own. Do they want e-books, home surveillance? Operators must use their known brand to sell customers more. You’ve also got to hold customers by taking very good care of them. There needs to be one customer care interface across your organisation, improving service levels and reducing time taken.”
Tecnotree sells across the world, in developed and emerging markets, offering an interesting comparative view of where different regions are on the process of back office transformation: “It’s notable that while operators in emerging markets face problems, they at least have the advantage of being able to deploy one billing system for all service types,” says Laaksonen. “In the UK it will be different for mobile, broadband and WiMAX. In emerging markets with low ARPU, they are not going for convergence and integration because they want to, but because they have to.”
Greg Coogan is senior marketing manager with software vendor Convergys, which provides back office solutions for telecoms service providers, cable companies and utilities. He also enjoys a global perspective: “We sell to most of the Tier 1s around the world,” he says. “People are looking to do more with less at the moment, partly because of the economic downturn, and partly because the networks they run are more critical now, and are being asked to do a lot more. You’ve got to do what you do better and better, as part of delivering a better customer experience.”
Coogan picks out a number of trends of back office transformation that have a direct bearing on the customer relationship: “One is the growth in self care – allowing customers to manage their own accounts,” he points out. “It’s a move on from the old model of the customer calling into a call centre. Now they can do common tasks themselves. With a smartphone, you can make your own changes to the configuration of your account. This makes customers feel empowered, as well as driving down the cost of delivering services to them.”
Another trend, he says, is progress towards understanding the context of events and interpreting customer actions: “If you know a particular cell site is down, then you can dynamically anticipate that a customer calling you from that area might be calling about that problem and can be dealt with accordingly as they call. It’s a rules-based approach to managing customers that puts the smarts into the system. Another trend which is particularly relevant to wireless carriers, is managing the interaction between your customers at a high level. This can be revenue producing as well as serving customers better. Any reduction in your churn rate has an impact on your bottom line. Carriers are always talking about outsourcing products and services while being stuck in a 20th century model of customer service themselves. Only yesterday I called up a service provider and got shuffled around between three different departments. As a service provider there’s only so much you can do in terms of offering new products or reducing pricing, but there’s plenty to be done around the issue of customer service.”
So what of the future? What does the back office landscape of a few years hence look like? Smith of MDS foresees carriers and service providers taking a more and more pragmatic and business-savvy approach to transformation: “We haven’t seen a continuation of the costly, complex and labour-intensive ‘rip and replace’ transformation projects of a few years ago, which promised so much but mostly failed to deliver,” he says. “Instead we’re going to see the drive towards a frugal and integrated approach to IT systems, and indeed the operational processes.”
Smith predicts the rapid advancement of the industry’s adoption of cloud-based and virtualised services which will provide telcos with greater options when it comes to outsourcing key IT services to a third party provider: “We’re seeing that this is an accelerating trend – as little as five years ago, it would’ve been unthinkable for telcos to be outsourcing their network management to third parties, but nowadays many are doing just that. This shows just how far they have come in terms of understanding where their core value and market differentiation comes from.”
Time for transformation
According to analyst firm Coleman & Parkes, author of a research report commissioned by vendor Amdocs, 74% of telecoms service providers worldwide are currently running, or have implemented, a transformation project within the last three years. Some 69% say they feel an accelerated need for transformation, fearing that costs could otherwise spiral out of control, or that they might fail to meet customer needs and demands.
“All transformation projects are unique,” says David Chambers, director of OSS solution marketing for Amdocs. “But one common factor is that service providers are usually ill equipped to manage these complicated processes alone. Forty percent of the service providers surveyed admitted to deviating from their transformation plans and failing to monitor and control costs during the transformational change.”
Chambers also highlights that having the right skills to run a transformation project and working with the right partner, are amongst the main concerns that telcos raise when asked about transformation projects.
“Service providers use KPIs to measure the success of a transformation program,” points out Chambers. “The most commonly measured KPI is customer satisfaction, used by 59% of the those polled, followed by cost reduction at 53%, employee satisfaction at 44% and having more efficient systems in place at 43%. The real challenge, though, is how to effectively measure those KPIs – in other words how best to effectively measure customer satisfaction and improvements in customer satisfaction following the transformation project. SPs expect external experts to help them translate these KPIs into traceable and clear measurement units.”
Europe, according to the findings, leads the way when it comes to recognising the benefits of third-party support, with 72% of its telcos using consulting in the planning phase compared to 53% worldwide, and 69% saying they found this ‘very useful’.
“More than half of global service providers reported that outsourcing areas of their transformation projects would help implement the projects more efficiently,” said Chambers. “Nearly as many believed outsourcing would help implement the projects more cost effectively, with lowered or eliminated capital expenditures."
