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Backoffice & OSS
Commentary
Service providers need to stay course in troubled time
Automation, new business and customer care will be keys to success
by Martin Creaner, President, TM Forum
So here we are in a brand new year where we are now firmly entrenched in the worst financial situation the world has seen since the Great Depression of the 1930s.
And like most of the pundits making predictions, I also believe we are only at the edge of the abyss. There’s no doubt we are heading into very difficult times for the next 12 months. At the tail end of 2008 we were observing a recession rather than actually living it out. In 2009, we’re going to be smack in the middle of the firestorm.
It’s as if an oil tanker has crashed outside your home, and you can see it smoldering but it hasn’t exploded yet. You know something awful is going to happen pretty soon, and you’d better react quickly or else be consumed in the flames. But as of this moment, it is a potential disaster, not an actual disaster. That’s how I visualize the situation we’re in today. Of course a number of industries — automotive, financial and retail — have already started living with the consequences of recession, but for the communications industry it’s still a looming threat that’s only beginning to become real.
Telecom: recession-proof?
We hear a lot of talk about this company or that industry being recession-proof, but I think that’s largely a myth. I will say that telecom may experience different challenges than other industries and could largely come away unscathed, but only if providers make good decisions today.
One of the key reasons why telecom will do better than many other industries is that communications services over the past few decades have become as important to most consumers as electricity and even food. This is certainly true in the consumer market with flat-rate, all-you-can-eat voice and data plans dominating the scene. And while the business market will suffer more, I still believe that overall communications service revenues will hold up pretty well during 2009.
But communications services providers can’t just rest on their laurels and wait for the cash to flow into their coffers. They have to remain in a proactive mindset and keep their focus on a handful of key areas in 2009 to come out of this recession in one piece.
Telecom’s top priorities
As with any year — not just one where global markets are in a downward turn — there are three top areas that are always top of mind for me. I call each segment part of an “eternal triangle” that service providers should always have an eye on.
The first is to reduce the overall cost of running your business, generally through some level of automation. This automation and eliminating unnecessary steps in your overall business process should cut straight across the entire company.
Second is to look for new business opportunities. This leg of the triangle really only appeared about 20 years ago. Prior to that, most providers didn’t really care much about new lines of business. There was dial tone, and maybe one or two other business products, and that was it. Today, we have this constant search for new business revenue because the core products that underpin the whole industry, are either shrinking, or if not shrinking, are certainly not growing at the rate that providers would like in terms of ROI.
The third, and probably most important, leg is to improve customer experience to such a level where customer churn stabilizes and drops.
I would expect the CEO of any service provider to think about all three of these priorities each and every day, and which one you place a greater emphasis on, on any given day, depends on the general market environment.
In the early days of a recession, reducing the cost of running the business takes up a lot of time and effort and generally dominates thinking, sometimes to the extent of putting the chief financial officer in charge of the whole ship. In this kind of situation, the new leader’s natural reaction — no matter how strategic they might think they are — will be that they really understand the first leg of the triangle, while the other two legs are a bit too abstract.
If they cut costs, they instantly can relate that to their bottom line, whereas if they invest in new service development or improving customer experience, they can make the intellectual leap that it will translate itself to the top line, but they might not be entirely convinced of the value since they may not reap the benefits for 12 months or longer.
The golden rule is that all three legs of the eternal triangle are always important. It is understandable to want to increase focus on one leg over the other two depending on whether you are in a recession, a growing market or a deregulating market, but you must always keep investing in all three.
Stand your ground
Underpinning this eternal triangle is the notion of transformation, which impacts all three legs. Most major service providers have rolled out significant business transformation projects in the past few years, and while they may have a tiger by the tail, they have to keep investing in these projects even in lean financial times.
So I would go so far as to add a fourth item to our list of priorities: stand your ground and keep your nerve on your transformation projects. This is the wrong time to abort major transformation projects, as the logic that drove the original business case is still valid. Quite frankly, I don’t see any providers initiating major new projects in 2009, but the ones that lose their nerve mid-stream will have caused significant damage to their business. They’ll have undermined their ability to deliver things the old way, and they won’t have created a new way of delivering things. In other words, they’ll be stuck in limbo.
Overall, telcos are in pretty good shape. They generate good amounts of cash, and cash will be king in 2009. Looking to the year ahead, I don’t see a great deal of promise facing us. It’s going to be a grind-it-out year that will cause a ripple effect across the industry and throughout the value chain. But as long as providers keep their eye on the eternal triangle, paying due attention to each leg, and stay the course with transformation projects, they’ll be in the best possible shape to ride out the recession.
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