oracle approach for telecom challenges
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Oracle Approach for Telecom Challenges (Cost Reduction Focus)
Vijay Ramaswamy Senior Director, Oracle Insight & Customer Strategy
22 November 2013
Copyright © 2013, Oracle and/or its affiliates. All rights reserved. Confidential – Oracle and Client Restricted 2
Managing Revenue Growth While Controlling Costs Is A Huge Challenge For Telcos
Revenue growth = opex growth
Airtel
America Movil
AT&T
BT
China Mobile
China Telecom
Deutsche Telekom
Etisalat
France Telecom
KDDI
KPN
KT
MTS
NTT
Telecom Italia
Telefonica
Telenor
TeliaSonera
Verizon
Zain
- 6
- 4
- 2
0
2
4
6
8
10
12
14
- -10 - 5 5 10 15 20
Revenue growth (%)
Opex growth (%)
Primary focus on revenues from
emerging – sooner or later cost focus
will be key
Very aggressive cost cutting
measures due to deep decline in
revenues
Source: Adapted from Ovum Telco KPIs – superimposed PT new KPIs on historical KPIs
PT
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Several Of These Telcos Have Implemented Aggressive Cost Reduction Measures
7.7% reduction in Opex costs through labour costs as well as lower mobile termination rates
‘Save for Service’ project aimed at EUR 4.2 billion savings - cost saving measures including
workforce reduction primarily in German operations.
6.1% reduction primarily due to exchange rate fluctuations combined with some a few cost
reduction programs
‘Chrysalid’ program to control spend around EUR 2.5 billion in 4 years through best practices in
network mgmt, marketing, customer relations, distribution etc
Lower wages and salaries and improved adoption of M4O drove reduced Op-Ex
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PT’s EBITDA Has Exhibited A Constant Decline But Is Not Alone Among Other Incumbent Peers
Industry EBITDA average
Telecom Services (B2B) 55.07%
Global Top 20 Telcos 36%
• Given smaller barriers to entry within the value added
service provider environments, smaller players are making
greater margins
• For asset intensive Incumbents, its far more challenging to
extract enough turnovers from existing assets
Source: Ovum Telco KPIs; Insight analysis; Value line Database;
34,7%
33,3%
9M12 9M13
PT EBITDA Margins
PT is focussed on continued efficiency
improvements in order to offset the pressure on
declining revenues especially within the high profit
enterprise segment
44,9% 42,8%
9M12 9M13
Portugal + Oi Portugal only
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3,9
3,8
3Q13
3Q12
6,3
5,8
3Q13
3Q12
1,07
1,02
3Q13
3Q12
Residential Customers Growth Personal Customers Growth (mobile) Enterprise Customers Growth
Customer growth is good given current conditions...
Port
ugal only
(In
Mill
ions)
32,0
32,0
3Q13
3Q12
7,8
8,9
3Q13
3Q12
20,7
23,1
3Q13
3Q12
Residential Customers ARPU Personal Customers ARPU Enterprise Customers ARPU
Port
ugal only
(In
Euro
s)
But their willingness to spend as much as before is waning...
Creating a greater pressure on margins given a predominantly fixed asset base
Balancing Margins With Declining Revenues Is Tough
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Several Avenues Available For PT To Address Cost Reduction Imperatives
Hig
h
Low
Low High
Siz
e o
f C
ost
Re
du
cti
on
s
Feasibility (Lower effort & costs)
Strategic Wins Quick Wins
Leisure Targets Continuous Savings
• NGN Networks
• FMC Convergence
Initiatives
• Full blown
infrastructure
rationalisation &
virtualisation
• Phased cross-
channel customer
experience
• Optimising traditional
channel costs
• Improving decision
management
• Identification and
discarding un-used
assets
• Signalling integration
activities
• Targeted motivational
measures
(gamification etc)
• Procurement, fleet &
supply chain activities
• Reducing IT
maintenance costs
• Process re-
engineering &
Modernisation
Higher risk and
hence senior exec
sponsorship is
required. Controlled
change management
Bottled within
individual units and
can be managed as
a low profile project
Customer touch-point
operations – easy to
gain sponsorship.
Faster time to value
Extract thick costs to
release them into
other areas. Lower
impact on overall
business
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Margin Is A 2-way Lever To Success – Impact On Revenues As Well As Costs
Margin
Cost Drivers
Services’ cost
Workload
Volume
Unit Time
Service support
Cost of sales Workload
Time spent on sales
Sales support
Revenue Drivers
Units sold or Retention
Up-sell/Cross-
sell
Retention
Time to Market
Price Tariffs,
Bundling
Manage
cost centre
budgets
through
efficiencies
Manage profit
centres – marginal
cost for every
addition in
revenue is low
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A Top Down Breakdown Of A Telco’s Operational Costs Will Help Determine Prioritisation
Opex Breakdown
Non-Process Opex
Support Process Opex
Operational Process Opex
Typical Telco Opex Breakdown
25%-30%
25%-30%
50%-55%
• Interconnection fees, taxes, CPE etc.
• Limited control over these
• HR, IT, Finance, procurement and other back-office activities.
• Reasonable potential for savings exist
Network Infrastructure
40%-45%
Network Ops & Design 18%
- 23% Sales 20% -
25%
Customer Service 10% -
15%
Billing 7% - 12%
Source: Deloitte, Insight analysis Strategic long term wins Quick wins
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Cost Reduction Can Be Achieved Across Several Areas, But A Right Balance In Prioritisation Is Important
IT Platform
s
Fleet, Facilitie
s..
Network Operations
HR
Illustrative Cost Reduction Levers
• Lower cost of servicing a customer
• Lower acquisition costs
• Improved productivity of staff across
functions
• Improved first call resolution rates
(direct impact on call centre costs)
• Reduced faults across the entire
Order to Provision to Cash chain
• Shared service capabilities driving
greater productivity for back-office
• Reduce cost to market (several ways)
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Two Approaches Possible For The Role Of IT As Business Enabler To Achieve Margin Maximisation
Prioritise them
against strategic
goals to achieve
Map it against
appropriate new
business demand
IT Options
available to
address them
Prioritisation and
balance between
different projects
Business & IT
roadmap to
achieving wins
IT roadmap with a
Business buy-in
Joint
Execution
Joint
Execution
Assess top cost
buckets for the
business as a
whole
Identify IT budget
constraints and
platform
rationalisation
needs
END
STATE
Business capability gaps
determines IT Options
IT capabilities restrict business
capabilities to address
CURRENT
STATE
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Illustrative: Picking The Order to Cash Area For Approach To Execution
CUSTOMER PRODUCT OPERATIONS
Marketing Product Conception Fulfillment & Billing
Sales Extended Revenue Chain Development Field Service Management
Service Product Delivery Network
Management
MANAGE & CONTROL
Business Intelligence
Strategic Enterprise Management
Financial Performance Management
Human Resource Management
TECHNOLOGY
Infrastructure Management
Business Process Management
Architecture Management
Information Management
Order to cash
process
Source: Insight communications industry component framework
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Streamlining Order to Cash Processes Requires Several Key Capabilities
Order Capture Provision Validate &
Enable Activate Invoice Collect
Order to Cash Process
Multi-
channels Customer
Customer Management
Channel Mgmt
Billing Order Capture
Order Delivery
Key Capabilities
Delivery role of IT as an enabler to business
Explore
Buy Connect
Use
Pay Get Help
Move Chan
ge
Renew /
Term
Superior Customer Experience (CRM) Design of Offer
Delivery of Offer
Fulfillment CRM Billing Provisioning Activation Inventory Product
SDP
Product Design & Delivery
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Each Capability Area Will Target Operational Improvements That Will Drive Cost Benefits For PT
Customer Management
Enabling Capabilities
• Unique 360 degree view of customer
• Multi-channel capabilities
• Harmonized , integrated and
simplified customer processes
cross-channels
• Robust proactive retention and win
back capabilities
• Flexible loyalty program measure
across products/offers
• Customer scoring and profiling is
integrated with CRM
Sample Target Operational KPIs
Number of Order
Capture systems
1
?
Best Practice PT - Today
Average call
handling time
6.1 minutes
?
Number of
applications in
call centers
2
?
Potential Benefits
• Improved Productivity of call center
staff
• Reduced cost of order management
• Improved customer intimacy
• Reduced customer churn
• Increased cross-sell rate
• Reduced Opex
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Channel Mgmt
Enabling Capabilities
• Point of service (POS) system with high
reliability, performance and usability.
• Integrated POS and CRM systems
• Harmonized look and feel cross-channels
• Single sign on cross online services
• Differentiated and personalized experience
• Integrated business intelligence and RTD
• Rapid time to market through unified
catalogue and product hub
Sample Target Operational KPIs
Best Practice PT - Today
Potential Benefits
Self service
account
management ?
Online sales vs
Total Sales
50%
?
% of transactions
over number of
online visits ?
15% - 30%
30%
• Improved customer experience
• Increased revenue through better
targeting
• Increase in margins through deflecting
customers through cheaper channels
• Improved customer retention
Each Capability Area Will Target Operational Improvements That Will Drive Cost Benefits For PT
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Key Considerations To Bear In Mind While Addressing Margin Maximisation Initiatives
Sponsor
• Joint business & IT exec sponsorship to support strategic transformation activities
Simplify
• Business Process and IT platform should be simplified to cater to future needs
Streamline
• Avoid hesitation to change status quo processes
• Business focussed approach to streamlining processes – define success metrics
People
• Manage cultural drivers effectively and manage change through proper communication and accountability
Infrastructure
• Resilient and scalable support infrastructure to enable convergence around commercial as well as network functions
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From An Oracle Perspective We Can Help Address Issues Across The Telco Stack
Service Delivery & Fulfilment
Customer Master
Customer Experience (Sales, Marketing,
Service, Social etc)
Back Office
Integration
Billing & Revenue Mgmt
Technical Infrastructure (hardware,
Processing, Virtualisation, OS etc)
End-to-End Stack
Customers
Networks
Designed based on industry recognised
standards
B
Lower total cost of ownership
A
Vastly improved centralised control over
efficiencies
C
Potential Value
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Oracle Insight Welcomes The Opportunity To Discuss With You Options In Detail And Provide Our Support
Industry
Experience
Solution
Knowledge
Value
Analysis Oracle Insight
Composition
A methodology focused on enabling greater customer business value
Drives business impact by helping view technology as enablers of business value
Helps build a compelling value proposition
Assists with alignment with your executive team
For any questions, please don’t hesitate to contact me at
vijay.ramaswamy@oracle.com / Ph: +44 7825121521
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