Oracle Approach for Telecom Challenges

Oracle Approach for Telecom
Challenges
(Cost Reduction Focus)
Vijay Ramaswamy
Senior Director, Oracle Insight & Customer Strategy

22 November 2013

Managing Revenue Growth While Controlling Costs Is A
Huge Challenge For Telcos
Revenue growth = opex growth

Revenue growth (%)
14

MTS
China Telecom

Airtel

12

Telecom Italia
China Mobile

10
8

KT
America Movil

6

Very aggressive cost cutting
measures due to deep decline in
revenues

-10

-5

4

Telenor
Verizon
Telefonica
2
NTT
AT&T
France Telecom
0
KDDI

Zain
Deutsche Telekom
TeliaSonera
BT
PT

-2

Etisalat
KPN

-4
-6

Source: Adapted from Ovum Telco KPIs – superimposed PT new KPIs on historical KPIs

2

Copyright © 2013, Oracle and/or its affiliates. All rights reserved.

Confidential – Oracle and Client Restricted

5

Primary focus on revenues from
emerging – sooner or later cost focus
will be key
10

15

20
Opex growth (%)

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

3



PT’s EBITDA Has Exhibited A Constant Decline But Is
Not Alone Among Other Incumbent Peers
PT EBITDA Margins
Portugal + Oi

34,7%

Portugal only

44,9%

42,8%

33,3%

9M12

9M13

Industry

9M12

9M13

EBITDA average

Telecom Services (B2B)
Global Top 20 Telcos

55.07%
36%

Source: Ovum Telco KPIs; Insight analysis; Value line Database;

4


PT is focussed on continued efficiency
improvements in order to offset the pressure on
declining revenues especially within the high profit
enterprise segment


• 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

Balancing Margins With Declining Revenues Is Tough
Portugal only (In Millions)

Customer growth is good given current conditions...
Residential Customers Growth

3Q12

3,8

3Q13

3,9

Personal Customers Growth (mobile)

3Q12

5,8

3Q13

6,3

Enterprise Customers Growth

3Q12

3Q13

1,02

1,07

Portugal only (In Euros)

But their willingness to spend as much as before is waning...
Residential Customers ARPU

Personal Customers ARPU

3Q12

32,0

3Q12

3Q13

32,0

3Q13

8,9

7,8

Enterprise Customers ARPU

3Q12

3Q13

23,1

20,7

Creating a greater pressure on margins given a predominantly fixed asset base

5



Leisure Targets

Low

Bottled within
individual units and
can be managed as
a low profile project

Strategic Wins
• NGN Networks
• FMC Convergence
Initiatives
• Full blown
infrastructure
rationalisation &
virtualisation

Size of Cost Reductions

Higher risk and
hence senior exec
sponsorship is
required. Controlled
change management

High

Several Avenues Available For PT To Address Cost
Reduction Imperatives

• Identification and
discarding un-used
assets
• Signalling integration
activities
• Targeted motivational
measures
(gamification etc)

Quick Wins
• Phased crosschannel customer
experience
• Optimising traditional
channel costs
• Improving decision
management

Continuous Savings
• Procurement, fleet &
supply chain activities
• Reducing IT
maintenance costs
• Process reengineering &
Modernisation

Low

High
Feasibility (Lower effort & costs)

6



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

Margin Is A 2-way Lever To Success – Impact On
Revenues As Well As Costs
Volume
Services’
cost

Workload

Unit Time
Service
support

Cost Drivers

Time spent
on sales
Cost of sales

Units sold or
Retention
Revenue
Drivers


Retention
Time to
Market

Price

7

Workload
Upsell/Crosssell

Margin


Manage
cost centre
budgets
through
efficiencies

Tariffs,
Bundling

Sales
support

Manage profit
centres – marginal
cost for every
addition in
revenue is low

A Top Down Breakdown Of A Telco’s Operational Costs
Will Help Determine Prioritisation
Typical Telco Opex Breakdown
25%-30%

• Interconnection fees, taxes, CPE etc.
• Limited control over these

25%-30%

• HR, IT, Finance, procurement and other back-office activities.
• Reasonable potential for savings exist

50%-55%

Billing 7% 12%
Customer
Service 10% 15%

Network
Infrastructure
40%-45%

Opex Breakdown
Sales 20% 25%

Non-Process Opex
Support Process Opex
Operational Process Opex

Quick wins

Source: Deloitte, Insight analysis

8



Network Ops
& Design 18%
- 23%

Strategic long term wins

Cost Reduction Can Be Achieved Across Several Areas,
But A Right Balance In Prioritisation Is Important
Illustrative Cost Reduction Levers

• Lower cost of servicing a customer
• Lower acquisition costs

Network
Operations

IT
Platform
s

HR
Fleet,
Facilitie
s..

• 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)

9



Two Approaches Possible For The Role Of IT As
Business Enabler To Achieve Margin Maximisation
Business capability gaps
determines IT Options

Assess top cost
buckets for the
business as a
whole

Prioritise them
against strategic
goals to achieve

IT Options
available to
address them

CURRENT
STATE
Identify IT budget
constraints and
platform
rationalisation
needs

10

Map it against
appropriate new
business demand


Business & IT
roadmap to
achieving wins

Prioritisation and IT roadmap with a
balance between Business buy-in
different projects
IT capabilities restrict business
capabilities to address


Joint
Execution

Joint
Execution

END
STATE

Illustrative: Picking The Order to Cash Area For
Approach To Execution
CUSTOMER

OPERATIONS

Marketing

Product Conception

Fulfillment & Billing

Sales

Extended Revenue Chain Development

Field Service Management

Service

Order to cash
process

PRODUCT

Product Delivery

Network
Management

Business Intelligence
Strategic Enterprise Management
MANAGE & CONTROL

Financial Performance Management
Human Resource Management
Infrastructure Management
Business Process Management

TECHNOLOGY
Architecture Management
Information Management
Source: Insight communications industry component framework

11



Streamlining Order to Cash Processes Requires Several
Key Capabilities
Order to Cash Process
Multichannels

Order Capture

Provision

Validate &
Enable

Activate

Invoice

Collect

Customer

Customer Management

Billing

Order Capture

Channel Mgmt

Order Delivery

Key Capabilities
Superior Customer Experience (CRM)
Explor
e

Buy

Conn
ect
Pay

Use
Get
Help

Move
Chan
ge

Rene
w/
Term

Product Design & Delivery
Design of Offer
Delivery of Offer
CRM

Delivery role of IT as an enabler to business

12



Billing

Product Fulfillment Provisioning

Activation

Inventory
SDP

Customer Management

Each Capability Area Will Target Operational
Improvements That Will Drive Cost Benefits For PT
Sample Target Operational KPIs

Enabling Capabilities

• Unique 360 degree view of customer
• Multi-channel capabilities

Average call
handling time

• Harmonized , integrated and
simplified customer processes
cross-channels

• Robust proactive retention and win
back capabilities

• Flexible loyalty program measure
across products/offers

Best Practice


staff

• Improved customer intimacy

?

• Reduced customer churn

2
Number of
applications in
call centers

• Improved Productivity of call center
• Reduced cost of order management

1

integrated with CRM


?

Number of Order
Capture systems

• Customer scoring and profiling is

13

6.1 minutes

Potential Benefits

?

• Increased cross-sell rate
• Reduced Opex

PT - Today

Channel Mgmt

Each Capability Area Will Target Operational
Improvements That Will Drive Cost Benefits For
PT
Enabling Capabilities
• Point of service (POS) system with high
reliability, performance and usability.

Sample Target Operational KPIs
50%

Online sales vs
Total Sales

• 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

14


Self service
account
management
% of transactions
over number of
online visits
Best Practice


• Improved customer experience
• Increased revenue through better

?

• Integrated POS and CRM systems

Potential Benefits

15% - 30%
?

targeting

• Increase in margins through deflecting
customers through cheaper channels

30%
?

PT - Today

• Improved customer retention

Key Considerations To Bear In Mind While Addressing
Margin Maximisation Initiatives
• Joint business & IT exec sponsorship to support strategic transformation activities
Sponsor

• Business Process and IT platform should be simplified to cater to future needs
Simplify

• Avoid hesitation to change status quo processes
• Business focussed approach to streamlining processes – define success metrics
Streamline

• Manage cultural drivers effectively and manage change through proper communication
and accountability
People

• Resilient and scalable support infrastructure to enable convergence around commercial
as well as network functions
Infrastructure

15



From An Oracle Perspective We Can Help Address
Issues Across The Telco Stack
End-to-End Stack

Potential Value

Customers

A

Customer Experience (Sales, Marketing,
Service, Social etc)

Lower total cost of ownership

Integration

B

Back Office

Designed based on industry recognised
standards

Billing & Revenue Mgmt
Service Delivery & Fulfilment
C
Customer Master
Technical Infrastructure (hardware,
Processing, Virtualisation, OS etc)
Networks

16



Vastly improved centralised control over
efficiencies

Oracle Insight Welcomes The Opportunity To Discuss
With You Options In Detail And Provide Our Support
Oracle Insight
Composition

Value
Analysis

Industry
Experience

Solution
Knowledge

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
17



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Oracle Approach for Telecom Challenges

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