Telecoms operators today are increasingly interested in exploring the benefits of outsourcing their CRM and billing systems to third party solutions providers.

Cambridge-based research company, Analysys expects the Western European market for outsourcing technology and customer services by telecoms operators to show 6 percent annual growth between 2005 and 2010, rising from EUR5.9 billion to EUR8.0 billion. Our own experience at Cerillion indicates that the appetite of operators to outsource business support systems for customer management, order management and billing, is continuing to increase.

Cerillion’s on-the-show floor survey carried out at the 3GSM World Congress in February this year found that 50 percent of respondents thought operators were more open-minded about outsourced billing than a year before. Just 15 percent said they were less so.

To underline this optimistic mood, major new contracts are regularly reported in the media. In recent times, one of the most notable was the March 2007 announcement by IBM Global Services that it had won a 10-year deal with Indian operator, Idea Cellular. Under the terms of the agreement, IBM is helping to handle services like billing, revenue assurance, credit collection and subscriber management.

A Diverse Market

One of the significant advantages of the managed service approach for CRM and billing systems is that it can bring benefits to a wide range of operators, working on a broad range of projects. An operator undergoing a large-scale business transformation project, for example, may benefit from a managed service approach to ensure it remains competitive and retains the ability to launch new products and services for the duration of that project.

A telco looking to establish itself in an emerging market, may seek to put a managed service into operation during the period where it is focused on bringing new people on board and training them up, before ultimately transitioning to a licensed implementation.

Alternatively, an operator may take a long-term strategic decision not to manage its own CRM and billing systems but to hand that role over to a provider with expertise in the field, leaving the operator itself free to focus on delivering a high quality customer experience.

Putting the Customer First

This emphasis on the customer is important. After all, customers are ultimately the ones paying to allow operators the luxury of owning their own business support systems. It is often overlooked, but arguably the most important single benefit operators can achieve from outsourcing their systems is the cost saving that can be passed onto customers.

When purchasing new systems, operators will typically incur significant upfront capital expenses before they begin to reap benefits from the solution. With a managed service model, the entry barrier is much lower. While the operator will still have operational costs to take into account, those costs will usually be much lower and more predictable than with a traditional fully implemented solution.

There is also a danger that telcos who own their own systems end up focusing more on the technology than they do on their customers. Although the situation has undoubtedly improved in recent years, the telecoms industry still has an unfortunate tendency to concentrate more on system functionality than real business drivers. Too many misguided decisions have been made by IT directors intent on purchasing the latest state-of-the-art systems rather than investing in a planned strategy of business improvement and enhanced customer service provision.

In a competitive market, operators should always put the customer first. While acknowledging that technology is important, Professor Robert East, expert in customer behaviour at Kingston Business School comments: “Customer-facing technology needs to become more sophisticated to deal with recurrent issues more quickly and solve problems more efficiently. Businesses need to focus on technology that actually delivers satisfaction to people".

Reaping the Rewards

But it is not only customers who have to foot the bill for operators indulging in the luxury of managing their own systems. On top of the obvious capex and opex charges, operators may be missing out on a range of other business improvements which the managed service model provides.

One key benefit they could achieve by migrating to a managed service model is the ability to commit their technology provider to a service level agreement (SLA) with agreed turnaround times for implementing new products and incident resolution, for example.

Such contracts formalise the way that billing and CRM systems are run and, by so doing, enable operators to gauge how quickly system changes and additions can be made. In contrast, the IT department within a large telco business will typically have no specific SLAs in place with any other part of the organisation and often no fixed review process either.

Another important benefit of the managed service approach is that it supports improved time to market for new services. This is because the managed service provider, typically with the benefit of extensive experience of a broad range of different customer installations, will usually understand the systems and the processes around those systems much more clearly than the operator does.

Operators working in emerging markets can also benefit by obtaining access to scarce skilled resource directly rather than facing the headache of trying to recruit people locally with the requisite skills. Telco start-ups in all regions can often also benefit in a similar way.

Bright Future in Prospect

The future for outsourcing of CRM and billing systems is looking increasingly positive. As Simon Sherrington, author of a recent Analysys report on outsourcing, points out: “Outsourcing has become an important weapon in a telecoms operator’s strategic arsenal. An effective and well-managed outsourcing scheme can deliver flexibility, reduce time to market for new services, and help to deliver profit growth for shareholders.”

There is also clear evidence that outsourcing can help operators to achieve significant cost savings. However, if today’s operators are to sustain long-term competitive edge and other lasting benefits from their investment in a managed service approach, they need to ensure that they focus, above all, on the customer benefits that outsourcing can bring.

Dominic Smith is the Marketing Director for Cerillion Technologies, a leading provider of carrier grade CRM & Billing, Interconnect and Mediation solutions to fixed, mobile, IP and convergent operators worldwide. He has twelve years experience in the customer care and billing business, previously as marketing director at LHS, and in a variety of roles in Schlumberger and Sema. Dominic has presented on billing topics at various industry conferences. He holds a BSc (Hons) in Industrial Mathematics from Loughborough University, UK. Cerillion Technologies