Telecom Asia: Why are some operators opting to outsource their entire billing-related services while many others maintain these in-house?
Abhay Kumar: Operators today are facing increased competition in every market, pressure on ARPU and a need to cut costs. They also have to differentiate themselves from their competitors and roll out new services very quickly.
In this environment, operators need to put a stronger focus on the business and pay more attention to setting their business strategies. It therefore makes sense for an operator to bring in a strategic partner to manage their people, processes and systems, enabling the operator to grow their business.
Indeed, many operators are facing increasing cost and resource constraints. They want to devote their resources and opex/capex investments to more business and growth-focused activities such as branding, product development, sales and marketing, and customer experience as opposed to IT management or billing-related infrastructure, applications and back-office processes.
On top of this, operators recognize that an experienced managed services provider can achieve operational and business benefits that are difficult to achieve in-house thanks to the managed services provider’s deep domain expertise, global delivery model, best practices, tools and methodologies.
Outsourcing, or what we call strategic sourcing, provides significant cost savings, typically between 20-30% in opex reduction, as well as cost predictability over the length of the agreement. In many cases, operators can take the opex savings from the first years to “fund” billing transformation and/or modernization initiatives in later years. In many deals, the billing-related infrastructure is transferred to the managed services partner, which removes additional costs related to hosting and maintenance.
However, some operators see billing as a “core” function, and believe they need to maintain control of the end-to-end billing environments, operations and processes, even if this requires significant opex/capex investments on their part to maintain, improve or scale their billing operations.
What are the main benefits and challenges operators face in moving in this direction?
The benefits of moving to strategic sourcing are clear: it provides operators with an improved business focus, reduces their costs and ensures cost predictability over the course of the agreement.
The managed services provider’s domain expertise also provides operators with improved quality and service levels, improved business KPIs such as reduced care calls/tickets, access to billing domain expertise and, very importantly, reduced risk. A managed services provider also means that the operator has a single, accountable focal point for all billing-related issues.
Moving to a managed services model does involve challenges. There is often internal IT resistance to such a step (“we can do it better in-house”), while managing transition activities such as knowledge transfer is not always simple. There is also the risk of disruptions to the ongoing business that has to be minimized. Operators need to take into account regulatory or cultural implications of outsourcing in terms of possible off-shoring restrictions, employee transfers and so on.
What is telcos’ major objection and how do you counter this?
When an operator considers strategic sourcing, they want to ensure they can minimize the impact to their employees and disruption to customers. They also don’t want to lose control or visibility into their billing operations.
To adress these concerns, at Amdocs we have a formal transition methodology that includes considerations for employee training and potential re-badging. To ensure adequate knowledge transfer, so as to avoid disruption to customers, there is a period of “shadowing” in which our team shadows the operator, and then “reverse-shadowing” in which we’re accountable for operational tasks and the operator shadows us to make sure it is performed correctly. Only then, is there a full transition of responsibility to the Amdocs strategic sourcing team.
We also provide the necessary tools and reporting/dashboard mechanisms to provide real-time, daily, weekly, or monthly visibility into the “health” of the managed environments, applications, and processes – in addition to current vs. target service levels. We also work with the operator to define and implement a joint governance model to resolve any escalations and issues related to operations and to set periodic reviews of ongoing business objectives and associated SLAs.
Is there one path to moving these services to a third party or are there a number of options for operators to take?
It depends. In most cases, a phased approach is preferred to allow adequate time for transition activities. But if we’re talking about a “greenfield” operator launching a new line of business (e.g. Wimax operator in India), then a “big-bang” path could be considered, since end-user disruption is minimal.
What is the significance of your recently announced extension of managed services contracts with two operators in North America?
The AT&T and Bell Canada contract extensions reinforce how service providers can achieve significant operational and business benefits by transitioning infrastructure management, application management, and business process operations to Amdocs.
We leverage nearly 30 years of experience in the communication industry and apply our lessons learned/best practices from other global managed services engagements (and product implementations) to continuously look for opportunities to generate ongoing cost efficiencies and operational improvements for our customers.
In addition, these extensions reinforce Amdocs’ support and commitment for both Amdocs and non-Amdocs environments (legacy or third-party applications).
Amdocs is strong in Europe and the US, what are your plans in Asia to gain momentum in managed services?
We are actively working to promote the Amdocs managed services value proposition and service offerings across the region, leveraging our experience and expertise as well as our strong local APAC presence.
Amdocs is investing strongly in the Asia-Pacific region, which is a strong focus for growth for our Global Strategic Sourcing business. Amdocs operates nine development centers in Asia Pacific and serves more than 40 customers across 17 Asian countries. Additionally, more than a third of our employees globally are based in the Asia-Pacific region. We are also setting up operation centers to support our managed services customers in the region.
In fact, we’re holding our second annual InTouch APAC business forum in Singapore on June 17th, where we will present additional insights and direction regarding our managed services vision and support for the region.