Strategic sourcing without losing control

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.