Telecoms.com periodically invites expert third parties to share their views on the industry’s most pressing issues. In this piece Akil Chomoko, Chief Marketing Officer at MDS Global, explores what we mean by ‘digital BSS’ and why we should care.
The need to switch to digital methods and systems has been an accepted business and technology mantra for some time. In fact, the switch to digital is now so universally accepted to be ‘the right thing to do’ that it seems to have become unnecessary to even state the business case supporting the changeover.
A recent trend has also seen the “we’ve gone digital” mantra morph into meaning little more than that a business has embraced virtualization and moved some of its networking, technology and storage to the cloud. But to deliver real, long term, business benefits and improved profitability, “going digital” has to be about more than just offloading services to the cloud.
To get to the heart of the matter, we commissioned STL Partners to research and analyse the benefits to operators of introducing a digital BSS solution to serve the Enterprise sector of their customer base. We gave STL a free hand to question the service providers, to dig into the detail of their business models, and to analyse the potential financial impact across a range of practical and operational areas of their business. The result: STL’s research uncovered a potential 34 per cent boost to operator EBIT profits.
At a time when average revenues per account are declining, measures that claim to boost profitability are always going to get attention. But given that implementing any change will involve upfront investment, being able to precisely quantify what that change can achieve and in which areas of service provider operation – as a result identifying and detailing exactly how the profit boost is delivered – serves to really elevate and inform the discussion.
Looking at some basic operational costs, it becomes clear that adopting a digital approach can drive real, measurable, savings in sales and general administration expenses (SG&A), and also in the cost of goods sold (COGS). In particular, STL found that digital systems can enable those savings through automating areas such as service configuration and provision.
Whether dealing directly with an enterprise customer, or via a reseller partner, a digital BSS solution allows service providers to offer automated customer configuration of their services. Automated configuration gives controlled but open access to the system and enables the customer, or the partner, to self-select and personalise the level of service they require.
The system can then configure the service, price it in terms of cost to the operator, quote for it in terms of cost to the customer, and then both supply it and invoice for it without the need for any manual intervention. This is true, zero-touch automated customer provisioning, which STL estimate can contribute to savings in SG&A expenses alone of some 9.1 per cent.
It’s also worth bearing in mind that, in many countries, more than 90 per cent of businesses are SMEs. Tailoring solutions for each enterprise customer would be grossly inefficient and supremely labour intensive and therefore can’t be sensibly offered. Switching to an automated, self-service solution is the only way that providers can deliver this level of flexibility – and that in turn can boost revenues by attracting new customers and partner resellers. STL estimate that on top of the savings achieved, automated service configuration and purchasing can deliver a revenue boost worth a further 2.4 per cent.
But the learnings didn’t stop there. One interesting finding from the research was that 60 per cent of the operators STL spoke to said that real-time billing management would be the element of a digital approach to BSS that would make the biggest impact on their profitability. That was more than three times the number who placed automated service configuration and purchasing in first place. This is partly because – just like switching to digital – real-time billing management has become accepted as the best method to combat churn and reduce demand on customer service operations.
The findings of the detailed analysis were rather different. STL did find that real-time billing management would reduce the cost of the customer service by 6 per cent over three years, and the cost of customer retention by 3.5 per cent over the same period. However, over the same period, STL calculated that automated service configuration and purchasing would more than double those percentage savings on the cost of customer services – up to 13 per cent. And while savings in customer retention costs would be slightly lower, at 2.8 per cent, the cost of customer acquisition would be reduced by as much as 11 per cent.
When all the revenue generation and costs savings in different areas were considered together, the biggest impact on overall operator profitability did not come from real-time billing management as predicted by the service providers – it was quite clearly delivered by automated service configuration, with improved use of customer analytics in second place.
Overall STL concluded that, across the five use cases of digital BSS they analysed, the combined impact on overall operator profitability would be an increase of between 2.7 and 4.1 percentage points over a three-year period. For a typical operator with historic EBIT profits of around 10 per cent, STL’s mid-point, or expected, return of 3.4 per cent would represent an increase of more than 30 per cent in overall profitability.
Importantly, the research serves to increase our own understanding of the areas for operators to target for improvement. It helps to build a proper business case for adopting a fully digital approach to BSS as well as showing a clear path to a return on the investment in both the long and the short term.
Everyone agrees that going digital is undoubtedly “the right thing to do”. Now – and very appropriately in BSS terms – it has the numbers to support the argument.
Akil Chomoko is Chief Marketing Officer at MDS Global. Akil has led product marketing and been a part of management teams in telecoms for almost 20 years, serving the OSS, BSS and CRM sectors. He began his career at Telecom SA (South Africa) as a developer before joining the team at Intec Telecom Systems, where he helped to establish product and commercial leadership for more than 8 years. Based in London in the UK, Akil has extensive experience in market and product strategy, drawing on all aspects of technology, industrial and regulatory evolution. He has an MBA from Imperial College, London.