Big-picture analysis highlights importance of strategic balance

The TM Forum's Business Benchmarking group and analyst firm OSS Observer released the first of a series of industry updates this week that complement and make more consumable the forum's in-depth industry benchmarking study reports. The update report also provides additional analysis and makes recommendations on investing in next-generation technologies and capabilities.

The report paints a sobering picture of global telecom market dynamics that includes PSTN revenue being cut in half over the next four years and the boom days of the 1990s disappearing in the rearview mirror. The report is sobering not because the market looks grim -- it doesn't -- but because the challenges for communications service providers are both daunting and risky.

Global revenue growth will be 6% through 2001, according to OSS Observer. That's twice as fast as it has grown historically for North American and Western European providers. However, much of that growth is being driven by double-digit rates of growth in Russia, China, India, Indonesia, the Middle East and Africa and Latin America -- basically everywhere but here.

And the global mobile market is even more promising with a 26% subscriber growth rate last year that propelled the number of users to 2.5 billion. Global revenue grew by 18% to $712 billion, but again, not in the established markets. There it was 14%. However, subscriber growth could come to a standstill soon unless operators are willing to drive it at the cost of, in turn, driving average revenue per user through the floor.

To drive revenue with new services, service providers will have to continue to invest in new service delivery capabilities and also continue to drive automation throughout the business.

The study focuses on five "balance points" -- areas identified through benchmarking, which service providers need to weigh their investment options carefully. These points are (1) operational spending vs. customer loss; (2) prepaid vs. postpaid (surprisingly, there is no difference in retention for the two payment methods); (3) retaining and acquiring customers; (4) service availability vs. profitability; and (5) timing, commitments and profitability.

"This work is a wonderful example of what the TM Forum is for, which is to help the industry be as successful as possible," said Tonia Graham, program manager for the TM Forum Business Benchmarking Program and co-author of the report along with OSS Observer's Larry Goldman. "It is one thing to say we are dedicated to supporting the membership through this critical time as the industry transforms; it is another to belly up to the bar and give them something they can use."

Graham said that if service providers are going to stay in business and thrive, the decisions they make today will have a very high impact on their future. And the takeaway from this study is how important it will be to maintain a balance, she said.

The balance will be between investing in infrastructure that gets you where you will need to be in the future or in services and capabilities that customers value. "Some service providers have chosen to attain high service availability, which they will need in the future, but which the customer may not value right now," Graham said. "There are so many trade-offs. It's great to be goal-oriented and reach six-nines availability, but meanwhile some other part of your business has gone in the tank."

The report is an attempt to make sense of all the metrics the forum collects in its major study to help service providers make these tough decisions. Take, for example, customer care. Many company leaders believe the way to success is through gold-level customer service for everybody all the time. Not so, according to the report. Comparing the customer loss rate, for example, between operators with best-in-class performance in this area for both prepay and post-paid services, it is very difficult to significantly improve. "It may be best to put your effort and investment into other improvements," the report said.

This is an example of the benefits for operators that participate in the program and are able to compare their performance to other operators. If you are already among the best in a category, you can look to other categories where you may not be the best and invest there.

While revenue growth hovers at 6%, the report said there are pockets of higher growth opportunity in residential broadband and business services. The key to taking advantage of these opportunities lies in process automation, because it both keeps the lid on operational costs and speeds up the delivery of new services.

The bottom line is: "Make sure your customers want the things you think they do. If they don't, you'd better be spending the money elsewhere," the report said.