In the past, change has occurred at varying speeds across industries, businesses and the economy at large. ‘Innovations’ have typically emerged around the evolution of technology or the creation of new or different ways of doing things. However, the proliferation of technology today has produced innovation around the world at unprecedented levels.

The telecom industry is going through an unprecedented transformation globally. Until recently, voice telephony was the major resource in demand, with voice traffic dominating the load on the network. However, the growth of the Internet has caused a shift to where more data than voice traffic is being transmitted on the network.

Data continues to grow at an exponential rate, which is causing a dilemma for the existing telecom service providers, since voice still generates over 80 percent of the revenue. New enhanced services are needed to bridge the gap between voice and data.

The telecommunications industry in India has grown in four phases over the past few decades. Each of these phases has had its footprint on the businesses. The 1990s saw the end of the regulated environment in India. Passing through the deregulation and technology phases, we now are inexorably moving towards the customer phase (refer to the chart below).

Let’s look at some of the priorities and challenges that the domestic service providers would face over the next few years.

The Indian telecom services market is set to go through breakneck changes in the year 2002-03, perhaps as much as it has in the last few years put together. The advent of new service providers in the basic telephony industry spectrum, radical rationalization of ILD and DLD tariffs, and the entry of the fourth GSM-based cellular operator, are individual moves of very large magnitude. This coupled with the technological enhancements and market outlook for data growth rates will lead these service providers to a challenging future environment. This further accelerates the shift to the ‘customer’ phase.

The transition from a regulated environment has been paved by technological innovation. The revolutionary GSM networks brought in by the operators made a significant departure from the public sector driven past and attracted customers to the new GSM technology. With the advent of deregulation in India, the additional GSM operators and potentially more WiLL-based mobile operators would make the ownership of the customer relationship vital to the enterprise. It is only now that issues of overcapacity and competition are surfacing.

The current trends in the telecom industry make this a dynamic and competitive marketplace, creating opportunities for new players to compete directly with the incumbents. The key trends that affect the telecom industry include:

• Significant price reductions in wireline and wireless voice services
• Advances in wireless and Internet technologies
• Growing need for data network services because of increasing Internet access and corporate intranet usage
• Addition of high-speed access to the last mile
• Changing regulatory environment

Considering these trends, chief executive officers in the telecom industry must address several fundamental issues to succeed in this rapidly changing industry.

We see three key imperatives for telecom companies:

1. The need to identify, acquire, and retain, the most profitable customers

2. Reduce costs and improve service

3. ffer value-added services

Service Profitable Customers
Telecom service providers must enable high quality; high value services—and new services—at all touch points. Otherwise, the margins are at serious risk. They must change how they position themselves: not only in what they do, but in what they offer, and who their customers are. They need to focus on customer relationships, provide new value propositions, and assure customers that their offerings are of high quality.

The ability to leverage customer information to cross-sell and up-sell is one of the key competitive advantages of the future telco.

Cut Costs and Improve Service
Cutting costs is fairly ‘easy’ – as many CEO’s would agree – as much as half of them may be unproductive. The only trouble is in identifying which half?

There are several approaches to cutting costs and improving service. Often legacy information architecture can be the reason for the increased costs, since application maintenance costs and costs of special requests that have not been coded into the system can increase total costs to an intolerable level.

Improving service quality by allowing customer self-service through more efficient use of automated tools is one such example that service providers are using to monitor costs.

A delay in understanding the requirements of a high-value customer which leads to churn creates a loss equivalent to the lifetime value of the customer to the enterprise.

An alternative solution to improving service, while at the same time keeping costs in check could be strategic outsourcing. Strategic outsourcing is a concept where the entire technology overheads and services are ‘outsourced’ to a technological services provider with defined SLAs and a defined outgo for a specified work.

Offer Value-added Services
Offering value-added services is tremendously profitable for the new telecom service providers. The new players are not burdened with legacy systems based on circuit-switched technology and the task of integrating new network technology into the current infrastructure. They can focus on implementing telecommunications equipment that supports the convergence of voice and data.

The idea is to get new services to the market faster, introduce new services easier, and improve the quality-of-services provided. The need is for open standards based scalable architecture, which delivers revenue-generating services and integrates with the existing service provider environment. This can enable faster introduction of new, easily incorporated products, services and support capabilities with minimal incremental headcount.

In an environment that is mushrooming with takeovers, mergers and acquisitions, it is vital that the service providers are able to integrate complicated business systems with each other and be able to provide the same level of value-added services to all customers.