Increasingly, operators are looking to launch new services for driving revenues while optimizing current systems in order to reduce their cost structure. The need to launch new services has a direct impact on operations and IT infrastructure: As operators need to upgrade their IT systems for supporting an expanded service portfolio. In order to address these growing requirements, operators are launching comprehensive renewal transformation programs that involve a shift from the current bespoke processes to standardized processes supported by packaged solutions and out-of-the-box IT implementations.
The reasons why operators are launching IT renewal programs are as follows:
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Transition to Faster Time-to-market Strategy
Telcos are under constant pressure from fast-moving internet players that are not only threatening their core revenue streams, but are also doing it in a fundamentally different manner. We see this in how telcos have traditionally developed product features. Internet players have perfected an approach where they first release products in beta, and then incrementally and rapidly add product features to it. This approach helps them incorporate user feedback rapidly back into the system. For instance, Google's most popular services, including Gmail and Google Talk, had the beta label for over 5 years; during this time Google made multiple rapid iterations of product features, while still having a strong base product available to consumers. On the other hand, telco product testing and launch typically takes months and product iterations subsequent to launch are usually few. This is changing in recent times. For instance, Telefónica, which acquired social networking site Tuenti in August 2010, rapidly launched a low-cost invitation-only Mobile Virtual Network Operator (MVNO) using the brand by December 2010. The need for a rapid turnaround in terms of launching services is putting increasing pressure on the IT systems.
- Removing Superfluous Costs
Another major challenge for the telecom operators is coping with the rising cost of maintaining the IT systems. In comparison to other sectors, players in the telecom sector already spend a significant amount on information technology (see Figure 1). Estimatedly, global telcos spend on the IT systems has increased from around $71 bn in 2008 to over $86 bn by 2014. Such rising costs of IT are forcing operators to take a closer look at ways and means to control it. Growing costs of operations are forcing operators to look at new models involving infrastructure sharing and network outsourcing. Multiple telcos have also initiated cost-rationalization programs in order to ensure that they use the recent financial slowdown as a good driver for removing superfluous costs.
- Multiple Systems and Platforms: Hinderance to Growth
Over the years, telco IT systems have grown into multiple disparate platforms for a variety of reasons. Most of the major telecom operators have grown to their current market position after a series of mergers and acquisitions. Each such transaction brings with it its own set of existing IT platforms that are rarely integrated back into the parent company's IT systems. Hence this results in an operator running several versions of the same system within the organization. Similarly, many product lines within an operator typically ran in a silo fashion, implementing their own IT systems that rarely integrated seamlessly with other product lines. This also led to a situation where multiple IT systems began to co-exist and were developed independently.
Another problem leading to the fragmented nature of IT systems is the lack of maturity in commercial off-the-shelf solutions (COTS). Traditionally, COTS solutions allowed only a limited amount of customization, which did not permit operators to fully benefit by installing these systems. Moreover, process standardization was a significant challenge for the telecom operators, given the lack of established and accepted industry standards for IT architectures. Such proliferation has resulted in IT systems becoming unwieldy in time.
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