STRATEGY: The Next Leg

As the global telecommunications industry shows encouraging signs of emerging from its long economic winter, the question persists: how to achieve new growth?

A couple of years ago, the answer appeared to be unprecedented investment in wired and wireless infrastructure, to meet huge anticipated market demand. That this demand has yet to fully materialize does not mean those were poor investments; they were only premature.

Most studies show that the No. 1 priority among telecom service providers is to reduce costs and expenses. Indeed, major providers lowered their debt by more than 15 percent in 2002. They persistently improved operational efficiency and cut back assets through process re-engineering, platform consolidation, and outsourcing. 

These measures may help make a business more productive and profitable, but a company’s long-term success depends on sustained growth and market share. So, how can growth be spurred? The answer, as many service providers are discovering, lies in moving up the value chain to become ‘enablers of network-centric applications’.

This means having the ability to respond quickly, with flexibility and at much lower cost, to changing market demands. Nearly every telecom carrier we talk to today faces rapid changes in capital markets, in demand, supply and pricing, or in preferences of customers, employees, and government regulators. 

Telecom carriers long for the ability to respond immediately, with all the resources at their disposal, including those of their suppliers, partners, and distributors. In essence they’re looking to become ‘on-demand’ businesses, with the powerful ability to sense and respond. On-demand is a business model–one that is resilient, variable, responsive, and focused and will drive new levels of productivity.

With an appropriate IT partner, telecom carriers can be uniquely positioned to take advantage of this emerging phase of e-business. Let’s take a look at two real-world examples of how telcos are getting business improvement with open, scalable and flexible solutions. 

In Taiwan, Far EasTone Telecommunications, a joint venture of the Far Eastern Group and AT&T Wireless, uses a delivery environment to introduce new voice, text and fully integrated Internet services faster, more easily and at a lower cost.

FarEasTone has reported encouraging results, saying that the environment has allowed it to go to market with new services 42 percent faster while boosting active services from 150 to more than 700. Service time to market fell from up to 180 days to as few as seven days. 

Orange France, a wireless subsidiary of France Telecom, uses a similar environment to enable more than 400 services on the Orange Portal, including innovative offerings like the movie and info channels, virtual portals for teenagers, support of color wireless application protocol phones and personal digital assistants (PDAs), and Orange Smart eCars service. Customers can access their services via wireless devices, PCs and PDAs, and the content is automatically presented in a format adapted to the customer device.

Another aspect of the on-demand environment is grid computing. Telecom providers can leverage their global network expertise to be both consumers and providers of grid services. Grid protocols will enable new revenue streams like digital-content distribution and dynamic e-hosting services. Such services have features well known to telcos such as distributed processing networks, high reliability, metering, billing and monitoring. Autonomic computing, also an element of the on-demand model, supports grid infrastructure deployment by simplifying and commercializing automation. 

But the creation of on-demand environment is easier said than done. It requires virtualization across disparate systems as also end-to-end business integration. Creating this environment will entail a lot of work, a lot of cooperation, and considerable new invention. It will take the integration not just of technologies, but also of technologies with business insight. It will also require a consistent embracing of open platforms and common standards.

The hard work apart, once telecom carriers take the step towards becoming on-demand, they are going to open up huge new opportunities for themselves. They will be better able to manage their businesses in the face of change and uncertainty, provide better customer service, react more rapidly to changing market conditions, manage risk, outpace their competitors, and achieve clearer returns on investment.

By leveraging the technology to embrace the dynamic needs of their customers, telcos will unleash the value that leads to sustained market growth.

Vivek Gupta, country manager, communications sector, IBM India Limited