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Wednesday, February 23, 2005

Telcos : Time To Automate Services

The telecom sector is one of the most exciting sectors to watch - partly because this changes so much and so visiby - very rarely, we see technology changing so dramatically as in telecom affecting so huge a population. we recently covered in this blog, Bweek perpectiveThe old phone companies are artifacts, and the new telecoms will look more like their counterparts in cable and computers Consumers and business will increasingly have their pick of new services from a bunch of providers that are fighting hard to win their business.But as that era fades,another is dawning. "This is the end of World War I - the Bells vs. AT&T and MCI,Now, World War II, among the phone, cable, and tech companies",is about to begin, as quoted therein.
Mckinsey quarterly has come with an impressive article, on the need for telcos to embrace automated self services. Excerpts with edits and my comments added:

In 2003, one major airline saved $200 million by selling more than half of its tickets over the Web, which for airlines is 90 percent cheaper than phones. Amazon.com has built a business model based on its customers' willingness to buy goods and to ask—and receive answers to—most service questions online. Surveys show customers prefer the convenience of Internet banking, e-retailing, wireless brokerage transactions, and online government license renewals. Telecom sector's pricing and margins have been under great pressure for a decade, while revenues for traditional voice services are expected to decline further amid intensifying competition between telcos and cable companies. Some telcos will need to cut as much as 20 or 30 percent of their current operating costs over the next four years to stay competitive. They can achieve up to 50 percent of the savings by e-enabling their sales and service functions.

Telcos who play a key role in e-enabling companies in other sectors have on the whole been slow to e-enable their sales and service. Most telcos have Web sites but don't leverage them aggressively; only a few have started to streamline and automate their back-office processes. A number of organizational impediments have slowed down progress in this area. Some telecom executives resist change because they still think that automated sales channels won't generate as much revenue as traditional labor-intensive ones do. Difficult organizational changes are needed because the costs and the benefits of e-enablement accrue to different parts of a company.Customers complain that they can't get full information without phoning a call center or visiting a retail outlet resulting in only about 10 percent of this sector's sales and service traffic going online in contrast to , consumers buying 30 percent of all airline tickets through this channel. For many telcos, customer calls trigger 85 percent of all incremental revenues. Whether the call is about a bill, service to a new address, a complaint, or an inquiry about new services, it becomes a sales opening; the call-center employee takes the opportunity to sell additional services, such as wireless, DSL, and even, in some cases, satellite television. One out of four calls leads to increased revenue for the company.
Telco executives know what some banks have achieved by automating up to 75 percent of all service transactions and simultaneously raising customer satisfaction. Yet they fear tinkering with the sector's lifeline—the direct call—despite knowing that it is an expensive way to sell. A typical call-center transaction costs $8 to $10; the same transaction online costs $0.15 to $0.80. Printed bills cost four times as much as e-bills, and customers can be served online 24 hours a day without significant additional costs. E-enabling sales and service involves comparatively small investments for companies that typically spend $1 billion or so each year on IT.But returns can be quite high – some , 300 percent in certain sectors. Organizational and managerial obstacles come in the way - only a committed and able executive can help a company overcome them. Given the complexities involved no single person can push these mega e-enablement initiatives, given the involvement of different functions: call centers, the network, billing centers, the Web site – this becomes the direct CIO leadership responsibility.
Telcos – both landline and wirelss all over the world can no longer afford a business model where customers pick up the telephone and talk with call-center sales and service staffs using old and inefficient systems. Customers dislike the slow, confusing, labor-intensive processes put in place in telecom companies. Telecommunications companies soon won't have the margins to support the current inefficiencies, in any case. To reduce costs and simultaneously improve service, these companies must persuade their customers to move to far more cost-efficient automated channels—the Web, automated telephone systems, or wireless transactions—and streamline their internal sales and support operations.

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