Keeping track of profits and margins in the new service-led economy

Telecoms.com periodically invites expert third-party contributors to submit analysis on a key topic affecting the telco industry. In this article David Blumhorst, Vice President of Solutions and Services at Changepoint, looks at the change of the telecoms sector from a hardware and bandwidth provider-led to a service-led industry, and what considerations CSPs need to take into account to keep effectively deliver service in these new market conditions.  

Communications Service Providers (CSPs) have a long heritage in delivering IT solutions in the most complex environments in the world. The network infrastructure is the bedrock that business operates across, connecting the globe through voice and data services. It is no surprise, therefore, that many operators have started to use their unique expertise and position as the global highway to deliver more complex IT services and act as a Systems Integrator (SI) to customers.

However, transforming into an SI comes with its own set of challenges. Delivering IT services is not the same as delivering voice and data services. CSPs are no longer selling bandwidth and cables, they are selling people and time; requiring a whole new approach and a new business model.

CSPs looking to deliver professional services need to ensure they have the right people, in the right job, at the right time. Added to this, they must have a firm grip on costs and margins in order to correctly price services and ensure profitability. To do this, they need access to accurate data that ensures they can track all the moving parts of their professional services offerings. This need is the driving force behind why Professional Services Automation (PSA) is becoming such a significant tool for today’s CSPs.

The core pillars of successful service delivery

The shift from CSP to IT service provider has been happening over a number of years, but telcos are still fairly new players in the IT services game coming up against established SIs, such as Accenture. Yet telcos are in a very strong and unique position; they have access to customers they are already delivering services to and the ability to package up solutions that other providers can’t.

In any services business, the pressure is also always on to shorten order-to-cash cycles, maximise billings and very tightly manage service projects to achieve high margins and monitor profit and loss. When working with existing customers, CSPs need to be careful to get these factors right first time or they could potentially damage existing revenue streams. There are three key areas that CSPs should be mindful of when setting up a services business:

  • Understanding cost and profit: When selling IT services, most costs are wrapped up in people and time; if a job takes longer, then it costs more to deliver. Yet many organisations are still trying to manage all these variables on outdated spreadsheets, limiting visibility and making it impossible to gain a clear view of how much a service is actually costing to deliver.
  • Setting achievable Service Level Agreements (SLAs): In order to set these SLAs, service providers need to have a clear understanding of what is achievable and in what timeframes. However, if CSPs are delivering a new service, they will not have a set of benchmarks to measure against.  This means SLAs are often just a ‘finger in the air’ estimation, which can lead to over-promising and under-delivering.
  • Resource management:  As with any IT project, things crop up and create delays: one small hiccup can reverberate and have a knock on effect across the services division resulting in frustrated customers, broken SLAs, and higher cost to the business. If you’re managing a global team, flying specialists to different corners of the world, then it can be very difficult to see the wider impact of such disruptions.

Automation: The secret to service success

Instead of relying on instantly out-of-date spreadsheets that are siloed by team and country, CSPs need to have a real-time view of the business environment across territories, time-zones and teams; ensuring the right skills and assets are deployed in the right place, at the right time. CSPs need tools that can monitor a widely distributed pool of resources – both human and otherwise – as well as tracking the financial health of a project; this will help them take action where needed to avoid over-spend and project delays.

By embedding business analytics into processes, CSPs can deliver a consistent and reliable data flow back to the business; allowing for invaluable in-depth financial reporting. Capturing data from across the entire business ecosystem, including the complete customer lifecycle from sale to services delivery to invoicing, will satisfy that need for visibility.

Also, by putting parameters in place and enforcing common business rules, CSPs can set meaningful SLAs. Accurate, real-time monitoring gives CSPs the ability to set Key Performance Indicators (KPIs), which help to quantify and measure business processes, vastly improving overall efficiency and lowering costs. For example, by creating a scalable and repeatable process that can be widely replicated, CSPs can improve the overall efficiency and profitability of their operations.

Business transformation without the risk

Business transformation is never easy, but it can be made much simpler through improved alignment with technology and automation of business processes. CSPs that are able to easily track and deliver an efficient, financially healthy services division will have more time to devote to strategic business needs, instead of spending time ‘fire-fighting’ problems that crop up unseen. As such, CSPs can be sure that they are getting things right first time and benefiting from greater margins and happier customers – a win-win for all!

Dave Blumhorst HeadshotDavid Blumhorst joined Changepoint in December 2009 and his Solutions and Services team is focused on enabling successful business outcomes for customers using Changepoint’s Daptiv PPM toolset. Prior to joining Changepoint, David ran EffectiveIT Group, a Changepoint partner and process consulting firm, that delivered implementation services to Fortune 1000 clients such as Carlyle Group, Beam Global, and Aegon USA. David is a seasoned executive who has run IT, professional services, and finance departments. He has served as a controller and CFO for small to mid-sized companies, served as CIO at mid-sized companies such as Clarent, and was the senior director of the IT-PMO at PeopleSoft. Throughout his 30+ year career he has always found innovative ways to use technology to create business value.

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