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  • A Weekend Warrior’s Guide to Capex Reduction

    A Weekend Warrior’s Guide to Capex Reduction

    As a recreational athlete, I’m by default a numbers guy.  Being a wee bit past my prime competitive years, those numbers don’t look quite as good as they used to.  For example, I know that my rate of decline in a 10K running race is approximately 4 seconds slower per klick per year.  This motivates me to become more efficient.  With my training.  With my nutrition.  With my body mechanics.  I want to get as much from my aging athlete’s body as I can!

    You’ve probably guessed where I’m going with this.  Operators universally strive to “sweat” as much from their networks as possible.  Consider a key metric found in many operator financial statements: Capex-to-Sales ratio.   It’s an indicator of how efficient an operator is at translating network investments (approximately 80% of overall Capex) into revenue.   From my reviews of operator financials, I typically see this number in the 13-20% range, with a mean of ~15%.  Compare this to Retail (4%), Transportation (8%) and Pharma (6%).   The Communications sector leads the pack.

    Sure, we all know that Telecom is Capex-intensive.  This just puts a number on it.   But there are further pressures on operator balance sheets.  Most operators cannot maintain the required investments in their networks with cash from operations alone (as evidenced by declining EBITDA margins), so they pile on debt.  This becomes a vicious cycle.  Proceeds from bond sales yield more working capital,  but debt service requires free cash.   What’s the best way for an operator to increase free cash flow in the business?  Reduce Capex!  And around and around we go.

    Hence it becomes imperative for operators to seek innovative ways to address seemingly contradictory goals  – reducing their Capex burden, while supporting increased bandwidth demands and new product/service rollouts.   For this I advocate turning to the numbers.  For example, do you have a metrics-driven understanding of:

    • Your asset utilization rate?
    • Which deployed assets have not carried traffic in the past 60 days?
    • Mean time from asset purchase to revenue contribution?
    • Sparing levels vs. industry best practices?
    • Detailed asset movement history for assets in your mobility RAN?
    • % alignment between your fixed asset register or ERP and your network?

    An asset assurance program addresses these questions and many others to drive measurable improvements in Capex efficiency.  One final point—there is change looming on the horizon in the form of large scale network transformation programs.  These programs are only accelerating Capex pressures on operators.  I will explore this topic in my next post.  Right now I’ve got my running shoes laced-up and I’m headed out the door.  I’ve got to get my numbers back on track!

  • Managed Services – An important weapon in a telco’s arsenal for BSS business optimisation

    Managed Services – An important weapon in a telco’s arsenal for BSS business optimisation

    While pressures on cost and margins with traditional services remain, fast emerging services are bringing in new risks and demands for new skills to manage them. Telcos are now looking for Managed Services engagements as a key differentiator in the emerging world.

    Telco’s are at the cross roads today – on one side they are pushing boundaries in a saturated and commoditized market to garner revenues and improve margins, whilst on the other they are pressurised to innovate and cater to the demands of the ubiquitous connectivity and data enabled services. Telco’s do not have a choice, but to act, to remain relevant in the market place with the changing landscape, new challenges and competition. With telco’s looking inwards for business optimisation – focusing primarily on the profitability of the business and monitoring the operational state of the business – what are the key trends shaping the industry and opportunity landscape ?

    Opportunities to remain relevant and successful in the new world order are plenty. Some of the initiatives are fairly quick to implement, while others require long term dedication and focus. Let us look at 3 key areas of opportunities in BSS for any telco.

    • OpEx control – Improving margins: The immediate and short-term opportunity for telcos is to control OpEx and improve margins on an already stressed traditional revenue streams. However, how do operators overcome the challenges facing them at two different levels – (a) skills upgrade (b) shortage of talented resources internally, and start improving their margins?
    • CapEx control – Improving RoIC: In the medium term, telcos are going to invest heavily in new and emerging technologies. The common conundrum corporate heads face are related to (a) successfully managing risks that comes with anything new (b) utilising the available critical capacity of technology & resources (c) responding timely & appropriately to market in face of competition and consumer expectations. How does Managed services help in providing the necessary capabilities to improve RoIC?
    • Economy of scale – Fuel growth: In the medium-longer term, telco leaders are going to look beyond their operating boundaries ; Industry consolidation, overseas M&A, new sources of revenue like PaaS/IaaS/SaaS for MVNOs or group op-co’s will be a key ingredient to the revenue growth. Is Managed services a viable solution to manage strategic and compliance risks?

    Click here and download our latest newsletter in collaboration with Gartner for answers to the critical questions facing the industry leaders.

  • Preserving Capex and Improving Network Efficiency – Can both go hand-in-hand?

    Preserving Capex and Improving Network Efficiency – Can both go hand-in-hand?

    As one of the largest capital line items in every telecom operator’s budget, Network Capex continues to drive large numbers every year since network augments and migrations to newer technologies are unavoidable budget items. Today operators are spending huge sums of money on new network infrastructure for advanced telecom services like LTE / 4G, IPX, etc. without adequate visibility on revenue growth. A recent survey points out 20% of the assets fail to return cost of capital and 5-15% of these network assets are ‘stranded’.

    Hence, effective capital expenditure and network asset lifecycle management are rapidly becoming a big boardroom issue for telecoms operators. This is only possible when all functions work together to maximize the returns from their investments. Both the CFO’s and the CTO’s teams in a telecoms operator should have a holistic and collaborative view on the network asset investment.

    The urgent need is to have a strategic approach to asset assurance program which manages and reduces network capex substantially. ROC Asset Assurance is different from ERP services because of its workflow and analytics elements. It can initiate workflow to ensure that all the applicable assets are procured and deployed when needed. ROC Asset Assurance helps the CFO & CTO function within the operator company to tackle the following pain-points:

    • Planning of capital spend vs budget
    • Tracking deployed assets and ROI on those assets
    • What to buy, when to buy, where to buy, and for what reason?
    • Information related to assets
    • Ensuring usage of all available assets at the utmost efficiency
    • Network resource capacity and the need to respond

    To learn how an effective asset assurance program will provide complete confidence to operators that their network will grow to meet market demands while also guaranteeing optimal value for every dollar of capital budget spent, download our newsletter: Asset Assurance –  Preserving Capex While Improving Network Efficiency featuring research from leading Analyst firm Gartner.

  • BSS/OSS Transformation – An Assailable Phase for Telcos

    BSS/OSS Transformation – An Assailable Phase for Telcos

    “Rapid” is an understatement to describe the pace at which the telecommunications industry is evolving. A vicious circle formed between the advancement of hardware capabilities and services offered to utilize these capabilities is probably what is causing this constant evolution. With such augmentation in the services offered, migrating to next-generation operations and billing systems is inevitable to operators. While the change is definitely a thumbs-up for telcos, the flip side is the challenges inherent to the transition phase itself.
    Consider an expert chef in a successful restaurant offering a variety of dishes to customers. Quite obviously, his menu changes periodically to ensure that he caters to the constantly changing customers’ taste. While a changing menu keeps the restaurant and the chef in good business, it also brings in a big risk of cooking something unsavory in the process of creating something new. Though the chef is dexterous at what he does, it would always be a possibility that he would add that extra pinch of salt or sugar while trying out a new dish. Does this mean that the chef is not competent enough? Or should it stop the chef and the restaurant from offering newer dishes? The answer is “No”. It only goes to indicate that the transformation phase is highly vulnerable and needs to be dealt with extra caution to ensure continued success in the business.
    Equating the above analogy to the telecom sector, one would understand that the chef is the telco and the new dishes are the variety of services offered to customers. The extra pinch of salt/sugar that we spoke about is the possible leakage or frauds that can hit telcos during the phase of BSS/OSS transformation.
    A recent survey by KPMG indicates that 49% of the teclos undergoing transformation projects saw a significant increase in revenue leakage and threat of fraud while another 45% indicated a partial increase in revenue leakage and threat of fraud. Put together, a whopping 94% of operators have encountered some kind of increase in revenue leakages during the transformation phase.
    Reasons for this vulnerability are quite straight forward. The controls that existed with a set process get disrupted and start to diminish once the transformation begins, thus leaving the operators in a bit of a handicap. Another main reason would be the significant loss of data that is an innate characteristic of transformation projects. This causes blind spots in the revenue chain and keeps telcos in the dark about the leakages occurring. To add to the telcos’ woes, transformation projects are not completed in a day’s work. They may stretch to anywhere between 2-10 years depending upon the size and type of operations.
    All this points to one thing – with the breathtaking speed of change in the telecom sector, telcos have to adapt quickly and decisively or else risk even greater leakage. Revenue Assurance processes need “greater than ever” emphasis during the transformation phase. After all, no one likes extra salt in their dishes; not even a pinch of it.

  • Asset Assurance – Translating Visibility into Capital Savings

    Asset Assurance – Translating Visibility into Capital Savings

    As one of the largest capital line items in every operator’s budget, Network Capital Expense continues to drive large numbers every year.  Re-purposing fixed line and backhaul assets, moving to complete IP backbones, migrations to newer technologies (e.g., LTE), and demanding more throughput from the same asset footprint have all contributed to consistent pressure on capital, regardless of previous years’ growths and efforts.

    Each year, network capital planning and budgeting have repeatedly been baselined on factors that include:

    1. Growth planning and projections
    2. Network maintenance and replacements
    3. Decommissioning and retirement
    4. Previous year expenditures

    Each of these factors contributes valuable intelligence that help planning activities determine and set budget levels, but critical gaps are also created in the process that strand capital indefinitely.  Gaining visibility into the available capital assets, and acting on that knowledge are the primary keys to actually preserving capital, creating peak utilization efficiency, and generating the highest level of free cash flow in the business.  But what aren’t operators doing today?

    The ability to understand what capital is stranded in your network is based on visibility.  ERP systems consistently lack views into deployed assets; similarly, inventory platforms have a good (yet almost always incomplete) view into what is deployed.  What isn’t known are factors around capacity and utilization rates, lost or vacant assets, or status of all “tagged” assets.  This, coupled with a clearly orchestrated and managed retirement and resale process, positions the operator to not only “connect” data from ERP and Network sources, but to also act on that data in a way that is poised to saved the average operator tens of millions of dollars in capital expense and increase free cash, all in the first year of such a program.

    Without the ability to act, no realization of optimization and savings should be expected from any program – this is the difference between mere reporting visibility, and a program to drive the data through a lifecycle that culminates in tremendous operators gains.  This is a unique set of capabilities for any operator, and it forms a program Subex calls ROC Asset Assurance.

  • Introducing ROC Asset Assurance

    Introducing ROC Asset Assurance

    Your network has a story to tell you about wasteful Capex practices which are likely reducing your Return on Capital.   If you are like most Operators, you may not be listening.

    Much of the Telecom Industry’s recent focus has been placed on CEM and related analytics.  Certainly, customer acquisition and retention programs are critical as these drive revenue.   Network augments and migrations to new technologies are an unavoidable “price to pay” and the lion’s share of management’s attention is placed on squeezing as much revenue traffic onto pipes and spectrum as possible.

    Trouble is, EBITDA margins are being squeezed for reasons that I’m sure you are all too familiar with.  Amongst many Operators with whom Subex has spoken recently, there is a growing recognition that network costs must be better managed, but also a frustration that lack of visibility and insights undermine the ability to do so.

    As I said, your network has a story to tell you—in fact, many stories.  What’s more, it will give you critical information that your ERP or Asset Tracking system simply can’t.  Without this information, your ability to optimize Capex throughout the asset lifecycle can be significantly eroded.

    Can you answer:

    Where are my assets?

    ERPs are important for managing vendor relationships, driving supply chain process and tracking warehouse inventory. Once an asset leaves the warehouse, responsibility for tracking and managing the asset typically shifts to technical OSS’s (e.g. Network Inventory).  Data quality within technical OSS’s is notoriously poor.  As a result, assets can become stranded, under-utilized and/or lost.   Consequently, Operators spend Capex that could otherwise be avoided if existing assets were effectively harvested and redeployed.

     

    The Asset Lifecycle and Relative Positioning of ERPs vs. Technical OSS

    When are my assets generating returns?

    A critical capital management objective is minimizing the cash-cash cycle.  This is the interval between paying cash to a vendor, and receiving cash from a customer once an asset becomes productive (i.e. carries revenue traffic).   Each extra day in the cycle increases your cost of capital.  Reducing the cycle requires that you know the answer to:

    • How much time elapsed from the purchase of an asset until deployment in the network?
    • How much time elapsed from deployment of the asset until it became productive?

    Equipped with such time-to-value analytics, finance can better hold Network Operations accountable for any excessively long intervals.  Network Operations also has the actionable information it needs to identify and correct inefficient deployment and service delivery processes.

    Where did my assets go?

    A very common dysfunction is mismanagement of assets once they are decommissioned or retired.  Some assets remain powered but unproductive, contributing to excessive energy costs.  Others simply disappear (whether moved, shelved or pilfered) and are no longer available for re-provisioning or salvage.  A recent PwC survey found that “one half of wireline operators and over one-third of wireless operators indicated that less than 50% of their assets are currently catalogued and managed.”  Network Intelligence enables Operators to track movement of assets in the network and provides an early alert when an asset has been removed and does not reappear elsewhere.

    What assets do I need?

    A critical component of avoiding unnecessary Capex is having accurate and timely Network Intelligence to guide the budgeting, forecasting and planning process.  This is especially important for portions of the network which are most sensitive to traffic growth.  It is essential to monitor resource utilization and equip planners with metrics and trending to ensure assets are purchased when needed, where needed and for the right purpose.

    Introducing ROC Asset Assurance

    Drawing on our industry leadership in Data Integrity Management, Capacity Management, Network Discovery and Analytics, Subex is launching ROC Asset Assurance to harness Network Intelligence throughout the asset lifecycle and do for Asset Assurance what Subex has famously done for Revenue Assurance and other business optimization areas.   Look for more exciting details on ROC Asset Assurance in the days and weeks to come.

  • Subex Tweetup Series 1. Internal Fraud

    Subex Tweetup Series 1. Internal Fraud

    Subex Tweetup Series is a initiative for Subexians to share their knowledge and experience in the field emerging telecom trends and practices through Social Media interactions.

    Today, Mr Rohit Maheshwari (Sr Director Business Consulting APAC) shared interesting insides on Internal Frauds. Internal Fraud has been a key area of concern for telecom operators since long. With the advent of new services like IP Services, Mobile Money and others operators will stand more exposed than ever. Below link contains more information on the conversation with Rohit. Please feel free to comment and add more inputs…

    https://storify.com/ravishpatel/subex-tweetup-internalfraud

    Subex provides holistic revenue assurance coverage in a traditional circuit-switched as well as next generation packet-switched landscape, streamlines integration during a merger, and navigates a technology shift such as Internet of Things (IoT). Our solution meets the revenue assurance needs of mobile and fixed line communications service providers (CSPs), analog data networks, digital data service providers and triple / quad play enterprises. It drives revenue growth by extracting unbilled revenue, leveraging automation to identify revenue leakage, and safeguarding revenue streams from potential losses.

  • What kids can teach about Outsourcing??

    What kids can teach about Outsourcing??

    Let’s deal with the difficult one first – Managed Services and outsourcing is here to stay and grow. So, what does this have to do with kids? Well nothing direct, except that kids can help resolve one of the biggest barriers to outsourcing – asking for HELP!
    One thing I often notice, while meeting some of the prospects, is their reluctance to ask for help. The acknowledgement comes blatantly or subtly – there is a need to improve. The pressure of efficiency, productivity, reducing costs (or justifying with equal or exceeding returns) is mounting up on each one of them.  So, why hesitate to ask for help when there is a need? The top 3 inhibiting reasons are:
    a) Asking for help is considered a sign of weakness/failure
    b) Trust deficiency in the person who offers help
    c) Waiting for someone else to do it, so I cannot go wrong
    There have been many management theories propounding kids’ psychology. Without surprise, it holds well when it comes to breaking these barriers too. Let me explain how, with typical kids’ perspective and how business could go about doing it.
    Asking for help is a sign of weakness/failure

    • Kids view: Why? Why? Why? The ubiquitous question that drives every parent crazy is a Childs’ natural way to learn the world around her and develop cognitive skills. The kid sees it as an opportunity to be inquisitive, seek assistance (from someone who knows), learn something new and expand their horizon. The child doesn’t hesitate to ask for help  in its quest to face the world
    • Business way: Today while businesses appreciate hard work and diligence, they expect efficiency. Asking for help is a sure-fire way to achieve it. Seeking assistance is a fun way to solve a problem together and learn something new

      Trust deficiency

    • Kids view: Kids learn whom to trust and who not, either from the parents or slowly over a period of time
    • Business way: If past experience is something to go with and the trusted partner has delivered before, then entrust them with a new challenge. Else, if you are just starting, then start small, build confidence, before entrusting with bigger responsibilities

     Waiting for someone else to do it

    • Kids view: Walk into a classroom and ask for volunteers to try out something new – you will be amazed to see the numbers of tiny hands go up. Kids yearn for new things
    • Business way: Years of conditioning to be extremely risk averse has led to this state of mind. A well-planned and executed engagement will manage & mitigate the risks. Besides, many businesses have seen success the outsourcing way – there is enough precedence available. Go and get one for your benefit

    After all, kids do continue to teach us a vital lesson or two…

  • Who ate all the pie? The healthy eating approach to M2M

    Who ate all the pie? The healthy eating approach to M2M

    Sitting listening to one of the speakers whilst attending the ‘M2M: Beyond Connectivity’ seminar hosted by European Communications this week, for a moment I was reminded of the classic football chant – “Who ate all the pies?”  The general consensus is that the chant was originated by Sheffield United supporters at the end of the 19th century and aimed at their 140kg goalkeeper.  Not sure he would be playing in the top flight nowadays!!

    So what was it that led me to draw a parallel between an overweight football player and M2M?  In the presentation by Ansgar Schlautmann from Arthur D. Little, an interesting and revealing view of the holistic value chain for smart solutions was given.

    The individual players in the spread of total revenues need not however be concerned by the splits shown; even in fact for the CSPs who see their connectivity portion with a distribution of somewhere between 15-20%.  With the anticipated value of the M2M market projected to reach approximately $86 billion[i] by 2017, even this slice of the pie should be enough to get their teeth into.

    The analogies associated with balanced nutrition and how the industry will ensure that each participant will get its own healthy share can be drawn in a number of ways, so let’s consider them.

    Use by

    If we have to be honest, it’s a good thing that the M2M industry has come to us with a long shelf life.  It’s been a number of years to even get us to this point where we see on the horizon a potential explosion of new product/service offerings being crafted for the market.

    There will always be those people who want to be early adopters and will derive the niche, well crafted packaged service for their market, but surely one of the keys here is to just start thinking M2M in all areas of our lives, we need to start using it, to start realising the potential it can bring to daily routine where in a sense – decisions are made for us.  This isn’t to a Skynet level, albeit the goal there was for speed and efficiency and to reduce human error – even though M2M can bring us that.  To reap the benefits of M2M, we need to build it, we need to use it, when by?  The sooner the better.

    Best before

    Even though we can get excited by cars that will arrange their own services; highway maintenance being done based upon vehicular data relating to potholes; smart cities that will see routine maintenance programmes scrapped for self servicing provisioning and so on – the reality is we are a little way from reaching this best before point.  Now I say best before not in the context of a product/service will expire in it’s usefulness at some point in the future.  I mean with regards to when we will see offerings come to us as consumers that will encapsulate all of the richness that M2M could potentially bring to us.  It is getting closer, advancements are being made in all sectors of the industry, but to reach a best before point – I don’t see that happening until we see wholehearted adoption within the verticals themselves.

    Ingredients

    Having the right ingredients, i.e. providing energy, protein, carbohydrates etc. in the right quantity, quality and packaging in many cases are a key factor when we hit the supermarket or the online grocery sites.  As consumers in this M2M arena, will we be so different?  We want well packaged, well balanced, quality products and services.  As participants in this M2M value chain, the balance will come from the blend of services that can be offered; the partnerships that are built; being able to craft simple, yet wholesome solutions to the consumer flavour of the day.

  • Why do Telcos settle for less?

    Why do Telcos settle for less?

    What makes a Telco settle for less? Is it the budget, fear of survival in a highly competitive market or knowledge and skill issues?

    Bangladesh recently opened up the Interconnect landscape with 21 new ICX and 22 new IGW licensees entering the fray. This, without doubt, has fragmented the entire Interconnect market and has put significant pressure on the incumbents (to fight emerging competition) and for the new telcos (to have a viable business case for break even and eventually survive).

    In a recently concluded InterConnect Conference at Bangladesh hosted by Subex, I had the opportunity to interact with a wide range of audience – CXOs, consultants & IT personnel. While it was acknowledged that a billing system is important to start the operations and convert “usage” to “cash”, it was evident from the discussions, that price was the driving factor in deciding a billing platform and to that end operators were scouting for “low cost” billing systems or looking at developing it in-house. Severe cash-flow issues, as the roll-out along with statutory payments to the regulator for obtaining and maintaining the license, was proving to be very costly. Hence cash-flow and total cost of ownership (TCO) were the main contributing factors to look at a low-cost billing option. The new telcos, in addition, were also exposed to the following risks:

    • Survival : Accurate and prompt billing will be a significant differentiating factor in the highly competitive market
    • Agility : As competition intensifies they need to be flexible to adapt to market needs and offer innovative products and services at the shortest possible time
    • Revenue leakages : Bangladesh as a market is highly prone to fraud and as per the regulator more than 10% of the revenue is lost due to illegal bypass

    So, how are the telcos going to remain agile, competitive and eventually break-even at the shortest possible time? Do they have to settle for less and allow the forces of the market to dictate the future?

    Subex unveiled a cloud offering for the Interconnect operators in the roadshow. It gives the best of both the worlds – low cost and superior technology, and help the telcos be ready for the future. The cloud model mitigates the business risks and provides the following benefits to the ICX and IGW:

    • Low cost of deployment & operations : With a TCO less than 30% of a licensed/in-house model and completely managed by experts, and CapEx requirement lesser by 50-60%
    • Low commitment : Volume based pricing to fit the business needs and scale as the business grows
    • Minimal risks : Easy sign-on and sign-off to the cloud model
    • Ready to launch: Pre-configured application requiring minimal customization (about 20%) to suit telco specific needs
    • Minimal domain knowledge: With service provider completely managing the core activities, knowledge and resource requirements from Telco are minimal. They are already constrained with resources and those can be used for growing their business
    • Flexibility : The cloud model can very easily extend into Revenue assurance, Fraud Management, Analytics for future

    Naturally the excitement was evident when such an option was presented to the telco representatives. The only objection was around security (which was expected) and security is very easily addressable with the right technology and stringent processes.The “best-in-class” solution is available on a “best-in-class” service model which suits the pocket and addresses the business risks. It was time for the operators to go back and “relook” at their business case.

    After all, when they have a great option, why do they have to settle for less?