Improving business results through digital transformation Tm forum live! - June 2015

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Improving business resultsthrough digital transformation

Insights from McKinsey’s Horizon360 Telecom IT Diagnostic

TM Forum Live!

Nice, June 2015

1

A few words about us

www.mckinsey.com www.horizon360.com

[email protected]+351 96659 7900

Duarte Begonha

[email protected]+39 (348) 8952934

Giuliano Caldo

Telecom O&T leader Head of IT Diagnostics

2SOURCE: Horizon360 Telecom IT Diagnostic

Our research is based on the Telecom IT Diagnostic, which has been run at 80 telecom operators globally…

6 participants▪ 2 integrated▪ 4 fixed/cable/satellite

48 participants▪ 26 mobile only▪ 6 fixed/cable/satellite▪ 16 integrated


4 participants▪ 2 integrated▪ 2 fixed/cable/satellite


US and CanadaEurope

Latin America

Middle East / Africa

Asia/Pacific

3

…and covers well beyond IT spendScope of Horizon360 Telecom IT diagnostic

IT Efficiency

IT Capabilities

Voice of theBusiness

IT Effectiveness / Digital

How does my IT spend compare to others?

▪ Quantitative benchmarks of IT spend and FTE across all towers and functions

▪ Includes key efficiency metrics (e.g., server utilization)

How specifically can we improve our performance?

▪ Qualitative survey of the IT organization against a catalog of best practices

How does the business actually see it?

▪ Survey of business users covering business/IT alignment, quality, and performance

Is IT providing adequate value to the business for what we spend?

▪ Sector specific analysis of functionality in critical business domains

▪ Diagnostic of level of digitization (channels, key processes)

SOURCE: Horizon360 Telecom IT Diagnostic

Based on

standards

4

Over time, telcos have been able to increase their IT efficiencyCohort of 7 telecom operators in mature markets; Index: 2008=100


-3.2%

-6.4%

-11.7%

0.5%

85.0

71.7

53.5

0,0

20,0

40,0

60,0

80,0

100,0

120,0

2008 2009 2010 2011 2012 2013 2014

103.0

Number of customers IT spend Revenue Company FTE

CAGR

5

Furthermore, IT has been effective at reducing product time-to-market (TTM)


Cohort of 7 telecom operators in mature markets; Weeks

5

-6%

6,2

4,5

3,0

3,5

4,0

4,5

5,0

5,5

6,0

6,5

2008 2010 2012 2014

Average consumer TTM (weeks)

-11%

8,06,8

4,44,0

9,0

2008 2013 2018

Bundle component change

-6%

7,65,8

5,54,0

9,0

2008 2013 2018

Change in existingtariff

-4%3,9

5,1

3,23,0

5,0

7,0

2008 2013 2018

New tariff

-11%

11,8

6,8 6,65,0

10,0

2008 2013 2018

New bundle

CAGR

6

Investment in IT likely misplaced/ ineffective to enable margin growth

But good IT does not necessarily lead to high profit margins


10 15 20 25 30 35 40

45

50%

15

20

25

10%

40

35

30

ProfitabilityPercent

Functionality scoreIndex

Mobile telecom operators

Measured through a

balanced score of 180

areas of IT functionality,

spanning all of TM Forum’s

TAM application domains

7

Telcos with a high profit margin have high IT effectiveness in selected areas of digitization and analytics

43

21

High margin

players

Low margin

players


Profit margin

Percent

Areas of IT effectiveness most correlated with profit margin

Effective use of customer analytics

Digitization of order management

Digitization of CRM

Streamlining of IT architecture

Automation/ streamlining of IT infrastructure

8

Highly profitable players make effective use of customer informationCustomer information & Analytics

1


High margin Low margin

1

2

3

4

Key practice

Automation of campaign

management: up

to micro segments

A

Integration of customer

data in the call centerB

Real time availability

of customer data across

channels

C

Real time analytics:

implemented for

Marketing & Sales

D

Duplication/Redundancy

in data entry

(1: >80%, 4: <40%)

E

Implications for Telcos

▪ Real time Customer data across channels,

improving Call-center/

PoS/Digital channels

efficiency

▪ Harvest Customer data

for insights/campaigns and analyze current state

of business with real time

Marketing & Sales Analytics

▪ Reduce redundancy in data entry, starting

from customer order

A

B

CD

E

1= worst

practice

4= best

practice

2 3

9

Highly profitable players are ahead at digitizing order managementOrder Management

2



1

2

3

4

▪ Integrate Order

management with CRM

and Work force

management systems

▪ Centralize Order

Management systems,

offering business users

flexibility to configure new

products & tariffs

▪ Automate product activation for subscribers

reducing back-office work

Key practice Implications for Telcos

A Automation : Integration

of front office and back

office

B Centralized order

management for product

bundles

C Order management

system allows users

to configure new

products & tariff

D Automated Activation for

Mobile & VAS products

Provisioning system’s

full integration with

Workforce management

system

E

A

B

CD

E

1= worst

practice

4= best

practice

2 3

10

Highly profitable players are ahead at digitizing CRMCRM & Service Management

3



1

2

3

4

▪ Integrate Sales with Service channels across

different lines of business

▪ Enhance user traceability and gather voice of the customer from digital channels (e.g., twitter,

Facebook) to empower

cross-selling and micro-

segmentation

▪ Offer self-service functionalities through automated channels (e.g,.

apps, online) to increase

customer satisfaction while

reducing back-office costs


Integrated Sales &

Service for all productsA

Systems allow

traceability of User

requests, tickets &

complaints

B

Use of Micro-blogging:

for customer

intelligence/ interaction

C

Buy & Manage on

automated channels:

multiple products for

B2C & B2B customers

D

Range of Assurance

activities possible at

Point of Sale

E

A

B

CD

E

1= worst

practice

4= best

practice

2 3

11

Highly profitable players are streamlining the IT landscape Architecture

4



▪ Partner with business for architecture design, adopt standardization & reduce fragmentation of functionality across

applications to simplify

business and IT to ensure agility and TTM

▪ Establish unified (single if

possible) sources of data

▪ Set an architecture board for application rationalization

and compliance to enforce

a simpler IT

1

2

3

4


Partnership of business

and IT in designing

system architecture

A

Reduce fragmentation of

functionality across the

application landscape

B

Unified accounting viewC

Architecture compliance

review in placeD

Application

rationalization in placeE

A

B

CD

E

1= worst

practice

4= best

practice

2 3

12

Highly profitable players are streamlining and automating infrastructureInfrastructure Services

5



1

2

3

4

▪ Automate server handling end to end,

from deployment to load

balancing

▪ Adopt technologies for effective capacity management of existing

resources


Use of Automated load

balancingA

Automated call routing

& SLA management

in helpdesk

B

Automated deployment

of server imagesC

Minimize performance

overheads with proper

use of Lpars

D

High speed internal

network usage

& adoption

E

A

B

CD

E

1= worst

practice

4= best

practice

2 3

13

40

50

60

70

80

90

100

2 4 6 8 10

IT spend/revenue

Percent

Telecom operators can transform to increase their performanceTransformation roadmap for an integrated player

A

DC

B


Telco 2 - end state

Applications

▪ Best of breed solutions + few internal

solutions

▪ Siebel CRM for B2C,B2B LoBs

▪ Order management transformation

▪ Full SOA architecture

▪ Sunset of unused applications

Infrastructure

▪ Improve utilization. Currently one of the

operators with having most highly utilized

infrastructure in its data center

▪ New consolidated data center up in 2010

Total IT spend: decrease in absolute terms

Telco 2 - transformation program

3 prong strategy for Telco 2 from 2008-2014

▪ Application transformation

▪ Infrastructure Transformation

▪ Operating model change

Median line201220112009 20102008 2013

Telco 1 Telco 2 Telco 3

IT Effectiveness Score

All this while IT supported critical changes in business, like 4G, 4P convergence

Balanced score based on

▪ Functionality ▪ Time-to-market ▪ Service availability

Improving business results through digital transformation Tm forum live! - June 2015

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