Conquering Outsourcing

Conquering Outsourcing: How to Achieve Significant Business Benefits
Outsourcing all or part of a company' support systems can improve corporate earnings and achieve sustainable performance improvement.
by Tom Antunes, vice president, product and industry marketing, Convergys

In the world of billing, there are essentially two approaches to processing data and creating statements: 1) do it yourself; 2) hire someone else to do it for you.

For years many carriers used the first method, believing that keeping such strategic operations in-house made sense on many levels, not the least of which was financial. Outsourcing was seen simply as a way to offload unimportant activities and reduce costs.

Yet with heavy investments in new licensing and technology, carriers are increasingly finding themselves laden with large, fixed capital expense streams with fixed depreciation schedules. At the same time, carriers are faced with the need to optimize business support systems (BSS) to improve revenues and, ultimately, the lifetime value of each subscriber. The challenge is formidable, given the presence of legacy systems, the innate complexity of the processes that BSS support, the difficulty of systems integration, and the fragmentation of the BSS industry around numerous point solutions.

With these challenges, many carriers today are recognizing that it is indeed better to outsource all or part of their support systems, particularly those in provisioning, billing and customer care, in an effort to improve corporate earnings and achieve sustainable performance improvement.

Yet unlike in years past, today's shift toward outsourcing is no longer a simple matter of cost reduction. It is also a strategic move on the part of savvy carriers, who use the model to create high-performance support operations that keep pace with industry best practices, access competitive skill sets, improve service levels, and increase their ability to respond to changing market dynamics. And yes, achieve significant financial savings.

Companies that outsource can garner other benefits as well. One benefit is a greater focus on core competencies. An operator needs to focus all of its energies on competing for subscribers, improving their core business and implementing new technologies. A billing operation should enhance these efforts, not challenge them. A world-class billing and care operation allows an operator to free up valuable traditional and intellectual capital.

Another benefit is faster time to market. World-class billing and care operations allow an operator to quickly deploy an end-to-end billing system as well as a billing operations workforce. This is a competitive advantage in a market that rewards the operators who can bring new products and services to market ahead of their competitors. The pressures of the telecom market today are to launch new feature-rich services to customers quickly. By outsourcing the billing and customer care aspects of the business, an operator is better able to launch these services and enhance the billing system on a faster timeline. An outsourced provider has a greater R&D budget, and has processes in place to enhance the billing system and integrate it quickly.
Additionally, companies can minimize their operational risk. Following these practices and investing in this type of robust data center combine to enable a better likelihood of operational success.

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So how do you know whether your company is ready to make the leap into outsourcing? Cost, of course, remains one of the most important factors in evaluating a decision for an outsourcing offering. An operator's business case for outsourcing should compare the projected total cost of ownership of outsourcing versus cost of ownership if the work were done in-house. The comparison should include costs often not readily available in an operator's budget. Those include administrative costs, including human resources, taxes, and facilities; cost of capital (financial cost) including hardware, capital depreciation, and software; future expenditures for development, implementation and migration costs to develop a new solution in-house; research and development (R&D) for evaluation of new technologies and value-added services; and consultants and other contract services.

In addition, operators must determine if their internal billing and care operations are up to the task of creating more valuable subscribers. World-class billing and care systems are based not only on the latest client-server hardware and object-oriented programming, but also on robust management practices. There are three main pieces to this. The first is integration services for the implementation and launch of a billing solution in a data center, such as implementation planning and management, software customization and configuration, as well as migration, conversion and training support. Second, there is application services. The application services practice includes daily and monthly tasks required to run the billing and care system. These activities are all focused on the actual running of the billing solution. Key services include production operations, performance management monitoring, capacity planning and client reporting. Third, there are infrastructure services. Infrastructure services ensure the facilities, hardware and network operate with carrier-grade reliability. Concurrent with application services, the data center department should provide infrastructure services to host the solution for the operator. Some of the key elements to consider are facilities, help desk, and asset management.

After evaluating these factors, carriers also need to consider the vendor selection process. As a carrier, you should demand at the very least the following from any prospective outsourcing partner:

· Experience. Knowledgeable outsourcing vendors allow clients to leverage the scale and skills acquired and developed throughout their history, accelerating the carrier's entry into the marketplace via outsourcing and helping carriers avoid start-up and ongoing expenditures for hardware, people and new processes.

· Information and Analysis. Look for a vendor who measures and analyzes work processes to improve the quality of the products and services provided to clients, as well as the efficiency with which those products and services are provided. Some examples of common parameters found in such measures are bill accuracy,bill timeliness, system availability, delivery time met, and trouble report turnaround time.

· Technology. A billing and care operation is only as good as the underlying billing software being used. To that end, look for a vendor who allows a plug-and-play approach to its software will enable you to get the software you need, when you need it. Such an approach also enables a flexible migration path for clients to expand their billing and customer care capabilities without loss of initial investment; greater expansion capabilities into new vertical markets or support systems; and robust technical capabilities to support next-generation requirements well into the future.

· Value Guarantees. Can the vendor provide guaranteed real savings in both capital and operating expenditures, which lower the operators total cost of ownership by leveraging the vast investments made by the vendor? Also look for predefined performance guarantees on key business process metrics and revenue assurance capabilities.

· Consistent Execution. Does the vendor have a proven track record of implementation and operation of industry best practices expertise across multiple industries?

· Delivery Flexibility. Can the vendor offer flexible contract terms and availability of various delivery models, including those that enable you to take back control at a future date?

· Strong Network of Alliances. Does the vendor have a large network of alliances, in order to bring the right subcontractors into the deal faster and manage the subcontracting relationship to improve speed to success?

Obviously, there are many operational, technical, and financial considerations that must be weighed when determining the right approach to an outsourcing relationship. Yet when done correctly, the outsourcing of billing operations can have many positive impacts to your business.

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