Operators shift their spending priorities

10 Feb 2009

The pain points have changed. The main challenges of just a couple of years ago are no longer top of the agenda.

Look at the simple fact that European telcos, with almost $2 trillion in corporate debit maturing over the next three years, will have to refinance at a time when the cost of funding has jumped sharply. Many telcos across Asia are in a similar boat.

Raising ARPU and improving customer service suddenly take a back seat to addressing balance sheet issues. Telstra reportedly has frozen capex, and other operators are similarly cautious with a renewed stress on ROI. Cash matters and companies are looking at variable cost models.

'Four years ago I didn't think it was possible to be any more focused on ROI,' said Amdocs's Seth Nesbitt. 'But now operators are even more focused - they are more selective and have set higher hurdles.'

Clarity executive director Tony Kalcina said he's having to reinvent how his team engages with customers. 'Before it was typically a technologist sale - targeting the CIO or CTO, who pushed through a procurement proposal,' he told Telecom Asia.

Now he's selling to the CFO, who is interested in things like quick ways to stop leakage. He has had to rework proposals pending for months so the technology is wrapped in a solid business case in the short and medium term.

'We've always had to do that, but there's much more emphasis on ROI and cutting cost.' He's also having to be more creative in the ways it is compensated. Some customers are looking at annuity payments and paying out of opex over three to five years.

Nesbitt agrees, noting that Amdocs is working on flexible ways for telcos to invest in its technology, including pure software deals, software as a service, managed services and everything in between.

To help its enterprise customers in these challenging times, Verizon is offering pay-per-use/user models as well as credit financing. SVP Nancy Gofus says she sees much more interest in managed and hosted services.

Kalcina is also engaging with customers to take over staff and entire back-office operations to take significant costs off the table. Working with partners, Clarity uses its technology to automate manual processes and can lower costs by 20%. 'Most telcos are not very efficient and need an event [like the downturn] to get them focused on efficiency.'

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