Carriers Answer The Call

Welcome Guest. | Log In| Register | Membership Benefits

T E L E C O M M U N I C A T I O N S
Carriers Answer The Call
Technology will determine their ability to reengineer and outpace new competition

By Mary E. Thyfault
Issue date: Sept. 18,1995

Intense. that's a one-word description for today's telecommunications industry. Some of the world's largest companies are urgently reinventing themselves as they prepare for the figh t of their lives. "We're moving as fast as we know how," says Drew Kelso, president of the telecom division at local and cellular phone carrier Alltel Information Services in Little Rock, Ark.

The pace of change will grow only more rapid. Washington lawmakers are rewriting telecom rules to stir up competition between long-distance companies, local phone service providers, and cable TV companies. Technology breakthroughs are bursting out every day.

Analysts predict that by the turn of the century, today's telecom carriers will derive more than half their revenue from products that didn't exist as recently as last year. This is happening in an industry where six years ago, a then-upstart MCI sold only one product--long-distance service. Today, it sells 450 products and services.

"We're entering a much more competitive phase," says Ron Ponder, AT&T's senior VP and chief information officer. "We're going to be facing a significant number of competitors."

With the changes come turbulence and u ncertainty. But one thing is for sure in this new competitive environment: Information technology will be at the core of everything the industry is and does. Just about every carrier is the midst of a major business process reengineering project. Many are modifying core processes, including billing, database marketing, and customer service systems.

"The challenge is using IT to reduce cost and improve customer service," says Joseph Kraemer, managing director of communications and electronics consulting in the Washington office of systems integrator EDS.

That puts information systems managers on the hot seat like never before. "We're starting to get emergency calls saying our CEO wants to know why we're doing this or that," says Dan Elron, a partner in the New York office of Andersen Consulting.

At Bell Atlantic, for instance, an IS team briefs company vice chairman Lawrence Babbio monthly about strategic technology projects. These include a customer-service system that the Philadelphia company hop es will save $116 million over five years. The effort is part of a companywide reengineering project that began in late 1993.

To slash $2 billion off the bottom line between 1994 and 1998, Pacific Telesis in San Francisco is reengineering nearly every business process from human resources to customer billing. Pac Tel's goals are lofty: a 75% reduction in the time it takes to activate service for a customer; 40% improvement in the time it takes to disconnect a line; and 78% maintenance cost savings per customer.

Intense Pace
At Nynex in New York, CIO Joe Castellano projects it will take "2,000 man-days" over the next two years to complete a companywide process-reengineering project. Says Castellano, "The pace is very, very intensive."

At many carriers, billing is the process that's receiving the harshest scrutiny. In fact, billing systems often form the heart of telecom companies' product development and marketing efforts. Telecom carriers can take existing products based on billing sy stems and repackage them.

Take MCI's trend-setting Friends and Family residential calling plan, which has gone through several marketing iterations. The entire concept is based on a flexible billing system that lets MCI easily alter the size of discounts and decide the best target market.

Most telcos can't easily offer similar competitive systems, says Nick Pansen, an associate partner in the Atlanta office of Andersen Consulting. "They don't have the time-to-market flexibility," Pansen says. As a result, nearly every phone company is assessing--and sometimes reengineering--its billing system.

Taking Back The Process
AT&T, which lost 5% market share over a four-year period to MCI's Friends and Family, is in the midst of one of the most aggressive billing reengineering projects in the industry. Instead of letting the regional Bell companies handle billing for its 90 million customers, AT&T has taken back the process by building the systems to perform that function in-house. Be cause AT&T will control customer data, the carrier will be able to offer customers a new discount plan without depending on the Bells.

As a result, AT&T should be able to react more quickly. It will be able to collect valuable customer data and use that information to create calling plans based on customer usage. "It will give us a lot of flexibility to do a lot more things," says Rino Bergonzi, AT&T VP and division executive for corporate information technology services in Warren, N.J.

Billing will become increasingly important to the Bells as well, especially as they begin to face competition in the local phone markets.

But Bell CIOs are each taking different approaches to how quickly and how completely their billing systems are overhauled.

Pacific Telesis and Bell Atlantic are reengineering their billing systems entirely. Pac Tel has just completed a mainframe-based billing system that relies on standard software tables to make pricing changes quickly. Bob Barada, VP of corpora te strategy and development, says Pac Tel has nearly completed a billing system that's as flexible as Friends and Family.

Pac Tel believes portions of its system are good enough to sell to Bell Atlantic and others. Bell Atlantic is bringing out the first release of a new billing system next March, based in part on Pac Tel's billing technology. The system will enable Bell Atlantic to make quick changes to even the most complex services in 10 to 20 days. The average rate of change today is 45 days.

"We've got to be ready for anything that the regulatory environment lets us go into in the next few years," says Ralph Szygenda, Bell Atlantic's CIO. "This is a critical effort."

But CIOs at US West and Nynex say it's still too risky to completely reengineer core billing systems. "It takes a lot of money and a lot of time, and the probability of success would certainly be debatable," says David Laube, US West's CIO.

Laube says reengineering an entire telecom billing system is one of the most difficul t projects in the systems world. That's why the Englewood, Colo., carrier is reworking only portions of its billing system, including call rating and invoice generation.

Nynex's Castellano says there's too much uncertainty in the telecom industry to engage in wholesale reengineering. "Right now, it's too hard to see what the eventual billing system will look like," he says. "Once we get closer to a real competitive environment, the direction will become a lot clearer."

Still, Nynex is planning for the change. By 1997, according to Castellano, the carrier will triple staff and budget resources dedicated to billing system projects.

In addition to making pricing changes quickly, AT&T, MCI, and Pac Tel say new billing systems are key to another IT initiative: database marketing.

In the past year, these carriers have started taking reams of customer information and using it to target products and services at high-revenue producing customers. The data even allows carriers to direct higher leve ls of services to the customers that spend the most.

AT&T is now selecting a set of 15 to 25 data elements that will define a customer across the company's different product lines. This will enable different divisions to look at the same customer. "The long-distance division knows a customer by a 10-digit telephone number and the Universal Card division knows them by a 14-digit card number," says AT&T's Bergonzi.

A massive data warehouse based on Teradata technology will help AT&T segment and target customers. "When it's all said and done, this will have more impact than anything we've ever done," says AT&T's Ponder.

To get that integrated view, AT&T is building a 4-terabyte database this fall that will grow to as much as 14 terabytes six months later. AT&T also is tuning its IBM DB2 database to handle 2,000 to 3,000 transactions per second, up from 1,000. "It's a transaction-based system unheard of in the industry," says AT&T's Bergonzi.

Got Their Attention
Even the Baby Bells are paying attention to database marketing. Bell Atlantic is rolling out a system next year that provides the carrier with rapid access to usage and financial data of specific customer groups.

Last year, Pac Tel started arming salespeople with notebook computers equipped with data organized by city block. They show which customers are near a competitors' network, and therefore most likely to switch carriers. In the past, "most carriers didn't know which customers were vulnerable," says Andersen Consulting's Elron.

As competition increases, IT spending is focused on holding onto customers. "Customer loyalty is going to be the future battleground," says US West's Laube. That means that the focus at US West and other telcos is on improving the quality and speed of customer access.

Pac Tel will be able to meet customer demand more quickly with a new broadband network that enables the carrier to turn on service using software, instead of bringing it up circuit by circuit. "We will just type in information and issue an order," says Pac Tel's Barada.

Meanwhile, Sprint is looking at its network to decrease service activation time from one to three days down to just two hours. And at Alltel, customers who have service trouble will be able to key in information to request
a repair.

Pressure To Update
Bell Atlantic is currently rolling out a system that will activate service while a customer is still on the line. To accomplish all of this, telecom carriers are under pressure to move to the latest technologies. In many cases, this means distributed client-server computing. But there are those who urge caution.

George Fuciu, Sprint's senior VP of IS, is concerned about the reliability and manageability of these systems. "To the users it's no big deal," he says. "But it scares the hell out of me."

Two years ago, Sprint ran nearly all business processes on legacy mainframe systems. Today, both applications developers and users are pushing to move vital bus iness applications--including the company's order-entry process--to a distributed environment.

Users like the fact that Fuciu's team can roll out a client-server project more quickly than a traditional mainframe-based-project. "The [internal] clients are pulling us along," says Fuciu. "We're there with them, but we're one step behind and a little reluctant."

US West is another carrier reluctant to wholeheartedly embrace client-server technologies. CIO Laube says the company is moving to client-server only "where it makes sense." For example, the company just moved its payroll systems over to client-server. In the process, it has slashed the number of programmers in the area from 100 to 20, and the number of people processing payrolls from 400 to 60. But Laube is quick to note that US West employees moving to direct deposit also helped the carrier make those cuts.

Laube says many client-server systems simply won't work for large-scale projects. "It will work for 50 people, but when you've got 30,0 00 users, it's not so simple," he says.

In reality, nothing is easy when it comes to technology in the telecom sector. Whether it's moving to a client-server architecture or reengineering a billing system, the sheer scale of most telecom IT projects means the stakes are high--and the cost of failure is even higher.

(To view the Telecommunications chart in PDF format click here)

Comments on this story?

InformationWeek http://techweb.cmp.com/iwk

CAREER CENTER

Ready to take that job and shove it?
Open | Close