Telecom's New Attitude

Some communications providers are forgoing outsourcing altogether, bent on reengineering business processes in-house to save money. Cingular Wireless CIO Thaddeus Arroyo has overseen some big changes in the past year. The company -- a creature of numerous mergers -- has consolidated 11 billing systems into two, winnowed 1,400 software applications down to 300, and consolidated data-center facilities and is now moving to a new enterprise resource planning system. The hard part: Arroyo needs to create business processes that will let Cingular Wireless exploit the changes. "Our IT planning cannot be disjointed from our business planning," he says.

Thus, the company is implementing business processes that give managers a horizontal look at the enterprise. The goal: faster decision making and better, less-expensive customer service. For example, Cingular is implementing global call routing, which it says will improve customer service by virtualizing 20 physical call centers so the most qualified agent is available for any customer regardless of location.

Cingular is moving to Oracle 11i to form the backbone of its new ERP system. Among the advantages offered by the move: The company will be able to integrate procurement and payment processes, significantly reducing human intervention. It has also recently wrapped up a major infrastructure consolidation project that Arroyo says will cut costs and allow it to more efficiently roll out advanced services for high-speed 3G networks. "To introduce a new service, we now have to upgrade several systems, not hundreds," Arroyo says.

Arroyo says he considered outsourcing a number of these processes but thought the company could operate them less expensively in-house, especially after consolidating systems. Cingular earlier this year actually brought in-house billing systems that had been outsourced with Convergys Corp.

Industry consultants say telecom companies need to realize a significant level of savings before they will make the decision to outsource, otherwise the complexity and risk of transferring business operations to an outsider isn't worth it. "Twenty percent savings seems to be the magic number right now," says Greg Douglass, VP for telecom and media networks at Cap Gemini Ernst & Young.

Telecom carriers' need to adopt new, more flexible infrastructures is also resonating with IT vendors. IBM has developed what it calls its Service Provider Delivery Environment, which represents an amalgamation of numerous IBM initiatives tailored to the needs of big telecom companies. It uses IBM's WebSphere software and Linux to help carriers connect numerous legacy systems that they have either built internally or acquired through mergers. The idea is to eliminate systems that don't communicate with each other. The delivery environment is also designed to ease a telecom company's transition from hardwired, circuit-switched networks to the packet-based, soft-switching systems that they'll need in the future.

IBM also thinks a new initiative whereby customers can get direct access to IBM research could pay big dividends for the capital-intensive telecom business. IBM research executive Paul Bloom says telco participation in the development of automation technologies such as natural-language voice response could save the industry billions.

If telecom carriers and wireless service providers can reduce costs through outsourcing or internal reengineering, without skimping on new services, the troubled industry could have a brighter future. An industry study released in December indicates that telecom business will grow from $1 trillion in revenue in 2002 to $1.3 trillion in 2007.

For now, most carriers are focused on how to transition from old business models informed by monopolies and analog technology to more competitive, cost-efficient strategies that will position them for digital services. Says Nextel's LeFave, "Right now, we're all under the gun."

Photo by David Deal