Telecommunications:<br>Cost Cutting Takes On A Customer Focus

Global Crossing. Qwest. WorldCom. If 2001 was a bad year for the telecom sector--faced with slipping prices and slumping earnings--2002 may go down as the industry's annus horribilis. No wonder CIOs at telecom companies are investing more judiciously in technology projects that benefit customers. They're also simplifying their IT operations to cut costs.

Ed Glotzbach, executive VP and CIO at SBC Communications Inc., has just completed a three-year, $364 million project that addresses both these areas. SBC is giving 23,000 field technicians ruggedized wireless notebook PCs to better coordinate service appointments, which has increased customer satisfaction and sales, improved efficiency by up to 20%, and will save about $220 million annually beginning next year. SBC also drastically reduced its use of outsourcers to save more than $100 million a year. Today, SBC uses fewer than 1,000 IT contractors, compared with more than 2,000 two years ago.

Verizon Communications Inc. has upgraded its IT systems, resulting in operational cost reductions of 15%, says Kevin Price, director of IT operations effectiveness. The cost of IT support for Verizon's conventional phone business is 37% less than when Bell Atlantic merged with GTE to form Verizon. New operational-and billing-support software improves internal processes and provides interfaces that let customers access Web-service functions.

It's quicker for Sprint to implement applications that cut costs and please customers, now that it has unified the software-development process for its Global Markets Group, says Carol Bussing, VP of IS at the unit. New software developed through this process lets customers review and pay bills online.

Telecom revenue will drop drastically this year, to $256 billion from $273 billion in 2001, says Alan Pearce, president and CEO at research firm Information Age Economics. Profits may disappear completely this year, he says. The trend, Pearce adds, is the result of damaging rounds of rate cuts and the migration of customers to less-expensive technologies such as using low-cost wireless plans instead of long distance, or using E-mail instead of the telephone.

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