Telecommunications: Telecoms Call Up IT To Stay Relevant

Few industries face the technology challenges that confront the telecommunications sector. Local and long-distance service providers are fighting off new competition from mobile phones and voice-over-IP services offered by cable television and other companies. At the same time, they need to modernize their internal IT systems to better serve customers and operate more efficiently.

Verizon Communications, the nation's largest telecom company with $67.7 billion in annual revenue, cut more than $100 million in costs last year and expects to cut another $150 million this year by implementing self-service technologies for retail, wholesale, and enterprise customers via a Web site and voice portal. The company says 95% of its enterprise revenue comes from customer accounts that are managed online. Improved IT systems also helped the company cut staff by 20,000 with no effect on performance.

"IT is in the middle of everything that Verizon does today," CIO Shaygan Kheradpir says. "The telecommunications industry is being transformed rapidly as traditional telecom and computer communications merge." Verizon's priorities include shrinking its cost structure, moving more quickly to develop new products and services, and improving the customer experience. "All three have a very heavy IT component," Kheradpir says.

Long-distance companies also face challenges as competition from Internet calls, which eliminate the distinction between local and long distance, and wireless calling plans, which offer cheap long-distance service, force down rates and shrink profit margins. AT&T is backing away from the consumer market and refocusing on business customers. It's also modernizing a hodgepodge of IT systems that were built over decades. For example, the company had 77 billing systems and 52 project-management systems before Hossein Eslambolchi, AT&T's CIO and chief technology officer, launched a plan called the Concept of One ("do it once, do it right, use it everywhere"), and the Concept of Zero ("zero defects, zero cycle time, automate everywhere possible").

Building single platforms to support key business processes such as ordering, provisioning, and customer care has made it easier to automate many of the processes, says Behzad Nadji, AT&T's chief architect and a VP at AT&T Labs Research. "In 2000, we were at almost zero automation when it came to ordering IP services. Now we're almost at 95% automation," he says. "The goal is to improve the customer experience, and it has helped us reduce costs."

AT&T already has eliminated more than 150 systems and plans to cut another 270. These efforts have helped cut contract cycle times by 14%, resolve customer billing disputes for eight key billing systems in 35% less time, and let the company detect many service-disruptive events before they affect customers.

INDUSTRY LEADERS Company Revenue in millions Income (loss)
in millions Verizon Communications $67,752 $3,077 AT&T $34,529 $1,863 MCI Inc. $27,300 $22,200 BellSouth Corp. $20,341 $2,110 Cingular Wireless LLC $15,483 $1,022 Sprint Corp. $14,185 $1,876 Nextel Communications Inc. $10,820 $1,530 QualComm Inc. $3,970 $827 Global Crossing Ltd. $2,932 - EarthLink Inc. $1,402 ($62) Hughes Network Systems $1,322 - XO Communications Inc. $1,111 ($103) Financial data is from public sources and company supplied.
Revenue is for latest fiscal year.
Dashes indicate companies requesting financial information not be disclosed.

SNAPSHOT INSIDE COMPANIES Average portion of revenue spent on IT 5% Companies using radio-frequency identification -- Companies globally sourcing products and supplies 67% HOW COMPANIES DIVIDE THEIR I.T. BUDGETS Hardware purchases 13% IT Services or outsourcing 22% Research and development 2% Salaries and benefits 27% Applications 25% Everything else 11% INDUSTRY FINANCIALS Average year-over-year revenue change -4% Average year-over-year net income change 2,363% DATA: INFORMATIONWEEK RESEARCH
See year-over-year shifts in business-technology practices for this industry.
Compare and contrast this year's data with last year's.

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