The future of the telecom consulting industry and what will be the next killer telecom consulting solution is the question on many people’s lips.

The demand for consulting services increased drastically in the 2000’s when GSM services started in Nigeria, specifically for telecom and e-business consultants. Stimulated by the explosion of various operators, increasing market liberalization and the growth of mobile and Internet services, the 2000’s were synonymous with exploding capital investments and double digit-growth in all telecom sectors, including consulting.

During the latter half of the 2000’s and through 2009, telecom consultancy grew at more than 20% per annum. Telecom and IT practices expanded year on year during this period, representing one of the fastest growing sectors for management and IT/Telco firms.

However, as the financial crisis started and world economy slowed, telecom service providers went out of business. The Operators turned their focus from expansion to survival and return to profitability, at the same time reducing consulting budgets and shifting their telecom consulting requirements. By mid-2009, following disappointing financial performances of fixed and mobile operators, the effects of over-priced 3G licenses and over spending on capital expenditure were being felt.

Negative telecom industry forces coupled with increasing economic and political uncertainties have impacted the telecom consulting industry for the past 3 years. While demand was strong in a number of service areas, the global climate caused many clients to defer consulting spending. Telecom consulting requirements moved from network development, investment, acquisition and new service introduction to cost reduction and revenue generation services.
Leading the next wave

Today’s global telecom industry is in the midst of revolutionary changes and further consolidation is likely in the next 2-3 years. Operators are now returning to profitability and will once again implement growth strategies. The majority of this growth will be fuelled by continued telecom market liberalization, increased proliferation of Internet and broadband services and rising mobile penetration in developing countries. Additional trends, impacting the telecom industry, include:

• Increasingly sophisticated and demanding end-users
• Continued focus on profitability
• Increased outsourcing and offshoring
• Return of IPOs, continued mergers and acquisitions
• Bundling of existing products
• Mobile/Internet/Fixed convergence
• Emergence of mobile saturation in some regions

Based on those trends, operators that survived the fallout of the past year have implemented significant changes to their organizations and are now focusing on the following key initiatives:

• Launching new products with focus on business customers, wireless applications and broadband and content offerings
• Cost cutting through outsourcing of non-core activities
• Product bundling, triple-play
• Improving the customer experience and minimizing churn
• Maximizing invested network efficiencies
• Revisiting their global development strategy

Customers are also increasingly showing a strong desire to reduce the number of vendors with whom they contract, favoring consultants that have a full set of services, including consulting, systems integration and network and services management.

Cost reduction has been, and still is, one of the key priorities within telecom consulting customers. Telecom companies are working to offset tumbling revenues with improved operational efficiency. This objective translates into opportunities for consultants able to optimize service delivery and customer care processes, consolidate systems and procedures, or reduce expenditure through outsourcing of IT, billing, network management or other non-core activities. The best opportunities involve operational improvements and cost savings in terms of people, network, or service delivery.

Fixed and mobile operators were and still are seeking to reduce their debt, generate additional revenue and ride out the end of the telecom storm. As subscriber growth slowed, their focus has shifted from network and service expansion to reducing operating and capital expenditures. Some operators have therefore chosen to outsource many of their non-core operations, while others have focused on process re-engineering and optimizing service delivery. These cost reduction opportunities remained through 2009, while outsourcing projects will be one of the main growth sectors for years to come.

Another key concern of telecom customers is revenue generation. Millions of dollars have been spent on national and International network and service expansion, mobile licenses and intelligent technologies. Operators are now looking to increase return on investment through the development of new services and business models. Consultants who can help achieve these objectives are in the best position to win over customers trying to return to profitability.

Now that many operators are starting to focus again on growth and expansion, key opportunities for consulting firms to focus on in the next few years should therefore include:

• Outsourcing/Offshoring (Network and Business Process)
• Mobile data and 3G
• Privatization process and IPO support
• Broadband consulting, Triple-play services, Convergence
• Management contract
• Business/Strategic planning
• Security and fraud management
• IP services
• Process Management
• Optimisation of revenues, asset utilization and of return on investment

The need for each of the above opportunities will not really vary  on customers’ location and their market liberalization and competition status.

For example, operators in Middle East and Africa, a region still in the initial stages of market liberalization with basic technological needs, will require consulting solutions focused on privatization, management contracts, network expansion as well as mobile and Internet service introduction. Key drivers for this region will include continued liberalisation and privatisation, mobile growth, launch of broadband services, entry of many new operators and the expansion of VoIP services but the fact is they also require high consulting solutions focusing on cost and revenue optimization, through outsourcing and offshoring (among others), broadband, VoIP and triple play services as well as customer churn reduction and revenue protection similar to Western Europe and North America.

Continuing market consolidation, the return of IPOs, mobile data and 3G applications should engender a large portion of telecom consulting requests Customers in Asia, Latin America, and Eastern Europe will lie between these two poles and will require a mixture of solutions.

The new face of telecom consulting

The worldwide consulting market has undergone tremendous changes in the last decade, and more is to come as competition heats up in the current sellers’ market. Initially, telecom consulting customers’ needs were focused on straightforward technical and strategic telecom solutions and the line between telecom and IT consulting was obvious. However, as networks become more intelligent and require integrated messaging, entertainment, and content, the line between network and IT infrastructure starts to fade. IT and systems is becoming an integral part of the Telco’s day-to-day operation and services and the boundaries between telecom and IT solution are blurring.

This trend benefits consultants able to provide software integration, outsourcing, managed services, and network integration capabilities. Consequently, as operators increasingly rely on intelligent applications to generate value for their clients, the importance of systems in the provision of telecom services will continue to climb.

Major IT consultants are entering the telecom consulting segment, as more customers request telecom consulting offerings packaged with IT solutions. The two offerings cannot be segregated anymore and consultants are stepping up to the mark by forming alliances with IT firms and vice-versa. Currently, the top 6 telecom consulting firms, in terms of revenue (Accenture, CGE&Y, Deloitte and BearingPoint, IBM and Getronics) are all firms offering a complete suite of telecom and IT solutions.

Consultants are now offering the whole spectrum of services. This is evident in the latest market restructuring activities, where system integrators such as IBM and EDS are buying strategy and management consulting firms, enabling them to cover all of their customers’ needs, and placing themselves in pole position in the converging telecom environment. Also, all are investing in managed services and outsourcing capabilities to take advantage of carrier demands for improved operational efficiencies and reduced cost structures.

What will be the next trend you may ask? Well as customers want consultants able to advise not only on solution deployment but also on implementation and integration issues, outsourcing and implementation capabilities will become more important in the winning of strategic contracts. This means that alliances with outsourcing and implementation partners such as IBM and Microsoft, amongst others, will be critical in ensuring key projects are not lost to competitors.

The recent  corporate downsizing and return to profitability has increased demand on consulting firms to carry out activities that companies no longer have the in-house staff to perform. Outsourcing of information systems, market research, human resource planning, sales force and even strategic planning has been a source of growth for consultants.

Until recently, most outsourcing occurred in IT/Network Management functions, but is now increasing in network design, build and manage functions. There is also a growing trend toward the outsourcing of back-office and support functions such as HR, accounting/finance, procurement and customer service. Some operators are also starting to outsource some of their services and applications. For example mobile operators, which are outsourcing the provision of their multi-media content and value-added services. Outsourcing of non-core business activities is now becoming one of the most dynamic sectors of the industry, enabling customers to focus on revenue generating activities.

Global consulting firms will also continue to grow their offshore capabilities. Accenture and EDS planned to move 30,000 and 20,000 jobs respectively 5 years ago! This trend has been and  will continue.

Initially, offshore outsourcing was mainly used to reduce cost to compete, as much domestically as internationally. However, firms are increasingly using outsourcing not only as an operational-efficiency driver but also as a key globalisation facilitator. Consultants are responding by establishing service centres in multiple countries, creating a global outsourcing trend and leveraging an array of nearshore and offshore capabilities. By the end of 2009, most of the large IT service providers and consulting firms such as IBM, Accenture and EDS had implemented a global outsourcing structure via offshore or nearshore acquisitions and alliances. The full-blown impact of this trend is really being felt.

Flexibility is the key

What will be the winning factor for a successful telecom consulting practice in years to come? As in any relationship the key to success will be flexibility. Telecom consultants have had to adjust rapidly to the chaotic telecom environment of the last decade and this will certainly become more and more important in years to come. The telecom industry will face relentless pressure on price and technological complexity will continue to intensify.

Consultants must strive to offer customers leading edge solutions and support at the price, location and format requested. The ever-changing complex telecom environment will drive companies to become partners, competitors and some time providers and customers. The winning telecom consulting firm will have to be all of these when necessary and adapt itself to all situations to ensure maximum benefit.

Offering flexible payment structures and contract terms also becomes more and more critical, based on customers’ specific requirements, be it shared risk and reward, deliverable oriented, day rates or a mixture of those options. Embracing new forms of tendering and contract negotiations will also challenge consulting companies, as their clients move towards more streamlined bidding processes including the use of e-auctions, a trend that should see increased popularity with consulting customers.

An outline of how this new innovative bidding process may work is as follows: all bidding finalists are placed in different rooms with computers connected to the customer’s system. The lowest price offered by the finalists is shown to each party and each consultant has one hour to bid down from that ceiling price, based on other bidder’s reactions. If a price modification is proposed in the last 10 minutes of bidding, the customer extends the bidding process by another hour. This can be repeated twice. The customer then determines who wins the bid by combining the consultants’ technical and pricing scores. This new method of tender negotiation enables customers to drive the price to its lowest limit, reduce negotiation time and hopefully reduces price negotiation corruption.

Surviving and building sustainable businesses based on long term client relationships will be ever more dependent on consulting companies developing or acquiring the leading edge knowledge and expertise that clients are demanding on an ever decreasing technology and business cycle.

Transferring knowledge to clients, whilst acquiring new waive skills themselves, in shorter and shorter time frames will stretch even the most competent of consultants. Those that are able to do this, along with combining the new mix of service offerings, will undoubtedly thrive, those that cannot may find themselves returning to the ashes.

 

Major excerpts culled from www.hottelecomnews.com Isabelle Paradis – Global Telecom Consulting market report March 05

 

The information contained in this publication is only intended as a

general review of the subject concerned and should not be treated

as a substitute for specific advice concerning specific situations.

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please contact Ademola Alade at demola@delayus.net

 

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