Providers in the dynamic communications services face continual challenges and pressures. The rapid rise of 5G networks has greatly increased coverage and speed across all markets, making it extremely difficult for operators to differentiate in the face of this commodification of connectivity. While revenues have been rising, margins are eroding. In addition, experts are still predicting an impending global recession driven by high inflation and raised interest rates. These factors tend to push CSP leaders to prioritize cost-cutting and to revisit budgets. But such moves are usually reactive in nature and focused strictly on the short term. We have found the more strategic approach to be cost optimization, which is geared to medium- and long-term gains in efficiency and productivity and helps derive more from existing spends.
While there are several ways to drive cost optimization, we will look closely at automation within service and network operations — the area where the most “bang for the buck” is available. Automating these operations is an increasingly potent differentiator as CSPs move beyond connectivity and become digital services providers too.
Operations is the logical cost optimization target
A look at a few basic ratios helps show where to best focus optimization efforts. According to TMForum, total expenses for CSPs amount to between 48% and 79% of revenues and a large proportion (around 60% to 90%) of capital expenditures (CapEx) is invested on the network. As customers demand ubiquitous connectivity, higher speeds and increased reliability, reducing investments in the network is not necessarily viable. Meanwhile, operating expenditures (OpEx) is 2.5 to 3 times higher than CapEx, offering far more scope to optimize costs. Key CSP OpEx categories include labor, network management and IT operations, intercarrier/wholesale payments, equipment, content, site/plant, energy, and selling, general and administrative expenses (SG&A). So, it’s a “target rich environment.”
The high costs of CSP operations begs the questions: Can automation help optimize costs, and if so how and where? The answers depend on three factors:
- Are there repetitive processes that will continue to be applicable long term?
- Are there manual processes that can be readily generalized?
- Can substantial operational efficiency be derived from automated execution?
As these questions make clear, service and network operations are the most logical and prime targets for automation.
Focusing on the automation potential in the order to cash process
The CSP order to cash process, from customer signup and ordering of services through delivery of payments to the CSP, is often riddled with different teams, multiple systems and inefficient manual swivel-chair processes. CSPs have a significant opportunity to improve efficiency and lower the total cost of operations by automating ordering, fulfillment, service orchestration and revenue management. Figure 1 shows how many sub-steps in the order to cash process can be readily automated.