Finance transformation
with 2019), operating income over the same period halved. Telefonica Deutschland, the German branch
of Telefonica/O2, is for its part seeking to cut the costs of running its IT operations by 30% by 2025. It says that, in the future, over 80% of all applications will run in the cloud. Meanwhile, Vodafone has migrated its enterprise and resource planning (ERP) environment to a single digital core, which has meant standardising more than 80% of its core business processes. The UK giant has also established a shared services model across the entire enterprise, beginning with the finance function. The upshot here has been to remove silos and create an environment more conducive to digital transformation. “Legacy investment is switching off and customers are being shifted,” summarises West. “The backbone network clearly continues to get investment, but switching off legacy products and migrating customers on to new services more aggressively is supporting the reduction of the old and utilisation of the new.”
Another important aspect of digitisation lies in a company’s use of data. This is an area in which finance departments can play an active role – by using data analysis and forecasting techniques, they can make decisions more strategically. What all these strategies share is that they cut costs, and help position telcos as modern businesses capable of holding their own against digital-native rivals.
“There have been quite a few new players coming in who are more digitally savvy, without the heavy legacy infrastructure costs of a big telco,” says Morroll. “If big telco companies lack sophistication in their digital services, the smaller, more agile, digital- first telco retailers may end up stealing the lead.”
Balancing the books
Of course, the desire to cut costs is all well and good – but what about the upfront pain of the investments telcos need to get there? To put it another way, how can the industry balance these expenses against the efficiencies they stand to gain through adopting a natively digital approach? West suggests that the biggest investment envelopes are being directed to last-generation network infrastructure deployment, with data and analytics being used to determine what the priorities are. “The million-pound question is: which use cases will be adopted by each customer segment and at what price?” he says. “We are also seeing investments being made in the platforms that will enable the desired customer experience of the future, as well as in bringing the front-end customer journey together. The investments in the digital journey are enabling cost efficiencies but
Finance Director Europe /
www.ns-businesshub.com
also driving revenues with a lower cost of sale, funding further investment.” West also points out that while telco is a capital- intensive industry, the brands themselves are strong and connectivity keeps them in customers’ lives. “By being a top priority for almost every consumer and business, [allowing them to] survive and thrive, this allows telcos to be the first contact to enable selling of adjacent services,” he adds. “5G is going to bring far more products and services to put telcos even further at the heart of digital transformation. Healthcare, manufacturing, media, port logistics are all showing large opportunities driven by 5G.”
“By being a top priority for almost every consumer and business, [allowing them to] survive and thrive, this allows telcos to be the first contact to enable selling of adjacent services.”
Ian West, KPMG UK Opportunities ahead
Morroll emphasises that telcos, aware of the challenges they’re facing, are trying to figure out how to play to their strengths. These include the ownership of fibre fixed networks, and the ability to cement customer loyalty in stores. Beyond that, Morroll thinks there’s a golden opportunity for telcos to get involved in the internet of things (IoT) and the so-called ‘connected home’. This might come in the form of offering advice, or even providing a call-out service to customers who need help connecting up elements of their home. “The connected home all goes back to Wi-Fi, and therefore it feels like a natural step for the telco businesses to branch into this and find yet another way to connect with customers,” she says. “It’ll be interesting to see which players move into that space, because the electronics retail industry might also decide to play in that field. I think it’s up for grabs.” West believes that operators are making a tremendous effort to evolve past their existing legacy environments, in which products and services developed incrementally over a period of many years. Today, connectivity alone will not suffice, and slow change will not keep a business afloat. “Owning the connectivity opens the door, but driving further services means going digital to connect customers and support their customers’ digital journey,” he says.
In the wake of the pandemic, society has realised how indispensable telcos actually are. From a finance perspective, the task lies with steering them towards a wholesale business transformation. ●
73%
Telecoms.com 65% Total Telecom 25
Consumers open to purchasing more digital services from telcos.
Telcos have implemented a roadmap for digital transformation.
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