The Telecomms Roller Coaster
- 05 April, 2006 12:29
In Australia, telcos are shaping up, shipping out or looking for a slice, and CIOs intend to use that to their advantage.
While US CIOs grapple with the aftermath of recent telecomms mega-mergers and their effect on existing voice and data contracts, their Australian counterparts are facing similar dilemmas amid a rapidly changing landscape.
Unlike the US where consolidation is rampant, the local market is a mix of burgeoning second-tier carriers and larger suppliers that are either shedding staff to remain competitive or putting up "for sale" signs. One thing they have in common is a hunger for a slice of Telstra's pie, which they express mostly by spruiking convergence as a path around the Big T's last-mile monopoly - and towards better value for customers.
Bank of Queensland CIO and head of technology Nick Young says the question he and other CIOs face is: when will enterprises be able to move to faster, cheaper services? With a cloud of uncertainty over Telstra, Young is hopeful this will be the year that CIOs finally get access to better services to meet the demand for low-cost bandwidth.
"That's the challenge we all have," Young says, adding the Bank of Queensland is "fortunate" to be able to operate on low bandwidth infrastructure because of its application architecture. "We've been able to manage at a lower bandwidth than our competitors but face the same issues - customers want access to more services and we are always looking at ways we can give them that without blowing costs out," he says. "It's difficult to do long-term planning when you have that coming, but I'm hoping over the coming months it will become clearer."
In the bank's case, Young is forced to be pragmatic with carrier selection in the interest of providing services to a geographically dispersed customer base. "You need someone with capability to get to all end points and we have hundreds of them," he says. "Certainly, there are ways you can go at looking at different providers for different services and go at it from a business benefit [viewpoint]." Young claims that the amount of benefit sits somewhere between "the size of the impact" and not multi-sourcing services "for the sake of it".
Given the increased likelihood for larger organizations to multi-source, this also means a higher prospect of billing inaccuracies, which Young says there is "no magic" to alleviating. "Sit down and make sure you have appropriate governance in the company and make sure you are getting charged the right rates for the services," Young says. "Otherwise, you will spend too much money."
The rising tide of competition has allowed CIOs to vote with their feet to avoid inflated pricing regimes, but even so, Young believes moving carriers is still a big decision. "It's certainly not a world where you can just flick a switch and be with another provider," he says. "With the complexity of the world we operate in, especially a bank, it's simply not possible."
Another issue is contract length, which Young says also needs to be approached as a trade-off. The usual rule is: the longer the period of your contract, the better the deal, since the provider gets the benefit of certainty that comes with long-term business. However, Young says that CIOs looking to use the threat of switching carriers after negotiating a short-term contract need to have realistic expectations about service levels and pricing, which would be better under a longer contract.
Amid all the challenges that managing voice and data services presents to today's CIOs, Young remains optimistic about the future of a constantly diversifying market. "We're waiting to see what the new Telstra is like," he says. "And also how that impacts the competitive positioning of Telstra's competitors and how they respond to changes that occur at Telstra."
Not surprisingly, Young says CIOs will be very happy if they get better services and lower costs as a result of the changes.
Two Carriers at Once
Banking and financial services company Suncorp is also combing a multitude of options for its communications requirements and, like the Bank of Queensland, its complex network ensures that obtaining a single pipe for all its needs remains a distant hope.
Suncorp's general manager of IT infrastructure services Paul Cameron says a dramatically changing market has forced Telstra to reconsider its value proposition. "When Telstra was the dominant monopoly everything was provided off catalogues," Cameron says. "Now there is competition with the likes of Optus and PowerTel."
Cameron agrees with Young that a change of service provider does not simply involve "flicking a switch", but he chooses to encourage competition by using two carriers simultaneously. "We have a core 'metro' network and the WAN," he says. "There's plenty of separation so you can use separate carriers. You can churn. That never used to occur before; now you don't have to buy [from] the Big T."
Cameron is a firm believer in negotiating shorter two-year contracts to "survey the market" and to keep abreast of the changing face of telecomms. "Technology moves quickly - a good example of that is with ADSL2+ - so you're getting more bang-for-buck," he says. "You see little shop fronts that are agile and move flexibly. Telstra has no other option but to compete at that level."
To counter the "real" issue of billing problems, which stem from consolidation, and the provider's level of "flexibility and transparency", Cameron advises regular auditing and bargaining lower-tariff services around mobility.
"Auditing is a necessary evil if the billing system isn't transparent," he says. "Often the enterprise has an allocation model and leverages carrier systems. When consolidation occurs, the value proposition you had with your telco of choice is lost, but we're not seeing that a great deal at the moment. The differential is price and how they bill their services."
Cameron uses the example of "tariffing" mobiles that are used within the organization's own building as a way to offer more flexibility. If a carrier's billing system can assist with reduced tariffs, this makes mobility within a building or campus more attractive. Cameron says carriers are pursuing that component, but the billing systems are difficult to modify.
As reported by Computerworld in July 2005, the Bank of Queensland was an early adopter of VoIP for its corporate network, a move Suncorp and other financial institutions will inevitably follow.
"VoIP is not about technology any more, it's about business communications," Cameron says, adding that convergence is now becoming very much a reality. "We are moving to a converged environment which is a good thing. You don't have to go to separate voice and data carriers, but can go to one. The business model is driven by cost reduction, but the more compelling proposition is consistency of service across the whole of business."
Believing there are more business benefits to VoIP than "just saving money", Cameron's interest lies with the possibilities of a unified directory, lack of geographic restrictions, and improved business continuity. Not only will convergence ease the billing "pain", Cameron says, but it will also introduce more purchasing options, such as the choice to buy communications services or raw data.
Cameron even wonders whether voice billing systems themselves will become irrelevant in the face of "one pipe" carriers. "The outcome [of VoIP] is quite attractive but it should be done in an organic fashion," he says. "Whatever your investment plan looks like, plan for convergence."
Cameron's holistic advice for CIOs dealing with carriers is simple - don't commit yourself. See the big picture and ensure you create a partnership that can deliver a service to meet medium and longer-term goals, he says.
SIDEBAR: Key Objectives for CIOs
Don't fence-sit. Exercise your right to competition by using alternative carriers and better value and services for all will inextricably follow.
Shorter contracts. With the telecomms industry in a state of mercurial change don't miss the boat with contract lock-in.
Diligent procurement. Have subject matter experts review all contracts, not just the lawyers.
Billing transparency. In addition to keeping a close eye on what you're paying, ask service providers to be more open in what they bill you.
Prudent bundling. Don't bundle different types of services with the sole anticipation of a discount, as other charges may increase and service levels drop.
Plan for convergence. Fear it or favour it, VoIP has irrevocably entered the fray, so prepare to manage a converged infrastructure with business benefits, not technology, the key drivers.