#1 – Telco IT goes from misunderstood synergy enabler to customer value creator
In 2019, the trend of IT and Networks integration will decline, taken over by more business-oriented IT functions. The trend was based on an overestimation of the potential synergies, which have proven hard to reach. While some parts of IT can benefit from being part of Networks, the main part, i.e., application development and maintenance, does not. In our mind it’s clear that it is this increased value focus, not the underlying technologies, that will determine the organizational placement of operators’ BSS.
In recent years, operators have established joint technology departments: moving the IT and Networks departments together. Such moves have been driven by the pursuit of synergies, allowing them to boost the efficiency of both functions. However, in many other industries, IT departments are moving closer to the business areas, driven by the need for faster time-to-market, increased customer focus, and innovation. What is the right answer?
To many people it made sense to put IT and Networks under a common umbrella. The IT department has traditionally handled the BSS (Business Support System) and the Networks department has been responsible for the OSS (Operations Support System). Both being technology heavy and relying on people with similar competencies, it was assumed that there would be synergies – meaning improved efficiency and lower costs. In the telecom industry, with increased competition and stagnant growth, this is key to survival. Therefore, operators created joint departments, run by a combined CTO/CIO. However, the potential synergies were greatly overestimated and even harder to actualize.
On the other hand, some operators, and many companies in other industries, are moving IT closer to the business areas. This trend, spearheaded by fast-moving high-tech companies and disruptive startups, is driven by an effort to get closer to the customers, to deliver more value, and to do it faster than everybody else. And when the competition is shifting to new, agile and cross-functional ways of working, who dares to stay behind?
So, where does IT belong? With Networks, closer to operations, or with the business areas, closer to the customer? As with most things in life, this issue is not all black and white. The synthesis of these two trends is simply to split IT into two and move the parts where they belong. Application development, which benefits from cross-functional competencies, iterative involvement of end users, and a faster time-to-market needs to happen closer to – and together with – the business areas. Basic infrastructure and operations, which benefit from standardization and scale, have a rightful place at the Networks table. This organizational setup allows operators to get the best of two worlds. In the long run, it can result in more innovation, employee engagement and customer satisfaction, while at the same time reducing costs and preparing for cloudification and virtualization. Several operators have started to take this more nuanced approach to their organizations, and the rest will soon follow.
Therefore, Northstream predicts that in 2019, the trend of IT and Networks integration will decline, and most operators will embrace the idea of IT divergence: moving the parts of IT that are focused on value creation closer to the business areas; and moving the parts that are focused on cost-efficiency and standardization closer to the Networks department.