Costing System Maturity in Telecommunications Companies - Results of a Detecon Survey

Study Costing System Maturity in Telecommunications Companies Results of a Detecon Survey We make ICT strategies work Results of the Detecon Survey Study < Costing System Maturity in Telecommunications Companies Results of a Detecon Survey February 2010 © Detecon International GmbH 1 > Study Results of the Detecon Survey This publication or parts there of may only be reproduced or copied with the prior written permission of the publishers. Published by Detecon International GmbH Oberkasseler Straße 2, D-53227 Bonn www.detecon.com 2 © Detecon International GmbH Results of the Detecon Survey Study < Table of Contents 1 Executive Summary 4 2 Findings 5 3 Detecon‘s Conclusion 6 4 Detecon‘s Recommendations 8 5 Survey Results 10 6 The Company 20 © Detecon International GmbH 3 > Study Results of the Detecon Survey 1. Executive Summary The objective of this survey is to give a brief overview of the maturity of cost accounting systems at European tele- communications operators by focusing on the following aspects: “What is the position of the costing department in the company?”, “What information does the costing department currently deliver every month?”, “What are the deliverables used for?” and “What tools are used to produce this information?”. Detecon interviewed 22 costing professionals of 16 European telecommunications operators in the period of August to November 2009 to find out if there is a specific costing trend. Each interviewee was asked to answer 20 questions. Interviews were conducted either by phone or in one-to-one meetings. Of those interviewed, 32% came from fixed line carriers, 32% from fixed + mobile carriers, 27% from mobile carriers and 9% from other telecommunications-related companies (e.g. satellite operators). The intervie- wees included 55% Costing Professionals and Managers, 33% Executives and 15% Others. The responses of the interviewees were grouped into three regions. The regional grouping was done as follows: Region West (Germany, Luxembourg, Switzerland, UK), Region East (Czech Republic, Georgia, Poland, Romania, Russia, Slovakia, Ukraine, Uzbekistan) and Region South (Croatia, Macedonia, Turkey). Due to the selected amount of participants, no comments are made as to the interpretation of regional responses. 4 © Detecon International GmbH Results of the Detecon Survey Study < 2. Findings Most respondents agree that the costing department is an essential function that delivers value to their business. It seems that most operators can now calculate the cost and profit per service and tariff in regular intervals. However, this Detecon survey reveals that operators seem to struggle to determine cost and profit per customer or even sales channel. When it comes to using costing information in day-to-day business life, most respondents agree that Pricing, Strategic Business Cases, Regulatory and Cost Benchmarking are the key areas where costing input can be used to calculate more precisely the economic impact of managerial decision-making. Interestingly, customer cost and profit information is quite often used to calculate the life time value of specific customers. However, as the answers to questions 14 and 15 show, it seems that customer value is not used to manage customers differently. While most operators have implemented Microsoft Excel or Access based costing tools, less than 50% have deployed professional vendor software yet as the responses to questions 18 and 19 show. In the interviews, many respondents indicated that initiatives are under way to integrate the existing tools into a common ERP envi- ronment. Most respondents explained that costing teams have been put in place in the Finance Department in the last 3 to 5 years and that these teams have become a well-regarded interface function to many other parts of the business. What Detecon also found out is that the level of costing systems maturity is very much correlating to the profit margin over the years that a telecommunications company has been operating. These correlations are summarized in the graph below. Costing system maturity Profit margin Western European Operators Eastern and Southern European Operators 5 10 15 20 Years of telecommunication company’s operations Key business focus � Growth and revenues � Intensifying competition and � Cost cutting and efficiency � Profitability and selected regulatory constraints projects growth Obstacles for costing systems � Focus of the business is on � The need to better understand � Strong management pressure � Implement the growth, costing systems are costs arises due to pressures to set up a costing system in recommendations of the not in scope of management from the regulator to reduce a minimum amount of time costing analysis prices and covering all requirement � Link costing systems with � The benefits of costing outside from all parts of the planning & forecasting and the scope of regulatory organization without any management incentive purposes is not understood priorities and with frequent schemes changes � Keep systems simple and Value added improve cycle times � Limited at this stage � Show early on who are the � Give management a tool that � Get management thinking from economically important shows the performance “revenue” to “profit” growth customers, services, channels reality at a much greater level � Give a tool that allows for and align the organization and of detail to enable better monthly performance tracking Profit margin curve budgetary investments decisions Costing system maturity curve © Detecon International GmbH 5 > Study Results of the Detecon Survey 3.