About 15 years ago most of the billing systems were developed in -house. The focus of the billing systems were limited to circuit switched telephone calls. The few parameters that could be charged for, were basically on the basis of duration and distance. The substantial growth of the telecom market in the late 1990's caused by the liberalization of the Telecom sector in various countries around the globe has not only led to a huge number of new players entering into the telecom space, but also in creating a new arena of services like MMS, video conferencing, mobile tv, m- commerce etc, the billing of which is a big concern for the telcos. An uptake in the billing systems due to introduction of new services, billing complexities due to differential rating of services and billing complexities due to revenue sharing have made billing of telecom services extremely complex for telcos to carry it in-house. Outsourcing comes to the rescue in this situation. Telcos today focus more on their core business which is to provide good quality communication services and outsource the secondary jobs like rating, billing, mediation, customer care, data warehousing etc.
The main sources of revenues in the billing outsourcing market for the outsourcee are from the billing software licenses, Implementation of billing systems, either by the software providers like Intec, Amdocs, Convergys, LHS, Comverse etc, or by system integrators like IBM, Accenture, HP, Tech Mahindra, Wipro etc and finally through outsourcing of the billing operations which can be done as a managed service or as a billing bureau service.
The overall market of the telecom outsourced services is at about $210bn and is growing at a CAGR of 6.3%, and has been predicted by Insight Corp. to cross the $250bn mark in early 2011. The main component of this revenue is network outsourcing, which accounts for more than 50% of overall revenues. The Billing outsourcing market which is growing at CAGR of 7.32% in 2008 stands at around $4bn covering 88% of the overall billing revenues. Billing Outsourcing forms the major portion of the overall BSS outsourcing at almost 45%. But this share seems to follow a decreasing trend due to the popularity and acceptance of new services like revenue assurance and fraud management, which forms a huge portion of the spending on revenue management. The outsourcing trend in various service lines are wireline, wireless, cable/DBS etc largely varies. The major part of the outsourced billing market is formed by the wireline non IP i.e. more than 50%, but this is continuously decreasing because of the increasing share of outsourced billing in Cable/DBS (Digital Broadcast Satellite such as Dishtv, Tata Sky etc).
North America forms around 50% of the overall billing market and the trend followed by the American market highly dominates the global market. The recession in the U.S. market in 2002 reduced the I.T. spending by Telcos heavily but triggered the outsourcing growth. This seems to be happening again due to the slowdown in the U.S. economy. If this happens, the billing outsourcing market would become larger than $5.5bn at CAGR 7.32% in 2012.
Posted by : Adarsh Thakur
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9 comments:
good perspective given..
I have one question in mind : "Why do you think that the outsourcing revenues will increase". along with the detrimental factors that would enhance these revenues
Most of the outsourcing is based on process expertise while there is an urgent need of domain based processes and business expertise. There should be a focus on Enterprise Application Outsourcing. Telecom Industry as a whole has lacked the concept of Enterprise Application Outsourcing.
Detailed perspective given,showing the change in telephone billing with the passage of time,need of outsourcing & reasons for its growth.
a very wide overview has been given regarding the billing outsourcing. but i wanted to ask how the recession in USofA and the market scenario here in our country effects the outsourcing market?
Answer to Bhavesh's Question:
As I have already mentioned that outsourced revenues from North America houses more than 50% of the overall outsourced revenues. In my analysis of North America I have included only 2 countries US and Canada. US trends always has a significant impact on the global trends as it forms a significant portion.
In 2001-2003, the period of the dot com bubble burst and the US recession, the IT spending of the Telcos witnessed a decline but if you analyse the outsourcing trends during that period, it’s a bell shaped curve i.e. A sudden increase in outsourcing. Its obvious as the bottomline of outsourcing is cost-cutting, which is the need of the hour during recession, which is taking place in US currently due to the sub-prime crisis.
Moreover, the world telecom density stands above 50% currently and more than half of the world telecom market is now a maturing market, characterized by perfect competition. According to economics, the long run cost curve for a perfectly competitive market is a “U” shaped curve and the firms should operate on the bottom-most point, which is the least operating cost. Outsourcing is the only solution to this.
I hope this solves your query.
To answer Purva:
Please find you answer, in the comment in which I have answered Bhavesh's query.
I hope it solves your query also.
Priyanjali, its not always that process expertise is the cause of outsourcing, not even the major cause. I would like to quote the following examples:
Kingfisher Airlines is appreciated for its excellent services. But you will be surprised to know that its ground operations are outsourced to Indian Airlines, the worst service provider as perceived by many!!!
Levis has outsourced the manufacturing to Arvind mills, the owner of the unsuccessful brand, Ruf-Tuf!!
I think these examples negate the possibility of process expertise being the major cause for Outsourcing.
A very good analysis of the billing outsourcing market. I wanted to know the delivery options have you considered in the analysis of the outsourcing revenues and what would be the future trends in each of them.
Aditya, you have raised a very good question. It is extremely necessary to understand the delivery options for outsourced billing that are considered while analyzing them. The delivery options considered are:
• Wireline non-IP Voice and data communications over a fixed-wire network. Includes plain old telephone service, value-added services and private networks
• Wireline IP Includes next-generation wireline data services, such as "infotainment," video streaming and multimedia conferencing
• Wireless non-IP Non-fixed-wire communications through paging, cellular and personal communication systems
• Wireless IP Includes next-generation wireless data services such as Short Message Service, Multimedia Messaging Service, video streaming and wireless gaming
• Cable/DBS Includes cable TV and Digital Broadcast Satellite (DTH)
The major part of the outsourced billing market is formed by the wireline non IP i.e. more than 50%, but this is continuously decreasing because of the increasing share of outsourced billing in Cable/DBS indicating a very attractive and growing market.
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