The majority of chief information officers (CIOs) are spending over half of their budget on maintenance and simply ‘keeping the lights on’ (opex) and will consider outsourcing and standardisation in the next year.
According to independent research by PricewaterhouseCoopers (PwC) and Oracle into the IT priorities of European communications service providers (CSPs), 60% of CIOs currently spend more than half of their opex budget on ‘maintenance’ and said addressing this is going to be a major priority in 2012.
A more strategic use of outsourcing and standardisation will be central to this with 88% of CIOs planning an upgrade of their customer relationship management (CRM) systems in 2012, to free their focus on more strategic requirements and revenue drivers such as portal and content applications.
Billing and mediation and reporting will increasingly be done in-house, keeping CIOs in touch with the activities and data that will shape their business, which will require greater integration and more careful management.
According to the research, more than two-thirds (67%) of bespoke applications are delivered with a ‘substantial’ budget overrun (74% have some level of budget overrun), compared to 52% of commercial-off-the-shelf (COTS) applications which are delivered under budget. As a result, 95% of CIOs said they plan to increase their use of COTS in 2012.
The CIOs said they believe this move towards standardisation will create greater agility and make many of the partnerships they need to seek with content and media companies easier to switch on or off.
It will also reduce the cost implications of maintaining restrictive legacy systems, which can also prove a costly and problematic overhead in a business characterized by rapid mergers and acquisitions.
Oracle Communications VP of product marketing Dan Ford said: ‘CSPs are at a crossroads. They face another year of budgetary pressure, at a time when the need for innovation and competitive differentiation has never been greater. CSPs need to increase customer retention and improve the provision of content and services such as media and applications.’
David Russell, UK telecommunications leader at PwC added: ‘Through 2012 we see a dual challenge for CIOs as they come under increasing pressure to reduce both operating costs and capital expenditure, while meeting their organisation’s desire to invest in improving customer experience to drive retention.
‘With the squeeze on product pricing, the need to reduce operational costs, the requirement to simplify IT and increased competition, CSPs see improved customer experience as the key differentiator,’ he concluded.
PwC was commissioned by Oracle Communications to survey a mix of 30 communications CIOs, CTOs and senior IT executives in ten countries within the EMEA region.
The survey consisted of 26 questions focused on the respondents’ current IT environment and associated budgets, key drivers and challenges.
Forty-five percent of respondents provided both mobile and fixed-line services. The rest of the respondents’ organisations were split between either a mobile provider only (32%) or a fixed-line provider only (23%).
More than 50% of respondents had annual revenues of greater than US$5bn, including 18% with revenues greater than US$20bn.