M&A as the "Normal" State of Business
M&A has become an invaluable business strategy used by many communications service providers (CSPs) to bring incremental business to their coverage areas, and to increase their competitive advantage. During 2005-06, the pace of M&A continues to accelerate, and the importance of IT therein continues to grow. However, unrealized economies of scale in IT and other key areas are a looming threat to success of these mega mergers.
CSPs (e.g., telcos and cable/satellite companies) are increasingly falling victim to a number of typical M&A integration problems - including lack of M&A process, over-integration, loss of IT staff, and not realizing assets and economies of scale (both post-acquisition and post-divestiture). Coping with multiple operational systems to support LOB-centric customer and product lines has been a way of life for most enterprises whether they evolve organically by adding new product/services or customer segments or by M&A-driven agglomeration.1 Whether it be airlines, financial institutions, pharmaceuticals or retailers, etc. it is quite clear that such M&A deals add new products and customers subsystems to an already overtaxed IT landscape.
This costly outcome is greatly exacerbated when the scale of the customer and product support systems approaches that of the mega M&A that is taking place in the CSP world. The good news is that these deep pocket enterprises have tremendous incentives to pioneer the use of new software technologies such as CDI as they look to reap the benefits of their M&A activities.
Specifically, the greatest restructuring of the worldwide communications industry since the Bell system breakup in 1984 is now under way via the gargantuan SBC/AT&T and Verizon/MCI mergers. This market consolidation is in its early stages and over the next several years there will continue to be major M&A and other major partnering among CSPs of all sizes and in all regions of the world. The current network and business model landscape poses serious challenges for the status quo as the pervasiveness of IP has revolutionized the rules of the game. CSPs must rise above the role of commodity player to create next-generation services - as well as pricing and partnership models - that will survive and thrive.
Most large businesses (i.e., the Global 5000 largest firms) are moving towards being able to reconcile account administration by "customer view" across channels rather than LOB-centric "product line" view. This is very common when we look at the customer and product landscapes resulting from business mergers occuring in the worldwide communications industry. As we all know, telcos added to their product stacks each time they introduced a new product - i.e., they have to add yet another operational environment to support the sales and service for that product. Historically, each new "product" requires new back office systems, new customer care systems, etc. - all of which further contributes to the business's inability to have one view of the customer. And the rate of new product introduction is not slowing down. Today, the CSP product marketplace evolves rapidly as both telcos and cable companies roll out voice over IP (VoIP), video on demand, IP television (IPTV), et al. VoIP is one of the key drivers for the introduction of CDI as the CSPs are being stressed to rapidly deploy such products. In virtually every major telco there is such a proliferation of such products and channels that both the IT landscape and the staff are increasingly stressed. In particular, the CSPs are looking to roll out many different low-end products that captivate (capture) consumers by the stickiness of that application - i.e., once you've integrated such specific functions into your consumer lifestyle, it is increasingly unlikely that you will switch CSP and, therefore, the consumer becomes "captive" and prone to buy more up-scale, high margin services as well rather than switch CSP and go through ramp up and integration of yet another CSP's services. Such product/service "bundles" are compelling when they work and this is a well known technique in the cable and telephone industries as a way to reduce churn.
Further stressing the CSP is are the regional disparities caused by regulatory issues that require continuation of product bundling. Generally speaking there is a proliferation of segmentation across consumer/residential, small-to-medium business (SMBs) and large enterprise customer segments. Historically each of these segments has had their own provisioning/engineering support systems, billing systems, etc. All of this growth has contributed to an inability of the CSPs to rationalize their view of the customer/product portfolio. From a customer perspective this has led to an uncoordinated treatment depending upon which channels and which products you are calling in about.
