Independent research by PricewaterhouseCoopers (PwC) into the IT priorities of Communications Service Providers (CSPs) in Russia has found that 43 percent of CIOs currently spend more than half of their operating budget on “maintenance.” That is compared to 60 percent of CIOs in the rest of the Europe, Middle East, and Africa (EMEA) region.
While that suggests Russian CIOs may be managing many of their costs more effectively than some EMEA peers, more than two thirds (69 percent) of Russian CIOs did report significant overspend related to their use of bespoke applications.
The average overspend on bespoke applications was 15 percent, while overspend on commercial-off-the-shelf (COTS) applications was 11.3 percent.
When CIOs spent less than was planned, the average cost-saving on bespoke applications was 3.5 percent compared to 11 percent for COTS applications.
CIOs believe the move toward standardization (87 percent plan to increase their use of COTS in 2012) will create greater agility and make many of the partnerships they will 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 prove an expensive and problematic overhead in a business characterized by the need to bring products and services to market quickly.
Increased use of COTS in 2012 and the associated lower total cost of ownership will allow CIOs in Russia to target more of their budget at growth activities.
Nearly three quarters (72 percent) of CIOs in Russia plan a major upgrade or replacement of customer relationship management (CRM) systems in 2012. This will free them to focus on more strategic requirements and revenue drivers such as portal and content applications.
In EMEA, 45 percent of CSPs used an average of 15 applications or more to handle CRM systems. In Russia, systems are more streamlined, with only 20 percent of CSPs using 15 applications or more.
“This research shows CIOs in Russia are focused on simplifying and streamlining their core IT operations, and have made good progress in getting on top of maintenance costs. That is an important step toward focusing their budgets on growth rather than keeping the lights on, at a time when CSPs around the world are under budgetary pressures and faced with the need to increase innovation and competitive differentiation. By streamlining IT and reducing overspend on bespoke applications, CSPs across Russia will be better positioned to focus on the improved provision of content and services such as media and applications to customers, increasing loyalty and creating new revenue streams.“We are seeing renewed interest in business applications, such as CRM, Web Commerce, Self-Service, and Retail Point of Service, as companies look to better engage with their existing customers. We are also seeing CIOs increasingly buying off-the-shelf applications to create a more standardized IT ecosystem, across their own business, but also to tie in with standardization across partners,” said Dan Ford, vice president, product marketing, Oracle Communications.
“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 organization’s desire to invest in improving customer experience to drive retention. CSPs see improved customer experience as the key differentiator and that means focusing spend and IT resource on effective CRM, not maintenance of bespoke apps,” said David Russell, UK telecommunications leader, PwC.
PwC was commissioned by Oracle Communications to survey a mix of 22 communications CIOs, and CTOs in Russia, and 30 CIOs, CTOs and senior IT managers in 10 countries within the EMEA cluster, in the first quarter of 2011, to understand their IT agenda in particular with respect to COTS applications in the short (18 months) to mid-term (three years).
The survey consisted of 26 questions focused on the respondents’ current IT environment and associated budgets, key drivers and challenges for change and future IT strategies specific to COTS.
Thirty-six percent of respondents provided both mobile and fixed-line services. The rest of the respondents’ organizations were split between either a mobile provider only (36 percent) or a fixed-line provider only (27 percent).
Nearly one third (32 percent) of respondents had annual revenues of greater than US$5 billion, with 41 percent having an annual revenue of between US$1 billion and $5 billion.
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