Why analytics is the answer for the modern day CFO

Expert Speak

By Sandeep Banga

Gordon Gekko, a fictional character in the movie Wall Street (1987), rightly said, “The most valuable commodity I know of is information.” Fortunately, for telecom operators and their Chief Financial Officers, they possess no dearth of this ‘valuable commodity’, which they can leverage through telecom analytics.

But let’s take a step back for a moment.

The telecom world as we know is evolving, and with it, the role of the CFOs has also been undergoing a drastic change. Their role is no longer confined to solely focusing on past performance, on the numbers, and on financial reporting; but the mandate seems almost universally to have been exceeded, with the CFOs needing to also provide information about where the business is going and how quickly it is getting there.

The CFOs’ involvement in corporate strategy has also become an integral part of the job, with CFOs now having the ability and the mandate to contribute directly to the direction of the business as well as reviewing and reporting on its performance. This all means that today’s CFOs need to be more strategic and need to ensure that there is better alignment with strategic business imperatives and this requirement puts them at the focal point for not just financial reporting but also managerial reporting, along with their core objective of maintaining a strong and healthy balance sheet.

But, as we know, the dynamic nature of the telecom environment places multiple hurdles in the face of the modern day CFO, which include, but are not restricted to the following:

CFOs today need to ensure that they are able to increase margin and earnings performance

• It is a well-known fact that ARPU has been declining steadily in every region of the world, and coupled with slow revenue growth is leading to a steady erosion of margins since 2010 in most regions. In the midst of these challenges, the mandate of CFOs to increase margins and earnings performance is becoming increasingly critical, and difficult.

Organisational attempts at growing revenues are being deflated by errors and leakage

• Addressing revenue leakages is a major concern for telecom operators, and is quickly becoming a CFO mandate, considering most RA teams ultimately report to the CFO. Considering that revenue leakages have a direct impact on the revenue growth, it is now the role of the CFO to take a proactive stance to address any errors and leakages.

Assessing risks and developing measure to prevent security breaches

• Like revenue leakages, security breaches and telecom frauds can cost operators heavily, and are obstacles in the way of CFOs in maintaining a strong balance sheet. $38.1 billion (USD) was lost to frauds in 2015, and though the number is decreasing year-on-year (YoY), telcos are still feeling the pinch of losing cash to frauds, and the task to resolve this lies with the CFOs.

Increasing capital expenses (capex) during a period of decreasing revenues

• A recent survey that was conducted by TMForum led by Subex revealed the following:

• 1 in 3 operators did not measure returns on capex investment

• 77 per cent of the respondents believed that inadequate asset utilisation leads to increase in costs

• 55 per cent of the respondents believed that network planning is based on guesses

• 64 per cent believed that capex planning is driven by technology and not business objectives.

Moreover, global CSP revenues declined by 5.3 per cent for the year ended March 2016, while capex increased, pushing up capital expenses (capex/revenues) to 19.8 per cent for the year

Increasing competition, even from OTT players

• Which, according to Ovum, is expected to cost telcos a total $386 billion between 2012 and 2018

Responding to the volatility and velocity of change

• The signs are that revenues from traditional services will plateau over the next 10 years. Indeed, income from traditional communications services is anticipated by some analysts to decline by 50 per cent from current levels by 2025. This means that CSPs need to embrace the digital revolution, and can no longer remain as dumb pipes but need to be seen as smart pipes by offering digital services and be seen as DSPs or even LSPs (Lifestyle Service Providers).

And the challenges don’t just end there! Today CFOs need to spend more time and effort managing the future rather than dwelling in the past, and hence need to take an even closer look at data analytics to connect the dots and to predict the future. To their advantage, telecom CFOs possess unprecedented quantities of data, from multiple sources including customer data and network data, and can leverage this data through the power of telecom analytics.

If leveraged in the right way, by applying advanced analytics, telecom CFOs will be able to address the challenges they are facing, and achieve business outcomes that align with their agenda, through the generation of actionable telecom insights. CFOs will possess the power to have a 360 degrees view of their business context and identify and even predict issues, opportunities and threats proactively, and will help address them before internal audits. For these reasons, it has now become the mandate of the CFO to drive analytics for both strategic and operational decision-making.

By generating telecom insights, an Advanced Analytics Solution can help CFOs to meet the increasing expectations placed on their changing roles by enabling them to:

• Proactively predict and direct resources to counter risks and leverage opportunities

• Reduce uncertainty by predicting disruptive changes and respond and adapt to create growth opportunities

• Predict revenue leakages and fraud to proactively address risks

• Predict redundancies and reallocate budgets to reduce and control costs

• Increase impact of pricing and promotion decisions through optimisation.

Advanced Telecom Analytics has the scope of helping CFOs of telecom operators meet business objectives effectively, and we have even witnessed, or rather helped a Tier 1 CSP, based in North America save costs by purely helping them resolve disputes. Through the generation of telecom insights, the partnership helped the CSP improve their hit ratio of predicting and addressing disputes to 9x, which in turn helped them save up to a few million dollars. Thus is the power of Advanced Telecom Analytics.

About the author:

Sandeep Banga is responsible for Product Marketing of Subex’s Analytics portfolio. In addition to this role, he also looks after Public Relations and Analyst Relations for the company. He comes in with 9 years’ experience in the Marketing domain.

(The story was first published on www.subex.com . To read the story original story, please click here: https://www.subex.com/why-analytics-is-the-answer-for-the-modern-day-cfo/ )

References:

http://www.ey.com/gl/en/issues/managing-finance/the-dna-of-the-cfo—perspectives-on-the-evolving-role—the-cfo-s-contribution

https://www.strategyanalytics.com/strategy-analytics/news/strategy-analytics-press-releases/strategy-analytics-press-release/2015/01/23/global-trends-for-mobile-operators-show-stagnant-revenues-and-declining-margins#.WD-iJeZ9600

https://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/global-revenue-assurance-survey/Documents/global-revenue-assurance-survey.pdf

https://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/global-revenue-assurance-survey/Documents/global-revenue-assurance-survey.pdf

https://www.ovum.com/research/communications-service-provider-csp-revenue-capex-tracker-1q16/

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One Comment to “Why analytics is the answer for the modern day CFO”

  • Very nicely penned article, backed up by relevant data points. The fact is well known and it is high time for all CFOs across other sectors besides telecom gear up for AI and analytics. These tools not only make the decision easier but also fast (which is equally important in this dynamic world).

  • It was a 360 degrees view of finance as a career to do a CFO role in a large listed company. Few can give this kind of candid view.

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