Commissioned by MDS Global, a research report by telecoms analyst house STL Partners has revealed that fully embracing digital business support systems could enable operators and service providers to unlock a 34 per cent boost to their current profit margins for enterprise services.
The report – The Digital BSS Dividend – says that digitising BSS systems will allow operators to increase EBIT profit margins for enterprise services even in the face of declining revenue growth. Importantly, the report does not tag a single major factor to underpin the profit boost, but rather highlights marginal gains across a number of areas that impact profitability.
“The headline number is dramatic and impressive,” said Akil Chomoko, Chief Marketing Officer at MDS Global, “but this is no stretch target; rather it can be reached through small incremental changes that combine to make a major difference. This is about the marginal gains that add-up to a big increase in overall margins.”
The research analysed the impact digitising business support systems could have across five key areas of a service provider’s operations – realtime billing management, automated service configuration, partner and wholesaler relationships, customer data analysis, and account management.
Based on the analysis, the report studied the individual and combined effects the incremental changes and marginal gains enabled by digital BSS systems could have on service provider EBIT across the five areas over a three-year period.
The combined improvements ranged from a low of 2.7 percentage points to a high of 4.1 points. The expected midpoint improvement of 3.4 percentage points would equate to a 34 per cent hike in profitability for a typical service provider operating at an overall historic EBIT margin of around ten per cent.
The research highlights that EBIT improvements would come both from digital measures that can reduce service provider operating costs, as well as those that can drive new revenues by making customer acquisition and new service introduction easier and more efficient.
The report also says that new and developing technologies such as Edge Cloud, 5G, IoT and AI all promise to open up new services and business models for B2B customers that service providers can embrace – especially given the transition towards more flexible, efficient and ‘as-a-service’ solutions. It states that the adoption of digital business support systems would support and augment the delivery of these services by creating the seamless and dynamic back-end systems required both for customers and for the service provider’s channel partners.
Although the report identifies automated service configuration and purchasing as the area where digital BSS can have the greatest impact on EBIT margins; it also stresses that the realtime billing management provided by digital systems would help address a major pain point by providing customers and partners with accurate and timely access to information.
The findings show that adopting these measures creates the environment to help develop new or customised services by providing access to up-to-the minute customer data that can inform and define the ‘sticky’ service propositions that will reduce enterprise churn.
A free copy of the full report – “The Digital BSS Dividend: Unlocking 30pc EBIT rise for Enterprise Services” – is available on the MDS Global website.