Those of you who attended 3GSM this year should have received an email from GSMA prior to the show declaring that 2007 is the year of cost control. What do you think?

Recently, there's been a great deal of commentary on the slowing growth trends in the Telco industry (view our flash presentation for more on market commentary on declining growth trends). Our research in this area has discovered that global wireless operators with an average annual Operating Expenditure (OpEx) of $24 billion will need to save 4% in total operating expenses, or a staggering $700 million per year, in order to recover their cost of capital.


So the market is telling us that cost transformation is an important consideration for Telco Operators – but how do you do it right – while simultaneously delivering innovative services and appeasing your customers?

I believe that it comes down to a balance of how much time and energy you can afford to invest in reducing costs versus developing and launching new services. The two should be considered together, because operators can't afford to underfund new products and services.

Reducing costs should be viewed in a holistic manner, considering the entire enterprise as opposed to just one function. We conceived our framework for cost analysis and modelling after our research suggested that combining top-down targeting with bottom-up transformational diagnostics can help to lead to sustainable cost leadership. I'd also recommend looking at less traditional areas, such as channel optimization and routing, product and offer simplification, and business intelligence. To take the example of business intelligence – it's not an area historically associated with cost reduction, but our findings reveal it as a significant source of potential value, as businesses learn to use the data they have in more scientific ways and apply the resulting insights to achieve more efficient and smarter ways of working.

Is 2007 the year of cost control? My answer is not a simple yes or no…

The Telco industry is maturing at different paces. Northern Europe is already thinking about cost reduction and I think the U.S. will be next. Asia has had success in growing new products and services so their focus will remain on delivery for the time being while Southern Europe is still very much in a growth phase.

Cost savings will continue to be a hot topic for Telecom Operators for some time to come. You only have to look at other more mature industries for insights on how big an issue it will be.

Do you agree that 2007 is the year for cost cutting?