National carrier Telstra outlined its strategy to lock in customers and lift its lead over competitors in the increasingly competitive telecommunications industry at a recent integrator conference.
In a plenary speech at the Dimension Data Forum 12 conference in Queensland, Telstra data solutions and sales managing director Paul Geason, said the company was evolving its offering to present a simplified view of its products to customers.
Product-focused companies, including Telstra, had let their portfolio proliferate until customers had to work really hard to make the right choice, he said.
'The problem is, it's awfully hard to buy [these products], and customers have to ask which of the 250 products is good for their business. So we want to make this choice technology-agnostic,' Geason said.
Instead, service providers should work out what customers really want and simply offer that, tailoring the offering to meet individual needs instead of asking end users to sift through an array of branded goods and services, he said.
'We think only a limited number of things are important to our customers--such as speed and reliability,' Geason said. 'At the end of the day, with data there's got to be continuity in terms of the commercial model. So we ask the customer what speed and reliability they want and then offer pricing for that. In the past, we created a product and said, 'well, here's our range'.'
He said a simple change in the price point for each customer, without there having to be any product or technology discussion around that, would be the way of the future for service providers. The shape and form of the customer transaction offered a 'real way' for Telstra to differentiate itself from competitors, he said.
'We think this is going to be particularly helpful,' Geason said.
Such a strategy not only changed the customer's view of an offering, but relieved them of the responsibility for technology decisions most were unqualified to make, he said.
The implication is that if a service provider makes the product range--and therefore the technology--opaque to the end user, it increases dependence of the customer on the service provider, increasing customer loyalty and slowing churn in an increasingly competitive market, Geason suggested.
He said that such tactics could improve pricing and increase margins for the service provider at the same time as driving down overall costs for the end-user.
'We're first of all bringing together capabilities, hard-wired behaviours of packages--such as ConnectIP--which has been around 12 months and is really starting to do well,' Geason said.
He said ConnectIP pulled together the connectivity services with some associated products such as hardware and management services.
'The experience for the customer is one billing, one connection, end-to-end, one helpdesk, one-ness. And we have to do that more and more and more,' Geason said.
However, Geason pointed out that other service providers might have trouble picking up an 'efficient and cost-effective' network that enabled them to compete with Telstra.
'That's the challenge for the service provider,' he said.
Citing relatively flat to modest revenue growth in a number of telecommunications market sectors, Geason positioned the Telstra strategy as Hobson's choice.
Physical growth in data had been 'extraordinary', with Telstra carrying 2,000 Terabytes on its business data networks in June 2003, up from 800 Terabytes in June 2001. The company was recording 250 million SMS messages a month, with 18 million alone last New Year's Eve, he said.
He said IDC predicted e-commerce would be worth US$6 trillion of business in 2006, with 80 percent of that expected to be B2B e-commerce. EBay has sold US$14.9 billion worth of merchandise to data, a 16 percent increase on the previous corresponding period in 2002. Yet income from that data had not kept pace, he said.
'Operating costs have to come down. We're all competing for business and government dollars. The common view is we're seeing some structural issues in the market and maybe some ownership issues,' Geason said.
Competition, consolidation and rationalisation would continue to characterise the IT sector for the foreseeable future, he said.
'The reality for us is we expect competition to only intensify. Capacity doesn't simply come out of the ground,' Geason said.