Changing from management-centric systems to consumer-centric operations is the challenge facing today's telecom companies. Increased competition has resulted in the need to review basic operating principles. But streamlining business processes can lead to opportunities for overall diversification. Learn how one major communications company re-invented and transformed every aspect of its business, reduced costs and redeployed staff using Oracle's E-Business Suite to: Consolidate financial systems Integrate and manage real estate assets Reduce lead time Read one analyst's view of the causes behind the challenges facing today's telecom giants, and the changes that will be necessary to operate efficiently, tailor services to market demand and change consumer perceptions.

As Published In August 2005

Taking Flight
By David Baum

Korean Communications company KT streamlines and reduces costs.

Few enterprises are taxed with the enormous complexities and challenges of privatization, and even fewer would describe such a task as an opportunity—one to improve operational efficiencies, promote service innovation, and maximize customer satisfaction. But for KT, South Korea's largest communications firm, privatization was truly perceived as an opportunity, and the upgrade and consolidation of KT's information systems was crucial to realizing increasingly streamlined operations and reduced costs.

KT's IT investments are driven by its long-term view into the future of the communications industry in the Asia-Pacific region. "We see a number of events affecting our industry in the coming years, including broadband convergence networks involving technologies such as WiBro [Wireless Broadband] and WCDMA [Wideband Code Division Multiple Access], that will provide widespread high-speed wireless access to online products and services," says Dong-Woo Kim, financial manager at KT.

But where will change be chiefly felt? How does the growing trend toward industry consolidation affect the customer? Industry analysts such as Jim Warner, president of the TeleManagement Forum—a nonprofit organization that provides leadership, guidance, and solutions to improve management of communications and information services—are adamant that the inescapable move is toward convergence and streamlining of business processes. Companies that fail to take note of the changing times may be doomed to obsolescence. "I think, in most cases, telecom companies are still suffering from a monopoly hangover—as in, 'We control the market; therefore, we will decide when certain things will take place,' as opposed to, for example, the financial-services industry or retail industry, where, if company X detects an opportunity, it will jump on it," notes Warner.

"Mergers and acquisitions, as well as strategic alliances, will create organizations capable of delivering a variety of products and services—including mobile, fixed line, personal portals, and content—from a single supplier," Kim notes. "The goal is to provide ubiquitous access to services for consumers and businesses no matter where they happen to be at any given moment. The cable-based telecom business continues to decline in favor of wireless data access. And we are still looking for ways to better integrate mobile communications, personal computing, and home appliances. In this way, Asian telecommunication companies hope to find new profits through diversified business opportunities."

But when it's time to start the transformation process, what tools worked for KT? According to Kim, "With our Oracle solution, we've seen innovation in our work processes and better use of assets and manpower." KT's CEO, Yong-Kyung Lee, concurs, adding that "Oracle's E-Business Suite is at the core of our consolidation of internal systems. It is the basis for our achieving greater efficiency and transparency."

KT used the accelerated implementation methodology (AIM) for the project. AIM links each major project milestone with prior high points through a checkpoint-review process, ensuring that requirements are current and assumptions are still valid. In addition, KT built time into its project plan for gap analysis and system changes, and was able to deploy the system in less than 18 months.

The Right Information, When It's Needed

Spotlight KT Location: Bundang, South Korea www.kt.co.kr Annual revenue: 11.6 trillion Korean won, or US$10 billion (FY2003 Exchange Rate of US$1 to 1159 Kwon) Employees: 43,000 Oracle products and services: Oracle Database; Oracle Application Server; Oracle Demand Planning, Oracle Advanced Supply Chain Planning, Oracle Inventory, Oracle Purchasing, Oracle iProcurement, Oracle iSupplier Portal, Oracle Projects, Oracle Enterprise Asset Management, Oracle Property Manager, Oracle Intelligence, Oracle Product Lifecycle Management, Oracle CADView-3D Other products and services: Hardware: IBM; OS: IBM AIX Partners: KTI Corp., Hyundai Information Technology Co. Ltd., and IBM BCS Korea

KT used Oracle Financials to consolidate three financial systems into one. Implementing the new system allowed the company to redeploy 25 percent of its finance staff. Even better, month-end financial reporting that once took 15 days to complete now takes only 5 days. This faster access to more-accurate financial information is also helping KT to meet its transparency and corporate-governance goals.

KT also integrated its real estate, logistics, purchasing, construction, and asset-management processes with Oracle Property Manager, Oracle Purchasing, Oracle Projects, Oracle Enterprise Asset Management, and Oracle Product Lifecycle Management. Previously, individual departments managed these processes independently, and some processes were performed manually.

"Our managers now make better decisions based on real-time access to more-accurate information," explains Kim. The company reports a 99 percent accuracy rate between its financial records and actual inventory.

Asset Management Made Easier

Like most telecom companies, KT faced major challenges in effectively managing the huge number of physical assets it owns. With the implementation of Oracle Enterprise Asset Management (eAM), the company streamlined its asset-management processes, from asset purchase and installation through ongoing maintenance and retirement. KT's facility management team implemented a single, integrated bar code system for tracking assets. Tracking product codes and location codes enables the communications firm to manage the information efficiently.

"Oracle's eAM solution is the best fit for managing telecommunication assets that we have seen," says Kim. "It has more than met our expectations for improving our facility processes. The new system brings KT's asset-tracking capabilities to a new level." Each physical asset is mapped to a financial asset record. Every asset is also mapped to a business unit, which means KT has a better understanding of its return on assets, future asset-investment requirements, and utilization rates by business unit. This level of detail is improving daily asset maintenance, tracking processes, and long-term planning and investment decisions.

Real Estate Management Simplified

KT automated its previous paper-based real estate map documents into a digitized format and implemented Oracle Product Lifecycle Management to integrate proposals, construction maps, documents, and other types of map materials. This step allows KT to increase work efficiency, better manage the information, and share it with its outsourcing companies.

Better Supplier Collaboration Reduces Lead Times

On average, for KT, lead times for components and replacement parts have fallen from 45 days to 17 days with the implementation of Oracle Purchasing and Oracle iSupplier Portal. Oracle Application Server uses XML to establish communications channels with more than 7,600 suppliers that are part of the system, which tracks purchasing activity from planning, requisitioning, ordering, and invoicing through delivery. Automating previously manual processes has increased purchasing efficiencies dramatically and has streamlined KT's communications with its large supplier base.

Q&A Jim Warner: The Power of Lean and Industry Convergence How are communications companies handling the new world of increased competition, deregulation, and runaway consumer expectations? Jim Warner, president of the TeleManagement Forum, speaks to Profit on these topics and more. Profit: What does the future look like for the communications industry? Warner: The biggest thing is this notion of getting services "anytime, anywhere, on any device." At the technological level, that's probably No. 1. At our TeleManagement World conference last month, we focused on business transformation, which gets into the whole Lean-operations aspect, and the ability of customers to get whatever services they want, wherever they happen to be, on whatever device they choose, without having to go through all kinds of gyrations. I carry a ridiculous number of access numbers, depending on which hotel room I end up in, in which city or country. But the moment that you're able to get the same level of service that you enjoy, say, in your office—when you can get that anywhere, on any device—that's going to be huge. Profit: When do you think those barriers are going to start to be knocked down? Warner: That's a tough one, because it is partly technological and partly service-oriented—and by "service-oriented" I mean that I think the telecom industry as a whole is still a good decade behind other industries in terms of how they view their customers. It's not that people running the telcos don't know this, but there does seem to be some sort of genetic predisposition to taking their time. Profit: Do you see areas where they are moving more quickly? Warner: The wireless industry gets it more than the typical incumbent wire-line carriers do. It's scary to think about what would happen if there were really good wireless broadband. At our conference, there was a guy who had a cell phone/PDA/BlackBerry sort of a thing. Because we had WiFi running, he was able to be on the Web, walking around the show floor, checking on various statistics back at home. But, of course, 10 steps outside the building, it's just back to being a regular old cell phone. Profit: How do you see the industry in terms of customer-centricity? Warner: There's no doubt telcos are not yet customer-centric, but it doesn't mean they don't understand that their customers are important. First, they're still used to providing mass-market services; a kind of one-size-fits-all. In telecom, like many other industries, the customer base has become fragmented. Companies are going to have to start tailoring their services: They might have to have perhaps three or four flavors of a service, each one tailored to some specific market niche. Profit: What about asset management? Warner: It gets back to that whole tailored-services concept, or customer-centric services. It's the whole management aspect that enables you to not only identify but also deliver those services in a very short time-to-market window. That means having a very accurate view of what assets you have to bring to bear on the problem—or opportunity. One of the problems we have is that rolling out a new service takes not only a long time but also an enormous investment in the management. If you roll out a service and you had to invest zillions of dollars in the management of it, you're going to be very reluctant to turn that service off, even if it proves that, despite your best efforts, it just didn't hit. In a customer-centric business, you accept the fact that you're not going to get it right all the time. You just want more winners than losers. But telecom's heritage is that we'll play with it in the labs for 40 years, and then, when we absolutely know that it works, we'll let people have it. And that's not a customer-centric approach. You have to take risks, and risk and telecom rarely are used in the same sentence. Profit: What about Lean—has it had an impact? Warner: Take BT, in the U.K.—it's a great example. It's going through a complete twenty-first-century business transformation. It's transforming everything, starting with the network. Or look at Telecom Italia, or Telstra, in Australia; they're completely reinventing their business processes so that they can offer advanced services and better customer service. Profit: What are the key technology drivers? Warner: A lot of it has to do with a standardized view of key business processes. That's really the key or, if you flip it around, the reason telecom has not been able to do it before. Part of it was environmental; as long as you're a monopoly, you've got incentive to be inefficient because, basically, your profits are a percentage on top of your costs. But when you face true competition, you've got to become Lean and efficient and nimble. But, of course, telecom has this history of every company either building its own systems or specifying them to such a degree that it's essentially buying custom stuff. Look at other industries: They're pretty much buying off-the-shelf components, gluing them together, and adapting them to give them a unique advantage. They don't go out and invent their own protocols, like telecom has done and still does. Profit: Are telecoms becoming more willing to use industry-standard systems? Warner: Some are, but I could name some that believe they're the smartest cats on the planet, and they really don't see any need to go outside. They'll just continue to build their own systems. And that's fine in the short run, but the maintenance costs they're going to incur for years and years down the road are just astronomical, to say nothing of being hamstrung when it comes to adding new components or systems from the outside. Profit: What kind of impact do you think those changes are going to have on the consumer? Warner: It's similar to Moore's law in IT, in that people expect to buy ever-increasing capability, whether it's the speed of the processor or the capabilities of the software, at ever-declining prices. People are beginning to expect that same thing out of telecom. And as they begin to have a choice, they're saying, "If you're not willing to do that for me, that company over there can, so I'm switching my business." That's where Lean comes in, because you reach a point as a business where you can't keep lowering your prices or cutting your costs, because at some point you impact your ability to deliver service. And if you don't undertake business transformation, which is just another way of saying "going Lean," you're out of business.