protecting margins and creating value in telecom

IBM Software Telecommunications

Protecting margins and creating valueStrategies for simplifying and optimising B2B selling and ordering processes in communications, media and entertainment

Executive summary In 2010, Communications, Media, and Entertainment (CME) businesses are becoming more confident in their revenue potential with most companies feeling the recession is behind them or nearly halfway over. To prepare for spending growth, many CME businesses plan to increase their focus on sales strategies with a keen focus on improving customer collaboration as a top priority.

However, improving customer collaboration, especially in business-to-business (B2B) selling and order scenarios, is difficult to achieve due to product portfolio and selling/ordering process complexity. Within the CME marketplace, companies are offering customers a rich array of options including products and services via multiple channels. This is good news for customers, who demand freedom of choice and ease of use. But it makes selling and order management a complex task for CME companies, which are looking to optimise these processes to increase sales performance.

Key findingsToo often, the CME sales staff is facing an overly manual and complex B2B sales environment that inhibits a salesperson’s ability to close deals or drive high-value sales. For example, it is common to find pricing information used to generate a quote to be out-of-date, leading to misquotes and erroneous orders. Aggravating and alienating customers is a real possibility, with accompanying risk to your company’s reputation.

To overcome these challenges, CME companies are committing resources this year to simplifying the complex selling and ordering processes. A recent IBM Sterling survey revealed that CME companies are placing more emphasis on how they interact with and sell to their customers, especially in B2B markets.

The configure, price, quote (CPQ) process presents the most productive opportunity for improvement. Tools can be used within the CPQ process to ensure a solution is located and the order is configured accurately to prevent downstream errors in fulfillment or provisioning. Tools can also deliver the automation needed to make the sales and ordering process more responsive, efficient, and accurate.

Contents:

1 Executive summary

2 The CME business climate

3 The opportunity-to-cash business processes

3 Configure, price, quote processes ripe for improvement

5 CPQ process improvements at work

6 Five key capabilities for a configure, price, and quote solution

7 The human side of process improvement

7 Conclusion

Several leading CME companies have achieved major improvements in their CPQ process by embracing five key configure, price, quote process improvements that have led to reductions in order-processing times, increases in revenue, and increased customer responsiveness.

When evaluating CPQ solutions, look for five key solution capabilities:

Interoperability•

Usability•

Maintainability•

Performance•

Multi-channel support•

To eliminate the number-one user adoption issue, make sure the CPQ solution yields greater direct benefit to the salesperson than the amount of time necessary to master its use. Also, ensure the system improves order accuracy. Sales management must demonstrate a solid commitment to the project, or salespeople can be expected to resist.

The CME business climateAs the recession ends, companies need to improve their sales processes, including reducing complexity, in order to be more responsive to customer needs while also eliminating the manual process points that create opportunities for margin drain. Within today’s CME space, companies are facing increasing complexity as well as greater competition. This calls for greater focus on optimising and transforming the sales process, especially in the area of configuring, pricing, and quoting/ordering solutions. (For the purposes of this white paper, the term “CME” will include telecommunications and cable service providers; media companies involved in complex sales like advertising sales; and software and IT providers selling complex offerings like managed services.)

In communications, for example, a sales representative may approach a potential client with a variety of communication services across voice, video, data, and managed service categories. In addition, the rep may also offer services from third-party providers and partners to create an overall solution. During the pre-order process, the rep will gather customer location-specific requirements and then map those requirements to an appropriate set of products and services. With appropriate products and services selected, the representative will then find the appropriate price point for service using factors such as customer history (spend and length of relationship), usage volume, term commitments, and many other factors.

By contrast, in advertising a representative will need to gather information about the customer’s product and target market and link it back to specific advertising products. Not only will the configuration need to include the development of the advertising message, but also the media and geographies where the message will be delivered. Multiple parameters may go into figuring the price of an ad, including placement, time, color, size, geographic region, and customisation. Preparing an accurate, timely quote is highly complex in these environments.

To overcome these challenges, CME companies are placing greater emphasis on simplifying their complex selling and ordering processes. Constant fluctuations in the breadth and type of product offerings, pricing changes, and reduced sales forces make managing an already complex sales process even more difficult. Failure to uniformly manage products and pricing can lead to misquotes that alienate customers and potentially damage your company’s reputation.

In early 2010, IBM Sterling initiated a survey with the objective of better understanding the current climate of the IT decision maker in CME companies as well as understanding needs and priorities relating to improving sales process performance to enable revenue and margin growth.

We surveyed 313 IT decision makers in US CME companies and 100 UK CME companies. The survey results demonstrated that CME companies are placing greater focus on how they interact with and sell to their customers, especially in B2B markets. The survey found that 80 percent of these companies in the United States and 61 percent in the United Kingdom feel the recession is over or nearly halfway over.

However, any potential growth in revenue appears to be dependent on investment. The majority of respondents (over 70 percent) said they will invest in better serving their customer base by expanding into new sales channels, improving responsiveness of the sales process, and preparing for growth in customer spending. For example, in the U.S., when asked for top priorities for software investment, 91 percent of respondents indicated that better collaboration with customers, including sales and customer service, is a top priority.

IBM Software Telecommunications

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In Figure 1, below, we see process domains such as solution management, which refers to the solution discovery and configuration processes needed to find the right solution for your business customers. Further, channel sales management represents enabling sales and ordering through multiple sales channels including direct sales and indirect sales.

This paper will evaluate how today’s CME businesses can extend their CPQ processes, focusing on solution configuration and channel management, as these areas are the source of the greatest complexity.

Configure, price, quote processes ripe for improvementThe complexity of the CPQ process makes it difficult for CME companies to increase the value of the sale, reduce the cost of that sale, and ultimately increase the margin of each sale. As a whole, the industry is burdened by a richly varied product and service portfolio – for example, a communications portfolio of multi-location voice, data, and managed services complemented by managed support services. An order will typically involve many different variables and parameters, including product dependencies, locations, order volume, historical spend, and customer contract length.

Traditionally, CME companies’ sales and order handling processes are highly manual, leaving considerable room for error in finding and pricing solutions for customers. In many cases, companies will use solution configuration or order-entry solutions that are not directly integrated with the product/pricing catalog or supporting systems (such as inventory management).

The opportunity-to-cash business processesThree distinct business processes in the B2B opportunity-to-cash lifecycle can be improved to drive better sales results:

Sales account managementThese are the processes and systems that provide the functionality for media companies to manage a sale: account activity planning, building account plans, stakeholder and influencer mapping, identification of key buying criteria, territory management, lead tracking and forecasting, and general relationship management.

Configure, price, quote (CPQ)These are the necessary workflows and capabilities enabling solution discovery, solution configuration, pricing, quoting, and contract generation to complete a sale and related order management that provides the solution that meets the customer’s needs.

Business intelligence and analyticsAnalytics is a critical piece of the complex selling and order management puzzle, as executives need to access insights related to pipeline turnover and revenue generation to enable better decision making.

The Telemanagement Forum’s Telecom Applications Map (TAM) provides a useful visual depiction of this sales process (see Figure 1). TAM is a working guide to help companies and their suppliers use a common reference map and language to navigate a complex systems landscape that is typically found in today’s CME businesses.

TelecommunicationsIBM Software

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Figure 1: Telemanagement forum telecom applications map release 3.2

CampaignAnalytics

ProductSupportJob Aids

Funnel and LeadManagement

ContractManagement

SolutionManagement

Corporate SalesWorkflow Management

Sales Aids

Market/Sales Domain

Customer/Prospect Data

Aquistion

Mass MarketSales WorkflowManagement

Customer Sales Portals

Internal Sales Portals

IndirectSales Portals

Mass MarketSales Reporting

and Tracking

OfferManagement

SalesNegotiation

Campaign Management

Mass Market Sales ManagementCorporate Sales

Management

Compensation ResultsRecording

Compensation and Results

Affiliates

Virtual NetworkOperators

Dealers

Retail Outlets

Telesales

Direct SalesForce

Channel SalesManagement

Sales Portals

CampaignDesign

CampaignExecution and

Refinement

CampaignPerformance

Tracking

LeadGeneration


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It is quite common that orders are not automatically validated for correct product configuration and pricing. Generally it is up to the salesperson or consultant to perform this validation. This manual validation, without systematic managed constraints or validations, can lead to a high number of mis-configured orders and order rejections. These manual processes lead to decreased margins (consider a company that needs to provide credits for each order error). They also create high levels of revenue leakage (consider incorrectly priced orders where the price is significantly below list and creates low or no margin). Further, without automation, salespeople tend to miss opportunities for cross-sells and up-sells, which reduces revenue potential.

And as a CME company’s product and service portfolios become deeper and broader, the more complex the sales processes become. Making incompatible choices or not making all the required choices can lead to order errors and delays. For example, we know of one company that asked seven of its sales people to develop a quote for an £80,000 order. Only three priced the quote correctly, and all the orders had some type of error. Why? Because the sales system did not ensure the users were guided to making the right choices and decisions.

Many CME companies are facing CPQ process issues that inhibit revenue and margin growth. Here are the top three sub-processes needing improvement:

1. The solution configuration processIt is quite common to find that solution discovery and configuration rely on disconnected tools as well as time-consuming and error-prone manual order entry. Without needed validations, there can be a high number of order rejections and lost deals.

2. In the channel support areaIt is typical to find that the disconnected sales system environment and overly complex CPQ process limit a company’s ability to expand into new sales channels, such as partner sales or self-service.

3. In the product and pricing support areaIt is common to find the lack of a centralised product and pricing catalog solution that communicates and enforces pricing rules across all sales channels. This can lead to issues such as sales reps using old price and product information, resulting in costly inaccurate quotes to customers and partners.

Today’s CME businesses are facing real-life CPQ issues that call for solutions to reduce process complexity and deliver the automation needed to make the sales and ordering process more responsive, efficient, and accurate.

Figure 2: B2B selling and ordering configure, price, quote flow

What do you offer?

I want to place an order.

I want to changemy service.

What is the price?

Recommend Configure Price and Quote

ChangeManagement

GatherFindRecommendPresent

PriceCompareDiscountQuote

QualifyConfigureValidateSubmit

AccessInquirePresentModify


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CPQ process improvements at workSeveral companies in the CME space have transformed and optimised their CPQ process to achieve improved revenue and margins. Some highlights include:

A multibillion-dollar worldwide telecom equipment •

provider implemented a world-class CPQ solution to enable a guided selling environment that eliminated most manual ordering steps in their process. The result was a 66 percent reduction in quote-processing times.A multi-national software and IT services provider •

implemented a CPQ solution in its partner sales channel environment. The system enabled its partners to serve themselves, end-to-end, with ordering data storage services and other IT support plans. The result was a 500 percent increase in revenue generated through the self-service channel.A US telecommunications company implemented a •

new order configuration solution to guide customers on making real-time changes to their network services based on the latest data available. The solution will enable this provider to be significantly more responsive to changing customer requirements.

All of the companies in the cases listed have embraced one or more of five changes to their B2B opportunity-to-cash lifecycle. These changes include:

1. Ensuring process integration across all key processes in the opportunity-to-cash lifecycle, including seamless integration between customer and opportunity management systems and processes and CPQ systems and processes.

Today, many companies are implementing new sales force automation (SFA) and customer relationship management (CRM) solutions such as Salesforce.com to manage key opportunity-side processes. But Salesforce.com does not supply capabilities such as solution configuration to handle selling and ordering complex products and services found in the CME market. Thus, the transactional sales functions, such as solution discovery and configuration, are managed by separate systems. A key requirement is for CME companies to find SFA/CRM and CPQ solutions that support open integration and end-to-end integrated process modelling to deliver a seamless ordering experience for users.

2. Implementing solution discovery and configuration solutions to enable guided recommendations and configuration to improve responsiveness to customer requirements, as well as reduced order errors and delays.

A guided selling and order configuration solution orchestrates the complete CPQ process to ensure users make accurate choices and that orders are priced accurately and fully validated before submission to downstream systems. With a proper configurator, you define how the order behaves when certain choices or decisions are made. The ideal order configuration solution can make a highly complex configure-to-order scenario into something simple.

The best configuration solutions act as a bridge from a company’s back-office systems, rules, and data, to its front-end order-entry processes to provide a common ordering process and logic communication and enforcement layer across all ordering channels. Thus, the solution becomes an integral part of the opportunity-to-cash process to ensure prices are quoted and orders placed accurately.

3. Using advanced quote-management solutions to apply the proper business rules to negotiated pricing based on the context of the order – who is the customer, what is the value of the deal – in order to eliminate rogue pricing while accelerating the quote-processing time.

Today’s sales processes must ensure that the proper validations are applied to avoid rogue pricing and discounting, which can cause margin drain. However, the quote-approval process cannot be too constricting or onerous, which would inhibit sales effectiveness. To address this issue, many companies are turning to quote-management solutions that can dynamically generate a quote approval workflow and rules based on the context of the order.


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4. Moving to offer-management solutions that enable more effective management, communication, and enforcement of pricing policies across different channels. This process needs to include partners, to help substantially eliminate pricing errors due to misinformation as well as improve time to market with new products, pricing, and promotions.

Many CME companies are embracing an operational environment where all sales channels interact with a single sales, ordering, and service logic and data layer that provides consistent communication and enforcement of all product, pricing, and ordering rules and processes across all channels. The result is more effective management, communication, and enforcement of rules and policies across different channels and geographies, substantially eliminating inconsistencies that materially impact profitability and customer satisfaction.

5. Focusing greater attention on post-sales support, enabling customers to have greater flexibility in how they manage their installed or delivered products and services (including managing configuration changes and processing renewal).

CME companies are also embracing solutions that can facilitate the configuration of upgrades to as-installed products or as-subscribed services in the field. This function enables an organisation to take a client’s product and/or service bundle as it was built, subscribed to, or delivered, and perform a configuration of an upgrade to that installed/sold product and/or service.

Five key capabilities for a configure, price, and quote solutionWhen evaluating selling and ordering solutions in the CPQ area, look for these five key capabilities:

1. Interoperability. A CPQ solution should be designed for integration and interoperability with your existing front- and back-office systems. The best solution employs open-standards-based integration architecture for connection with any business system or rules set. Further, look for a vendor with significant experience in integrating with ERP systems (such as SAP) and SFA systems (such as Saleforce.com). This will help you move a disconnected sales system into a seamlessly connected sales system environment more quickly than other solutions.

2. Usability. Your CPQ solution should provide the highest degree of flexibility in defining and presenting order configuration for the most complex products and product combinations. Ideally, you will select a solution that employs a constraint-based order configuration process where the user decides which selections to make in whatever order he or she chooses. This is called “user-guided behavior.” With such technology, users can answer questions in any order and the solution will maintain all compatible relationships. This allows users to follow their own configuration path and still end up with a valid configuration, regardless of how complex the constraints are.

3. Maintainability. This needs to be addressed from the perspective of multiple roles. From an IT perspective, you should strive to find a solution that can be configured to meet changing business needs. For example, it is ideal to support multiple user communities through one order-configuration system. But each community may have different user requirements for things like order workflow. A solution that provides configurable, profile-driven business processes and user interface flows will make it much easier for IT to support multiple user communities efficiently and effectively. From an end-user perspective, you will need to give business users the access and control to manage business processes and data on their own. This directly improves time to market. For example, in the areas of pricing management, it is important to give end users such tools as intuitive, thin-client price lists and mass update functions that facilitate quick updates on many price list items.

4. Performance. Scalability and performance are often overlooked. The best-fit solution is one that has proven it can handle large numbers of concurrent users processing end-to- end order configurations, not just simple order changes, with sub-second response times for configuration actions. Look for modern technology, such as the use of a multi-threaded stateless server environment that can support thousands of users or configuration models (constraints) that are compiled with all constraint logic executed (as needed) in memory. This type of environment can scale to support the largest user and order volumes.


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5. Multi-channel support. Your business depends on you having optimal reach to sell through not only your own sales force but through an extended sales force provided by your partners. Key in this endeavor is finding a CPQ solution that not only enables you to support multiple channels (like call centers, field sales, and e-commerce) but also multiple storefronts where you can support your sales partners with a partner-specific sales experience. You will need to support partner-branded products, pricing, and order workflow. The ideal CPQ solution will enable you to configure, launch, and manage multiple sales partner storefronts via a single product catalogue and single order-configuration engine.

The human side of process improvementIt is difficult to achieve change in selling processes. Sales representatives tend to resist any change they view as more of an imposition than an aid. As several decades of failed SFA projects attest, lack of adoption can wreck your return on investment in a hurry.

These best practices can help you avoid low adoption rates: Ensure that the direct benefit to the salesperson outweighs the time it takes to learn the system. The biggest pressure on sales organisations and sales reps today is to sell, sell, sell – anything not directly related to advancing a sale is deemed irrelevant. Sales reps have previously viewed transactional sales tools as of great informational benefit to management but at the cost of individual salespeople spending more time doing data entry. With that as background, to ensure new systems can be adopted, you will need to minimise the incremental time needed for salespeople to get up and running with the system. This is the biggest area that impacts adoption. Make sure that the benefits to the salesperson – in his or her pocket – are clearly articulated and genuine.

Improve the accuracy of the ordering and proposal process. If your sales and order management system cannot boost accuracy and reduce lead times, it will sap the energy and motivation of the salespeople. If you can help reduce the proposal turnaround time, for example, from three days to three hours, that has real meaning for salespeople and will go a long way toward easing adoption.

Secure commitment from sales management. There are many constituencies around sales and order management processes – for example executive management, IT, and sales management. If the CEO or CIO has discussed the need for a new system but the chief sales officer does not appear to wholeheartedly support the project, that lack of commitment will drift down into the sales teams. The salespeople are likely to be wary about the changes themselves, and lack of strong sponsorship by sales management could prove fatal to adoption.

ConclusionThe CME vertical has one of the most complex environments for successful sales. Products and services come in a wide array of configurations and pricing, offers regularly change, and government and industry regulations must be considered on many deals. So, while companies are constantly increasing product offerings in an effort to be more responsive to customer needs, they may internally be struggling to manage the sale and configuration of these products.

For this reason, CME companies are focusing on improving complex sales and order management processes. Automating these traditionally manual processes can yield significant benefits if you choose a comprehensive solution that features multi-channel support and usability, among other important considerations. Usability is particularly important, as sales personnel will resist learning to use the system if they perceive that the time spent learning to use it will outweigh its benefits.

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