1. TeBIT 2012
Executive Report
Telco’s New IT Weapon:
Business Value Creation
After years of aggressive cost-cutting, IT
departments are discovering the potential
of delivering superior business value.

2. The Boston Consulting Group (BCG) is a global manage-
ment consulting firm and the world’s leading advisor on
business strategy. We partner with clients from the pri-
vate, public, and not-for-profit sectors in all regions to
identify their highest-value opportunities, address their
most critical challenges, and transform their enterprises.
Our customized approach combines deep insight into the
dynamics of companies and markets with close collabora-
tion at all levels of the client organization. This ensures
that our clients achieve sustainable competitive advan-
tage, build more capable organizations, and secure lasting
results. Founded in 1963, BCG is a private company with
77 offices in 42 countries. For more information, please
visit www.bcg.com.
ETIS, founded in 1991, is a membership based organisa-
tion which brings together the major telecommunications
providers in Europe on key information and communica-
tion technology issues. The mission of ETIS is to enable its
members to improve their business performance by per-
sonal exchange of information on using ICT effectively.
ETIS achieves this by engaging its members in various
working groups, sharing best-practices, benchmarking,
web-based information services, discussion forums, work-
shops and conferences. ETIS Central Office is located in
Brussels, Belgium. For more information, please visit
www.etis.org.

3. TeBIT 2012 Executive Report 1
The telecommunications industry, once listed
among the recession-resistant sectors, is now
having a hard time keeping up with the mas-
sive reduction of its profit pool. Even increases
in customer base seem unable to compensate
for declining revenue. What, then, is the way
forward? Are further cost reductions possible?
If so, at what price? Is IT spending a prerequisite for business value creation? Are tel-
cos even willing—or financially able—to move in that direction? These are some of
the key questions addressed in TeBIT 2012, which as in previous years was jointly
developed by ETIS—The Global IT Association for Telecommunications—and
The Boston Consulting Group (BCG).
The goal of this executive report is to highlight some of the insights unveiled by TeBIT
2012—findings that do not just explore industry-specific IT challenges, but can help
telcos to tackle them. This year we present for the first time a tool to measure business
value creation and compare the IT cost associated with it among participants. We also
introduce a new way to normalise IT cost to allow for a fair comparison for smaller
operators and pure mobile players. We will continue to listen to our members and
adapt our activities and studies in line with their evolving challenges.
What makes this benchmarking so unique is that it was created by the telcos for the
telcos and coordinated by an independent non-profit organisation that has no financial
interest in the outcome. By participating in this benchmark, operators get an unbiased,
in-depth, telecom-specific look at the IT environment of their organisation.
It has been a tradition among the TeBIT participants to openly share all data on a com-
pany level to encourage discussion and exchange of knowledge. Only companies that
participate in the study can obtain the full results and benefits of the report. Moreover,
participants are eligible for a one-on-one discussion of their company-specific results
with the core TeBIT benchmarking team. The findings show that IT units need to chal-
lenge their cost position, outsourcing activities and possibly also their strategy. If the
goal of telcos is business value creation, then IT can contribute to it. The question is do
the returns justify the costs borne—and which initiatives should be prioritised?
The ETIS motto is “sharing knowledge is our strength” and both ETIS and BCG believe
that benchmarking and sharing experiences among peers will be crucial for achieving
success in the future.
Terje Tondel, ETIS Managing Director
Frank Felden, BCG Partner and Managing Director
Preface

4. 2 ETIS
TeBIT 2012 Executive Report
At a Glance
N
o news, as the saying goes, is good news, but
telecom operators may beg to differ. A market
landscape largely unchanged from a year ago
means revenues continue to drop for many providers,
with price—and budget—pressure remaining nearly
universal. For telco IT departments, a further chal-
lenge remains: How to cut costs while spurring the
innovation that yields profits.
One thing, however, has changed. As revealed by the
most recent ETIS Telco IT Benchmarking Study
(TeBIT)—a survey of IT spending and performance of
European operators that was completed in September
2012—the aggressive cost cutting telcos successfully
carried out in the past could not be repeated last year.
That makes sense, of course: the “easy” cuts have al-
ready been made and providers can only hold off on
IT updates for so long. But how do telco IT depart-
ments compensate?
Here the news is encouraging. TeBIT 2012 homes in
on a second lever IT departments can pull: business
value creation. The benchmark finds a general corre-
lation between IT spending and generating business
value in key telco processes. While cost cutting remains
essential, spending can be focused in ways that move
the business forward. With that realisation, telcos are
starting to align their IT cost position with the com-
pany’s long-term strategy—and they are starting to see
results.
An analysis of the TeBIT data revealed the following
key findings:
◊ Most telcos did not manage spending in line with
revenue change. For TeBIT participants, 2011 rev-
enues were down by an average of 2.7 percent,but
IT spending declined just 0.6 percent. IT CAPEX
dropped by 2.1 percent, while IT OPEX remained
stable.
◊ A general correlation between IT spending and
business value creation was found in most, but
not all, telco processes. Telcos appear to be selec-
tively choosing which areas to prioritise—or are
having the choice made for them by burning
platforms. Either way, no telco leads in all busi-
ness areas.
◊ The aggressive cost cutting IT departments car-
ried out last year could not be repeated. Indeed,
challenges in cost-cutting—resulting from either
less “low-hanging fruit” or necessary IT updates—
make value generation a key lever to be pulled in
conjunction with spending reductions.
◊ The benchmark’s new “normalisation” analysis—
adjusting IT spending for a telco’s size, business
mix and business value creation—reveals that
most operators have closely aligned spending
levels. Normalisation also enables telcos to more
accurately determine how their spending compares
to other telcos.
◊ Telcos are ahead of where they need to be to keep
spending constant with 2009 levels.But if revenues
and spending continue to drop at last year’s rates,
they will surpass those levels in 2014.Thisgivestelcos
a couple of years to fine-tune their cost position.
◊ IT investments appear to be more fragmented than
focused.On average,just 23 percent of each partici-
pating telco’s IT CAPEX went into their top five
IT projects. Automation remains a sound area for
investment,with a correlation between automation
and satisfaction seen in key telco processes.
◊ Outsourcing continues to be popular, accounting
for 33 percent of IT spending, but the savings
many participants expect may not be materialis-
ing. In fact, outsourcing may actually be driving
costs. Telcos may want to take a closer look at
their own outsourced processes and see if their
goals are truly being met.
◊ Telcos should think carefully about both cost cut-
ting and value generation, and how each strategy
can be used to align the IT cost position—and
investments—with the telco’s long-term business
strategy. Whether the focus is on growth, on sav-
ings or middle ground, alignment is vital for mov-
ing the company, and its prospects, forward.

5. The Boston Consulting Group 3
TeBIT 2012 Executive Report
Content
At a Glance 2
Introduction 4
IT Does Matter in Business Value Creation 4
Cost Reductions Continue, But Not at a Record Pace 8
IT Cost Levels: Not Comparing Apples to Oranges, After All 11
Fragmented, not Focused, Investment? 12
IT Outsourcing: Does It Drive Costs? 13
Aligning Cost Position With Business Strategy 14
Note to the Reader 16

6. 4 ETIS
TeBIT 2012 Executive Report
Introduction
IT Does Matter in Business
Value Creation
For Europe’s telecom market, the story is more of the
same—which means less of just about everything. Reve-
nues are still dropping, prices continue to erode and that
all-important metric, average revenue per user, remains
on a downward trajectory. Even where there have been
gains, the news is bittersweet: an increase in mobile sub-
scribers countered by a loss of fixed-line customers and
coming at the price of higher OPEX.
To be sure, telecom companies have been hard at work
the past few years trying to cut costs and their IT depart-
ments have been the focal point of their efforts. Tradi-
tionally, this report—the Telco IT Benchmarking Study
(TeBIT)—has taken a detailed look at the IT expenses of
participating telcos: how they compare to revenue and
previous years; how they break down over various cate-
gories; what patterns and strategies can be seen in the
spending. Last year’s benchmark brought encouraging
news: Telco IT departments contributed more than their
share to cost reduction, while making investments—in
areas such as automation—that looked to be the right
ones to spur and support innovation.
Are telcos continuing down that path? That is the ques-
tion this year’s survey, once again conducted by ETIS—
the Global IT Association for Telecommunications—and
The Boston Consulting Group (BCG), set out to tackle. But
to truly answer it, the benchmark had to look not only at
costs, but also at where those costs are going—and what
telcos are getting in return. This is something the TeBIT
survey touched upon last year, but now it goes further,
looking at the output of IT and the value it helps to
create for the business.
That this deeper dive is essential is clear from a key find-
ing of this year’s benchmark: It is getting harder to cut
costs. The low-hanging fruit is gone, or going fast; systems
need to be updated, IT architectures changed. Cost cut-
ting has yet to reach its limit—and continues to be essen-
tial—but the huge reductions we saw last year were not
repeated. While IT expenses did drop overall for the sur-
vey’s participating companies, most did not manage costs
in line with revenues.
The benchmark makes clear, however, that cost cutting is
just one lever telco IT units can pull to help move the
business forward. Its closer look at the output of IT finds
a general correlation between spending and value crea-
tion. Thus, the cost position can and should, be aligned
with long-term business strategy. We are already seeing
this happen and the TeBIT shows how IT units can im-
prove their alignment still.
Indeed, this year’s benchmark does not just provide the
numbers. It gives telcos a lens through which to examine
their own spending for flaws. The TeBIT finds, for exam-
ple, that the varying cost levels among participants are
much more in line once factors such as size and business
mix are accounted for. This “normalisation” analysis en-
ables telcos to better understand how their cost levels
compare to those of other companies.
For telco IT units, the challenge is no longer simply to cut
costs, but to align spending with long-term development.
It is a strategy that can boost competitiveness and growth.
And it is a strategy, as telcos are already discovering, that
works.
The pressure on IT budgets continues. For participating
telcos, 2011 revenues were down an average of 2.7 per-
cent from the previous year (worse even, than the market
average of 1.7 percent). ARPU declined by 4.3 percent,
steep enough that a modest uptick in subscribers, by
1.8 percent, could not rescue revenues. EBITDA dropped
too, by a sizable 7 percent—the result of lower revenues
combined with rising OPEX (up 1.2 percent).
The shrinking pie does not just mean that telcos need to
cut where they can, but that the money they do spend
should be spent wisely, with optimal impact on the
Continued on page 7

7. The Boston Consulting Group 5
TeBIT 2012 Executive Report
Score
100806040200
10028 28 24 20
13 13 10 4913
Telco B
Average
3391294
Telco Z
5612 18 17 9
Telco A
Telco Y
10181922 68
419101111
Max. possible score
Business value score
Billing and Collection
Assurance/Customer ServiceFulfilment
Product Mgmt., Market Sales Mgmt.
•
•
•
•
•
•
Source: TeBIT 2012
Figure 1 | Limited variation in participants business value scores
Calculated value score based on business KPIs
Cyta is a comparatively small incumbent Telco. How
does that fact impact your IT efforts? Are there cer-
tain advantages that an IT unit at a small Telco can
leverage?
The main difficulty we face in IT is one shared by large
incumbents in bigger countries: How to provide support
for the entire product range—from mobile to fixed line
to IT services—and provide it for both private and busi-
ness customers. However, we cannot afford to have an IT
department as big as that of an incumbent in a larger
country.
This means that our IT people need to spread their
efforts across a wide range of topics, at the expense of
depth and specialisation. So, when very specific expertise
is required, we end up creating non replaceable internal
experts, or we need to rely on third-party suppliers.
On the other hand, the small size of our company and
physical proximity allows our IT professionals to be well
connected—not just to each other but also to the busi-
ness departments. This enables business issues to be
resolved much more quickly and gives our IT unit greater
agility than IT units of large companies.
Cyta’s revenues from its mobile and fixed businesses
are of very similar size. Does this result in specific chal-
lenges for the IT unit?
While half of our revenues come from mobile services,
the other half comes from a broad range of services
besides fixed line telephony. This includes broadband
internet, IPTV, national and international wholesale
products, and business products including services and
solutions. Despite the lower contribution to overall
revenue from some services, we have never considered
“Be very realistic and involve all stakeholders”
Aristos Riris
is Senior Manager Networks at Cyta.
Costas Psillides
is IT Applications Manager at Cyta.

8. 6 ETIS
TeBIT 2012 Executive Report
abandoning these, since their existence adds to our
brand and differentiates us from our competition. How-
ever, this diversity naturally creates a much greater
challenge to IT than if we were a mobile-only provider.
We have undertaken efforts in the past to streamline
our IT and offer fixed-mobile convergent services but
not with the expected success. To be successful it is
vital to approach such projects in a very realistic manner,
and make sure that all stakeholders are included and
heard.
ERP has been one of Cyta’s major investment areas.
What were the reasons for focusing here,and what bene-
fits have been realised? Have there been any lessons
learned?
The reason for the ERP investment was to increase produc-
tivity, exploiting the ERP ability to have an integrated
view of our business activities. But it was also a fore-
runner for our IT transformation project.The main lesson
we learned is that good change management is impera-
tive and that we need to apply a different set of skills to
this type of projects. We realised that it takes more time
than initially anticipated for the users to see the benefits,
and technical problems always exist on the road even for
ERP systems which are well established in the market.
We learned too, that in order to achieve the right ba-
lance between internal application management and in-
tegrator support as well as challenging the recommen-
dations of third-party vendors and integrators, we need
to build a good level of expertise and competencies in-
house, and this takes time.
What do you see as the most important trends for Telcos
in the coming years? Which IT trends do you adopt?
First, we see the upgrade of the access network as an
important task for Telcos. This includes fibre to the home
on the fixed side, and the upgrade of the radio access to
single RAN on the mobile side. This will have significant
implications on IT.Second,the cloud will definitely impact
our business as well as our clients’.The needs of our busi-
ness customers are changing significantly. We are seeing
an increasing demand for more flexible, customised solu-
tions—increasingly for vertical services along the com-
plete Telco and IT product portfolio.
As a result, Cyta needs to rely on flexible IT systems and
IT professionals who understand the business and can
help clients be successful in the future.In this context,we
believe in a “right-sourcing” approach,aiming for the right
mix of in-house application management, outsourcing,
and third-party software, utilising Commercial-Off-The-
Shelf applications and Service Oriented Architecture.
Do you expect Telco operators to invest significantly
in Business Intelligence (BI)?
At Cyta, we have a very comprehensive data warehouse
system handling a large amount of information, however,
currently we are not utilising its full potential and there
is no specific BI function at Cyta. This is certainly an area
we would like to look into further. Identifying what speci-
fic information is useful to the businesses and how to
present it in a more tangible and actionable way, is what
BI should be all about and, at the end of the day, we be-
lieve this can make a big difference to the business.
What can Telco IT units learn from Internet companies?
Internet companies changed the world through innova-
tion and flexibility. They involved their customers in the
development of new applications and services—the cus-
tomers essentially became part of the ecosystem. We
can also benefit from this type of thinking. We should
collaborate with customers to quickly detect their chang-
ing needs. We should collaborate with third-party ven-
dors to provide better value to our customers.
Agility and flexibility need to be built into the entire
business model. The IT operations model is being
pushed towards service delivery and Service Oriented
Architecture. However, this orientation should be expan-
ded to the whole organization, as it is applicable to the
whole business, not just IT.
How important is a stable IT architecture for a highly
productive and efficient IT?
My short answer is that it is absolutely necessary. We
need to have a clear vision of where we are heading in
the future and an IT architecture that supports the steps
towards this future. This is of course a challenge—but it
is a necessity by all means.
How long do you expect the pressure on IT costs to
continue?
Right now, everybody is changing IT systems to decrease
costs, us too. Unfortunately, we have to invest first, so
costs go up in the short term. Down the road, these
systems, besides improving the position of our business
in the market, should result in savings. We see this
period of change as a good opportunity to introduce
appropriate KPIs and metrics that can help ensure
success—and these can also be used for continuous
tracking of IT costs.

9. The Boston Consulting Group 7
TeBIT 2012 Executive Report
business. In short, more bang for the buck. Traditionally,
IT departments have pointed to value creation to justify
their cost position: higher IT costs meant higher business
value. But is this really the case? This year’s benchmark
drilled down on that claim.
The survey asked participants for an assortment of KPIs,
such as average provisioning time, average churn and
number of customer complaints. These were then
grouped along key processes: product and sales manage-
ment; fulfilment; billing and collection; and assurance
and customer service. While the KPIs are impacted by
many factors, IT plays an important role for each of them.
Thus, comparing the IT spending telcos allocated to these
processes with how well they performed should give a
good idea of how spending correlates to business value
creation.
This analysis revealed that there was a general correla-
tion between spending and value creation, though the
link was stronger in some areas (such as product manage-
ment and sales) than others (like billing and collection).
For one area—fulfilment—higher spending did not neces-
sarily result in higher quality in the process.
A second key finding was that no telco led in all business
areas. For each of the four processes, the telcos received
scores based on the related KPIs (the maximum possible
score varied for each process, corresponding to its share
of overall IT spending). Some operators led for one or
even two of the processes, but all lagged somewhere. This
could mean that telcos were selectively targeting certain
areas for value creation. Or it could mean that they had
burning platforms that required special attention. Most
likely, some telcos fell into one category and some into
the other.
But perhaps the most important takeaway from this
analysis is that telcos have to make a choice about their cost
position: Do they want “no-frills IT” (low value creation,
but low cost) or “premium IT” (high value creation, but at
a high cost)? This choice should be aligned with their over-
all business strategy. No-frills IT, for example, would be
the ideal position for a telco prioritising cost reduction.
Premium IT would suit a telco focusing on growth.
Of course, telcos have to ensure that their cost position
actually is what it claims to be. The TeBIT’s KPI analysis
lets them put it to the test. The benchmark found that
most of the telcos were getting what they paid for—or
even more (see Figure 2). But the analysis also revealed
that some were spending above-average amounts but get-
ting below-average value. That is neither no-frills IT nor
premium IT, but an IT position that may benefit from
some adjustment.
Continued from page 4
IT spending in % of revenue
5 74 60
Totalbusiness value score
Ø =4.6%
Premium IT
?No frills IT
Value for money IT
70
60
50
40
0
Business value score
Best
Average
Worst
Note: Some data points have been added to ensure confidentiality of participants
Source: TeBIT 2012
Figure 2 | Higher business value creation seems to drive IT cost

10. 8 ETIS
TeBIT 2012 Executive Report
Cost Reductions Continue,
But Not at a Record Pace
Last year’s survey was notable for the aggressive cost
cutting undertaken by telecom companies; on average,
IT costs declined even faster than revenue. The 2012
benchmark finds that the momentum has slowed.
While participating telcos did reduce their IT spending
overall, they averaged just a 0.6 percent drop—com-
pared to an average revenue decline of 2.7 percent.
IT CAPEX dropped by 2.1 percent, while IT OPEX
remained stable.
Moreover, unlike last year, when nearly every telco was
paring its IT budget, strategies were all over the map. Of
the 70 percent telcos that saw falling revenues, around 45
percent decreased their IT spending by more than 5 per-
cent, but another around 45 percent increased it by more
than 5 percent (the remaining increased it by around 2
percent). Of the 30 percent telcos that saw positive reve-
nue change, only a third boosted its IT spending and
even in that case, IT spending as a percentage of reve-
nues dropped.
A possible explanation for this cloudier picture: some
telcos may have determined that they could not cut
further—or hold off on IT upgrades—without impact-
ing business. Outdated IT after all, can be just as hazar-
dous to the bottom line as any obstacle the market
tosses a telco. This theory seems particularly plausible
for operators in the mature telco markets, where IT
OPEX decreased by 6.3 percent (showing a continuing
commitment to cost reduction), but IT CAPEX rose by
1.7 percent (showing more investment in IT infrastruc-
ture).
Yet while cloudy, the forecast is certainly not gloomy.
Overall, the telcos are still on track with—and actually
a bit ahead of—the long-term IT cost reductions they
must make to keep spending as a percentage of reve-
nues constant with 2009 levels. The loss of momentum
did eat into some of the breathing room they had
created with 2010’s aggressive cuts, but there is still
around a 5 percent buffer. Even if spending and revenues
continue to drop as they did last year, the buffer will
remain until 2014. That gives telcos a couple of years
to fine-tune their cost position and make sure it is
aligned with business strategy—whether that strategy is
to lower costs or to spur growth.
IT OPEX as % of revenuesIT OPEX, changes 2010–11
%0-10
4.4
-6.3
0.1
5-5
%0-10 5-5
%0-10 5-5
% 4
2
0
4
2
0
2.22.02.1
Share of IT OPEX
%
4
2
0
4.3
3.3
3.9
6
IT CAPEX as % of revenues
%
2.0
3.1
2.4
Share of IT CAPEX
% 20
10
0
14.916.915.7
IT CAPEX, changes 2010–11
-4.7
1.7
-2.1
IT spending as % of revenues
% 6
4
2
0
4.2
5.24.6
Share of IT spending
% 10
5
0
6.46.56.5
IT spending, changes 2010–11
-0.5
-0.9
-0.6
Market avg. Mature market avg. Emerging market avg.
Source: TeBIT 2012
Figure 3 | IT OPEX stable, IT CAPEX dropped by 2.1%

11. The Boston Consulting Group 9
TeBIT 2012 Executive Report
IT spending grew
faster than revenue
IT spending declined
faster than revenue
-5
-10
Changes in ITspending in %
10
5
0
50-5-10 10
Changes in revenues 2010 to 2011 in %
Note: Some data points have been added to ensure confidentiality of participants
Source: TeBIT 2012
Figure 4 | Not all operators could adjust IT cost to declining revenues
Telenor is active in various, very different markets—
both emerging and mature—across the world. Can
these be served and supported by one unified or even
consolidated IT?
Given that IT comprises a large number of components
from data centers to customer-facing applications, there
are certainly areas that have the potential to be unified.
all in all, we aim to further improve the efficiency of our
operations and hence naturally look at exploiting econo-
mies of scale wherever this makes sense.The basic opera-
tions structure, i.e., IT infrastructure and end-user
equipment, provides a great lever to achieve this goal.
all our operations are cost-sensitive, but this is even
more important in emerging markets. Therefore, we fol-
low an approach to design a common platform in asia
and then roll this over into mature markets. The next
question is whether we should unify the full BSS stack
across all markets. From a technological standpoint,
there are no major barriers to do this. In fact, we are
developing a platform that can support all business
units. However, I am not yet sure whether we should
really follow this unification for all business units.
What are specific customer expectations in emerging
markets, and how does this impact/influence the
requirements of an IT unit in these markets?
In mature markets, we see a shift in demand to inte-
grated, advanced services comprising voice, messaging,
data,and additional mobile services.In emerging markets,
the main focus is still on traditional voice and messaging
services. We see growing demand for data services and
Internet-based services in parts of asia, and I strongly
believe that the growth in data services will come from
the asian markets, not the european market.
“TelcOS HaVe Been FenceD GarDenS FOr Many yearS.
THeSe WallS are cOMInG DOWn.”
Trond-Ove Breivik
is Telenor’s Group CIO.

12. 10 ETIS
TeBIT 2012 Executive Report
Given the expected, continued growth in mobile cus-
tomers in emerging markets, what is your strategy for
the IT in those markets going forward?
Given the much lower ARPU in emerging markets than
in traditional telco markets, the main focus has to be cost
efficiency. Customer demand revolves around low-cost,
good-quality basic voice and messaging services. We also
see demand for data services, but there are huge regional
differences. For example, the data market in Malaysia is
huge given the broad penetration by the Internet. In rural
Pakistan, however, the picture is entirely different. The
bottom line is that it is essential to be an extremely cost-
efficient operator. Based on these roots, we have the op-
portunity to move the Asian markets to the Internet age.
Do you see strategic components for Telenor IT that
are important for emerging as well as mature markets
and that you try to establish across Telenor Group?
The basic pillar of being successful in any market is cost
efficiency. We aim to reduce our spend on the “run” part
of our operations to a minimum to free up resources for
investing in new customer services.
How does Telenor align business with IT strategy?
Do you follow specific processes or do you have specific
governance bodies installed?
At Telenor, each business unit is required to have a
strategy documented in a business plan. This strategy
needs to be aligned with the group strategy and the
technology strategy, which is ensured by review and revi-
sion at group level. At this point, we are transitioning
from extremely autonomous business units to a more
integrated group, where strategies are more and more
defined at group level. In this process, we introduce
shared services for, e.g., finance, HR, and IT. However,
we do not want to deprive the business units of setting
their own strategy but rather make room for the
business units to focus more on strategies how to best
serve their customers in their respective markets.
To what extent do you automate your processes or do
you work with manual interfaces? Do you foresee a need
to strongly increase automation in the near future?
Our philosophy is to automate activities that can be auto-
mated and use automation where quality can be
improved by eliminating sources of error. At the same
time, however, we pay close attention to not destroying
the customer interface. We do not want to lose the hu-
man touch by turning Telenor into an automated inbox
for customer complaints. We need to be good at dealing
with humans, since at the end of the day, our customers
are humans.
Which areas are you currently most heavily investing in
and why?
We see the main investments being driven by end-of-life
scenarios. In our case, this means replacing CRM, billing
platforms, to name a few. However, while replacing older
platforms, we aim to remove the silos that exist between
classic voice and messaging and new data services, as
well as post- and prepaid services and move to a more
convergent platform. We have done quite a lot of that in
Asia already, but our European operations also require
renewal of some of their systems soon.Apart from the BSS
area,we also need to invest in the OSS area,especially for
those operations that offer fixed, broadband services.
What do you see as the most important trends for telcos
in the coming years? Which IT trends do you adopt?
Telcos have been fenced gardens for many years with
proprietary technology and very nice regulatory walls.
These walls are coming down quite quickly, especially
with telco equipment becoming more IP-based. With new
commerce on top of Internet-based services and smaller
MVNOs entering the market, our business is challenged.
Hence the traditional thinking within telcos has to be re-
vised. One focus for us is to provide smart connectivity so
that our customers can trust in Telenor services to be
modern, reliable, and scalable. At the same time, we
need to look at our cost position. Typical ICT players,
such as Skype, come in with a global delivery platform,
one interface, and almost fully automated services— all
without local assets. This is very different from the tradi-
tional, resource-demanding services our business it built
on. However, I believe in our potential to run our business
differently, while remaining a trusted brand and posi-
tioning ourselves as a high-quality operator that provides
services at a reasonable cost and that is accessible for
the customers when needed.
Furthermore, we closely follow IT trends, such as cloud
services and Software as a Service, and see where they fit.
These IT trends make the landscape more blurry and
allow us to go to market with non-traditional telco services.
As an example, we see opportunities for us in providing
SOHOs and large enterprises with value-added services
that bundle cloud services and communication services.
How would you summarise the challenges for telcos
today?
My key reflections are: First, protective walls are coming
down, and we need to transform the traditional telco
business into a more fluid and dynamic world. Second,
the cost levels that we can afford at least in the European
market will be challenged as we move forward.

13. The Boston Consulting Group 11
TeBIT 2012 Executive Report
IT Cost Levels: Not Comparing
Apples to Oranges, After All
This year’s TeBIT once again finds that cost levels vary
significantly among participants. While IT spending aver-
aged 4.6 percent of revenues, the spread was wide, rang-
ing from 2.8 percent to 6.2 percent. In the past, outliers
have justified their results by saying the numbers are not
comparable: A smaller operator cannot benefit from
economies of scale; an integrated player has more com-
plicated IT. True enough—but that does not mean an
operator is as efficient as it could be.
To better show whether providers were under- or over-
performing, this year’s benchmark attempts to normalise
IT spending, accounting for three factors that influence
cost: a telco’s size, its business mix and its business value
creation. Granted, other factors play a role too, but by
looking at those considered to have the highest impact,
the TeBIT gives telcos a view into how their cost levels
truly compare with those of other operators.
What this analysis found was that cost levels were much
more closely aligned when adjusted for these three fac-
tors. Now the gaps did mean something and outliers
could not dismiss their results as unique and non compa-
rable. Once normalised, IT spending accounted, on aver-
age, for 4.8 percent of revenue. Most participants fell
around that figure, but interestingly several telcos
whose unadjusted IT spending marked them as under-
performers, were actually outperformers once their cost
levels were normalised.
The key message here is that, yes, there is no single,
simple target for IT spending—the amount will vary
depending on a telco’s circumstances. But it is possible
to see whether spending is really aligned with those
circumstances. For the majority of telcos, the TeBIT
shows that it is.
Actual IT spending
in % of rev.
Size
correction¹
Business mix
correction¹
Business value
correction¹
Normalised IT
spending in % of rev.
0
Telco B
6.2Telco Z
2
Telco Y
64
5.7
Mean 4.7
8
4.2
Telco A 2.8
10-1
-0.2
0.0
0.2
0.2
-0.8
210-1
-0.1
-0.1
1.0
0.6
0.8
10-1
0.0
-0.1
-0.8
-0.2
-0.3
86420
5.0
5.5
6.5
Ø =4.8%
•
•
•
•
•
•
•
•
•
•
•
•
Adjusting that smaller
players do not benefit
from economies of scale
Adjusting that mobile
only players tend to
have a much simpler IT
Adjusting that high
business value creation
drives IT cost
3.7
3.2
1. ∆ IT spend in percent of revenue
Source: TeBIT 2012
Figure 5 | However, adjusted for size, business mix and business value creation,
IT cost levels are much more aligned

14. 12 ETIS
TeBIT 2012 Executive Report
Fragmented, not Focused,
Investment?
Given the tight budgets and tough competition in the
telecom market, one might reasonably assume that IT
investments are being narrowly focused on high prior-
ity projects: a select group of initiatives most likely to
spur innovation, efficiency or reduced process costs. But
the TeBIT data suggests otherwise.
This year’s survey drilled down on IT CAPEX in far
more detail than in the past. What we found was sur-
prising. On average, just 23 percent of each partici-
pating telco’s investment went into their top five IT pro-
jects. For no telco was the figure more than 40 percent,
and for one it was only 13 percent. Indeed, when we
looked across all TeBIT participants, analysing how
much, as a group, they spent on any initiative that had
been named as a top-five project, the figure was just 17
percent. So much for the notion that telcos were con-
centrating their investments on a few strategic issues.
What explains this finding? It could be that last year’s
big reductions killed or severely curtailed funding for
some major projects. It is possible too, that many smaller
projects have been funded to comply with regulatory
requirements, or because they do not cost too much. It
might also be the case that some telcos are indeed,
focusing on a core group of projects but are having diffi-
culty allocating costs to them—a lack of transparency
that will cause more problems down the road if not
addressed. Then there is the simplest and perhaps most
troubling, explanation of all: that telcos have not yet
decided to focus their investments.
Or, perhaps more accurately, they have not focused them
enough. The benchmark does show the telcos priori-
tising areas where they see the biggest payoff. The
largest shares of IT CAPEX are going into general infra-
structure and billing and collection projects and indeed,
those are the areas where survey respondents say they
expect the most beneficial impact. But with these
projects receiving just 4.9 percent and 3.8 percent of
IT CAPEX respectively, the question is whether the
telcos are hedging their bets.
The TeBIT also finds that some activities, even if they
are not receiving a significant share of investment capi-
tal, are popular among the telcos. Of the ~70 percent
Share of IT CAPEX on initiative to total IT CAPEX in %
88.0
4.0
2.0
0.0
Other
85.0
SOA
0.0
BI
0.0
IT
Security
0.0
CRM
2.7
Billing
and
Collection
3.8
General
Infra
4.9
0.2
ERP
0.1
IT
Digitization
and Automation
0.0
1.4
IT
archi-
tecture
COTS
1.9
SDP
1.8¹
1. Other initiatives named as Top 5 initiavtives
Source: TeBIT 2012
Figure 6 | Project fragmentation—85% spent on smaller projects

15. The Boston Consulting Group 13
TeBIT 2012 Executive Report
Ø =4.6%
Ø =33.1%
IT spending as % of revenue
7.0
6.0
5.0
4.0
0.0
0 20 25 30 35 40 45 50
Outsourcing costas % of IT spending 2011
Note: Outsourcing as defined here includes standard outsourced services and temporary project work undertaken by external IT service providers;
Some data points have been added to ensure confidentiality of participants
Source: TeBIT 2012
Figure 7 | Does outsourcing drive IT spending?
participants that broke down their IT CAPEX spending,
all were pursuing CRM projects and ~85 percent of
them had ongoing activity relating to IT security, busi-
ness intelligence and commercial off-the-shelf software
applications. How COTS was being used varied; while
some participants used it for 90 percent or more of
their marketing and product management processes,
others used it for around 10 percent of those processes.
Sales and order, customer service, technology manage-
ment and cross-functional services were other areas
where the use of COTS varied widely. What this demon-
strates is the applicability of COTS to many telco pro-
cesses—and the potential for expanding it further
across each organisation.
The benchmark also shows that many operators are
continuing to invest in automation—a smart strategy,
as the TeBIT data demonstrates a link between auto-
mation and satisfaction. The correlation, however, is
not uniform or universal. While sales and order, fulfil-
ment, billing and collection, retain and winback all
have a good correlation of automation and satisfaction,
customer service does not. The data also shows that
billing and collection is already highly automated, with
sales, fulfilment, and retain and winback less so. These
are all points telcos should consider when deciding
where to focus their automation investments.
IT Outsourcing: Does It
Drive Costs?
Outsourcing continues to be a popular strategy for TeBIT
participants, accounting for an average of 33 percent of
IT costs. The data can certainly be interpreted to call it
successful: participants are largely satisfied with their
outsourced services, which have a particularly strong
foothold in the areas of application development and
maintenance, infrastructure development and support
and training. About half of the telcos anticipate increa-
sing their level of outsourcing; just two plan to decrease
it. But the number-one reason participants cite for out-
sourcing is cost reduction—and the TeBIT data suggests
that this may not be happening.

16. 14 ETIS
TeBIT 2012 Executive Report
Aligning Cost Position With
Business Strategy
Telcos over-achieved target IT cost reductions in 2010,
but could not repeat this feat in 2011.
Is that cause for alarm? Probably not. IT expenses tend
to rise and fall in cycles and spending that improves sys-
tems is likely to be more beneficial in the long run than
savings that let systems become obsolete. And that is
really the key message of TeBIT 2012: telco IT units
have to think about long-term development. They need
to make a deliberate choice about the business value
generation they want to achieve and what a fair cost for
that position would be. The new analyses added to the
benchmark this year—looking at the correlation
between IT cost and value creation and normalising IT
levels among very different telcos—should help opera-
tors hone their cost position.
Cost cutting must continue, of course and that means
telcos should take a hard look at their outsourcing. Is it
really bringing the expected cost savings? If not, is it
adding value in other ways, and enough of it? They
need to take a closer look too, at their investments. Are
they focused, and most importantly, are they focused in
the right places? Automation should be pursued; in
TeBIT 2011TeBIT 2010
2008
0.00
201420132012201120102009
0.90
0.85
0.80
0.75
0.70
Change in ITspending
1.00
0.95
Average change in IT spending across all participants compared
to change required (= average decline in revenue)
Required change in IT
spending (as calculated
from change in revenue
in TeBIT 2011 and 2012)
Required change in IT
spending predicted by
TeBIT 2010
5% buffer
remaining
TeBIT 2012
Actual change in IT
spending as achieved
by participants
Note: The change in revenue and IT spending has been calculated from the revenue and IT spending of the participants of the respective TeBIT year
Source: TeBIT 2012
Figure 8 | TeBIT ‘10 stated Telcos have to heavily cut costs to keep IT as % of revenues stable—
actually, telcos outperformed this
Indeed, what the survey does show is that higher levels
of outsourcing seem to correlate with higher IT spending.
This does not necessarily mean that outsourcing is dri-
ving costs; it could be that the telcos which spend more
on IT just happen to have more outsourcing. But it does
not back up the notion—shared by many telcos—that
when you outsource IT you lower your costs. It is worth
noting that a link between outsourcing and cost savings
has not been seen in other IT-intensive industries such as
banking and insurance. Telcos may want to take a closer
look at their own outsourcing and see if their results are
truly consistent with their goals.

17. The Boston Consulting Group 15
TeBIT 2012 Executive Report
some areas perhaps, more than others. So too, should
commercial off-the-shelf software and less complex IT
architecture—which can lower costs as well as head-
aches.
No doubt, these are challenging times for telco IT units.
But for those that think carefully about the issues raised
by TeBIT 2012 and plan accordingly, this can be a time
for opportunity too—to create not just value, but growth.

18. 16 ETIS
TeBIT 2012 Executive Report
Note to the Reader
About the authors
Eirini Markoula is Benchmarking
Project Coordinator in the ETIS
Central Office in Brussels.
Frank Felden is a Partner and
Managing Director in the Cologne
office of The Boston Consulting
Group and the global leader for
the IT in Telco segment.
Thomas Krüger is a Principal in
the Düsseldorf office of The Boston
Consulting Group and topic
champion for IT architecture
in telco.
Diana Siegel is an Associate in
the Munich office of The Boston
Consulting Group.
Acknowledgments
The authors thank all partici-
pating telecom operators and
individuals who contributed to
TeBIT and to this publication,
including Aristos Riris, Costas
Psillides, and Trond-Ove Breivik.
We also thank Astrid Blumstengel,
Alan Cohen, Sebastian Puia, and
Mathias Richter for their help in
the data validation, writing, editing,
design, and production of this
publication.
For further contact
Eirini Markoula
ETIS Brussels
+32 488 463 517
em@etis.org
Frank Felden
BCG Cologne
+49 221 5500-5220
felden.frank@bcg.com
Thomas Krüger
BCG Düsseldorf
+49 211 3011-3270
krueger.thomas@bcg.com
Diana Siegel
BCG Munich
+49 89 2317-4438
siegel.diana@bcg.com

19. © 2012 ETIS, The Boston Consulting Group GmbH. All rights reserved.
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