Back-Office Bright Spot at Economic Summit

Panelists at the TM Forum’s Management World Conference this week agreed the economy will get worse before it gets better. They also agreed it is no time to stop investing in the network.

Rob Rich, managing director of TM Forum’s Transformation Information Resource Center, led panelists Zenas Hutcheson, senior managing director of Vesbridge Partners LLC; Keith Willets, chairman and CEO of the TM Forum; and Hussein Eslambolchi, chairman and CEO of Divvio, in a discussion on the impact of the current economic crisis on the telecom industry.

Rich noted that while some in the industry feel they have been through this before, recently, this crisis is different. For one thing, it is deeper and broader. Also, this time the telecom industry is not at the root of the problem.

Hutcheson said the economic crisis has its roots in access to easy money that started 20 years ago, and that people and their lenders forgot how to evaluate risk.

“Recessions are a natural part of the economy. But the imbalances are so massive that we are in a period of devaluation that will be quite severe,” Hutcheson said.

He said consumer spending is 70 percent to 80 percent of the economy and the bottom line is that consumers will have less money. “In this environment, bling is dead,” he said.

But there is a bright side for the telecom industry, he said. “People return to the essentials and the cable bill and mobile phone bill are rated equally with rent now. They have become an essential part of society. So the downturn for telecom will not be as severe.”

Hutcheson added that the stock market also believes that to be true based on the relatively small hit healthy service providers have taken on their stock valuations. “Market leaders in telecom will do better,” he said.

Willetts said the industry’s move to flat-rate pricing also may help it through this crisis as consumers don’t look to individual services to cut in order to save money. He also said service providers must continue their efforts to improve efficiency.

“We have gone from [being] lean and mean in theory to lean and mean in practice in the last five years,” Willetts said. “[So] for operators who say ‘bad times are coming, let’s cut everything,’ that would be the dumbest thing in the world to do right now. We will come out of this at some stage and need to be ready.”