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Telecom Giant Leverages Cost Modeling and Forecasting to Strengthen Negotiation Intelligence

In this video, Brandt Fifer, Director of Electronics & Media for IHS Technology, discusses how a telecommunication carrier leveraged IHS cost modeling and teardown services to go beyond the saturated smartphone market and become a player in the connected car and home segments. With greater insights into manufacturing costs, the carrier increased profitability by negotiating better terms with OEMS.

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Interview: Brandt Fifer, Director, Electronics & Media, IHS Technology

IHS Customer Recognition (CR): What were the organization’s strategic business goals?
Fifer: The strategic business goals of this telecommunications carrier, along with generally others within the industry, is to ensure that they maximize profitability for their customer base, while making sure that their subscriber base sticks around. In terms of their ability to make sure that that latter goal occurs, in terms of maintaining a subscriber base, it’s critical that they continue to offer merging and compelling products and services. So, with a saturated smart phone market, it’s no longer the premier, compelling and emerging products and services that keeps consumers coming to that carrier storefront. Other emerging technologies include the connected car, and a smart and connected home—all of which will bundle into a consumer’s package, which ultimately continue to make this carrier, amongst any other carriers who are doing the same thing, a very compelling alternative that will maintain that carrier’s position as a non-dumb-pipe option, which is ultimately when we render a carrier to simply the connected services that make it worthwhile.

CR: What challenges did this organization face to achieve its goals?
Fifer: As this particular company was facing its business goals, it faced numerous information challenges. One, it’s facing new and emerging technologies in environments and industries that it’s not necessarily familiar with. So, first, if you look at the connected car environment, the carriers in general are not very familiar with the automotive industry: how to become a part of that solution; how to become imbedded within that solution; and how to link with auto OEMs to ensure that they have a stake at the table, as opposed to just be a module within the vehicle that connects Carrier One or Carrier Two or Carrier Three to the services provided in that vehicle. Understanding and knowing that information, and understanding that having insights into that automotive arena, is absolutely critical to the carriers, especially when they’re making winds to be a good partner for those Tier One OEMs. Secondarily, there’s an informational challenge that relates to the client’s primary goal of profitability and really the backward-looking profitable sector, which is smart phone data. The primary informational challenge that they have in that regard is really understanding cost. In an environment where you have a saturation point that is being reached in the smart phone arena, especially within the U.S., it’s absolutely critical that they begin to focus on the cost side, since revenue will naturally begin to plateau, or the revenue opportunities will naturally plateau, as much as they continue to attempt to make revenue work in their favor. So, one of the natural, only alternatives to increase profitability is really a focus on cost. In order to focus on that cost, they need to tune their cost benchmarking understanding. And it’s something that they historically have not done. Carriers in the past, especially in environments where revenue is increasing at such a significant pace, have simply negotiated based off the seat-of-their-pants technique. You have a device that’s quoted to you for $500, and you simply say, “Well, I really prefer $425.” In this case, understanding and refining that cost benchmarking understanding, or awareness and insight, is now a finely tuned process. And it’s a critical information imperative to the success of profitability for this particular client.

Our well-developed teardown practice as well as our cost modeling capabilities… Those two products and services – in tandem – are very powerful for carriers, and for this particular carrier, they saved this carrier over a billion dollars within the course of a couple years.

Brandt Fifer
Director, Electronics & Media IHS Technology

CR: What results has the organization achieved by working with IHS?
Fifer: IHS was able to rapidly provide valid and expert intelligence quickly in that arena in order to help a client quickly advance their understanding of cost benchmarks within the wireless environment. With IHS, this client was able to achieve significant results through leveraging our cost modeling services, our teardown services, and, in general, access to analysts to better understand cost, and to apply that to their informational challenge, which is ultimately making sure that they were aware of the latest and most updated market costs for products so that they weren’t coming into negotiations with assumptions that were five months old. They knew what the products should ultimately cost at the point in time, did their negotiating in devices, and then were well-attuned to better understand incremental costs that might be offered during that negotiation and to counter any OEM stances that might add margins to those incremental costs. So, being very pointed and understanding those costs were absolutely critical to that information challenge. And then secondarily, it resulted in significant savings over time for that particular client. It has also resulted in other significant savings for other telecom clients within the industry through those same IHS services: our well-developed teardown practice as well as our cost modeling capabilities. Those two products and services – in tandem – are very powerful for carriers, and for this particular carrier, they saved this carrier over a billion dollars within the course of a couple years.

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