“…in a capital intensive industry like telecom, the key metric is return on capital, especially when that industry turns ex-growth. Revenue, EBITDA and cash are useful interim steps along the way, but the ultimate end-point is ROI. It’s not a clever conclusion, but it’s not the consensus conclusion either.
Unfortunately, such basic principles have gotten buried in daily practices that shift focuses elsewhere. ROI is rarely more than a side note in most balanced scorecards and it shows: ROI performance in the telecom industry is not good”
In a report entitled, “Capex is king: A new playbook for telecoms execs.”
According to the PWC report above, the telecommunications industry as a collective had a Return on Invested Capital (ROIC) of under 8% (others have suggested as low as 6%) versus a weighted average cost of capital (WACC) of around 9%, which is hardly a great indicator of adding value to shareholders.
So assuming that’s correct and assuming that ROI is the key metric for health (and future investment), this should also be a big play for a CAPEX-intensive industry like OSS right?
But is it? I’m curious dear readers.
Does your organisation build OSS business cases around ROI? Does it then measure how it’s tracking to that ROI (on a project or collective basis)? Does it understand the current rate of return provided by existing OSS tools? Or how revenues change upon investing in a new OSS? Is it just a cost of doing business? An insurance policy to ensure the key asset (the network) continues to deliver service for customers? Are anything resembling “returns” as a result of an OSS just too intangible to bother measuring? If it’s too intangible, do you have any metrics that you do measure your OSS (and OSS projects) by?
Are these questions you’ve asked in the past?