Optus job cuts part and parcel of business

The 750 job cuts by Optus is a reflection of growing pressure.

The decision by Optus to restructure and cut some 750 jobs in Australia was almost inevitable given the cut-throat nature of the telecommunications market, industry analysts argue.

Speaking to Computerworld Australia, Paul Budde, telecommunications analyst at BuddeComm, said the restructure was a necessary part of doing business.

“Look at how many people companies such as Google, Facebook and Skype need to run their business and compare that with the telcos," he said.

"They will have to become far more efficient, and this is one of the steps in that process for Optus.

“Companies will have to become far more efficient in all of the back office activities and need a far higher level of automation here.”

Frost & Sullivan analyst, Andy Woo, echoed Budde's comments arguing that the job cuts were "a sign of times" in that corporations were operating against difficult economic conditions within highly competitive markets.

"Costs across the board are naturally being monitored more closely," he said. "The 'restructuring' in this case with Optus is just a way of them to streamline and reduce duplications."

Yesterday, Optus announced it will shed 750 jobs from the company in a restructure which will pare back operational and back-end staff and create new customer-focused divisions.

Optus executive, Kevin Russell, on announcing the cuts had argued that the action was needed to keep the company competitive.

"The competitive environment requires Optus to have a sustainable cost structure to remain competitive and continue to deliver value to our customers," he said in a statement.

The restructure includes the creation of a new customer service division which will be developed to better manage Optus's relationship with its customers. The division will be supported by another newly created marketing and sales division.

The job cuts, nearly 8 per cent of Optus’ 9,500 staff, will cost around $37 million, with senior and middle management and operational, back office and support roles to be made redundant.

The job cuts were originally floated at the end of March this year, with SingTel also announcing in early March this year it would restructure Optus along operational lines, rather than geographical.

Geoff Johnson, research vice president at Gartner, noted that an additional driver for the restructure was that the company’s mobile network was under stress, with added demand from Vodafone customers joining the Optus and Telstra networks, creating pressure on the telcos.

“When we see these things happen [like the restructure], it’s usually done for good corporate reasons, which allows them to clear the decks, manage their op-ex and make the necessary future investments as they can,” Johnson said.

However, Johnson warned that although the restructure may give customers a “stronger voice”, customer service is not only delivered through customer facing staff.

“The way customer service is delivered in large telecoms operations, fixed or mobile, is through exquisite execution of their operation support systems and business support systems,” Johnson said.

“You need talented people to do that. But where they can automate and replace people with automated operations and business support processes, they should do that - and they’re doing that.”

Optus also cited areas of duplication as reasons for the job cuts, with Johnson saying this indicates the telco has developed its OSS and BSS to allow the large cut to jobs in this area.

“It’s all consistent – the recent restructure by SingTel, the current headcount reduction. They’re making investments in OSS, BSS and we’re seeing pressure on the network and hearing more complaints from corporate customers that the network performance is not what it was in the past,” he said.

Nicole McCormick, senior analyst telco strategy at Ovum, said cost cutting is a central part of business for operators and makes "complete sense" in the telco sphere.

"The demand side is moving quickly to even more discerning consumers ... In this 'new normal' environment, operators need to be lean to survive," she said.

"As for competitiveness, the hey days of rapid revenue growth are over and ARPUs are declining across the industry, so cost control becomes vital."

McCormick said while it is a competitive world, Optus will remain in second place position for some time to come and a mobile price war is not expected as Optus and Vodafone do not have the capacity for price cutting.

The Communications, Electrical and Plumbing Union (CEPU) has warned that the job cuts could adversely affect customer service if Optus follow Telstra's lead and moves jobs offshore.

"We think it is important that if that is the case, Optus comes clean," CEPU spokesman, Jim Metcher, told AAP.

Metcher said the redundancies would decrease the telco's ability to properly service the needs of its existing customers and make it difficult for them to grow their business.

"This would have a serious adverse affect on services currently offered by Optus to its customer base and more importantly in terms of where it wants to be as a carrier in the telecommunications industry," he said.

"When we're talking about job cuts in the order of one in 12, that is significant. Something would have to give in terms of its services."

Follow Stephanie McDonald on Twitter: @stephmcdonald0

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More about: AAP, BuddeComm, CEPU, Electrical and Plumbing Union, etwork, Facebook, Frost & Sullivan, Gartner, Google, Optus, Ovum, Skype, Telstra, Vodafone
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