15 July 2011 |
With greater pressure on telcos to deliver more than ever before, managed services could offer a solution. But as the industry’s needs are developing, are the solutions on offer keeping pace? Angela Partington explores.
Historically, networks have always been the major element dictating the managed services or outsourcing relationship. Network operations, network planning and network optimisation are crucial to the services provided by any carrier; whether they offer fixed-line or mobile networks, ensuring that those networks are comprehensive, functional and stay ahead of the technology curve is a crucial factor in a service operators success or failure.
With the exponential demands for data transit being experienced around the world, and a relentless race to upgrade and adopt new technologies, we are seeing continual additions and adaptations to the network fabric. Whether this is the adoption of a new generation of technology, such as 4G or LTE; the evolution of segments of the network, such as value-added platforms or intelligent network subsystems; or the introduction and transmission of IP, the main commonality is one of increasing complexity. Is it any wonder that carriers are increasingly turning to managed service providers to complement their activities, or even in some cases to take them over completely?
But as needs are evolving, the traditional approach of outsourcing and managed services is also having to change. This rigidity used to be embodied in the standard three or five-year contract, says Nathan Bell, director of products and marketing for Telstra International. Now there is a huge need for great flexibility, and people are looking much more at the short term as they make business decisions. I recently asked a customer if their business is working towards a five, 10 or 15-year development plan; he replied that hed prefer to be able to ensure predictability for six months. Thats why theres a trend towards shorter contracts, so that businesses can determine how to maximise the current model. Its important to be able to provide that agility.
A more modular model?
The requirements for managed services clearly vary significantly according to the service provider in question. Adriana Boersma-Rodriguez, VP and head of services, marketing and sales in Europe for Huawei Professional Services, says that strong global operators like Telefonica or Vodafone still tend to take a cautious approach towards outsourcing. They will have tried in a few places to outsource some areas, especially on field maintenance the most basic, lowest part in the chain. Her experience is that the majority of these customers only outsource the far-away parts and keep the local and strategic elements of their business in-house.
Other service providers have very different requirements, and for Tier 2 carriers and those operating in stronger European markets, Boersma-Rodriguezs expectations are different. For them to be able to survive, they needed to do an additional exercise in opex reduction. They not only outsource part of their network operations centre (NOC), but in some cases even the optimisation and the planning. Some customers have given us complete strategic planning as well.
Meeting this variety of need is fundamental to Huaweis new approach to the managed services market. It has developed a new vision for the business: One network managed with CARE. Offering collaboration, assurance, reduction of opex, and the continued enhancement of global infrastructure, Huawei might not be winning any awards for acronyms. But it offers an outsourcing model whereby telcos can select the network and support elements they need on a modular basis. Boersma-Rodriguez explains: It means that we will be able to guarantee that we deploy a complete network infrastructure. The different operators in that market will only take what they need for their use.
Jonathan Wright, commercial director of Interoute, also highlights the need for service providers to strike the right balance for their business when selecting which functions to outsource. For him, control and the amount of control to be surrendered is a crucial factor in the relationship structure. Theres typically a matrix between cost savings and control. The amount of business that a carrier outsources is a function of the amount of control they want to keep, weighed against the possible cost savings. If they relinquish total control, theyre going to make the greatest cost savings. But most rarely do.
But cost and control arent the only issues which carriers need to balance. Striking a realistic balance between expectations and outcome is essential to a successful managed services relationship. Bell says: Historically, there were fixed SLA standards that you had to stand up to, and where you failed to meet them you would provide either rebates or service credits. Now, SLAs are fixed with much more realism, and drawn up on a market-by-market basis to determine how to improve performance. The crux of the matter, he believes, comes down to a proper understanding of the carriers business requirements and objectives. Historically, outsourcing and managed services used to be so generic that it took a lot of guesstimations to make things work; when SLAs were compiled, business expectation was the highest priority. Now, our perspective has changed and we dont need to guess. Instead, we are working as a partnership with providers to help facilitate their business outcomes.
From NOC to SOC
As the relationship between carrier and managed services provider seeks to become more nuanced, so too does the range of available services and solutions. The requirements are greater than simply making a network extension available, or providing the functionality for a provider to break into new territories without the need for highly expensive infrastructure investment. Its also about extracting the best possible performance from the network, using key performance indicators (KPIs) for monitoring and surveillance of the network, analysing dropped calls and call quality, download speeds and throughput. Its aimed, says Ashwini Bakshi, head of managed services at Nokia Siemens Networks, at providing a superior quality experience based upon the underlying network and its performance.
As networks become faster and more capable, theres a dynamic to leverage this speed into offering new kinds of services to customers, and that again plays into dynamics on both sides, says Bakshi. Driving that dynamic is the move from network management to service management, and from network operations to service operations. We call it NOC to SOC. He gives the example that, if a service provider launches a new service for subscribers, such as a tennis streaming service during Wimbledon fortnight or a Facebook offering at particular times of the day, there needs to be enough capacity. Someone also needs to be monitoring operations and be able to react quickly should there be a problem. The managed service industry, he believes, is being driven by increasing complexity, the increased focus on new services, and the need to manage these discrete services.
Networks, as Bakshi puts it, are in a constant flux in terms of hardware, software and other kinds of configuration changes. Supporting the customers in the ongoing evolution and changes to the networks is an essential part of the managed services role. He explains: We increasingly see a need to move towards secure service operations, and then moving beyond that to the next level. This is something called customer experience management, and its really about shaping the individualised customer experience. We are able to pull out information about the customer experience of a single subscriber, so that the customer care people can pick up an individuals feedback or complaint, and resolve it. We are going to see much more granular managed services, with more nuance and focus on the end user.
This focus on the end user may seem to be a step away from pure wholesale, but there is a general consensus that the emphasis is changing. Interoutes Wright also speaks about the changes he has seen. If you look at the identity of telcos, theyre moving. Theres been a migration from that core role of plumbing a network, up to a managed service stack. And the further you are up that stack, the more your network becomes a service level agreement and the less it becomes about the rights to own that network.
Boersma-Rodriguez agrees that the fundamental concept of managed services is evolving: The business of a telecoms company is not to operate networks. The business is to satisfy the end user and to create and support more minutes in the network. New business models working together with managed services are taking place, and among the other very important trends we see is the quality of experience.
Guy Reiffer, VP of marketing at roaming, clearing and settlement house, MACH, also identifies a shift in approach. He explains that when MACH first moved into offering interconnect billing as a managed service, quite a number of telcos were uncomfortable with the proposition. Now people are becoming much more comfortable with it. Operators need to optimise revenue and subscriber retention, and focus on upfront services rather than back-end processes. A change has really occurred in the last 12 to 18 months.
There have always been geographical variations in the requirements placed upon managed services providers. As you journey across Asia, from India, to China, to Japan, to the Pacific and Australia, its about having insight and experience in the complexities and nuances of different geographies, says Bell. Based on what the customer is trying to achieve, you need to identify the right model for that particular country and region. No longer should you have the same SLA for Fiji as for the Philippines.
Such regional expertise is, of course, a vital aid to international players seeking to break into new markets. But particularly in highly developed markets such as Europe, managed services also offers a practical solution to the non-footprint problem, and the challenges of breaking into a crowded market. Wright comments: You could never set up a business case today to dig a brand new pan-European network, light it and compete. It would be absolutely bonkers.
But some of the greatest developments in outsourcing are arising in emerging markets, where the dynamics which lead service providers to consider managed services can be very different to those motivating their peers in more developed markets. Wright says: The question is: do you really need to run a network to take money off people? In India, the average revenue per user is about a fifth of what it is in Europe. Although theres an argument to say that, as margins get squeezed in Europe, this will become more of an issue there in the future.
The less developed markets dont have all this legacy equipment that we have in our big networks in developed markets, says Boersma-Rodriguez. Clearly, a managed services provider is an easy way to access infrastructure without requiring significant investment of both time and money. There can also be spectrum challenges in emerging markets.
As Bakshi says: Sometimes the spectrum available tends to be lower or more restricted in emerging markets. Then you need to use all your creativity, your toolsets and your automation techniques to extract the most capacity and performance from the system. As he points out, that tends to be less of a problem in more developed markets, where the dynamics are more to do with technology generational migration from 2G to 3G, or from 3G to LTE.
There are a number of approaches to tackling the nuances of regional variation. Huawei Professional Services prides itself on its localisation rate. Boersma-Rodriguez says: We currently have a localisation rate of 76%. From each 100 people, 76 people are local staff in the local country, and the rest are expats from China or different markets. We are working very hard to get closer to our customers and to really understand their challenges.
The drive is to combine local expertise in the market with a specialised understanding of the carriers business objectives, and a broader appreciation of the trends and development in the industry at large. If this leads to a less standardised service, offering more bespoke solutions of greater variety, that can only be a good thing. Doubtless, the biggest challenge lies at the outset, when service providers and outsourcers come together to identify what is really required, any why, and how those specific requirements can be met.
Bakshi explains it: You can think of it as a network layer-oriented value proposition and a capability set; and an end-user quality of experience and service value proposition. Thats managed services. But the truth is that, increasingly, managed services are whatever the service provider wants them to be. Whether the demands are for a straightforward network extension into a new geographical territory, or a sophisticated package of service operations and strategic planning, managed services providers are now more aware of the complexity and subtlety of their carriers individual needs.
Less than a decade ago, a startling four out of five clients looked to change suppliers at the end of their contract. With increasingly nuanced service delivery, we will all watch with interest to see how that figure changes.
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