November 2003

Leveraging Managed Services To Increase Your Competitive Edge

BY JOE BOVA

Are you efficiently addressing your network and business challenges?

Outsourcing solutions can help you reduce your overall business cost and let you focus your resources on core business issues.

The telecommunications industry has weathered rough seas in the past few years but today it is facing the dawn of a new and exciting period. Telecom services have permeated the globe, impacting local cultures at unprecedented levels. Consider the high cellular penetration and new mobile applications being rapidly consumed in Europe and Asia.

Broadband access in the form of DSL has passed the 10-million subscriber mark worldwide, with some operators now aggressively deploying advanced access technologies even before the lifecycle has run the gamut on the current technology generation. Mobile data applications are coming to the fore, and wireless data networks promise to change the way we access and use information.

Today�s service providers are preparing to improve business balance sheets and to capture new revenue streams. In order to accomplish these goals there is an array of network and business challenges that must be addressed:

� Wireline and wireless networks need integration to provide transparent information access;
� Multiple parallel networks need to be consolidated to reduce operating expenses; and
� The overall business strategy must be streamlined and focused on critical customer segments to gain market share.

All of these tasks must be done with reduced capital and operating expense budgets, and achieving operational efficiency for carrier organizations is the highest priority goal in today�s stringent financial environment.

Outsourcing partnerships are a vital solution that service providers can leverage to increase their competitive edge. Service providers have first-rate options to outsource a wide range of operational or support tasks to networking partners, enabling the organization to focus its time and energy on executing its business strategy. Outsourcing services help service providers reduce their overall costs and enable the organization to turn its focus to improving profitability. As a result, service providers can increase the competitive gap and improve market share with renewed vigor.

OUTSOURCING OPTIONS
Outsourcing options that service providers are examining today are focused on sets of services that assist with the design, engineering, installation, management, and optimization of the carrier�s telecom infrastructure. These services are used by top tier carriers around the world today, and the outsourcing market is expected to grow significantly as carriers adopt more services. According to some industry estimates, today�s outsourcing market is $9.3 billion.

The types of services that carriers can leverage include the following:

Operations and Support
Network performance is no longer the competitive differentiator it once was. Operators are realizing that the cost of developing the technical expertise, processes, and platform tools that can ensure networks continue to operate at �five nines� of availability can be shared across multiple networks. Outsourcing this function to service vendors allows carriers to retain state-of-the-art people, process, and platform support on a shared cost basis. Further, capital constraints dictate that carriers examine projected obsolescence and replacement plans of core elements of their technology platform. They must weigh the cost of operations and maintenance against replacement and migration expense. Outsourcing asset management, operations, and technology obsolescence planning to specialized service vendors can help squeeze valuable service life from legacy equipment.

Hosted Services
The keys to customer retention and revenue growth are price, feature and service availability, and service quality. Making advanced feature sets such as integrated messaging platforms, virtual private network, prepaid and advance spending limits available at competitive prices can be less risky if a carrier relies on a hosted application provider.

Revenue Expansion and Recovery
Discovering stranded assets that can be redeployed to support new customers and identifying customers that are not being billed are two outcomes of assessment activities that result in revenue recovery. Serving new customers more quickly expands revenues by enabling billing cycles to start sooner. With a streamlined network and operations process, you also gain a competitive edge in the ability to launch new services quickly. Your outsourcing partner should bring these tools to you much more quickly and effectively than a traditional supplier.

OpEx Reduction
Certainly the reduction of operational expenses is a critical goal in today�s environment. Outsourcing processes that are resource intensive for highly trained staff can save time and therefore staffing costs. Leveraging a vendor partner for projects that proactively identify and resolve network failures and fault conditions help minimize future outages and reduces fault incidents. Removing operational layers and process overlaps by accessing an outsourced provider that has an existing delivery platform helps to facilitate cost reductions while assuring Day 1 network quality.

Network Performance Enhancement
Outsourcing services can identify constraints that impact current network performance and identify critical issues before they impact the network. By right-sizing and optimizing the network you can gain such benefits as improving customer retention, reduce network downtime, reduce service degradation events, optimize customer applications, and optimize network facilities usage.

Streamline Business Model
Many aspects of operating a service provider defocus the organization and can lead to a perpetual state of firefighting. Competitive service providers must have time to focus on strategic market issues to develop attractive services. By streamlining the network and operational aspects, the organization as a whole can support forward looking corporate strategy better.

SUCCESS FACTORS FOR OUTSOURCING
Choosing a partner for outsourced services is an important decision that must be examined from several aspects. The right partner will provide you with not only technical expertise but also a proven framework for working together. Some of the things that should be examined when looking for an outsourcing partner include the following items.

Alignment of Expertise: As mentioned before, some non-telecom vendors offer IT-based outsourcing services that initially focus on maintaining servers and support systems and sometimes begin to add networking pieces. While IT expertise is an important talent base, it is vastly different from managing telecom networks. Just as you wouldn�t want a heart surgeon performing brain surgery, having an IT oriented company manage a wireline or wireless network successfully is a high-risk proposition.

Experience: Similar to getting the right expertise, choosing a partner that has been supporting a number of customers for a number of years is important. Ideally the vendor has been supporting other carrier�s with customer bases and networks similar to yours as well as supporting networks that are larger and different from yours. A breadth of experience gives you the opportunity to leverage your partner�s knowledge as your network grows and strategy evolves.

Multivendor Support: Carrier networks are multivendor environments. Your outsourcing partner should have expertise that supports not only its platforms but other leading platforms as well. Without multivendor support, outsourcing contracts are little more than basic maintenance agreements for branded platforms. The vendor should be able to remotely manage or support all your platforms covered in your networking agreement.

Risk Management: Managing relationships while acknowledging risks is a hallmark of a mature services provider. Planning for a range of circumstances is key to a win-win arrangement. Some risks can be planned for, such as staff changes, scope changes, resource access, etc. Other risks are uncontrollable -- such as government intervention, natural hazards, and environmental events. An outsourcing arrangement should assess the likelihood of various risks and include assurances and contingencies in the overall plan. Identifying potential issues upfront is critical to a successful partnership.

Alignment of Business Objectives: Benefits of successful outsourcing arrangements go beyond simple cost reductions. The �low hanging fruit� has long ago been picked. Committed cost reductions must be put in the context of greater business objectives. In other words, will this arrangement help to grow revenues, free up resources to work on future business enhancements, increase customer satisfaction and retention and improve ROI. Choosing a services partner that can add value and align with these goals is just as strategic as the choice of a critical technology supplier.

Performance: Defining performance metrics and expectations is another key aspect in entering an outsourcing arrangement. Service agreements should be enforced by penalties, but should also offer incentives for overachievements. Metrics should be clearly linked to service quality, network accessibility, and ultimately tangible benefits to the business. Your expectations for each of these areas should be clearly set and managed by your vendor partner.

Today service providers are under pressure to find winning business models, and that requires being willing to adopt new approaches to running telecom networks. Carriers need to execute business strategy flawlessly to thrive. By outsourcing aspects of the network and service operation, overall business costs can be reduced while the organization gains a sharper focus on the business strategy.
Outsourcing services help service providers by extending their resources and offer sound expertise that can be leveraged to increase competitive edge in the new telecom environment.

Joseph P. Bova is vice president, Managed Services at Lucent Worldwide Services. With more than 14,000 technicians, network designers, consultants and program managers, LWS serves the world�s largest service providers in more than 50 countries on five continents. In fact, the majority of Lucent�s top 50 customers call on LWS to help keep their networks running.

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