Market and economic conditions are requiring a reinvention of telecoms network business models.  Co-sponsored feature: Alcatel-Lucent 
 
 


Andreas Herzog: Market and economic conditions are requiring
a reinvention of telecoms network business models
 
For Alcatel-Lucent, managed services are a vital element of business model re-engineering and transformation projects. Through creative partnering and innovative risk sharing options managed services business model options provide the framework for helping create a next generation enabled portfolio of services for consumers and enterprises.
Managed services can help make it smoother and less costly to launch the next-generation services that drive revenue growth. And, they can allow service providers to focus on their customers, while simultaneously reducing their opex.
Further, in a world of open standards and multivendor network environments, managed services helps operators ensure all systems and products interwork properly.
“What’s changing are the needs of operators,” explains Andreas Herzog, president of managed services at Alcatel-Lucent. “The main change is in respect to end-to-end solutions. In the past, operators had specific needs for technology-focused solutions and, when they had the need to introduce new technology, they selected equipment, used integrators to install it or did it themselves because environments were not so complex. Managed services solutions became desirable when operators had a problem with respect to their cost structure or when revenues were under pressure. Those engagements addressed a very precise need to lower costs and focused primarily on that and nothing else.”
This has been the traditional approach to managed services for the last ten to fifteen years and if that was telecoms managed services version 1.0 the industry is now moving to version 2.0. “Today’s operators can’t afford to implement technology solutions one after the other,” says Herzog. “They now need to make hard decisions about what their future is and this is more and more becoming a focus on content and services, not on operating the infrastructure. This trend will accelerate over the next three to five years and we believe that the long-term outcome will be full specialisation of infrastructure providers and content and service providers, they’ll be different companies.”
The direction the market is taking is mirrored in two innovative examples of how Alcatel-Lucent offers transformational approaches in the telecoms market. These approaches are through managed infrastructure and through managed end-to-end service operations. With Alcatel-Lucent’s managed infrastructure approach, carriers can defer a significant portion of their up-front capex cost and “pay as they succeed” with the rollout and managed operations of their network transformation. With managed end-to-end service operations, Alcatel-Lucent’s managed services focus goes beyond the traditional network operations management and looks at the end-user’s service quality as the true measure of “quality of experience”.
That willingness to share risk underpins the managed services proposition. “Risk mitigation is an important component,” says Herzog. “Transformation decisions affect all the business areas of an operator – it’s not just a few elements, its change in the billing system, in customer care – all areas are impacted and operators can’t afford to take years to transform to new business models.”
However, that need for haste doesn’t make decisions simple or easy to execute. “For each operator, it’s the first time so they’re looking for partners with the capability and the expertise to help them,” says Herzog. “Capability means having relatively broad coverage to offer transformative solutions. Obviously there is not one senior player who could provide all these functionalities in their own area of competence so it’s a mix of IT, telecoms and business expertise that is required. That means the rule of the day is partnering. The important thing is this isn’t driven by vendors looking to enhance and extend their revenues by inventing the concept of business transformation, it’s the other way around. Carriers have a strong demand, and their known and trusted partners have created the capability, including partnering, to address this need.”
By definition, a one-size-fits-all approach to managed services is inappropriate. There’s no such thing as a uniform operator so there can’t be uniform managed services propositions. However, providers can assemble common approaches and build common frameworks and experiences. There are now two fundamental splits in operator expectations of managed services.
“In emerging markets, the trigger for transformative solutions is less the need to completely change the operator’s profile but more about helping cope with strong growth demands and in delivering efficiency gains,” says Herzog.
The related managed services solutions need to cope with rapid geographical expansion while maintaining a lean and harmonised operation model. This requires flexibility and rapid scalability from managed services vendors in order to quickly mobilise local resources, skills and expertise while leveraging global processes, tools and practices.
Mature markets have different challenges and objectives: It is more about the dramatic changes of carriers’ business models and offerings. For example, operators may want to establish or transform their enterprise business arm, they may want to transform their offer to existing customers or introduce totally new technology and service capabilities.
“It is the exact opposite from emerging markets in mature markets,” says Herzog. “Growth is not the question, differentiation is. Business transformation in general is about enabling a carrier to become a totally different player, often in a different domain. That means tremendous and dramatic changes and here, again, the solution is tailored to bring in additional skills and the different components that make up an end-to-end solution.”
Business transformation provides a key opportunity for operators to restructure and reposition themselves along their value chain towards more customer-centric activities, while relying on a strategic partner to manage and operate technology evolution. And the different regions and markets can have dramatically different transformational needs.
That strategic evolution means operators are exploring ways to streamline their operations and at the same time keep growing their revenues by leveraging all their assets from subscriber intimacy to real-time usage intelligence in order to create new services for end-users and new business partners.
As they will develop new business models, they will require new tools, such as data mining and business analytics and new integrated processes along network and IT operations to maximise the customer operations efficiencies.
The ultimate model for business transformation – sometimes called telco-in-a-box - is a means by which the vendor offers a set of already proven network, operations, IT and BPO solutions that can be rapidly deployed and quickly become fully operational. In this scenario, the managed services vendor takes on the full responsibilities for the network and service infrastructure planning, deployment, integration and day-to-day operations. The service provider retains the sales and marketing as well as the product management responsibility. Again partnering with the right Tier 1 players is a crucial success criteria for such solutions to cover the required breadth of needed solution-capabilities and components.
“Telco-in-a-box to me is a menu card for transformative solutions,” explains Herzog. “It should exclude only two functions – sales and part of strategic marketing – of the operator business. All the rest can be included in the telco-in-a-box proposition which you can also see as the enabler for a Virtual Network Operator (VNO).”
Herzog foresees that sort of proposition becoming more popular in the next 12 to 24 months. “For example, a wireless operator who wants to provide wireline services so it can offer bundled wireline and wireless services could acquire a fixed network, form a partnership or ask a provider with telco-in-a-box capabilities to design, plan, roll-out and operate a wireline network in its entirety.”
That type of scenario won’t work in all markets. Some have regulatory conditions that require licence owners operate the infrastructure but it illustrates one of the many ways managed services are now being deployed. There are many other models and approaches that must be encapsulated in the offerings of telecoms managed services providers. Those offerings will need, as a baseline requirement, to combine: operational excellence for network operations and services management; deep managed services industry knowledge for IP and MPLS network operations; the broadest, telecom multi-vendor expertise; the ability to manage customer experience end-to-end; and an integrated approach to converged network and IT operations.
As Herzog points out, a single organization will be unable to cover all these bases and the criteria for success means few organisations are naturally well-placed to address this market. “It has become quite obvious that you need to be an established player in at least parts of the components that are required,” he says. “It will be very difficult for a new entrant to jump into the market for transformation solutions. Those who are reluctant to partner will find it equally difficult to succeed because there is no way a telecoms managed services provider is going to sell a managed services proposition using subcontractors alone. Those who are successful will have the capability to put all those elements together in true end-to-end partnerships.”  GTB