The managed services model is evolving into a strategic partnership aligning business objectives, rather than only meeting specific technical requirements. Here, Valter D’Avino explains how he sees the next stage of managed services development. Co-sponsored feature: Ericsson
Walter D'Avino: Operators want more than just having the
network outsourced. They want a continuous partnership
The first round of managed services contracts, which allowed telecoms operators to test the concept and develop familiarity with outsourcing non-core functions, are coming to an end. In these contracts, resources were freed to focus on mission-critical operator activity such as the customer relationship, branding, charging and licence holding. And while it is clear that operator demands on outsourcing are now increasingly specific and complex, every operator has unique requirements and challenges making a one-size-fits-all approach to managed services impossible.
“It depends on which kind of operator we’re talking about,” says Valter D’Avino, vice president and head of managed services at Ericsson. “If we’re talking about the ones that are more mature outsourcers, they’re on a journey from network-based managed services to customer experience-oriented managed services. They’re looking for something more than just having the network outsourced, they want a continuous partnership that generates value back.”
These mature outsourcers are now looking to explore managed services further, for example in scope, for example by adding the IT side of their business to the partnership. “We definitely see that kind of trend emerge where the network and IT go together,” adds D’Avino. “The traditional model is to have the network managed by one managed services provider and the IT managed by somebody else but these traditional demarcations are breaking down.”
Another example of traditional demarcations breaking down is in the broadcast managed services space, where Ericsson has recently announced the intended acquisition of Technicolor’s Broadcast Services Division. “We see broadcast as another contiguous sector where the managed services way of working can be applied successfully. In general, though, the breadth of managed services is to expand from the network to IT, and in some cases all the way to network sharing and beyond.”
Cost savings still continue to be the main driver behind operators’ decisions to engage managed service providers, but the demands and expectations are now increasingly refined. “Opex still remains the prevailing factor but beyond cost, capabilities of innovation and understanding of the end user, along with providing the services end-to-end across networks, terminals and new services, become of more importance,” adds D’Avino. “For instance, offering the abilities to manage the introduction of new terminals end-to-end as a service are now values that the operators appreciate. In addition, there are many other variables from market to market and geography to geography that are pushing operators in the managed services direction.”
The value of outsourcing is dependent on individual operators’ needs and pressures. While one might find the ability to free up resources to focus on critical, consumer-facing operations, another might have a need to handle the increasing network and business complexity. The managed services value proposition therefore shifts from operator to operator.
“Again, there is no standard answer,” confirms D’Avino. “In the beginning there were green fields but now the landscape is much more complex so there are a variety of behaviours. Where an operator finds itself on the maturity curve depends on its attitude to managed services. For those at the end of that curve, the scope is in marketing, sales, the customer relationship, profiling the end user, understanding their behaviour and differentiating in proposals and packages – that’s the fundamental end game of managed services. But, if you go around the world, behaviours vary. This can depend on if the operator was historically a PTT or a challenger, or even vary depending on the geography they operate in.”
That inherent variety means that a managed services proposition that is attractive to one operator isn’t necessary applicable to all operators. That may seem counter to the concept of managed services delivering cost savings by creating economies of scale and performing the same operations for multiple operators. Those economies can still be accessed by managed service providers, however. “It is fundamentally important for a managed service provider to have the capability to segment operators and to understand at which part of the maturity curve they are on,” adds D’Avino. “It is critical for us to modulate our solutions accordingly. Each customer and each operation is different and in terms of engagement we have to customise throughout our solution. That means we must invent something all the time.”
The opex savings realized by managed services are also under pressure because operators continue to demand very high service levels, backed by rigid KPIs and service level agreements. “They will still continue to be very tough in this respect but, when we are producing value through customised solutions to an operator, their comfort level rises,” says D’Avino. “Their attitude to controlling the relationships starts from the function of the engagement. For many, opex saving is the critical metric, for others, the quality, in terms of KPIs, of the network is paramount. Theoretically, you can’t create maximised operational expenditure efficiency and the highest level of network quality. The compromise then is between savings and quality of the network – each operator will need to make their strategic decisions accordingly.”
Beyond the theoretical, D’Avino says Ericsson is able to draw on its experience to strike the correct balance between cost and quality for its customers. “We are managing networks with more than 900 million subscribers so we have significant experience in terms of network managed services,” he explains. “Knowledge sharing therefore could mean understanding how the network quality of an operator compares to other networks. We can understand from KPIs how a network is positioned not only against its competitors in its home market but also across the world.”
Keeping individual operator data confidential is an obvious requirement in this area. “We must keep the confidentiality when it comes to subscriber information and proprietary business information and assemble great insight into the performance of individual businesses,” says D’Avino. “That’s the value you access when join the managed services club but I would emphasise that keeping confidentiality is a very, very delicate part of the business. If you eliminate all specific subscriber data, however, you can gain valuable understanding about end-user behavior in general that you can share, explore and exploit.”
Generating confidence and comfort with managed services among operators as well as continually evolving the offering is a key step in managed service providers’ journey to creating a mature market. D’Avino sees room for significant further development. “If you consider the traditional opex of operators, outsourcing is still a relatively small part - which can be increased significantly,” he says. “The blend between what is kept internally and what is outsourced will shift towards managed services. Two things are driving that. First, our operator customers are concentrating on managing the end user through marketing, branding and focusing on the customer relationship rather than via network and technological operations. The second is that the maturity of operators will increase in managed services, in turn increasing the demand on us. I believe outsourcing is part of the natural development of the telecom industry.”
“Managed services provides the tool to shape the industry when the value chain is breaking down into pieces. We at Ericsson are focused on the technological side and here it is important that we are shaping the industry’s total expenditure,” adds D’Avino. “It’s a very important role that we can enable operators to access economies of scale, deliver greater quality and focus on the new core activities of their business. But segmentation is fundamental. Managed services solutions are not for the entire world. Not all customers have the same needs or capabilities. Our approach is to tailor and adapt and that is the continuous evolution of our managed services offering. Our customers have a variety of needs: one might choose to outsource the network and IT; another might choose to outsource network and terminals. We draw on our experience, skill and knowledge to create the most appropriate managed services propositions according to our operator customers’ needs.” GTB