Reader Forum: Outsourcing managed network services for competitive advantage

Editor’s Note: Welcome to our weekly Reader Forum section. In an attempt to broaden our interaction with our readers we have created this forum for those with something meaningful to say to the wireless industry. We want to keep this as open as possible, but maintain some editorial control so as to keep it free of commercials or attacks. Please send along submissions for this section to our editors at: [email protected] [email protected].
Over the past year, wireless carrier competition has focused more and more on “the next big thing”, ranging from devices to smart phone killer apps. What once were considered key differentiators such as “Do you hear me now?” and “The Network” are now considered table stakes for tier-one carriers. With this shift, carriers are now challenged to refocus their energy and invest in growing and developing their service offerings. One strategy is to implement outsourced managed services for network operations – at a lower cost than performed in-house – and reinvest the difference.
When used wisely, implementing managed services can deliver as good – if not better – service than in-house teams, with savings of 30%+. Managed service providers accomplish this via a variety of approaches focusing on greater efficiency, elimination of redundancy and a bottom-line mentality. These efficiencies typically include a “one-to-many” (e.g., multiple client serving) labor force of trained and well-managed mobile professionals, along with shared operations centers (e.g., network operations centers serving multiple clients) and lean approaches to getting work done.
What can managed services do for your business?
Once a managed services approach is implemented and transformation changes have occurred, carriers should expect to see up-front operational cost savings. Typically, managed services contracts last anywhere from three to seven years (sometimes longer), with a large percentage of realizable cost savings for the carrier yielded during and after the transformation timeframe (~12-18 months when the managed services provider takes over existing operations and executes changes for more efficient and cost-effective operations). This change often includes retiring processes, applications and tools that are outdated, eliminating redundancy and implementing new, best-in-class processes and tools in line with key carrier business goals (which are tied to service levels for the provider). After the transformation period, there are often additional, more modest savings that can be realized through continued productivity gains, further improvements in approaches and tools and by eliminating outdated and redundant operations and systems.
By nature of their engagements with multiple customers, managed services providers continually gain new expertise and develop more efficient ways of doing business. As a result, in addition to delivering straight cost savings, managed services providers can also offer creative cost sharing and revenue generation opportunities to their clients. These opportunities often spring from potential process and approach changes and re-engineering, as well as from suggested (and often provider brokered) creative site and backhaul sharing options. All of these opportunities, when carefully considered by the carrier, can enable funds traditionally earmarked as opex to be re-invested in products and services.
Are you ready for managed services?
Before a carrier can seriously consider whether or not managed services is a good opportunity for driving cost savings and improving operational performance, a readiness assessment that focuses on process/approach maturity and organizational maturity is required. The process/approach maturity assessment allows the carrier to analyze the specific functions that could be performed by a managed services provider and determine the extent to which those functions are sub-optimized. This portion of the assessment is critical to the carrier’s understanding of which major approach changes could realistically be expected from a managed services provider. The organizational maturity assessment enables the carrier to determine the existing readiness of the organization: How will the organization’s personnel react to a managed services approach? How many staff may be candidates for re-badging? How many current roles may be eliminated due to redundancy? The organizational maturity assessment acts as a “cultural barometer” to assist the carrier in preparing for and working with a managed services provider, both from a human resources and communications perspective.
A detailed baseline of current operations should be created next, which enables the carrier to fully document existing processes, and fully loaded costs, e.g., employee salaries, benefits, technology support costs. Equipped with the baseline, carriers can then assess the managed services marketplace to identify which suppliers are most qualified to deliver an equivalent (and usually better) service at a lower cost. After the market assessment, a competitive sourcing process is key to attracting the most creative and cost effective solutions from bidding managed services providers. With managed services, the more information the bidders have, the more specific they can be in providing a very realistic proposal, inclusive of all opportunities available for operational transformation and cost savings. Therefore, adequate time should be allowed for the bidders to fully understand the carrier’s operations, as well as more transparency than is generally offered during a typical sourcing process.
Avoiding the pitfalls
While engaging a managed services provider can drive considerable benefits, mismanagement of the process and/or vendors can also result in failure. Among the most prevalent of these problems is the incorrect or incomplete baselining of the work in question. This often leads to additional transition and transformation requirements that translate to cost increases. During transition, if not properly managed, the supplier’s performance may lag, which could result in impacts to service levels and potentially affect customer satisfaction. Another prevalent issue is the lack of a complete and detailed internal process change analysis leading to unprepared negotiations with suppliers. One of the most effective tools for negotiating with a managed services provider is knowing exactly how much change the carrier can make, and then pressing the suppliers to both match this and go beyond.
Determining a viable scope for a managed services provider to assume specific responsibilities and undergoing preparations for a well informed sourcing decision are critical for success in working with a managed services provider for network operations. If handled responsibly, the potential benefits from engaging a managed services provider can yield significant cost savings and operational improvement opportunities that allow carriers to focus on and invest in service offerings – providing them valuable market differentiation and competitive advantage.
Adam Cummins is a senior associate at Pace Harmon, an outsourcing advisory firm with extensive experience working with managed service providers.