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Published on Wednesday, 01 August 2012 07:09
Five years ago, network operators were hesitant to outsource operations and entrust their business to someone else. Today, almost every network operator depends on managed services for at least part of their operations and network managed services. The revenue from network managed services totaled US$12 billion in 2011. So, why the a sudden change in the business model?
Managed services allow operators to carefully manage their Opex. In many emerging markets even though the organisation will have sufficient internal resources to manage the network, Mobile operators are risk averse. By outsourcing management to a third party which is bound by contractual service level agreements, the operator doesn't share the burden of responsibility for a service outage.
“Outsourcing is a win-win situation,” says Jim Eller, principal analyst, wireless infrastructure. “Network operators can reduce OPEX, improve service quality and increase revenues. And network equipment vendors earn higher margins on services than on hardware and software, which is increasingly commoditized.” Even though this model is more expensive to operate in the long term, it is a popular alternative in countries which have limited local support resources. For example, a managed service contract may stipulate that the vendor operate a staffed local office.
What has changed today is the way managed services vendors have adapted their business models. Typically, most managed service vendors in this space are also hardware infrastructure vendors. It is not uncommon for a hardware vendor to lose a critical infrastructure upgrade, but to win the managed service business with another vendor's hardware. The philosophy being what is lost on the roundabout is won on the swings!
AdityaKaul, practice director, mobile networks, sees a fundamental change in network managed services. “It’s not just about reducing operational costs anymore,” says Kaul. “Most operators have already achieved cost savings through outsourcing, so they are now looking for managed services partners who can help them to transform their businesses and increase revenues. We call this new paradigm Managed Services 2.0 (MS 2.0).”
Mobile network vendors have realised that a multi-vendor network provides better value to the business in terms of Capex. However, managing these types of network also provides new challenges. In the past, the entire network was represented by a single vendor, end to end. Today it is not uncommon for packet core to be supplied by a different vendor than the circuit switched network. As a result of this multi-vendor evolution, the proprietary management tools used by managed services organisation need to be replaced, with vendor independent probe solutions.
The leading vendors in network managed services are the major network equipment vendors: Ericsson, Nokia Siemens Networks (NSN), Huawei and Alcatel-Lucent.
By Angela Sutherland
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