Managed Services - To Outsource or Not to Outsource

Embed Size (px)

Citation preview

  • 7/29/2019 Managed Services - To Outsource or Not to Outsource

    1/3

    To outsource or not to outsource, that is one of the most difficult questions for

    an operator. Vendors rarely consider this for in their view the need is absolute

    and usually independent of track record for the sales team have little contact or

    accountability to the delivery team.

    But from the vendors perspective, is the proposed managed service something

    which he has the capacity to excel at? As for an operator, the question is, is the

    managed service actually something which he wants and needs?

    There is a very real risk of weve got one too setting in here, for example look

    at the number of GNOCs being set up in countries where other businesses are

    removing them. Perhaps not so much for failure to perform but cultural issues

    making it difficult for the Call Service Agents to handle the calls.

    There is only one reason for outsourcing which is that; through the vendors skill and

    innovation the service can be delivered more efficiently than by the Operator. Thismay manifest itself as reduced operating costs, bundled pricing with an equipment

    overlay potentially saves capitol and capex, Head count reduction, speed to market

    faster, and so on.

    In the modern telco environment there is no place for any other motive;

    furthermore organisations on both sides of the fence are set for failure if they ignore

    that. In the long term it would have been better not to venture into it.

    There are several types of vendor client relationship.

    The first is a national operator, the so called island network.

    The second is the multi-national, where for example a parent operator holds a

    controlling interest in networks from several countries.

    It is essential also to consider the vendor, does the vendor have an, in country,

    presence already?

    If the vendor doesnt what are the reasons for approaching the client, is it for

    example a strategic move to allow the vendor entry to that particular market?

    If the scope is NOC operations only can the margin really justify the outsourcing?

    In most managed service cases the vendor inherits the labor force from the

    operator, that in itself is a painful exercise. Staff settled in their positions are bound

    to be wary of a plan to migrate them to another organization.

    If the vendor is going to show an outsourcing dividend how is he going to derive that

    saving?

  • 7/29/2019 Managed Services - To Outsource or Not to Outsource

    2/3

    If it is NOC operations only and that is to be hosted offshore at the vendors

    GNOC then it is unlikely that a significant percentage of the operators staff will be

    migrated. So the operator is facing the severance of close to 100 percent of the staff

    who fall under this plan.

    Reducing labor rates will be un-popular and we have seen attrition rates as high as

    100% per annum.

    What does that do? It leaves the vendor facing the loss of his workforce, he is forced

    either to retract the pay reduction or ship in his own staff to replace those lost. By

    definition that is going to be more expensive thus blowing the managed service

    budget clean out of the water.

    So we realize that simply mirroring the client organization has the potential to

    increase cost not reduce it, what are we going to do?

    We must accept that a truly mutually beneficial managed service must require the

    hosting of multiple networks from one country. That way not only can the GNOC

    deliver but the SPM and FLM organisations can also come under the remit of the

    MS. In fact that is the quickest way to show performance improvement through the

    reorganization of the FLM and SPM teams.

    The main reason for setting up the first managed service project in a country is to

    use it as a springboard to bring other networks from the same country on board.

    Operators need to make a quantum leap, managed service is not about off loadingthe bits of the organization that are difficult to manage, they dont like or are

    costly. managed service is about the skillful delivery of a raft of measures which

    coordinated; deliver the same or better service at eventually a lower cost.

    We have to say eventually as it becomes obvious that lower cost is the objective not

    the immediate result.

    One fundamental question remains; why should a multi-national operator

    outsource?

    Consider an operator headquartered in Quatar, with operations in the stans of the

    old Soviet union, Laos, Thailand, Bolivia, Fiji, etc.

    By outsourcing this network he is handing over its operations to a third party, a third

    party who in order to stay in business must make a profit.

    So why not reverse the trend but in a smart way? Let this operator build his own

    GNOCs, two for example one in Bangkok and another in Bolivia. With diversity

    redundancy that can support the all the networks within the remit. In other words

    in a very real sense the operator can become his own outsourcing partner heredrawing most of the benefit that the vendor can offer. But critically with out paying

  • 7/29/2019 Managed Services - To Outsource or Not to Outsource

    3/3

    the 3rd partys margin. There is an immediate value add which even the most

    aggressive vendor cannot deny. If he does the fallaciousness is evident and a Red flag

    to the operator.

    In this scenario the only value benefit the third party vendor can offer is when he is

    hosting multiple vendors across a substantial spread of the countries in which the

    operator actually operates.

    What this all comes down to is a simple perspective - only outsource if it is going to

    be done well where the economics permit the delivery and offer a margin.