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Strategic Outsourcing (Managing Costs Through Special Partners)

14TH Annual GSM>3G Middle East Telco World Summit7th December 2009

Mian Mutti Ur RehmanCosting & Regulatory Economist - Mobilink Pakistan

muti.rehman@mobilink.net

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Agenda

Attaining competitive advantage through special partners

Which Telecom functions and services should be outsourced?

Spot the risks involved in outsourcing business processes.

How to mitigate risks and increase ROI?

Introduction and Facts

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• A Managed/outsourced Service is provided by a service provider that takes on management responsibility for a function that has traditionally been carried out internally by a telecom operator.

• Outsourcing or managed services typically include establishing, operating and managing day-to-day operations of a telecom operator’s network, services and business support systems.

• It also Covers providing network capacity and hosting of contents and applications e.g MMS, push email etc.

Introduction and Facts

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• Network operating expenses typically constitutes between 17% to 20% of total OPEX

• Outsourcing functions and services could save 20% OPEX of Telecom operator.

• 60% of wireless operators and 80% of emerging market operators will have some form of managed services contracts by the end 2010 .

• 20% of emerging market operators will have fully outsourced their networks by the end of 2010.

• A real effect of increasing EBITDA by 8%.

Introduction and Facts

* Facts’ Source: Ericsson and Oliver Wayman and Motorola

Following are some facts about outsourcing myth.

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Introduction and Facts

* Facts’ Source: Ericsson and Oliver Wayman and Motorola

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Attaining competitive advantage through special partners

Minimizing Costs Business benefits Strategic benefits

•Minimized operational costs though extensive, highly efficient tools.

•Minimized capital expenditure though maximizing utilization of equipment.

•Flexible cost structure for future growth.

• Operator focuses on the customer base and core competencies.

• Increased subscriber revenue through high performing network

• Better end-user experience from network.

• Transfer of risk to third party.

•Rapid access to technology developments with minimal risk (e.g Wimax, NGN).

•Leverage off economies of scale.

•Faster time to market for new services.

•Partnership with a financially stable and viable company.

Following is mechanism how an operator can get competitive advantage.

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Which Telecom functions and services could be outsourced?

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Which Telecom functions and services could be outsourced?

There are different types of outsourcing arrangements following are most common forms for Network SLAs.

Service Form Contracted Scope

Out-Tasking • Specific Tasks mostly covers field maintenance.

• Handling of partial operation of function/process by provider

Managed Operations

• Outsourcing of Network operations and Maintenance

• Most common types are:

– Operate and maintain

– Build, operate, and maintain or build, operate, and

transfer

• Often includes headcount transfer

• Substantial reduction in OPEX.

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Which Telecom functions and services could be outsourced?

Service Form Contracted Scope

Site and Transmission Cost Management

• MS provider handles both core network and site & Transmission cost management

• Staff transfer would occur.

• Headcount and network OPEX would effect.

• It would have positive impact on CAPEX.

Assets Optimization

• Optimization of converge and capacity on behalf of Operator.

• Deployment is based on actual demand

• Optimization of cash flows and capital employed.

• Involves assets transfer.

• Secure Competitive OPEX efficiency and CAPEX productivity.

Application Management and Hosting

• Hosted and remorlty managed solution.

• Focuses on VAS e.g SMS/MMS

• Gain Share Arrangements

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• Network Monitoring • Network Element Management • Network Management • Fault & Performance Management • Configuration Management • Managed Router Service • Managed Voice Access and Networking • Managed Integrated Access • Managed Remote Access • Managed Backup Reporting • Managed Storage Reporting • Managed VoIP Service • Asset Management • Managed IP-PBX & Applications • Hosted IP-PBX & Applications • Managed Voice Security • Managed Firewall

• Vulnerability Scanning • Incident Management • Threat Assessment Monitoring • Managed Business Continuity Service • Software as a Service (SaaS) • Managed video as a service (MVaaS) • Hosted Video as a Service (HVaaS) • Managed Network & Endpoint Security • Back-office payments processing

managed services • Customer relationship management • Billing systems

There are growing Range of Managed Services some of these are following

Which Telecom functions and services could be outsourced?

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Spot the risks involved in outsourcing business processes.

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Spot the risks involved in outsourcing business processes.

Potential Gains Potential Risks• Reduce costs

• Increase flexibility and time to market

• Access to specific competencies

• Reduce new technology lead time

• Reduce asset intensity

• Generate short-term cash through divestments and free

investments to focus on other missions.

•Loss of strategic control

•Dependency created with large suppliers

•Reduced capability to monitor supplier performance and manage network migrations

•Implementation costs and workload

•Network performance and quality of service issues

“Managed Services is not a ‘hire-and-forget’ option”

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How to Mitigate Risk and increase ROI.

• Establish realistic expectations about benefits and scope.

• Define a detailed picture of the desired end-state early on by keeping under mentioned points in mind.

– Scoping – Operations and process model – KPI and performance model– Governance model– Asset model– Payment model– Third party contracts– HR transition model

Operators Can reduce risks of outsourcing and return on investment indirectly by following initiatives.

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Thank You!