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Managed services the road to operational efficiency
Managed services the road to operational efficiency
Managed services the road to operational efficiency
Managed services the road to operational efficiency
Managed services the road to operational efficiency
Managed services the road to operational efficiency
Managed services the road to operational efficiency
Managed services the road to operational efficiency
Managed services the road to operational efficiency
Managed services the road to operational efficiency
Managed services the road to operational efficiency
Managed services the road to operational efficiency
Managed services the road to operational efficiency
Managed services the road to operational efficiency
Managed services the road to operational efficiency
Managed services the road to operational efficiency
Managed services the road to operational efficiency
Managed services the road to operational efficiency
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Managed services the road to operational efficiency

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  • 1. Free to tmforum members 2011 | www.tmforum.org $995 where sold QUICK Insightsthe road tooperational efficiency? Sponsored by:
  • 2. CLOUDJoin usSERVICES for... MANAGEMENT MANAGEM WORLD WORLMAY 23-26, 2011 | THE CONVENTION CENTER DUBLIN, IRELAND MANAGEM MANAGEMENT WORLIndustry heavy-hitters to speak at Management World 2011 WORLDJoin them and other key players as they unwrap the who, what and how of communicationsenabling digital life. Speakers include: Olivier Baujard, CTO, Steffen Roehn, CIO, Ben Verwaayen, Deutsche Telekom Deutsche Telekom CEO, Alcatel-Lucent David Gurle, GM & VP Kevin Peters, CMO, Stephen Shurrock, Skype Enterprise, Skype AT&T CEO, O2 Ireland Erik Hoving, CEO, NetCo Rajeev Suri, CEO, Member of the Board, NSN KPN International To register, visit www.tmforum.org/mw20112 QUICK INSIGHT www.tmforum.org
  • 3. Managing services: The road to operational efficiency? Report author: Annie TurnerMENT Publications Managing Editor aturner@tmforum.orgLD Managing Director, TM Forum Insights Research: Rob Rich rrich@tmforum.org Creative Director: David Andrews dandrews@tmforum.org Commercial Sales Consultant: Mark Bradbury mbradbury@tmforum.org Publisher: Katy GambinoMENT kgambino@tmforum.orgLD Client Services: Caroline Taylor ctaylor@tmforum.org Marketing: Corporate Marketing Director, Lacey Caldwell Senko lsenko@tmforum.org Report Design: The Page Design Consultancy Ltd Head of Research and Publications: Page 4 Rebecca Henderson Executive summary rhenderson@tmforum.org Advisors: Page 5 Keith Willetts, Chairman and Chief Section 1 Executive Officer, TM Forum The need to move from tactics to strategy Martin Creaner, President and Chief – and the inhibitors Operating Officer, TM Forum Nik Willetts, Senior Vice President Page 10 of Communications Section 2 Published by: Sensible steps towards successful managed TM Forum services 240 Headquarters Plaza East Tower, 10th Floor Morristown, NJ 07960-6628 Page 14 USA Section 3 www.tmforum.org What can TM Forum do to help? Phone: +1 973-944-5100 Fax: +1 973-944-5110 Page 16 ISBN: 978-0-9838028-9-1 Sponsored feature Amdocs ©TeleManagement Forum 2011. The entire contents of this publication are protected by copyright. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means: electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, TM Forum. The views and opinions expressed by independent authors and contributors in this publication are provided in the writers’ personal capacities and are their sole responsibility. Their publication does not imply that they represent the views or opinions of TM Forum and must neither be regarded as constituting advice on any matter whatsoever, nor be interpreted as such. The reproduction of advertisements and sponsored features in this publication does not in any way imply endorsement by TM Forum or of products or services referred to therein. While every effort has been made to ensure that articles, sponsored features, logos and trademarks appear correctly, TM Forum cannot accept responsibility for any loss or damage caused directly or indirectly by the contents of this publication. www.tmforum.org QUICK INSIGHTS 3
  • 4. MANAGEDSERVICES Executive summary It’s disconcerting and unrealistic that so many industry. It is clear that managed services, and people in the communications industry are still how you use and/or provide them, need to viewing managed services as primarily being be a fundamental part of strategy, rather than a way of saving money. It is understandable, deployed in the tactical way they are today. though, given that Gartner expects average Section 1 looks at the inhibitors to embedding revenue per user (ARPU) to decline by up to managed services into a CSP’s strategy, which 25 percent by 2014, as the likes of Google vary from organizational structure to perhaps out and Skype continue to prosper and disrupt the of date ideas about what could and should be network operators’ established business models. outsourced. Google is already the fastest growing telco Section 2 suggests lots of new ways of and world’s third largest (in terms of cable, thinking about managed services and some fiber infrastructure, WiMAX and global cache sensible steps to take toward their successful centers) while Skype became the biggest adoption as part of the company’s strategy. It carrier of international minutes back in 2008 demands a great deal of both the service provider and now carries 13 percent of international and the organization paying for the service – not telephony traffic. least of which is giving up control of what have As traffic volumes and revenue diverge, costs been seen as core activities and allowing a third will overtake income unless radical action is party to run them in a different way. taken, and soon. However, as shown in Figure Section 3 puts forward ideas about the role 1-1 on page 5, growth opportunities are limited. that TM Forum could play in moving managed The central argument of this report is that in services forward, as suggested by some of its the next few years we will see radical changes members, what it is doing in this area to help, in the structure of the industry, with none and what it is planning to do. of the larger operators continuing to offer all This Quick Insights report is based on the the services they do now, end-to-end. Rather executive roundtable debate on managed they will provide perhaps two of the following services that took place at Management World functions: run the networks including broadband, in Orlando in November 2010. TM Forum act as an aggregated services provider or would like to thank all the senior executives become a digital life enabler, providing customers who attended for sharing their insights, and in with services and applications. particular we are grateful to Mary Whatman, In this scenario, the big question is how executive advisor to TM Forum and founding managed services will evolve – both in terms of partner, Parhelion Global Communications what communications service providers (CSPs) Advisors, for moderating the event, and to choose to outsource and what managed services Alice Harris, director, Billing Services, Qwest they offer others. Both will be deeply affected Communications, and Ralph Brown, CTO, by the changing shape of the communications CableLabs, for acting as provocateurs.4 QUICK INSIGHTS www.tmforum.org
  • 5. Without radical action,costs will overtake incomeSection 1The need to move from tactics to strategy –and the inhibitorsThe coming scenario Figure 1-1: Strategic mapping of market opportunities, worldwide (millions of dollars)Clearly the CSPs’ business model needs to  evolve. The average revenue per user (ARPU)will be declining by 25 percent in 2014, accordingto Gartner, as the likes of Google and Skypecontinue to prosper and disrupt the networkoperators’ established business models. Google is already the fastest growing telcoand world’s third largest (in terms of cable,fiber infrastructure, WiMAX, and global cachecenters) while Skype became the biggestcarrier of international minutes back in 2008,growing by around 41 percent according toTeleGeography, and now carries 13 percent ofinternational telephony. As traffic volumes and revenue diverge,costs will overtake income unless radical actionis taken, and soon. However, as shown inFigure 1-1, opportunities for growth are limited.Consequently, in the future, few organizations Source: Gartner, Inc., Management World Americas Executive Roundtable,that are network operators now will be Managed Services & Operational Efficiency, Mary Whatman, October 2010operating at all three levels, described in Figure Figure 1-2: A CSP’s business model will need to evolve1-2, according to Parhelion. Parhelion’s Mary Whatman says, “The core Home community Business communityservices operators provide now will change Healthcare Finance Home security Mobile commerce Social networking Machine to machinequickly. They are not likely to be providingthings like IPTV and advertising themselves, Digital life Digital life enablement (customer/partner) servicesthey’ll need partners. There are a lot of provider Lifestyle product provider Lifestyle management Personalizationsmall organizations emerging that providespecialist services like advertising. They don’t Aggregated Service aggregation enablement servicesnecessarily have networks, they sometimes provider Service enablement Content enablementdon’t have a direct relationship with thecustomer, just the content.” Network Broadband access enablement All of which will focus operators’ minds services provider Fixed Utility Wireless CATVon how and who they are going to partnerto do the parts they cannot do economically Source: Parhelion-GCAwww.tmforum.org QUICK INSIGHTS 5
  • 6. MANAGEDSERVICESthemselves, which will mean using managed responsibility as a strategic method forservices very differently. The trigger point improved, effective and efficient operations.will be the changing business model, with a The person or organization who owns or hascountry perhaps having only two networks direct oversight of the organization or systemthat everyone else will run their businesses being managed is referred to as the offer-er,over. Already it makes sense to see the client, or customer. The person or organizationnetwork almost as a separate organization, that accepts and provides the managed servicewith its own profit and loss. In future, network is regarded as the service provider.operators won’t just be providing services for Typically, the offer-er remains accountablethemselves, but will be offering the networks for the functionality and performance of thethrough a managed services arrangement too. managed service and does not relinquishTelstra is already moving in this direction. the overall management responsibility of the An emerging role for operators is as service organization or system.”aggregators, whereby they expose network One of the big questions is how managedelements and services to third parties so they services is going to evolve – both in termscan be used by customers and aggregate of what CSPs choose to outsource and thecontent from many different providers to managed services they offer others. Both willmake its carriage as economic and efficient as be deeply affected by the changing shape ofpossible. the communications industry. The digital life services providers will alsopartner with others to deliver their services. Tosucceed in this area will demand considerablemarketing skills and the ability to launch a lot ofnew offers quickly. Ralph Brown, CTO, CableLabs, comments,“This implies transformation at a number ofdifferent levels. Not just individual companies,but regulatory issues around network neutrality,the whole rights to content for example. Whatwe are seeing today is a lot of experimentation,not only on the regulatory front. How younavigate that is a big question.”Definition of managed servicesThe immaturity of managed services withinthe communications industry is reflected in thefact that there is considerable confusion aboutexactly what they are. For the purposes of this report, we have “The immaturity of managed services within theadopted the Wikipedia definition: “Managed services is the practice of communications industry is reflected in the fact that theretransferring day-to-day related management is considerable confusion about exactly what they are.”6 QUICK INSIGHTS www.tmforum.org
  • 7. Better communication structurecould eliminate duplicationFigure 1-3: What areas have you outsourced already? Strategy versus tactics It is not clear how many operators are looking80% at their sourcing strategy thinking about what70% they’re going to provide in-house, what they’re going to own and what they’re going to provide60% through third parties. There is evidence to50% suggest that few are looking at it holistically. Before the roundtable discussion, TM Forum40% asked attendees to fill in a short survey, asking30% what services they were outsourcing already and what they planned to outsource. (See20% Figure 1-3). While the number of attendees10% was not big enough to be a scientific sample, 0% it did include network operators from around the world, and their response to this question Data center management Desktop management Network management Application development Application maintenance Contact centers Billing operations Project management Other seems to bear out the general lack of a strategic approach to managed services. When asked what they were planning to outsource in the next 24 months, the results were Source: TM Forum roundtable survey Nov. 2010 similar, with only slightly different percentages. Curiously billing didn’t feature at all in either, although Whatman says that billing (beyond simply printing bills) has been outsourced to a greater or lesser extent by a number of operators and that a large number of CSPs are going through billing transformation now. This is in part because as the value chain develops and operators update their billing systems, it involves new technology, structure, and processes, so many are wondering whether to hire and train people or determine that billing really is not a core competency so why not hand the whole thing over? Organizational structure creates difficulties Operators tend to have five or six teams that look after different contracts, each has grown its expertise and knowledge base separately“Operators tend to have five or six teams that look after and they are often ignorant of each others’ role. There is a lot of duplication when theydifferent contracts, each has grown its expertise and knowledge could help each other greatly and save muchbase separately.” time and energy.www.tmforum.org QUICK INSIGHTS 7
  • 8. MANAGEDSERVICES Qwest Communications‘ Alice Harris Figure 1-4: What are the top three reasons for choosing to outsource them?acknowledges, “I have always beenresponsible for billing and my peer in thepayments area is responsible for her vendor Capital avoidancerelationships. Unless we decide to partner, andwe are both in the CFO organization, it mightnot happen. At the moment, we make each Customer satisfactionother aware of the deals that are happeningbut aren’t required to partner on an overallstrategy.” Gain new skills One delegate thinks this is not true in hisorganization’s case, saying, “For our largecustomers, we will start to put together those Improve qualityadvanced services so that we can provide thecloud. We are starting to offer Software as aService and some managed services such as Lower costssecurity or hosted services. “We are trying to understand how cloudservices will work and also how to provide 0 0.5 1.0 1.5 2.0 2.5 3.0those services, especially to our governmentaland big corporate customers. We are looking Source: TM Forum roundtable survey Nov. 2010at the interfaces and technology to enable thecloud in around three years from now. That isour vision. Some customers are demanding it,so we have to move fast.” This is an aggressive schedule by anystandard. Qwest’s Harris says, “That’s a really goodpoint. We always partner for our externalcustomers. We’re part of the Networx contract;that’s part of the U.S. Federal telecomsfulfillment process. The contract is veryrigorous; you have to be able to supply manyservices. Qwest is a big operator; and wedid have to build the digital life and serviceaggregation layers for certain products usingsupplier partnerships, so we had to build thattype of relationship.” The group largely agreed that the bigquestion was why can’t service providers makethis a standard way of doing business with lotsof partners, rather than an exception?8 QUICK INSIGHTS www.tmforum.org
  • 9. Beware biting off morethan you can chew Cost is a barrier Scaling up stretches core infrastructure Jim Matthews, VP enterprise architecture Yet another attendee adds, “When you’re and strategy, Charter Communications, has deploying 1,000 computers, it’s a different an answer to that. He says, “For us cost is ballgame and we’re deploying 100,000 a barrier. Setting up these kinds of services computers, so it’s a more complex ballgame. to offer them properly, whether internally We’re rolling out Ethernet, and some of the or externally, may require a certain level of network requests we’re getting have over capital investment and to make the business 1,000 legs. Provisioning them, getting it case you’ve got to be saving some money activated, doing it properly, getting the whole or offer something cheaper or better. We’ve order right is a huge task. done multiple layers of cutting costs through “To get to the level of being able to offer rationalization over the last four years and these types of services, at this scale, requires now we’re looking at what could be a capital an organizational will and restructuring as intensive process to get to the necessary level well as the logistical capabilities. Telcos of automation and optimization around this.” pride themselves on being very technical, This is a most interesting comment, given but when it comes to their management that capital avoidance was given by attendees systems and OSS/BSS, sometimes what they as the most common reason for engaging in consider adequate is ridiculous. Doing this managed services. If outsourcing contracts stuff requires a complete shift in how they’ve are negotiated on a departmental level, then done business. The telcos aren’t in charge any it can become an expense instead of capital more, it’s the IT people.” investment. Naturally this depends on how a They conclude, “The case in point is when company’s balance sheet works but another AT&T finally gave up and gave it all to IBM delegate argues, “It’s an accounting trick. It’s and Accenture to do. How can you offer a an artificial wall that makes your CFO happy. sophisticated service at a price that makes Maybe they want to write off capital assets sense for you and others?” every year rather than depreciate them over Or as another delegate put it, “If you get to several years.” the point that you’re responsible for providing Or maybe many of those who make the managed services across the network, if you’re outsourcing decisions do so because they can struggling with IT, you’ll struggle more when outsource a function because it is cheaper, you’re providing services to someone else.” faster and easier to pay for it from the departmental budget than have to stand in line for capital. A powerful reason why outsourcing decisions should be made at board level as part of an orchestrated strategy. “If you’re struggling with IT, you’ll struggle more when you’re providing services to someone else.”www.tmforum.org QUICK INSIGHTS 9
  • 10. MANAGEDSERVICES Section 2 Sensible steps towards successful managed services The definition of insanity manage change well and they control churn. Operators need to make strategic decisions, In an internal economy, your business is to put at board level, not departmental level. The a rush on IT – ‘ I need this tomorrow’. Then dollar value of some of these deals is just so they go to an outsource provider and they say, high and the impact on business is so real that ‘You’ll get it in three months’. If an outsourcer they have to be prepared to change. Arguably is going to be effective, they cannot react with operators need to make more changes than the same spontaneity that internal people do. their managed service providers. For a start, The same politics cannot prevail, or they can’t they need to accept them as a true partner, be any more successful than you can.” rather than see them in a subservient role. Put another way, you cannot have a true Also, operators will need more than one partnership and insist the partner does the strategic partner. As Qwest’s Harris says, “If exact same thing the way that you did it. It’s a I’m a service provider, I need more than one definition of insanity as inevitably the outcome broadband access enabler. If you’re providing will be the same, and where is the advantage it for me, I’m just one of many, but I need to in using the managed service? be number one in your eyes so you look after Operators have always had control of their me first. Otherwise how do I differentiate own networks, believing that networks are myself?” their differentiators, and have been able to Whatman replies, “We are asking those set their own priorities. Hence, handing these who get into managed services to own it – decisions over to a third party is against their move it into their big data centers, use cloud, deepest instincts. There is also a great deal of virtualization or whatever else is needed to resistance to institutional knowledge no longer make it the best it can be. If you do that, I being held inside the institution. reap the reward. We, collectively, don’t do this Yet unless we allow our managed service today. Instead the attitude is ‘You’re taking providers to operate in a different way to the over my operations and you have to get my practices of operators, the whole thing won’t agreement about every single change you work. make. I might not be the expert in your way of Whatman asserts, “We will become working, but I’m going to force you to do what dinosaurs and we’ll fade away, and the“You cannot have a true I want to do even though I don’t understand Googles and Apples and companies we don’tpartnership and insist the the implications for the way you operate and even know about yet will be there insteadpartner does the exact how that will affect me’.” because they don’t have the baggage we As one delegate observes, “The only reason have. We need to get rid of it, but it will onlysame thing the way that service bureaus can be more effective than work if we map this into our strategy. It’s anyou did it.” you is because they manage very tightly; they emotional issue.”10 QUICK INSIGHTS www.tmforum.org
  • 11. Transparency is needed tomanage operators’ expectationsThink the unthinkable it over and run it. Both parties have to adapt toAt least part of the answer to this vexed question figure out what’s going on, find that commonis that as operators look at how to make the shift ground, and establish what the right mix ofto the three-tier model (see Figure 1-2, page 5), processes and activities are.”they are going take a much more realistic look Jay Selva, chief consultant, managed servicesat what their core competencies really are and department, GTS, Huawei, supports this saying,be prepared to outsource functions that once “Using [TM Forum’s integrated businesseswould have been considered far too high risk. process architecture] Frameworx as a baseAnything that can be seen as a commodity has line helps us to understand what’s there andpotential, such as billing, which at the moment where the gaps are. Then we can say, sorry weis often viewed as a core competency. can’t provide this service to meet this service The question is, does it make more sense level agreement because you haven’t got thesefor senior management to be concentrating processes, for instance. Then there’s also theon something someone else can do, or to benchmarking piece of the TM Forum, you needbe concentrating on growing revenue by to standardize how you do your business anddeveloping skills and resources in the digital life use a common language.” (See Section 3.)sector and raising ARPU? It will be a part of theprocess of moving towards the three-tier model, Be realisticand whichever parts a particular service provider One outsourced IT service provider says,wants to operate in, they will have to give up “The operator should be willing to come tosome other aspects that they won’t want to. It’s the table, almost from the outset, and sayimportant that is understood from the start. candidly, ‘Here’s what we don’t do very well or think we don’t do very well’, then we canYou can’t automate what you can’t repeat help them assess that and figure out what theOperators need to have a better idea of transformation is going to look like. A lot ofwhat they want to get out of an outsourcing assumptions get made early on, maybe thatdeal. Richard McDonald, technical executive we change everything and fix it for them, andand distinguished IT architect, IBM Canada, it can lead to a mismatch of expectations. Thatcomments, “Service provider customers often needs to get sorted out early. It will come, I’vehave no idea what they want when they start seen it happen every single time, but it usuallyout. An old adage from service management is takes too long, probably two to three years intothat you can’t automate what you can’t repeat. the contract, and my experience of IT probablySo, if you haven’t got repeatable processes, if applies in other areas of managed services.”you haven’t got a repeatable documented way On the other hand, it is a common occurrenceof doing things, it’s difficult for someone to take that the buyer decides on which partner towww.tmforum.org QUICK INSIGHTS 11
  • 12. MANAGEDSERVICESchoose too soon, and so ends up defining the If price dominates the selection of partner,solution in terms of what the partner is able to disappointment is inevitable. Yet procurementprovide, rather than what it needs. and supply chain people in organizations are often mandated to go for the lowest price deal andYou can’t manage partners in isolation while they aren’t the decision makers, it can beIf a strategic approach is not taken, a company very difficult to push a higher cost one throughends up with different length contracts running because they run the purchasing processes.concurrently that it can’t get out of. Yet, Interestingly, when we surveyed attendeesaccording to Whatman, only about 10 percent of again, with the same questions after theCSPs have an operational agreement in place; roundtable, customer satisfaction had movedthat is an agreement between the partners that into first place, above capital avoidance, asare running different functions about how they the primary reason for outsourcing, althoughwork together and who is responsible for what. capital avoidance and lower costs were a closeWithout it, how can an operator function as a second and third.single, integrated organization? A service provider does not want to spend Penalties and incentivesa lot of time acting as an arbitrator between The operators need to understand thewarring outsource suppliers. An operational outsourcers’ business almost as well as theagreement ensures consistency across all the partner does because if they fail, the operatorpartners, and how the consumer of managed fails too. It also means they can negotiate on aservices deals with changes, disputes and other level playing field. If the partner’s lever is usingevents. If agreements are in silos, something is cheaper labor in another country, the operatorbound to be missed. has to understand that’s a big transition and transformation that will have a huge impactBuy in talent on its business. Perhaps it will mean that theOften the people making decisions about helpdesk won’t work well for a little while. Howmanaged services don’t have the knowledge important is that? Will it damage the businessthey need to make them. Operators need to buy and reputation?in the talent to move to managed services from How do you manage that risk? How do youpeople who understand it well. A very small monetize it? How does the customer build ateam can be highly effective. The team should mechanism so that it feels it is sharing that risk?comprise old hands from within the company The usual way is through a complicated set ofwho understand how it functions and new blood penalties and incentives.that understands how outsourcing works. The The group agreed that it is naïve to think thatcombination of the two is the key. all providers can deliver what they claim they can: often suppliers come in with one or twoCost is a complicated issue seed people and the rest of the organizationThe perception often is that outsourcing a service doesn’t know anything about it. As Whatmanwill reap savings of 25 to 30 percent. More says, “One supplier’s first contract cost it $1.2typically, it works out at 5 to 10 percent cheaper, million in penalty fees. Clearly it hadn’t beenbut the buyer should have a lot of additional ready, but such a heavy penalty encouragesreasons for outsourcing, such as greater flexibility. fast learning. We need to figure out what the12 QUICK INSIGHTS www.tmforum.org
  • 13. Paying heavy penaltiesspeeds up learning operators are going to look like going forward. Value added services How do we get them to learn as much as they A new use of the managed services construct can as quickly as they can without spending is presenting itself in the aggregation layer of $1.2 million?” We have to get this right as the new telecom business model, but rarely are providers of managed services as well as the lessons learned from established managed consumers, because if the provider fails, its services applied to these new opportunities. customer(s) fail too. For example, healthcare is most often is most One delegate says, “You put in incentives often cited as a managed service that could and penalties, but few companies have much be enabled by operators, such as a service appetite for the things that hurt. It’s hard to find whereby the patient sits and puts their arms a partner who is willing to put some skin in the on the chair arms so that their diabetes, heart game and has something substantial to lose.” and other vital signs information is sent to the healthcare provider. Acting on business outcomes There are lots of verticals, like healthcare, Performance indicators related to business and lots of possibilities for operators to outcomes are a more sensible base for enable specialized apps that cut across a lot evaluating contracts drawn up that today of subscribers and sectors. Applying what is rely on often arbitrary metrics and unrealistic learned from managed services, particularly penalties. Whatman says, “Operators’ attitude regarding risk management and mitigation, and is, ‘I want, I want, I want,’ but they don’t penalties based on business outcomes will be understand the cost and typically they are critical in meeting the expectations of all parties. poor at knowing what is critically important – a server for an application that is not customer Allowing for unforeseen events or business impacting being out of service In the last 10 years, we have experienced two might not matter, but the accuracy of the bill is major crises, the dot-com bubble bursting in essential.” 2001 and the global financial crisis in 2008. At An attendee observes, “If I have to pay a lot the time of negotiating its human resources of money to get the sort of backup I have, why contract with PwC and engaging CSC to look am I going to outsource?” Very simply, if the after its other applications, Nortel employed buyer insists on big penalties, the contract will over 100,000 people and the contracts were be expensive, and lots of those penalties might based on continuing growth. Instead the not accurately reflect the potential damage company hit hard times and never recovered. It a particular failing would do to the business was forced to renegotiate and pull the contracts anyway. back in-house. If it costs half as much to have a service The last 10 years has taught us we need to guaranteed to be up again within eight hours, build flexibility and adaptability into managed“The last 10 years has rather than four hours after failure, is it a service contracts to take account of unforeseentaught us we need to good decision to go for the cheaper option? events, but this is very difficult. From thebuild flexibility and Of course it depends on what the delay beginning, we need to think about how to would cost the business in terms of revenue, introduce additional resource or reduced resourceadaptability into managed reputation and customer satisfaction, and credits, and consider at what point we agree toservice contracts” striking a balance between them and cost. renegotiate – five years into the contract or 10?www.tmforum.org QUICK INSIGHTS 13
  • 14. MANAGEDSERVICESSection 3What can TM Forum do to help?The message is loud and clear. Managed locations using business metrics to developservices have to be part of an overall, coherent more understanding of what’s important.”strategy, rather than deployed tactically. They While the Forum has already undertaken ahave an important role to play in reshaping good deal of work on guidelines for servicethe communications industry into one that is level agreements, all the participants agreedeconomically sustainable and more fitted to the that they would like more help with howradically changing marketplace discussed in to address the issues they’ve talked about.Section 1. For example, to explore to what extent the Parhelion’s Whatman states, “A sourcing Business Process Framework (eTOM) dealsstrategy as part of an overall business strategy with with business-to-business processes thatis the foundation of where you want to go and need to be included in a managed servicesit will transform your business and who you contract.are. It is out of necessity we as an industry Another suggestion was that the Forumhave got to get together and sort this out. should look at areas of most interestPatience is required by all parties.” concerning outsourcing and help define a Her suggestion is that the Forum is well request for proposal. While this wouldn’t haveplaced to look at both the vendor and operator to cover every point, many felt that it couldside, to foster understanding of what both sides provide a very helpful starting point.need and want, and try to bring them together. Most of all though, the delegates thought thatAt the moment, neither side is getting to the biggest thing the Forum could offer wouldcommon ground and there’s a lot of frustration. be a place for people to share their experiences Charter’s Matthews says,” TM Forum can and best practices. One attendee from aexpose this for what it is – no free lunch. service provider in Latin America explains, “ItWhen you get into agreements, if we had is important for us to have more trained peoplea really good template that means you can in terms of the concept itself, not just IT orcome up with a service level agreement that network guys, but the business guys and topmakes sense, that measures it from a service management to be able to see exactly what isperspective, not a component perspective, happening in the U.S. and Europe where is hasthen you could reach a workable agreement. happened first. It’s understanding and trainingAnd if you can’t, at least you know what you’re we’d like from other countries.”getting into. If you sign up for it with your eyes Their view was echoed by many of thewide open you understand the risk.” delegates who would like to keep up to date Jay Selva of Huawei, says, “Vendors and with what is going on in other countries, toservice providers speak a different language – see how the roadmap to the three-tier modelwe need commonality. Huawei is also heavily is unfolding. In particular, the delegates wouldinvolved in the Forum’s benchmarking program, like to be able to share stories of successand we need input from operators at different and failure, and from this to devise ways14 QUICK INSIGHTS www.tmforum.org
  • 15. In language, standards, andbest practice, commonality is key of supporting the decision-making process, class. Operators are then in a position to tie how to measure offers from vendors, how to performance metrics to operational costs and assess risk and establish what processes are make a well-informed decision about whether required. In short, to help people get through a particular function or service should be the initial process so it’s as good as it can be. outsourced. There is also the question of applying Once that decision has been taken, based on standards to infrastructure you don’t own, empirical evidence rather than assumptions, the or as one attendee put it, “If I deploy the benchmarking information can be used to draw Business Process Framework, how does it up effective service level agreements (SLAs) for apply differently when I own the interface the managed service or services in question. compared with when someone else owns it?” TM Forum’s Business Metrics Program An executive from a service provider offers around 100 standardized key acknowledges, “At the moment we tend to performance indicators and key quality deal with vendors with a strong arm but we indicators that can be used to monitor and have to involve them more to take them to my measure business performance on which to customer with me.” build SLAs. Others will be developed over Commonality of language, standards, best time because it is essential that all parties use practice and understanding of each parties’ a common language about what needs to be needs and abilities is something the Forum will measured between customers and suppliers. be working on in 2011. Once TM Forum’s Benchmarking and Already TM Forum’s Benchmarking Program Business Metrics Programs are more highly enables its service provider members developed to support managed services, the to measure their business performance, Forum intends to produce a best practice completely confidentially, against the best-in- guidebook. “If I deploy the Business Process Framework, how does it apply differently when I own the interface compared with when someone else owns it?”www.tmforum.org QUICK INSIGHTS 15
  • 16. SPONSORED FEATUREStop going it alone:Use managed services to enhance the customer experienceService providers today have little choice and costly workarounds. In this context, transformation projects, as well as costbut to invest in the customer experience. customers suffer from too many service savings and efficiencies. With managed Rising customer expectations and interruptions, overly long billing cycles, services, service providers can takeconvergent competition put a premium slow resolution for service queries, a lack advantage of four critical enablers ofon a positive customer experience of customer-friendly tools, and too many customer experience that are so oftenacross all channels at every stage of the problems with ordering and activating hard to develop and optimize internally:relationship. new products and services. Driving an exceptional customer The end results include reduced • Global best practices and methodologiesexperience is no simple task. Success consumption of existing services, missed • Customer experience-focused toolsrests heavily on the right systems, opportunities for growth, reduced ARPU, • Business process automation and processes, governance, and continuous declining margins, and customers more optimizationimprovement. prone to complain and churn. • Systems innovation. Typically, service providers attempt to Many service providers try to improve,meet the challenge with a combination or at least maintain, the customer Enhancing the customer experienceof in-house resources and point solutions experience with a combination of in- through service level improvementfrom different vendors. However, the house resources and vendors of point and optimizationresults often fall short. solutions. It’s understandable – they Improving customer experience through Working with a managed services know their own systems and processes managed services is based on a processpartner provides a compelling alternative. best and they try to fill in with different which starts with mapping the customer-Although cost control has dominated the hardware, software, and service vendors experience-related processes, themanaged services discussion, a growing as the need arises. They want to serve as underlying systems, integration touchnumber of service providers have begun their own general contractor. points, and the measurable impactto view managed services partnerships Unfortunately, this go-it-alone on the end customer. Then, theseas opportunities to enhance the approach too often falls short of what factors are translated into performancecustomer experience as well. is needed to succeed. measurements (KPIs) and service level targets that the managed servicesCustomer experience challenges in the The managed services alternative provider can be held accountable for as aconnected world Managed services provide a compelling single point of accountability.The new competitive landscape for alternative to traditional in-houseservice providers puts a tremendous approaches to improving the customer Customer benefitspremium on customer experience as experience. Done right, managed services can delivera key driver of customer loyalty and Over the past decade, service providers substantial benefits around the customercompetitive advantage. With so many (and others) considered managed experience:choices available, customers are one services primarily as a way to control andbad experience away from dropping their reduce costs. • Increased reliabilitysubscriptions or pre-paid programs and More recently, a growing number • Improved qualityjumping to a better offer. of service providers have begun to • Enhanced choice All too often, inadequate systems and view managed services partnerships • Accelerated innovation and time to inefficient processes for marketing, sales, as opportunities for dramatic market.service, and support lead to uneven improvements in service quality andservice operations, inconsistent customer consistency, launching new operations, To learn more, please visitexperience across different channels, and executing modernization and http://gss.amdocs.com/customerexperience16 QUICK INSIGHTS www.tmforum.org
  • 17. Customer case study:Surge protection: Amdocs managed servicesensures smooth handling of top priority product launchThe challenge • First day sales break all records for the About our sponsor: company, matching the total sold by For nearly 30 years Amdocs Global• Tier 1 service provider in North America two previous bestsellers combined Strategic Sourcing has been a strategic counts down the days to a highly over their first three days. partner for leading service providers anticipated launch of a new • As traffic eases in the following days, worldwide, helping them to accelerate smartphone. Amdocs initiates a rapid design business growth, enhance their• Provider conducts extensive tests to review with the service provider to customers’ experience and reduce costs. ensure its network and sales explore potential upgrades that would We deliver cost-efficient business and application can handle double their ensure future success at even higher operational management services by normal volumes. levels of demand. combining flexible financial and delivery• On launch day, however, customer models with industry-specific expertise demand surges to four times the Takeaways and an unmatched delivery record. normal volume, overloading a channel Amdocs Global Strategic Sourcing partner system and diverting even • Handling the surge in sales and offerings provide a wide range of more traffic to the service provider’s activation traffic for major product managed services to support business main sales application. launches is a big test for customer and operational support systems (B/ experience management. Minimizing OSS), service delivery platforms (SDP)The solution any problems means you’re off and and directory publishing for the media running with happy customers, a and communications industry. Our flexible• Amdocs real-time, proactive positive buzz in the market, and an and tailored outsourcing solutions include monitoring tools and communication important new revenue stream. Let support for IT infrastructure management processes flag the problem those problems take center stage, and hosting, application management and immediately and provide constant however, and the hoped-for big day business process operations (operational transparency and control to the service can easily become a long-term drag on and IT oriented). provider; responding to immediate revenue, reputation, and renewals. In addition, Amdocs provides managed need, Amdocs adds capacity to • Maintaining surge capacity, transformation services, enabling service minimize delays with the overloaded responsiveness, and follow-on planning providers to modernize or consolidate sales application. capabilities with in-house resources for their systems while saving on operational the biggest hits is extremely difficult and capital costs.The result for most service providers. With an Our services are designed to provide effective managed services partner, value across all environments, based on• Monitoring and standby capacity however, the challenge can be met Amdocs or legacy in-house or third party from Amdocs managed services confidently, affordably, and with clear systems. enables a smooth and successful accountability. launch experience amid the risk of For more information, please visit substantial failure. http://gss.amdocs.comwww.tmforum.org QUICK INSIGHTS 17
  • 18. DO MORE IN THECONNECTED WORLDARE YOU SURE YOU’RE DOINGEVERYTHING POSSIBLE TO IMPROVEYOUR CUSTOMER EXPERIENCE?For nearly 30 years, Amdocs Global Strategic Sourcing has been the strategic partner of leadingservice providers and directory publishers worldwide, helping them enhance their customers’experience and optimize operations through best practices, best-in-class products and tools, andunparalleled industry expertise.Learn more at gss.amdocs.com/customerexperience.EXPERTISE. FORESIGHT. VALUE. © 2010 Amdocs. All Rights Reserved.

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