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100302 Key Drivers For Entering A Managed Service Partnership


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Key Drivers For Entering A Managed Service Partnership

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100302 Key Drivers For Entering A Managed Service Partnership

  1. 1. Managed Services for Growth Markets 2010 Key Drivers for Entering a Managed Service Partnership Frank Vernieuwe WTA CTO Advisor
  2. 2. Program Introduction Opex – capex reduction myth Operational excellence Emerging market situation Conclusions
  3. 3. Nedjma – WTA – Qtel Wataniya Télécom Algérie S.P.A is the Algerian subsidiary of Qatar Telecom Q.S.C. operating under the brand name Nedjma.
  4. 4. Our Country – Our Company Key dates • dec 2003 WTA obtains license • feb 2004 start of deployment • jul 2004 technical launch • aug 2004 commercial launch • dec 2006 all 48 wilayas are covered • mar 2008 all license coverage obligations fulfilled • dec 2009 continuous densification and coverage expansion Algeria Surface: 2.381.741 km² Population: 34.178.188 inhabitants Climate zones: Mediterranean, mountains, Sahara desert Road infrastructure: poor Power supply infrastructure: poor Security situation: average
  5. 5. Our Network Evolution subscribers vs. sites 9 000 8 000 7 000 6 000 5 000 4 000 3 000 2 000 1 000 0 # 2004 2005 2006 2007 2008 2009 # EOY subscribers sites # sites # subscribers (thousands) (thousands) 2004 374 285 2005 1 139 1 475 2006 1 527 2 991 2007 2 039 4 497 2008 2 708 5 114 2009 2 919 8 032
  6. 6. Program Introduction Opex – capex reduction myth Operational excellence Emerging market situation Conclusions
  7. 7. The capex-opex reduction myth Question « Will my capex and opex spent significantly reduce by outsourcing certain activities as a managed service ? » Answer (according to most managed service suppliers) « You can reduce your cost up to 50% by outsourcing this or that, a minimum saving of 20 to 30% is a given ! » Is this so ? Myth or reality ? First ask yourself « Do I really know my actual cost ? »
  8. 8. Know your costs ! The cost of a service or an activity has several components: • direct labour costs of employees performing the service • direct costs of current subcons performing (part of) the service • direct costs of materials or parts used in performing the service but also : • indirect labour cost of employees performing supporting services in departments such as purchasing, HR, IT, legal, etc. • indirect costs of current subcons performing (part of) the supporting services (transit, transport, customs clearing, etc.) • personnel related costs such as office space rental and maintenance, IT equipment, cars, allowances, travel, etc. • cost of money, warehousing and logistics, continuous training, etc.
  9. 9. Know your costs, all of them !! and finally, hidden costs : • costs due to operational inefficiencies increased competition, reduction of profit margins, new customers, new customer’s requirements in most cases changed the objectives of the company, new equipment and services were introduced, internal resources grew, subcontractors were engaged but internal processes and procedures were not altered or optimised, trainings not given, etc. resulting in a not 100% effective and efficient organisation
  10. 10. Know your costs, all of them !!! and some more hidden costs : • costs due to suboptimal performance or acceptance of too low levels of service and performance indicators resource capacity or resource allocation problems, employee fatigue, wrong benchmarking, all lead to missed market and sales opportunities, potential customer insatisfaction, better perceived value with a competitor’s service, increased churn and finally to a loss of revenue Most root causes for both types of hidden costs, also require too much management attention, leading again to additional costs and loss of opportunities.
  11. 11. Right scoping is key For outsourcing to have a positive impact on this cost structure, it is imperative that : • the scope of what is being outsourced is well defined (end to end) • service levels and performance indicators are set to the right levels • no operational gaps occur due to the outsourcing • the internal organisational structure and all processes and procedures are aligned with the outsourcing model • no double functions or activities survive (what is outsourced needs no duplication or shadowing within the own organisation) • the proper governance structures are put in place This might mean that specialised training needs to be given to those members of your organisation that will manage the outsourced services contract, or that additional people need to be hired to perform new supporting functions.
  12. 12. The capex-opex reduction myth « So will your capex and opex significantly reduce by outsourcing certain services or activities as a managed service ? » If the actual costs, including direct, indirect and hidden costs of an activity or service are compared with the costs of the alternative of performing the same activity or service, trough a well scoped managed services contract, using the same criteria of performance, then your costs probably will be less. If you compare actual costs by using only the direct costs visible in most accountancy systems, then the outsourcing costs will in most cases be significantly higher.
  13. 13. Program Introduction Opex – capex reduction myth Operational excellence Emerging market situation Conclusions
  14. 14. Operational excellence The key drivers to decide whether to outsource a certain activity or service, should in the first place be based on achieving operational excellence. This means: • enhancing operational efficiency and effectiveness • optimising resources and processes • giving transparency to the « real » actual situation • becoming the best in class using reliable benchmarking thus increasing customer satisfaction, revenues and profit levels. Outsourcing is one of many tools that can be used in such a business transformation process. Capex and opex reduction is achieved primarily because of resource and process optimisation associated with the outsourcing exercise, not because of the outsourcing as such.
  15. 15. Other key drivers A number of other drivers that play an important role in deciding to use a managed service provider to perform certain activities. • Outsourcing usually reduces the internal resistance to change. • Stakeholders confide more easily in an international reputed company to improve strategic or business critical services. • Upfront capex investments are transformed in gradually spend opex costs. • A proper construed OMS-contract will introduce the notion of risk sharing with the service provider (p.e. through service credits in case of substandard performance). • Concepts such as « pay as you grow » or « future proofing » your business are easily managed through a managed service model. • Outsourcing will help control galloping headcounts.
  16. 16. Program Introduction Opex – capex reduction myth Operational excellence Emerging market situation Conclusions
  17. 17. Emerging market situation Geographical challenges Emerging markets are quite often located in big countries, where a majority of the population is concentrated in a few geographical limited areas but where your licence obligations and opportunities for further growth are spread over a vast territory with poor infrastructure (roads, transport, power supply) and a potential risk of elevated security issues. Potential service providers need to have an in depth knowledge of this real life situation and need to demonstrate the required experience in those areas of expertise needed to provide the services.
  18. 18. Emerging market situation Fierce operator competition Areas popular for outsourcing in mature markets, often are key differentiators in acquiring and retaining clients and revenues in emerging markets : • coverage • deep indoor coverage • network availability • VAS and technology presence all have a direct impact on the client’s perceived Quality of Service. When outsourcing activities that have a direct impact on these key differentiators, the necessary guarantees need to be secured to maintain this competitive edge.
  19. 19. Emerging market situation Limited choice of available service providers Although most multinational service providing companies do have a presence in most emerging markets, these set-ups are often limited to a small number of core and commercial functions. Not all activities or services liable for outsourcing can be properly addressed by the current local setup of multinational companies or local service providers within the country. This implies that the ramp-up phase of an outsourcing exercise will require a lot of time, management attention, knowledge transfer and potentially resources transfer from the operator to the OMS-provider.
  20. 20. Program Introduction Opex – capex reduction myth Operational excellence Emerging market situation Conclusions
  21. 21. Conclusions The key drivers for outsourcing an activity or service should be based on achieving operational excellence. The customer should be placed in the centre of any operator’s strategy and operations. Maximising the customers experience measured against best in class benchmarks will assure profitability and market share in the long run. Outsourcing can be a powerful tool to achieve this objective, it is not a magic wand that solves all your issues overnight. Capex and opex reduction, although of prime importance in any outsourcing exercise, will only be achieved by optimising resources and processes, not because of the outsourcing as such.
  22. 22. Final recommendations • Outsourcing a strategic activity has a huge impact on the entire company, not only on that part of the organisation that is directly affected • All stakeholders need to support the outsourcing decision • C-level support and involvement is needed at all milestones in the process • Communicate in an appropriate way at the appropriate time • Outside consultancy and coaching throughout the process, as from the very start, is recommended • Only a watertight agreement can lead to a real partnership with the outsourced service provider • Know what you give, know what to expect • Be patient, it is a long journey with a lot of surprises
  23. 23. Thank you Frank Vernieuwe