The telecom industry is in a high growth phase and in such a scenario, it becomes difficult for the telecom service providers to handle all the chores of their offerings. The managed services market has given a much-needed support to the telecom operators and the same can be characterized by the agreements, which vary in scope between the telecom operators and Managed Service providers: incumbents, green fielders and lower-tier operations.
What are Managed Services?
Managed Services are extended by the Managed Service providers that take on the management responsibility for functions that have been traditionally carried out internally by a telecom operator. These services typically include establishment, operation and management of day-to-day operations of the mobile service operator’s network, services as well as business support systems.
Challenges faced by operators today
The telecom operators that have decided to rely on Managed Services have been mainly witnessing the following challenges:
- Owing to increased competition and in turn increased financial pressure, the telecom operators need to improve their financial outcomes and reduce their IT costs by outsourcing their functions to a professional that can input higher efficiency and scale economy.
- An increased level of complexity pushes the mobile service providers to reduce their need to build competence related to network and service and leave the management of this complexity upon the Managed Service Providers.
- The telecom operators need to dedicate their efforts to revenue generating activities like customer acquisition.
How can managed services help?
The telecom crisis of 2001-02 and the following financial pressure among the telecom operators led Managed Services to gain real traction and prominence as a distinct service offering. And, thus the potential cost saving and operational efficiencies pushed the telecom providers to enter into Managed Service agreements.
The pressure for the mobile service providers to reduce the costs is ongoing, especially owing to the fact that competition is rising. Managed Services possess potential operational efficiencies, generating scale-based synergies as increasing number of managed service contracts are agreed. The greater the scope of the agreement, the larger the potential of Managed service providers to maximize the efficiency and in turn reduce costs.
The telecom operators now witness a multi-technology scenario that keeps changing quickly. The accompanying risk of technology choice, the challenges associated with transitioning between technologies alongside the operational challenges of maximizing the potential of various co-existing add up to the substantial requirement of a single operator. As the number of end-users and technologies grow, the telecom environment is becoming more and more IT oriented. Managed Service providers possess the potential to extend support to the mobile service providers in this regard, providing necessary for managing existing technologies as well as transition between them. Also, the managed services support the telecom operators in executing necessary changes by acting as an agent to achieve strategic goals.
Are there any managed services related challenges one can expect?
Managed services are increasingly being considered as an alternative in most of the telecom operators’ procurement process. However, still there are many operators who have not yet adapted Managed Service engagements. This could be owing to the concerns regarding the potential loss of control and competence, fear regarding financial exposure to some Managed Service provider or a belief that a third-party may not be able to handle the operator-specific circumstances aptly.
Telecom operators can significantly reduce risk and maximize potential with successful adaption of Managed Services. The below given points may help them.
- An operator should decide well in advance on which areas of his business can be outsourced as a part of their strategy, alongside deciding what level of control they would like to maintain.
- A business case detailing the telecom operator’s cost structure and internal performance needs is an elemental part of any outsourcing strategy. A service provider that can explain its business to this extent is placed better for evaluating the ability of the managed service provider to meet performance and cost commitments.
- Providing sufficient freedom to the Managed Service Provider so as not to hinder the extraction of complete business value for both the parties is quite crucial. Cost savings should be maximized developing mirror functions leading to no duplication of work.
A thorough evaluation could help the telecom operators to establish trust and co-ordination with the Managed Service Providers.
Future of Managed Services
The growing number of Managed Services has and will over the coming time create a virtual circle leading to increased service competence, even greater efficiency and economies of scale. Looking forward to the future of the Managed services market, the most important aspect to analyze is the continued evolution of the market drivers. Additionally, it becomes quite interesting to continue the analogy to IT industry and accordingly draw conclusions on its importance to the rise of the managed services in the telecom industry.
It is clear that the key drivers of Managed Services till date will continue to apply over the coming years. The increasing popularity of Managed Services will drive these service providers to continue improving competence and continue to realize synergies in service provision. This will lead to a higher potential for cost savings backed by the maturing market which will perpetuate the Managed Service growth.