Operators have found that delivering managed connectivity and other services, with consumption- based pricing, can hugely expand their addressable market.
By wrapping the delivery of these managed services with network functions virtualisation (NFV), thus enabling applications to run on common hardware platforms, many operators have been able to shift their business from relying heavily on capital expenditure to a more opex-focussed model. By such means they are able to adapt their offer to tap into new opportunities that might have felt beyond them before.
Another way for an operator to tap into new markets with minimal need for risky investment is to pay for different types of managed services from a vendor.
Many operators have discovered that a different type of efficiency can be gained from such an alignment, making the cost of setting up, operating and maintaining a new network much more feasible, and often representing the best chance an operator has of breaking into fresh revenue areas, particularly where an emerging market is concerned.
A spate of such relationships has hit the headlines in the past year or two. In the last few months alone, Etisalat has signed a managed services contract with Nokia Networks which will see the vendor run its 3G and GSM networks in Nigeria, as well as help it improve network efficiency, while South Africa’s MTN Group has awarded Chinese vendor Huawei the job of managing operations in six new markets, including Ghana, Cameroon, Guinea and Benin.
Such deals make particular sense where a wide geography is a challenge, such as the help Ericsson provides to Russian carrier Vimpelcom in managing network operations in Siberia and the Urals. But they are by no means unknown in developed and urbanised markets too where incursions from OTT competitors have reduced profit margins and made the predictability of costs a prerequisite.
Vendors lead the way
To date these vendor-led managed services deals have tended to revolve around the development and management of infrastructure and the setting up of operations. We are now seeing what may amount to a new generation of vendor-inspired managed services, aimed at helping operators achieve savings and efficiencies in untried ways.
There is the example of Nokia Networks which is launching operations support system (OSS) as a service to enable operators to better manage their back office costs. Two tools are being offered as a managed service: Nokia Performance Manager to help operators control the performance and capacity of 2G, 3G and LTE networks, and Nokia Service Quality Manager to enable accurate real-time views of service quality across broadband networks. Nokia is claiming to be the first to market with an offer of this kind.
“Software as a service models are used widely in the IT industry, but in the telco market most operators still buy software solutions as an upfront investment,” says Amit Dhingra, head of managed services at Nokia Networks.
Upgrade cycles in a traditional software buying model are disruptive, and a hosted model could act to reduce that, helping to align expenditure with an actual ramp-up in network requirements.
Timo Ahomäki, CTO of Tecnotree, a vendor of IT solutions for telcos, has seen an increase in the number of operators turning to his company for services that cover business processes like billing and revenue assurance.
“This is especially the case with smaller operators,” he adds. It isn’t, he says, just traditional operators but also disruptive market entrants that prefer to look out of house for such key functions.
“We’re working with a number of players who aren’t exactly start-ups, but companies that are coming to telecoms from somewhere else and are looking to outsource,” he explains.
“They don’t want to take things like billing in-house. They’re already used to a model where you get that outside. They might have a billing platform provided by a BSS vendor but actually operated by a financial services provider. In some cases they might be looking to outsource this to begin with, and then transfer in-house in two or three years.”
Ahomäki believes that for a larger operator with a huge and complex business, such a step might be a challenge too far: “In Europe especially, older operators are cautious,” he says. “They’ve historically kept things in house and run big departments for absolutely everything. In places like Africa it’s harder to get skills in house, so it’s more natural there to go to a vendor. Operators will all let go eventually. It has to happen. It’s just that they might have a very complex web of systems bought for a good reason once upon a time and that only someone like Accenture can run for them – and that costs money.”
Paulo Pereira, global account director at Portuguese vendor WeDo, says the company provides revenue assurance and fraud management for 180 telecoms operators worldwide, mostly as a managed service: “We can provide them with a set of services based on cloud that allows them to tackle problems,” he says. “We correlate information from different systems so it can be audited. Operators want more flexibility, cost reduction and a move from capex to opex. They see value in revenue assurance.”
Virtualisation seems to be changing the rules of the managed services market, just as it is doing for so many areas of a telco’s business. Many OSS and BSS solutions vendors are in collaboration with virtualisation solution vendors to help provide operators with integrated services and solutions end-to-end that in turn help them answer the needs of their customers.
Mervyn Kelly, EMEA marketing director at vendor Ciena, believes that SDN and NFV are reinventing both how operators use managed services and also sell them on to their customer base.
“Many telecoms service providers have invested in acquiring cloud assets and offering cloud services, giving them a unique opportunity of leveraging both network and cloud assets in offering differentiated and bundled services that encompass both cloud and connectivity,” he says.
As an instance of a new kind of service bundle that could be put together through a vendor partnership he suggests a data replication service that offers different recovery time objectives and recovery point objectives depending on the criticality of the data: “Another example is the ability to enable enterprises to buy managed application IT services on-demand, adding functions such as encryption, firewall or WAN acceleration to the enterprise location in a matter of minutes rather than the traditional few weeks delivery time, with a pay-perconsumption pricing model,” he says.
It’s not just the bigger vendors like Ciena that are gearing their relationships with operators for a managed services world. Pravin Mirchandani is CMO of One Access, a vendor of branch office routers designed to help operators provide managed services to customers: “We’re different to standard enterprise products from Cisco or Huawei or whatever,” he says.
“We make functionality available easily in a compact form factor. Telcos want replicability – something they can get right and then press a button to achieve scale. We do that in Europe, which is a big market for us. Asia-Pacific is growing, and we’re building in North America. Our business is mostly fixed-line operators, and some MNOs. Mostly it’s ILECs and some CLECs.”
From to M2M to VoLTE
The right vendor partnership can help to make sense of otherwise challenging new market opportunities, such as VoLTE or M2M.
At first glance, M2M might seem a simple matter of connecting some sensors, but in reality it is a challenge that runs from end to end of an operator business, making the intervention of a vendor with a relevant track record near enough essential.
With the right partner, M2M becomes a chance to add value by doing something truly progressive and interesting with data, says Ben Parker, principal technologist of product strategy at Guavus: “We work with several telco players to help bookend the M2M challenge,” he says.
Real-time charging is another new and unmapped area that certain operators are now exploring through services relationships with software vendors. “We provide support for new business practises in the digital world,” says Jennifer Kyriakakis, founder and VP of marketing at MATRIXX, a California-based provider of a suite of services in the field of real time charging.
“We work with Swisscomm, Telstra, Vodafone and a number of MVNOs and MVNEs. Virtual companies are a sweet spot for us as they have an interest in exciting new business models. We work with many of them on a B2B2C chain. As they grow, they can add more capacity.”
In 2010, says Kyriakakis, MATRIXX was hearing from 75% of operators that they could see no value in real-time charging for it to be worth the expense of migrating there: “Now they see business value, and around 60% to 70% now want to move their customers to a real-time infrastructure,” she adds.
Unified communications is another market that operators have typically struggled to address alone, and here too managed services have helped to bridge their knowledge gap. Vendor Counterpath works with several large telcos, and specialises in enabling them to deliver a branded VoIP, video presence along with UC communications services for enterprises, all via the cloud.
Network Norway, for example, has built out its mobile network, working with Counterpath’s help to provide their business customers with coverage and UC services via an OTT-style service which extends a user’s mobile number and services across laptops, smartphones and tablet devices.
“Instead of losing customers to other VoIP OTT competitors, operators can grow in stature in the enterprise space,” says Todd Corothers, VP products and marketing with Counterpath.
Certain vendor operator service partnerships fall outside the realm of either equipment manufacture or software development.
Teleplan, for example, specialises in after sales support, and provides a number of managed services to those in the telecoms sector. One of its key markets is the refurbishment of base stations so that mobile network operators can more efficiently roll out improvements and new services such as 4G.
Teleplan also repairs and refurbishes customer handsets on the behalf of operators. “We can help the operator extend the range of their geography, and save money by extending the lifecycle of equipment,” says Sven Boddington, VP of client solutions of Teleplan.
The vendor operator relationship has certainly evolved in some diverse and interesting directions, well beyond the simple supply of equipment and software. It is a relationship that may deepen yet further as operators seek out further opportunities outside their traditional core business.
