New Network Drivers

Business is for profit. Ownership does not make any sense. That's why global
telecom service providers' network and other areas are run by telecom
infrastructure companies such as Ericsson, Nokia Siemens Networks and
Alcatel-Lucent.

The managed service deals are creating a new breed of network drivers.
Earlier, telecom infrastructure providers used to create their networks for SPs.
Following the flood of large outsourcing deals in the past few years, the
ownership of running the network is with the vendors.

A recent The New York Times article said: Companies such as Vodafone,
Telefonica, T-Mobile or Orange are not running the biggest wireless networks in
the world with a combined 355 mn customer base. Instead, Ericsson and Nokia
Siemens Networks are running the network. In the past six years, these wireless
equipment makers have become two of the largest mobile network operators in the
world. SPs hire them to manage the flow of voice, text and data among their
users.

Managed services deals are on the rise in India too. Besides Ericsson and
Nokia Siemens Networks, the key vendors are Alcatel-Lucent, ZTE and Huawei. The
business of running and maintaining networks is a prime business for them.
Ericsson generated $1.7 bn revenue from managing networks globally last year.
There's a significant rise in Nokia Siemens Networks managed services revenues
in India.

The potential is huge. According to a recent research by Forrester, the
managed services opportunity in India is $8.7 bn by 2013, with a total CAGR of
19%. Some recent industry reports reveal that almost 40% of Indian businesses
outsource their infrastructure managed service. In India, the managed services
sector will witness tremendous growth in the next five to six years.

What is prompting telcos to opt for managed service deals though they intend
to hand over their lifeline to a third party? Besides the urge to become more
profitable, the current economic environment is forcing telcos to go for managed
services. Operators and enterprises are fast realizing the potential and putting
special focus on their core deliverables, while trimming operational cost. By
outsourcing network infrastructure, operators are becoming more competitive on a
global scale.

Last year BT and BSNL have partnered to provide a complete range of managed
telecom services. Commenting on the same Kuldeep Goyal, CMD, BSNL says, “As BSNL
transforms into a premier integrated comuunication service provider, a robust
managed service offering is key to our future operations.”

The Indian telecom market is one of the few markets which has kept its growth
story intact in spite of the economic slowdown. With new policy led avenues like
3G, WiMax, MNP, NGN and m-commerce about to be unveiled, it is proving to be an
exciting future for managed service players. “Today more and more focus is being
put on newer pricing models which are linked to revenue, milestone or gain
shares which tightly couple a service provider's growth with the operator, and
create a common platform for partnership,” Kiran Desai, VP, manage IT services,
Wipro Infotech, says.

Even though the managed service space is moving at a good pace in India,
there are certain challenges that need to be tackled by both the operators and
managed service providers. One of the major technological challenges associated
with adopting and using the managed service model is the breakneck pace at which
mobile technology has evolved in the last few years, which requires heightened
involvement in assessing the relative merits of various technologies.

Key Hurdles

A key skill needed for any managed service provider is the ability to manage
multiple technologies and platforms. This requires significant investments and
takes time to build and scale up.

Some of the operational challenges include: operators need to devote
significant resource in assessing applications, negotiable agreements,
integrating applications and measuring performance of applications as well as
planning for service upgrades and expansion.

The major challenges associated with adoption of a managed services model is
the realization by operators that what they really own is business and
subscribers. “And the fundamental shift that operators must make in focusing on
their core business and subscriber base, while comfortably letting go of the
network operations management,” Sameer Sandhir, head, business development,
managed services, Alcatel-Lucent says.

In an effort to grow business, the operator is constantly faced with choices
of which service to deploy and in which territory, and with each choice comes
risk. According to Amber Sur, CMO and EVP, managed services, Comviva,
understanding the opportunity cost associated with each decision requires
analysis. Market expansion, whether in terms of extension into new markets or
development of new products for existing markets, involves risk. Involving an
experienced party or parties in the decision making and sharing the risk and
rewards with that party generally mitigates risk.

The skill and service levels of the managed service provider are critical.
There can be a lot of vapor ware in the claims, so customers need to carefully
evaluate the options. “Lowest price may not mean the lowest TCO,” says Alok
Bardiya, VP, managed services and marketing, Tata Communications.

Service providers face an ongoing challenge of identifying the best metrics
to describe the customer's perception of QoS and develop an infrastructure that
enables the measurement of these metrics-starting from network performance data.
Says Sudhir Narang, MD, BT India, “The key challenge for a service provider in a
multi-play network is the fact that multiple applications (services) with very
different QoS requirements and properties have to share a single transmission
infrastructure.”

Some of the prominent reasons of customer dissatisfaction are low quality
voice, dropped calls, slow data connection, non-or delayed SMS/MMS delivery, and
blocked or non-satisfactory roaming. Pricing for data-related services does not
map to current performance in terms of speed of access, continuity and clarity
of contents. User experience is impacted by the combined actions of such
impairments, including pricing.

It is Happening

Increasingly, starting with enterprise, IT and financial sectors,
organizations have begun to work with trusted providers, transferring delivery
and management of services.

In the telecommunications space, over the past few years, operators have
begun to transfer the management of individual VAS solutions to experienced
third parties.

Speaking about the broadband managed service deal with Alcatel-Lucent, Manoj
Kohli, CEO and Joint MD, Bharti Airtel says, “It will help us accelerate
performances as we migrate to next generation network for our broadband and
telephone customers, opening the door to advanced services and applications.”

Another major trend in the managed services space is a clear move towards an
outsourcing/shared service and opex model. Customers now understand the value of
using skilled service providers to outsource their needs to and move to a more
scalable, flexible model.

The Indian market has tremendous potential as most enterprises are looking
for an integrated solution to replace the individual management tools that they
currently use for individual devices. Multi-service platforms present complex
network management challenges for service providers.

Each new function of the network involves different issues and objectives,
which often call for targeted applications for rapid implementation.
Continuously increasing network traffic, shortage of skilled workers and need to
focus on core activities are the primary drivers of network management services
and this will continue in the coming year too. Factors such as increasing
penetration of broadband, online collaboration, e-commerce, and globalization
are also driving the demand for these services.

Trust Matters

Though the Indian managed services market is touching new heights, the
biggest question here is: Can operators trust an external company which may be
managing services of their competitors too? But most of the major players in
this space believe that they can easily trust an external service provider.
Their SLAs on security and privacy, which service providers sign, are able to
successfully deliver with the help of the capabilities enabled by today's
technology.

Globally, as a practice, companies do not hesitate in choosing a trusted
vendor who is servicing the competition as long as data secrecy and security is
taken care of. “On ground it is backed by stringent security compliances and
SLAs, therefore, I believe that the operators can trust an external service
provider that offers managed services as it not only manages the infrastructure
but also paves the way for smooth outsourcing operations,” says Sanjay Virnave,
president, sales, Tulip Telecom.

One of the key factors for any managed services operation to succeed is that
the partner is more of a partner than an external company. And partnership is
born out of trust. A partner ensures that no intellectual property or
intelligence associated with the business is shared with the competitors.
“Managed service partners and their employee maintain the highest level of
ethics to assure absolute business confidentiality across competition,” says
Sandhir of Alcatel-Lucent.

According to Neeraj Vyas, AVP, Aricent, “We do not necessarily see this as a
challenge. Every managed service engagement for us is separate, and significant
resources are spent in ensuring that the customer's IP is protected.”

Boon for Greenfield Operators

The scope of managed services will further grow considering the appetite
among operators to share base stations and hardware to cut both capital and
operational expenditure during the slowdown. Managed services will also be a
boon for greenfield operators, that are in the market to battle for their
survival and supremacy.

For greenfield operators, the biggest challenge is deploying a highly
efficient and optimized network in a short time frame and bringing together a
qualified and trained team for maintenance of the network so that the quality of
the network can be maintained.

Telecom service providers are faced with a scenario where the market
environment is changing rapidly, the battle to grow market share is ferocious,
the need to engage customers with practical and appealing services is paramount,
and the drive to improve top and bottomline performances.

According to Vikram Sharma, head, managed services, Cisco India and SAARC,
“In essence, service providers who are battling commoditization of their current
offerings leading to declining customers loyalty and shrinking margins, evolve
into experienced providers by offering sticky and differentiated services that
add strategic value to end customers.”

It is beneficial for greenfield operators because they no longer have to
really bother about network design complexities, deployment and scalability.
They can focus on their customers and let the managed service providers take
care of the service piece.

According to Rajeev Batra, CIO, Sistema Shyam Teleservices, its contact
center operations will grow at rapid pace, in line with its expansion across 22
circles in India.

Road Ahead

It is believed that the managed services industry will continue to grow in
spite of recent changes in the global economy. At present, the success of all
companies, small and large, is based on their ability to keep their costs low
without sacrificing the quality of services provided to the client. The managed
services model helps them reach their goals while staying within a budget.

The future of the managed services market is going to be end-to-end manged
services across technologies and across vendors making the managed services
partners as the single point of contact for everything related to the network.
The growth in the upcoming financial year will revolve around integration of
various networks into a single measurable, SLA driven entity with a focus on
operational control and management.

In the telecom space, launch of new technologies like 3G and 4G will enable
operators to offer bandwidth hungry applications such as video-on-demand,
network gaming applications and video-RBT among others. The key to success is
enabling timely deployment of such applications, avoiding costly practices and
extra expenses. By working with a third party and with experience from other
markets, operators can mitigate the risk of heavy investments in a technology
whose time has not come.

Arpita Prem

arpitap@cybermedia.co.in