A game of trust

Operators and vendors stand to gain from network outsourcing, but striking the right deal is key.

Tags: Huawei Technologies CompanyMobiserve (www.mobiserveholding.com)Nokia Middle East and AfricaNokia Siemens NetworksVodafone Qatar
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A game of trust Sameh Atalla, CEO, Mobiserve, is seeing growing interest in outsourcing by operators.
By  Nithyasree Trivikram Published  October 17, 2010

Network outsourcing has been growing steadily over the last few years in the Middle East and Africa region, and the need for greater efficiency in the telecom sector appears to be driving the trend.

Experts from the telecoms industry tell CommsMEA about network outsourcing trends, the different types of network outsourcing contracts in practice, and the challenges and advantages for operators and vendors in adopting this model.

COMMSMEA: What network outsourcing trends do you see in the Middle East and Africa region?

Dr Michael Fritsch: Operators have more and more been looking at external services for their networks to save cost and improve their operations. Starting with maintenance of operators’ networks, vendors moved into turnkey arrangements where they build their networks and operate all or parts of their networks later. In recent years, this has moved into third party management wherein vendors manage not only their own technologies but also that of other suppliers.

When it comes to managing networks in a build, operate and maintain model, the vendor either takes the design from the operator or provides it as part of the design for the operator, and then builds the network and manages it over time.

This is the model many operators have applied in the African countries and to a large extent in the Middle East, simply because operators in this region did not necessarily have the technical capability that their counterparts have acquired over time in the developed countries, but they still want to deploy the networks quickly and with the best possible quality. In this case, the operator is in an outsourcing relationship with the vendor right from the beginning.

Grahame Maher: A network operator’s main responsibility is not just to operate the network, but to a large extent lies in the future of where the business is leading to and how customers are handled. While both have to run well, operators can do it efficiently if they outsource their networks.

Outsourcing has been there for a long time, but maybe it is felt now in this region because of the evolution of telecommunications here.  The future for operators is to focus on customers, and not just on running their networks. The benefit comes from sharing networks, selecting the right partner and changing the organisation to a part-based organisation rather than a supplier-controlled network company.

Nicolas Bouverot: Network outsourcing is a slow moving segment for the MEA market compared to worldwide growth. However, every other operator that we talk to is ready to talk about outsourcing, and a few of them have already made the move. Statistics show that MEA’s network outsourcing is to increase quite sharply.

Samir Kumar: The managed services trend started in the MEA region about five years back, and there have been new methods of progress in its life cycle. Operators are now looking at outsourcing most of their networks to focus more on their core business of attending to subscribers and getting more application-oriented services to end-users. While we started initially with a BOT model, we are now maintaining operators’ networks as well.

Sameh Atalla: We will be seeing growth in network outsourcing of all operators in the MEA region. Whether it is about outsourcing the entire infrastructure, or operation and maintenance, or upgrades of technical parts of networks, the trend is moving towards vendors or to specialised telco companies.

Zheng Xiang: Network outsourcing is a trend in the Middle East due to the operators’ challenges and end-user demand for more bandwidth and high speed data services. In addition, the market is also open with more licenses, which in turn, creates competition among operators to focus on faster time-to-market, quality of services and cost reduction.

Managed services vendors are now building comprehensive platforms in the region, therefore achieving economies of scales in order to reduce the OPEX of operators, availability of skilled resources and updating new technologies that assures rapid time-to-market.

COMMSMEA: What sort of adoption levels do you see among MEA operators?

Samir Kumar: In the MEA region, if we look at private operators, they are at some point in time involved in the outsourcing space. In East Africa, I would say that we have more than 50% of operators who have outsourced their operations, or are in the process of outsourcing their networks in the next six to 12 months. Here, the whole outsourcing model is in different stages of maturity. In the Middle East, there is still a lot of BOT type of contracts, which have actually moved into managed services contracts.

Sameh Atalla: In the MEA region, operators are showing steady growth in adopting the outsourcing model. The greater the maturity of operators, the more we will see network outsourcing taking place, and we will see the numbers growing in the next few years.

Dr Michael Fritsch: There are quite a few design, build and operate models in the African markets, while comparatively less in the Middle East due to a broader base of technical competencies.

Network technology is evolving very fast at the moment. In mobile data networks, there is the next generation coming up with LTE which will deliver high broadband speeds with 5-10 times the speed of current 3G networks. Every time there is a new investment by operators, they start considering optimising the business model. The network deals that come up usually are more leaning towards managed services because of the growing experiences with these arrangements. It is also considered lucrative by the vendors as it gives them a constant revenue stream over the years going forward rather than one-off equipment and installation contracts.

COMMSMEA: What are the implications for telecom executives in this region?

Samir Kumar: When we look at most of the people working on the operator side of the industry, they need to move from running the networks to be part of a demand organisation. This means that whenever an operator outsources its network to outside organisations, as part of the deal, the operator still needs to ensure that the quality of services is met with. So operators are looking at KPIs while getting into an outsourcing deal with vendors like service level or upkeep time maintained. I think finding the right SLAs and KPIs are the most important aspects of an outsourcing contract.

COMMSMEA: What are the challenges that telecom operators typically face in outsourcing their mobile networks to vendors?

Grahame Maher: An operator outsourcing its mobile network needs to think of the right partner who can deliver quality services, and also make sure that the culture of the organisation is ready for partnering solutions. The culture of your business will depend upon the culture of your partner. So, an operator needs to make sure that it is selecting the right partner to sync with its organisation culture.

Nicolas Bouverot: As mobile and fixed networks are made of subsystems from different vendors, the separation between networks and the IT domain are becoming less. The challenge here is to find a single managed service provider who is capable of providing multi-vendor managed services. Another key challenge in managed services is that operators need enter an agreement with an outsourcing partner who can guarantee efficient solutions.

Dr Michael Fritsch: If you move from an internally managed network to a managed services arrangement, you handover both responsibilities and often your own employees to a third party. Here, the challenge involves management of the outsourcing transition that evolves from a project-perspective to dealing with all the aspects of resources that need to be transferred such as employees, contracts and tools.

COMMSMEA: Is Middle East and Africa lagging behind the West in network outsourcing?

Samir Kumar: The Middle East took a long time to move from the BOT model to an outsourcing market. I think the market is really moving ahead. We secured our first deal last year, and have executed them very well during this year. But, in terms of the number of deals, this region still lags behind the West.

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