One of the curious facts about the rise in the use of outsourcing and managed services by telcos and service providers over the last three years has been that the size and scope of the deals signed that involve network outsourcing is staying big (and in some cases getting bigger) while the deals for business process and IT outsourcing are staying small (or getting smaller).
To a certain extent this is accounted for by the network equipment providers – which win the vast bulk of the network outsourcing contracts – succeeding in extending the scope of their offerings as they push up from the network into the IT application domain. Moving from offering managed network operations centers (NOCs) to managed service operations centers (SOCs), which network equipment providers are now doing, inevitably involves running more equipment and applications from a single location.
Such deals are also seen as more strategic by both parties, with sharing of risk and benefits over long-term arrangements that can flex to accommodate market change. A focus on higher-level business outcomes means the managed network service provider may be given more levers to pull to achieve the benefits.
Also, in several regions of the world, the use of network managed service and outsourcing is growing: The early contracts tend to involve limited use of field operations outsourcing, as operators "dip a toe in the water" to see if outsourcing works for them. Such operators then tend to increase the scope of outsourced network operations next time – for instance, to outsource the running of the NOC. Operators in Europe, China and Latin America are among those that are following this pattern.
So if the network managed services deals are staying big, why are IT and business process outsourcing contracts not doing the same? Well, the era of the "megadeal" for IT infrastructure and applications has probably never really existed outside a few well-publicized examples such as deals between IBM Corp. (NYSE: IBM) and Bharti Airtel Ltd. (Mumbai: BHARTIARTL). And while operators' networks increasingly converge to support multiple services, many IT systems still tend be arranged in a more vertical fashion, with stacks supporting specific services, applications and solutions. Notable recent examples include managed mobility solutions and enterprise cloud services: In such cases, "standalone" managed services can be delivered effectively by an IT service provider independently of other IT stacks. While operators see the cost benefits of outsourcing more alongside their network, when it comes to IT systems they are more likely to look for outside help to solve specific problems or to introduce discrete new revenue-generating services, rather than handing over all the IT to a single managed service provider.
The latest Heavy Reading Insider, "Managed Services for Telcos: Progress & Pain Points," examines the market for the provision of managed network, IT and service operations. It looks at the drivers of outsourcing and managed service use by operators, comparing them by region and by type of operator and identifying how they have changed. The report also looks at how the nature of managed services engagements and the measures of success are changing in response to these changing drivers. It identifies the different types of service providers, which parts of the market they can participate in, and how they differentiate themselves. Finally, it profiles the key providers whose services encompass management of multi-vendor networks and IT infrastructures.
— Danny Dicks, Analyst, Heavy Reading Insider
Managed Services for Telcos: Progress & Pain Points, a 30-page report, is available as part of an annual subscription (12 monthly issues) to Heavy Reading Insider, priced at $1,595. This report is available for $900. To subscribe, please visit: www.heavyreading.com/insider.
