Service Quality expectations. The evolution of our industry proved to be dramatic and rapid, ushering in not just new technologies but new expectations from the subscribers to deliver ever more sophisticated high quality services.

Revenue pressure. The inevitable result was significant margin pressure on the CSP as they attempted to balance the two sides on a difficult equation – the increasing costs of meeting the bandwidth demands of a subscriber base who were discovering the joys of “all you can eat” data packages, coupled with the erosion of voice and data revenue by application and content providers with no stake in or responsibility for the pipe that delivered their services.

Network. From the network perspective the operation has had to change fundamentally to an IP-capable setup, embracing the complexities of managing data traffic with more sophisticated tools and processes requiring significant strategic investment. Service. From the service perspective, the operational setup has come full circle from the one-to-one service quality relationship represented by the switchboard operator, through the mass market service quality setup to the modern thinking of “per services per user” quality management.

Business. From the business perspective, operations have fundamentally changed from the relatively simple revenue-driven subscriber acquisition mandate, to the more sophisticated VAS management techniques for revenue maximisation and reduced revenue leakage.

The birth of an industry - MS as a TCO driver
For approximately 15 years CSPs around the world have been exploring the opportunities to streamline their businesses through outsourcing the operation of their networks, and today’s Managed Services discussion bears little resemblance to the first contracts.

In essence, of course, the emergence of the MSP was driven by the financial benefits to the CSP of outsourcing their operation. This manifested itself in several ways, primarily as a direct impact on the Operational Expenditure (OpEx) whereby the outsourced operation cost was 20 to 25% less than before, but also solving other operational problems which were beginning to raise their head as the CSPs were evolving.

The characteristics of the early MS business case for the MSP were firstly the fundamental principle of economies of scale in which MSPs could reduce OpEx especially when they were able to share resources across multiple operations in one country, and later across geographical boundaries through offshoring and the emergence of the Global Network Operations Centre (GNOC).

However although this represented a milestone in the development of the MS business in terms of process standardization, it was still very much characterised by a one-dimensional relationship between the CSP and the MSP, often managed by the Supply Chain organisation of the operator with inflexible contract conditions. And as the sophistication of the MS solution increased to match the technology shift, this lead to an effective restriction of the potential value the MSP was able to offer.

What this means for MS - reading the signs
On the one hand we have a changing Telecoms business, technological and operational landscape which demands a new phase of operational evolution to support the CSP business case, and on the other hand we have an MS industry that is coming of age in terms of maturity, tools and processes. All of this adds up to a picture which supports the increased adoption of evolved MS by today’s CSP. Whereas the original MS business was characterised by the demarcation of network and business functions, in that the CSP originally and rightly saw these as mutually exclusive functions and recognized the efficacy of separating them, the changes we have seen and outlined in this paper mean this boundary can no longer exist. As we strive to reinvent ourselves in response to the changes, it is clear that the demarcation of network and business is no longer possible – in fact the reverse is true; never has there been a time when it has been more important to retain and reinforce the link between business and network.

All of this information describes a situation in which the relationship between the CSP and MSP must move beyond the one-dimensional “client-supplier” relationship we have been accustomed to, to a new multi-dimensional relationship in which both parties have shared objectives, and performance of the MSP is tied to CSP business outcomes.

The need for a new idea – from TCO to TVO
The central theme of this discussion, as we begin to define what an evolved MSP looks like, is indeed the shift in focus in the way we measure success from cost reduction to higher level business outcomes. As we do this, we must embrace the movement away from MS contract performance measurement by network KPIs, towards more business-orientated metrics such as revenue enhancement and customer experience or service quality improvements. This transformation approach to MS has significant implications for the MSP who must demonstrate a good understanding of, and alignment with, CSP strategy - and be able to offer the right set of capabilities:

These transformational capabilities must be at the heart of the evolved MSP. Broadly speaking, CSPs also recognize that external support can be useful in driving the transformation of their businesses, a view confirmed by the Informa report which concludes that CSPs are “increasingly looking to MSPs to help them with the process of transforming their businesses..”

Today’s MSP – The three pillars of TVO
The facets of the TVO approach can be identified more specifically in the way we look at the capabilities and credentials of the modern MSP. These facets can be distilled into what Huawei are calling the three pillars of TVO:

i. Converged operations across all domains. In May 2013 at a conference on Managed Services (Managed Services Growth Markets), one of the main themes was around converged operations across fixed, mobile and IT networks, with the majority of CSPs acknowledging that this is an important capability going forward. This was also confirmed in Informa’s primary market research where they noted that the potential exploitation of Big Data is regarded as a “driver for the integration of telecoms/IT MS contracts”

ii. The power of process. Standardization of operations across disparate national operations within the same operator family. An accredited process capability which encompasses eTOM, ITIL and TL9000 standards.

iii. Investment. To be able to act as strategic partners to the CSP, the MSP “must focus on investing in Managed Services tools and processes” according to Informa. Furthermore, they suggest that “CSPs will choose their MSP partner on the basis of the MSP’s level of investment and innovation in tools and processes” with more than 80% of respondents rating this as an important factor. This in fact is relevant to all of the TVO pillars Further comments from Informa: “The benefits of centralized and multi-tenancy platforms for MS operations include more efficient field maintenance, optimized workforce management, reduced management complexity and synergies in sharing real-time service quality data”. CSP quote: “The secret is in the solution itself, not managing the solution..”

i. Standardized and accredited SOC processes

ii. Full process integration within the CSP operation including with, but also beyond, the NOC processes. In their June 3013 paper on Evolving Managed Services, Informa show that CSPs regard Customer Satisfaction as equally important to Network KPIs as a success metric for MS.

In a separate report from April 2013, Informa note that “Eighty-three percent of the CSPs that responded to the survey ranked the creation of a SOC as important or highly important to their future profitability”

CSP quote: “The most pressing focus for operators is organizational evolution – switching mindset from network management to service management….We are looking for a partner to help us become more customer-centric.”

i. VAS business operation offering data analysis & reporting

ii. Mass Content and Service Provider aggregation Informa: “there is clear intent from CSPs for future managed services contracts to be measured on the basis of business outcomes such as service quality, customer satisfaction, and financial measures (e.g. EBITDA)”

What about tomorrow?
In this paper we have discussed the importance of evolving to a business outcome orientated MSP-CSP relationship, and we have explained the background to that in terms of the technology, business and operational shifts we are seeing. One of the clearest manifestations of this whole scenario is the organizational transformation that CSPs mostly acknowledge they must go through, from Network- to Service-orientated operations. From a practical viewpoint this represented by the emergence of the SOC as a fully integrated control mechanism to ensure the correct focus, and an entity whose mandate is to bring the CSP organisation together, linking the NOC with the business in ways that have not yet been seen.

But what is next? Even as we are right now deploying the first fully integrated SOCs, we must nevertheless continually ask ourselves what we must do to support the evolution of our industry. There seems to be a consensus that MS engagements focused on business outcomes is the way forward. In their paper, Informa develop the idea that we must move along a path that changes the emphasis from KPI (Key Performance Indicator)to KQI (Key Quality Indicator) to KBI (Key Business Indicator) and ultimately to KBO (Key Business Objectives) in the way we measure the performance of MS contracts. So what would be the natural and practical operational manifestation of this path if we try to imagine what the CSP business will look like a few years down the road?

NOC to SOC to BOC
Perhaps the next focus will be the emergence of the Business Operation Centre or BOC. In the hierarchy of performance metrics, just in the same way we see the KQI used to drive the improvement of the KPI, we can imagine an entity called the BOC where the KBO and KBI are used in the same way to drive the improvement of KQIs. Hierarchically, this would work in the same way as the SOC in that here, our reason for improving things is not a KPI but a KQI. In this new imagined entity, our reason for improving things is firmly rooted in the business metrics.

What if we could alter the subscriber perception of a good experience without improving KQIs? A short while ago a European MVNO was voted as having the best coverage by subscribers whereas of course it was identical to the parent network who received a lower rating. The reason? A cool brand and better customer care, combined of course with the foundation of a good network with good KPIs and KQIs. Perhaps a future BOC could pick up issues like this and ensure that finally, we are managing our businesses with the purest of motives – to increase CSP shareholder value.

Conclusion
The Managed Services business continues to grow. In the Informa report we find that there is a strong and positive trend over the last 3 years for an increased appetite for outsourcing amongst CSPs. However the business must respond to the changing landscape by moving into a new phase in terms of value creation. More than half of the respondents in the Informa survey state that working with an MSP is important to drive revenue growth, and around two-thirds state that it is important for improving end-to-end service quality – metrics that were not even discussed a few short years ago.

We have described in this paper a vision of the capabilities of an evolved MSP, capable of taking its CSP customers to the next phase in their own evolution through the medium of MS projects. This requires a long term view of the market, a commitment to enhancing CSP business metrics that goes beyond any short term pain experienced, and the tenacity to stay the course when others are turning back.