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Managed Services

The Substance of 'Hollow Operators'

Alcatel-Lucent (NYSE: ALU), Ericsson AB (Nasdaq: ERIC), and Nokia Networks have announced nearly 50 major telecom managed services contracts between them from January 2008 to July 2009, according to an upcoming Light Reading Insider report. (See NSN Services Chief: Huawei's Years Behind, Services Now 45% of NSN Revenues, Ericsson, Sprint in $5B Managed Services Deal, and NSN Sees Managed Services as $277B Market.)

The report, "Telecom Managed Services: The Rise of the Hollow Operator," will debut on Wednesday at www.lightreading.com/insider and it will describe this growing phenomenon of -- wait for it -- "hollow operators."

Hollow operators are telecom carriers that "continue to own all or most of their infrastructure assets, but they will seek out third-party partnerships to offload more and more operational functions, with an eye toward cutting operational expenditure (opex) costs and freeing up internal resources for more intense business development activities," writes the report's author, Simon Sherrington.

[Ed. note: We haven't, to date, come up with a term to describe a hollow operator being run by a bunch of empty suits, but we're working on it.]

There are a bunch of reasons why operators would want to hollow out and trust the running of some of their networks to companies that have traditionally been telecom equipment suppliers. In developed countries, cost cutting is the main driver, especially as it relates to legacy networks. In emerging markets, carriers want to turn over their network operations so they can focus on growth -- "on branding, marketing, and selling services," the report states.

One growth spot for telecom managed services will be the U.S. Sherrington writes: "As natural market growth slows (particularly in the mobile market), operators will focus on cutting costs." For traditional telecom equipment vendors, this growing practice may be the one bright spot on their balance sheets in the years ahead.

— Phil Harvey, Editor-in-Chief, Light Reading

DCITDave 12/5/2012 | 3:58:31 PM
re: The Substance of 'Hollow Operators'

One of my favorite comments from this board:




A famous saying from an telco employee that goes something like "We're not a network provider, we are a billing system."  Which really is to say that a telco is about designing new ways to bill customers for new services in creative ways, not the underlying technology.





It's so true. One quick example: Verizon has shown us time and again how they have all PayPal-like technology that could allow customers to apply just about any bill for digital goods, online services, etc. to their phone bill, where charges would be itemized and organized. They haven't taken advantage of that technology, obviously, but it shows that the capability for SPs is there to become much more than just a network service provider. They do have the ability to use IT to extract loads of value from their network traffic if they could only get out of their own way.


ph

t.bogataj 12/5/2012 | 3:58:26 PM
re: The Substance of 'Hollow Operators'

"Ed. note: We haven't, to date, come up with a term to describe a hollow operator being run by a bunch of empty suits, but we're working on it."


Have a look at Bulgakov's "Master and Margarita"... If that doesn't give you an idea about naming empty suits, then nothing will.

DCITDave 12/5/2012 | 3:58:26 PM
re: The Substance of 'Hollow Operators'

I read Rushdie's The Satanic Verses. Close enough?

t.bogataj 12/5/2012 | 3:58:22 PM
re: The Substance of 'Hollow Operators'

Well, no. Nothing beats Bulgakov. See for yourself: http://www.youtube.com/watch?v=QE3PTdJ_l8I, starting at 1:00.

abashford 12/5/2012 | 3:58:13 PM
re: The Substance of 'Hollow Operators'

"They do have the ability to use IT to extract loads of value from their network traffic if they could only get out of their own way."


I expect the end game for service providers will be:  Whoever provides the target customer with the content they want, with the quality they want, with the security they want, where they want at the price they want will win.  Customers don't care about the underlying technology, and service providers will only care as much as they need to differentiate on those metrics. 

DCITDave 12/5/2012 | 3:58:11 PM
re: The Substance of 'Hollow Operators'

A tall order but, yes, I agree with you.

digits 12/5/2012 | 3:58:04 PM
re: The Substance of 'Hollow Operators' Surely, then, what we need are open, shared networks that provide the underlying infrastructure for multiple Service Providers that can concentrate on apps development, CRM, billing etc -- all the metrics mentioned below. That's the approach being taken in Singapore -- we'll see if it works out in five years or so.
t.bogataj 12/5/2012 | 3:57:59 PM
re: The Substance of 'Hollow Operators'

Ray, you bring a healthy, Euro-centric look on things. Too bad that you mention Singapore (sic!) when giving an example on open brpadband access, and that you introduce skepticism.


You needn't have looked further than, say, Holland or Germany to find good examples of a completely deregulated and open service access and delivery. And you don't have to look even months into the future: open networks are here today.


Want to bet on what happens with open access? (Ignoring the US, naturally.) Anyone?


T.

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