tmforum qi managed services[1]

8/3/2019 TMForum QI Managed Services[1]

http://slidepdf.com/reader/full/tmforum-qi-managed-services1 1/20

CHANGING LANDSCAPEAPPROACHES TO A

QUICK INSIGHTS

2 0 1 1 | w w w . t m f o r u m . o r g

MANAGED

SERVICES

Sponsored



MANAGED SERVICES:APPROACHES TO A CHANGING LANDSCAPE

2 www.tmforum.orgQUICK INSIGHT

ENABLING SIMPLICITY Being a service provider in today’s market isn’t

easy. Delivering the right level of service, at the

right price - and making a profit – is a tall order.

To succeed, your business needs to run with

maximum agility, simplicity and efficiency.

As the global industry association focused on

simplifying the complexity of running a service

provider’s business, TM Forum is collaboratively

delivering the standards that are taking the cost

and risk out of, and putting the flexibility into,

running your business.

Visit www.tmforum.org today to join the world’s

leading service providers who are using our

Frameworx standard to enable simplicity.


http://slidepdf.com/reader/full/tmforum-qi-managed-services1 3/20 3www.tmforum.org QUICK INSIGHTS

Managed services:

Approaches to a changing landscape

© 2011. The entire contents of this publication are protected by copyright. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form orby any means: electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, TeleManagement Forum. TM Forum would like to thank the sponsors and

advertisers who have enabled the publication of this fully independently researched report. The views and opinions expressed by individual authors and contributors in this publication are provided inthe writers’ personal capacities and are their sole responsibility. Their publication does not imply that they represent the views or opinions of TeleManagement Forum and must neither be regarded as

constituting advice on any matter whatsoever, nor be interpreted as such. The reproduction of advertisements and sponsored features in this publication does not in any way imply endorsement byTeleManagement Forum of products or services referred to therein.

Report author:Annie TurnerPublications Managing [email protected]

Editor:Claire [email protected]

Creative Director:David [email protected]

Commercial Sales Consultant:Mark [email protected]

Publisher:Katy Gambino

[email protected]

Client Services:Caroline [email protected]

Corporate Marketing Director:Lacey Caldwell [email protected]

Report Design:The Page Design Consultancy Ltd

Head of Research and Publications:Rebecca [email protected]

Advisors:Keith Willetts, Non-executive Chairman, TM Forum

Martin Creaner, Chief Executive Officer, TM Forum

Nik Willetts, Senior Vice President ofCommunications, TM Forum

Published by:TM Forum240 Headquarters PlazaEast Tower, 10th FloorMorristown, NJ 07960-6628USAwww.tmforum.orgPhone: +1 973-944-5100

Fax: +1 973-944-5110

This publication is free to TM Forum members

Page 4 Executive summary

Page 5 Section 1

The arguments for rethinking what we mean

by managed services, again, and their role in

our industry’s transformation

Page 8 Section 2

Should operators resist seeing managed

services strategically?

Page 10 Section 3

Lessons learned about using managed service

– words from the wise

Page 16 Section 4

In conclusion and TM Forum’s contribution to

managed services


http://slidepdf.com/reader/full/tmforum-qi-managed-services1 4/204 www.tmforum.orgQUICK INSIGHTS


That major shifts are taking place in our

industry is well known and discussed

constantly. The implications for managed

services are less well understood and receive

much less publicity, but they are fundamental

to the future of the communications and

associated industries. What we mean by

managed services is changing too.

In Section 1 we reflect that in the

foreseeable future, even the most basic

products and services, such as connectivity,

will be delivered by mixing and matching

assets owned by third parties and network

providers themselves. Already in many

countries, the provision of broadband is

restricted to a single or few suppliers, such

as in Australia, while many established

communications service providers are looking

to third parties to provide them with 4G

coverage – perhaps Yota Group in Russia is the

most striking example of this.

Network sharing is nothing new, but it will

become more prevalent as the economies

of scale become ever more important

and established players face increasingly

tough competition – the likes of hospitals

and insurance companies are now offering

communications services.

All of which means that network operators

need to find new sources of revenue. Thishas been talked about for years, but we look

at many examples that seem to indicate

progress is finally being made. However, the

only possible way of delivering them is through

partnerships – or put another way, through

partners delivering managed services. All of

the players will need managed services for

a variety of reasons, including to gain reach,

scalability, skills, products, flexibility, economies,

operational efficiencies, faster times to market,

reduced risk, strategic positioning and to deliver

better value to customers.

Yet there is little coordination of managed

services within a single territory, never mind

across several or many geographies. Mary

Whatman, Founding Partner, Parhelion Global

Communications Advisors, argues this is

storing up big trouble for later.

Section 2 examines arguments put

forward by service providers for not seeing

managed services as strategically important,

and suggestions about why they should,

while Section 3 offers lessons learned, from

consumers and suppliers, or both, of managed

services. There is considerable disagreement,

but the results are both insightful and very

much to the point.

Almost everyone agreed on the fundamental

importance of a good relationship between

partners, as well as intelligent contracts,

although the definition of a truly useful contract

is a work in progress.

Section 4 looks at where we are now, and

where we need to move to, and what TM

Forum and its various standards and other

activities brings to the table to help our industry

move forward, making the very most out of

managed services for all parties. After all,

for you to succeed, your partner has to be

successful.

This Quick Insights report is based on thelively debate at the executive roundtable

entitled Managed services and outsourcing:

Building strategic partnerships for long-term

success . TM Forum would like to thank all the

senior executives who so willingly shared their

wit and wisdom.

In particular, we would like to thank Mary

Whatman for acting as moderator, and Kathy

Romano, Director, Payment Processing, Verizon

Services Operations for acting as provocateur.

We hope you enjoy the report.

Executive summary



Economies of scale dictate that there

is no point building duplicate networks

A widely accepted definition of managed

services is outlined below:

Managed services is the practice of transferring

day-to-day related management responsibility

as a strategic method for improved effective

and efficient operations. The person or

organization who owns or has direct oversight

of the organization or system being managed

is referred to as the offer-er, client or customer.

The person or organization that accepts and

provides the managed service is regarded as

the service provider. Typically, the offer-er

remains accountable for the functionality and performance of the managed service and

does not relinquish the overall management

responsibility of the organization or system.

Source: Wikipedia

Some in the industry are arguing that we

should have already moved beyond this, due

to major shifts that are taking place in how the

industry is structured, new economic models

and the changing roles of network operators.

Certainly it is increasingly common for one ora small number of providers to be responsible

for offering broadband access, for example

the National Broadband Network is under

construction in Australia, there is a single

fixed infrastructure provider in Ghana. More

consolidation regarding the provision of fixed

broadband seems inevitable.

In many countries, operators will rely on third

parties to provide their customers with access

to 4G, either entirely or to some degree. In

Russia, Yota will provide the four biggest

The arguments for rethinking what we meanby managed services, again, and their role inour industry’s transformation

Section 1

network operators with broadband access via

4G (see panel), while in the U.S., LightSquared

is offering 4G nationwide, complemented by

satellite coverage, on a wholesale-only basis.

On June 14, as this report went to press, the

Financial Times reported that PCCW’s UK

subsidiary, UK Broadband, could start offering

wholesale 4G services as soon as 2012 to

mobile virtual network operators.

Network sharing is nothing new: in Canada,

Bell Canada, Aliant and Telus decided way back

in 2001 to share a single mobile infrastructure

so they could better use their resources to

compete against Rogers Communications.

All these trends will continue, dictated by

economies of scale and the fact that it makes

no business sense to build duplicate networks.

The era of ‘if we build it they will come’ is over.

It is received wisdom in the industry that

network operators will have to decide in

which layer(s) they want to play: offering

infrastructure, including broadband access

on a large scale, being an aggregator of

services and/or an enabler of digital life (see

Figure 1-1 on page 7). This theme is exploredin considerable detail in TM Forum’s Quick

Insights report Future Shock II: The age

of the user , which is free to members to

download from http://www.tmforum.org/

QuickInsights/8201/home.html

The changing structure and economics of

providing communications services along

with ever-increasing competition between

established players and the rise of new

entrants (the likes of hospitals and insurance

companies are now providing communications)

http://www.tmforum.org/quickinsights/8201/home.html







means operators have an urgent need to

identify, develop and offer new, revenue-

generating services. This has been talked

about for years, but progress has been slow.

Now it finally looks like things are beginning to

change. Consider these examples:

Over the last 18 months, PCCW in Hong

Kong has been developing an eHealth service

that will monitor people who are sick or

disabled at home, reminding them to take

their medicine on time and triggering alerts if

they aren’t moving around, for example.

In parts of Canada, Telus Health has

connected all the doctors and hospitals, and

all the health records in the nation’s capital. If

you are in hospital, depending on your cable

supplier, you can get a device next to your bed

that hooks you up to your home package so you

can watch your favorite cable shows as usual.

Sprint is talking about connecting to cars.

Telstra is to deliver machine-to-machine

communications.

The Connected Home is being developed in

many places.

A service provider in the Caribbean is

working on enabling customers to render their

PC screen exactly on every other device they

use, so they can interrupt it on one device and

restart it on another. The company has already

carried out a proof of concept.

Almost every communications service provider

has said it will offer some sort of specialized,

value added service to all its customers, such

as financial services, with services tailoredfor small and medium-sized businesses

(SMBs) – for instance, with security provided

as part of a bundle.

In the next two years we are likely to see an

added value service provider emerge that

will allow its customers to choose which

backbone service provider they want to use

from their devices, rather than oblige them to

take service from one as part of the bundle.

Sometimes price will be more important than

quality of service, and other times not.

In almost all cases, real and futuristic, the

operators will not be providing such services

on their own, but through partnerships.

Put another way, through partners offering

managed services. The services might be

offered across infrastructure owned entirely by

the network operators, or via networks owned

by different parties as discussed above.

The network operators could choose to offer

white label services from a third party under

their own brand. Alternatively, the network

provider might deliver services for a third

party, branded by that party, depending on

how you want to interface with the consumer

of the services and your agreement with the

managed services provider.

In the first instance, you will be users of

managed services, and in the second, providers

of managed services. Either way, the key is

that it gives operators huge opportunities in

the service aggregation layer (especially as

cloud computing becomes more prevalent),

again as shown in Figure 1-1 opposite, and at

the digital life enablement level, illustrated in

the same figure. Eden Zoller, Principal Analyst

with research house Ovum, has observed* that

while the digital enablement layer is typically

where operators would like to see themselves,

it is arguably less native to them.

The theory endorsed by many industry

commentators, based on the shifts that have

taken place already and look set to continue, is

that it is unlikely that most of today’s operators

will continue to play at all three levels. Of course,

this will vary from country to country, dependingon many things, including market maturity.

In all three layers, services providers will

need managed services for a variety of

reasons in different situations, including to gain

reach, scalability, skills, products, flexibility,

economies, operational efficiencies, faster

times to market, risk management, strategic

positioning and better value to customers.

Providers of managed services, and their op-

erator clients, need to do some rethinking in a big

hurry if they are to exploit the coming era of huge

*See Quick Insights report, Future

Shock II: The age of the user on

our website



There is little coordination of managed services

within a single country or across geographies

opportunity successfully and to its full potential.

All of which explains why Mary Whatman,

Founding Partner, Parhelion Global

Communications Advisors, came up with a

new definition of managed services as follows:

Managed services is the foundation for

monetization of the information-enabled

society by delivering services and operational

capabilities using real or virtual capabilities

sourced from companies, people or locations

that offer a business differentiating advantage

(managed services partner providers). The

consumer (enterprise, prosumer or community)

engages with their managed services provider

for a range of static or transient services.

Collectively managed services provider partners

fulfill the expectations of the consumer through

each having a defined, measured and monitored

set of boundaries and key performance

indicators against which they deliver. Defined

accountability and collaborative value are key!

Source: Parhelion-GCA

This has lots of implications. Previously

operators owned their own infrastructure from

end-to-end, now they are choosing to mix

and match assets. In the coming era, much

tighter governance will be needed, as these

agreements are more integral to the business.

The problem of a lack of coordination of

managed services starts at home. Outsourcing

tends to be done on a piecemeal basis, depart-

ment by department, rather than undertaken

as part of an orchestrated effort even within acompany’s operations in a single territory.

This is even worse for operators that are

active in many countries or territories (a quick

Internet search revealed that at least 47 have

properties in eight or more countries as part of

an operating group – Cable & Wireless leads in

terms of geographical spread with operations in

70 different markets). There is little to suggest

any coordination of managed services across

geographies.

This is a cause for concern for a number of

reasons. As time goes by (and standardized

infrastructure become increasingly common,

driven by economics and the need for greater

operational flexibility and business agility), one

of the big opportunities for services providers

will be to ‘package’ services they provide

in their home market overseas, including in

countries they don’t operate in at all. Also,

it seems that fewer and fewer stand-alone

operators will survive; to prosper, you will need

to be connected to a group.

From a managed services’ perspective, it

changes the whole dynamic of how a managed

service provider sells to a services provider andhow those managed services are used. How

you govern and are governed changes radically.

It should be a source of concern that the

solutions we are buying today, with contracts

up to seven or more years long, may not

be suitable a year from now. There is little

evidence to suggest that these considerations

are seen as part of operators’ strategies for the

next one, three or five years.

We look at the varying attitudes towards the

situation in the next section.

Homecommunity

Businesscommunity

Social networkcommunity

Healthcare Finance Homesecurity

Mobilecommerce

Socialnetworking

M2M Utilities Education

DIGITAL LIFE ENABLEMENT(CUSTOMER/PARTNER)

Lifestyle product provider Lifestyle management Personalization

SERVICES AGGREGATION ENABLEMENT

Services enablement Content enablement

BROADBAND ACCESS ENABLEMENT

Fixed WirelessUtlility CATV

Digital lifeservicesprovider

Aggregated

servicesprovider

Networkservicesprovider

Figure 1-1: A high-level perspective on today’s business model

Source: Parhelion-GCA




Should operators resist seeingmanaged services strategically?

Section 2

As Mary Whatman, Founding Partner, Parhelion

GCA, says, “The central organization needs

to take tighter control over its investments in

different geographies because if a solution or a

service is maturing in one geography and you

want to apply it to another, the greater control

will make it far more effective and efficient.

Central control will also make supporting the

solution much less complex.”

She argues that large organizations need a

center of excellence for central governance

and control of managed services, and that

operators should be looking to establish long-

term partnerships with the managed services

suppliers, rather than a subservient vendor

relationship with them.

Not everyone agrees. Here are some of

the opposing points of view to managed

services being strategically vital, put during

the roundtable discussion, and the answers

provided by members of the group. It also

demonstrates a real fear – understandably – of

giving away control.

Q: Who’s going to be the point of contact for

the end-to-end delivered service and how is

assurance going to be engineered in this new services provider model?

A: The worry is that until we’ve figured

out where we’re going, we won’t ask that

question, and that we won’t ask that question

until we’ve got 15 different contracts all set

up with different service level agreements

(SLAs) and different terms. It will be an

operational and business nightmare. We need

to think about delivering aggregated services

at the customer interface, which will make us

think of ourselves differently now, so that we

start asking those questions before we find

ourselves in a blizzard of incompatible contracts

that are expensive and difficult to exit.

Q: Customers will blame us for problems,

even if they are in the outsourced part of the

network, so we have to share information with

our networking sharing partner. This is not the

case today, we do not share information about

network management, so this will change our

game dramatically, from systems, to interfaces

to the old business model: who is responsible

then for the overall, end-to-end performance

and customer experience?

A: It’s nothing new and [the trend is] going

to increase. It is causing unease because

this is an industry that, from its inception,

had everything under its control, but when

its product was very simple – dial tone. With

a car, would you go to anybody but the car

manufacturer for a warranty? It says BMW or

Lexus or whatever, and they are responsible for

everything, even if they didn’t manufacture any

part of it.

“We have to learn how to do these things in

this industry, to look at those guys who do it

all the time for a living. In the car industry it’sbeen going on for 25 years or more because

they couldn’t afford to do it all themselves

and they’ve learned how to manage it. At one

time Mercedes thought they were the only

people who could make a screw good enough

to go into a Mercedes, and they nearly went

bankrupt. Now they buy engines from BMW.

We need to learn from them.



We need to avoid each department

having to learn lessons the hard way

Q: Does it make sense to have a common,

centralized function to manage all those

different outsourced functions, including

low-level functions such as performance

management, that only applies to operations?

I work in a big group and in my area of OSS,

outsourced performance management is a

small piece, not comparable to field services

being outsourced, or wholly outsourced data

services. They are different, they belong on a

different level.

A: What is happening with one contract could

cause another to be weak: they need to be

managed together closely to ensure common

terms and conditions, SLAs and operational

level agreements (OLAs). Also you end up with

each department or business unit having to

learn hard lessons themselves (see Section 3),

instead of drawing on the experience of

others in the group who have already been

through the process and learned a lot from

it. For example, the value of building in

bonuses versus penalties, or incorporating the

‘wrong’ metrics instead of looking at business

outcomes.

Q: We are introducing LTE and at the same

time discussing the introduction of many new

tariffs. We want to encourage people to buy

at the higher tariff to get better quality and

bandwidth. This could be a nightmare in terms

of performance management, but we view this

as a technology piece, and not directly involved

with what we think of as being managed

services.

A: In a year’s time, in order to differentiate

ourselves in the market, we might be able

to choose the quality of service we have for

particular services, paying more for faster

access, rather than simply buying a higher

speed bundle. How are you going to offer that

without taking it into consideration in your

planning and your OSS services now?

“In a year’s time, in order to differentiate ourselves in the market, we might be able

to choose the quality of service we have for particular services. How are we going to

offer that without taking it into consideration now?”




Lessons learned about using managedservices – words from the wise

Section 3

Here is some of the advice that came out

of the roundtable from the senior attendees

who’ve had extensive experience in the

processes of buying, working with and

providing managed services.

Not everyone agreed about everything,

depending on their experience and which side

of the fence they were on – supplier or client –

but their insights are fascinating.

Please note: Quotations are anonymous, except

where directly attributed. A line space between

paragraphs or the start of quotation under a new

heading indicates a different speaker.

Consolidate your suppliers as much as

possible

Harlan Vold, CIO, Yota Group, “Is Yota going to

go and build a core network in 198 cities? No –

it’s not my core business. I don’t even want to

own and ship equipment across a country with

11 time zones – it’s like shipping stuff halfway

round the world.

“We plan, as a service, a main supplier for our

data centers and the racks, servers, network

equipment and everything will be provided by

one company that can cover, let’s say, 150cities. I have to figure out the 40+ others. You

have to consolidate on partners who can do this

for you wherever you can or you’ll die through

the number of partners you have to manage.”

Relationships are critical

“The importance of relationships between the

managed services provider and their clients

came up over and over again, and in particular

the fact that both sides need to succeed or

both will fail.”

“It’s very beneficial for both parties to

understand each other. I can’t understand

the structure of most of the companies I am

working with and who reports to whom. You

get things like, ‘The unit that is responsible

for fixing you software can’t do it because....’.

Once you understand their problems, you

become a real partner. The next thing is that

you have to figure out who is willing to sign the

deal and what their expectations are.

“From the vendor’s point of view, after they

have signed the deal, it seems that the clients

are changing their opinion every second week

and you cannot put everything in the contract,

no matter how good you are. So if you

understand the customer’s needs, for example,

if you see they produce new price plans every

couple of days, even if it is not mentioned in

the contract, you need to say to them, ‘I am

not able to deliver that, it will kill me’.

“Otherwise the vendor knows the customer

is going to squeeze them and reduce the

price significantly. Then the vendor will take

the deal and sign it, but look for back doors

in the contract, and use them next time they

get a change request. So understanding thelogic behind the contract, its structure and the

expectations behind it is a critical part of the

process if you want to achieve a win:win.”

Only saving money is a waste of time

Kathleen Romano,Director, Payment

Processing, Verizon Services Operations, has

perhaps a surprising point of view, saying,

“My preoccupation is delivery of service to the

customer and I have two personal approaches

that might seem counter-intuitive.



If your supplier isn’t a partner, you need to think

hard about what you are asking them to run

“First, I don’t ever want anyone to come

to me with a deal that only saves me money

because if I don’t add value to the business,

and you don’t bring me something I can’t do

myself, I’m not interested.

“I can only manage a certain number of

things and as our business is moving so fast, I

need to add value, not simply stand still.”

Don’t build contracts on the assumption

of success

Romano continues, “So the other side of

‘you need to bring me added value’ is I have

a responsibility to understand what you [as a

managed service provider] are doing and to be

able to manage that, because if I can’t manage

it, I can’t get the best out of it. I’m going to

look pretty stupid if the contract fails. The first

thing I need to negotiate on any deal is what’s

going to happen when there’s a failure? If I can

get through that and know how we’ll deal with

failures, then we can build a deal that works.”

Partnership versus a vendor relationship

“Reliability, if it’s a partnership, it’s not just

about having someone to blame. We know that

if there is a problem, our customers will call our

call centers, reliability is key.”

“You need partners, not an arm’s length

relationship. You need your partners to live up to

what they promised by keeping them close.”

“We tried partnership with our clients. It wastoo difficult, too much was asked of us, so we

are happy to be vendors and provide what is

agreed in the contract.”

“All parties understand there will be change.

If I have to go back and look at the contract,

then the relationship is gone and you’d better

have a good termination clause in place.”

“Managed services will be increasingly

strategic, and while we have to accept that

some managed service providers don’t want

to be partners, you must think very carefully

about the level of involvement you want from

them and the importance of what you are

asking them to run.”

Change management is crucial

“You have to have a proper change

management clause in there, including

termination for convenience, termination for

cause. If you think through this stuff, then you

end up with the right thing. If you omit this

stuff, you are bound for chaos. If you only keep

10 to 15 percent of your previous staff, then

you’re bound for chaos.”

“One of the biggest sources of failure is

when the partner that is really experienced at

outsourcing doesn’t help the person who is

buying the service become accustomed to the

relationship. It will always fail. The provider

needs to help with the transition, which isn’t

an emotional decision like it is for the company

that has decided to outsource. It should be a

function of change management.”

Bonus versus penalties

“One of our outsourcing partners have not only

taken responsibility for one or two services in a

country we operate in, but total responsibility for

network planning and it’s all managed by SLA –

network quality that you manage in terms of calls

drops. The payment is something like a bonus

model, so we pay a set fee and they are betterpaid if they do well. If not, they are paid less.”

Mary Whatman, Parhelion GCA, agrees,

saying, “These are some of the things that

we keep learning, and why I recommend a

center of excellence. I have seen in the same

company a contract for OSS works like that –

benefits for success instead of penalties, but

the outsourcing of IT or Finance have none of

that, and they wonder why one contract went

well and the others didn’t.




“If strategies suddenly diverge you say, ‘Thanks very much, it was a

nice marriage, but I found a better partner’ and you have the pre-nuptial

drawn up already.”

“I’d rather pay a partner or vendor 80

percent of their fee and be prepared to pay up

to 110 percent of that fee if everything goes

well rather than build in penalties whereby I

charge them when things go wrong. It’s a huge

incentive and encourages innovation.”

Planning for change

Whatman asks, “Do you build innovation

clauses into your contract? ‘I need you to be

able to offer new services for me three times

a year’, say. How do you measure that and

what’s involved? What we’ve started to do

is identify the value element in the contract,

and try to measure it. This has not yet been

perfected.”

“If you change your business model in two

years’ time and your partner isn’t able to match

that change, you should have a Plan B. You

discuss it and either they improve to support

you as a partner, or you do something else.”

Talking strategy with your partner(s)

Romano explains, “In my last job [also at

Verizon] I worked very closely with Subex. We

had strategic planning sessions at least once

a year. They would present the kinds of things

they were working on, we would present our

business problems and together we would look

at what was the best approach to help us meet

those problems.

“A lot of times I came up with ideas onthings we wanted to do based on things they

were doing for other people. Sometimes it

worked better than others.”

“You can’t predict the future, which is why

you have to cut it into shorter increments so

that you can adapt it. You have to have the

right causes to adapt in good faith between the

two parties, whether it’s going up or down. If

strategies suddenly diverge, you say, ‘Thank

you very much, it was a nice marriage, but I

found a better partner’ and you have your pre-

nuptial drawn up already.”

The limitations of contracts

Morgan Chung, VP of Global Managed Services,

Carrier Software Business Unit, Huawei,

says,“The contract is very important and we

review it many times, but still there are a lot of

grey areas you cannot define completely.

“You can define SLAs, but SLAs do not

guarantee the satisfaction of every part of the

service. Things shift, not just concerning SLAs &

KPIs, such as key quality indicators. Beyond the

contractual agreement, the vendor needs to be

able to contribute even more, to work together

as a strategy partner to see what the customer

really needs.”

“Contracts are just a framework and the

environment is too dynamic and agile to rely

on them. The important thing is the level of

conversation you have with your partner.”

Business outcome metrics

Whatman says, “We’ve been working with a

number of partners to frame business outcomemetrics, so in IT for example, the important

metrics are not, ‘Is the server up 99.99 percent

of the time?’ That’s irrelevant. The important



You develop a decision tree to see what to

measure and what is irrelevant in business terms

question is ‘Can a customer put an order

through?’. For the order to go through in one

large North American operator meant 2,963

servers had to be up and running to get it right,

across four different vendors.

“We started out measuring every server up

99.99 percent of the time, but the one that

wasn’t available was critical. It stopped orders

going through. When you did the math, on

average the SLA had been adhered to and

there were no penalties against the supplier for

losing its customer business.”

“I was doing this stuff on my first outsourcing

contract 15 years ago and not just on the low-

level stuff. The low-level stuff is important,

you have to have four nines’ reliability on a

server as a basic ingredient, because if that

doesn’t work, the whole thing isn’t going work

on the top. We had simple definition of critical

outages, defined by, in a call center say, if 20

agents are out of work for 15 minutes, that’s

business critical.

You apply business sense to what that is and

you go step, by step, by step. From there, you

develop a decision tree from which you see

you need to measure some things and that

measuring other things is completely irrelevant.

That’s a relatively simple methodology to get

through these things.”

Subjective judgements are hard

Romano says, “The further you are fromthe customer, your business objectives are

different. I don’t care that [my managed service

provider’s] payment feeds came in late last

night because it didn’t impact a customer, but

if it had come in two hours later, so customers

didn’t get their payments posted, that would

have been an issue.”

Whatman adds, “How to measure how

unhappy your customer is and the impact on

them is more subjective than many of the other

measures we use. Subjective metrics make it

difficult to maintain a good relationship. More

pragmatic solutions should be explored.”

The cheapest deal is unlikely to be the best

“Honesty on both parts about why you are doing

the deal is far more important than the length

of the deal. Too often it’s more like banking – I

need to put the costs on somebody else, you can

load the costs at the end of this thing because

we’ll all have new jobs by then anyway and

goodbye. This ‘we do your mess for less’ type

of approach means things go sour very quickly.

Sometime vendors are prepared to lose

money to secure your brand as a customer

reference and I think as the customer, you

want to watch out for that, because that’s

often a very short-lived contract relationship,

especially when things go sour. On the other

hand, it can work well if the outsourcer needs

to keep your business. They will make the

money from elsewhere to fund it.”

Track records are important

If you can look at a vendor and their track

record and see that they’ve been doing this for

a long, long time, it’s a very good start.

Ask for bad as well as good references from

customers where things have gone wrong and

then been fixed.

If you can’t find what you want, create it“There wasn’t anybody who could help us,

so we had to create a partner, sending our

people out to find other people in companies

we’d worked with as part of our build and

create a partner, create the company, and

help them to be successful. So we have to do

that for probably 60 percent of the things I’m

interested in outsourcing because it doesn’t

exist at the maturity level where I could just

automatically expect a certain level like in

Western Europe or the U.S., say.”




“A year ago I would never have thought about outsourcing quality assurance or

architecture or governance, but this is changing. I’ve met an operator that uses

someone else to do due diligence that the information they are getting back is

accurate.”

Maintaining business knowledge

“This is one of the biggest issues. In one of the

longest contracts I was ever involved in, within

two years the knowledge about what the

systems were and the infrastructure – all the

decisions about them – was totally gone from

the client. I took over the contract and there

was fear on both sides. I put in place a reverse

knowledge transfer whereby any time they

hired someone, I trained them because then

they could make me be successful. This needs

to be addressed in the first six months.”

Verizon’s Romano agrees: “You have to

maintain in-house expertise or you are dead

because you need to understand what the

vendor is doing, what the process is and how it

works, or how can you manage it?”

Reciprocity works

“We find that a two-way partnership works

better than a one-way vendor contract

relationship. In my experience, the best

contracts have inter-reliance and reciprocity,”

Richard Ang, CTO, Worldwide Communications

Sector, Microsoft.

Room for maneuver

“A vendor told me, ‘If your contract is only worth

$250k, can’t do much for you. Bundle stuff

together, make it one or two million, then I can

negotiate and maneuver within my company.’That’s a good vendor. They were honest. They

told me what value they could bring.”

Morgan Chung of Huawei adds, “The wider

the scope of the contract, the more options a

vendor can offer to help a customer achieve

their goals. If the scope is very limited, so are

the options. Pay as you used is an option, so

you are only paying for what you are using.”

Revenue sharing is an option

“Lots of people with a more traditional

approach to outsourcing don’t like the revenue

sharing model, they see it as too risky, while

new and emerging markets are happier to

take this direction. I believe those in the more

mature markets will opt for this approach too

in time.”

The contract is just the start

“It’s important not to underestimate the

ongoing effort required.”

Communication is all

“We have weekly meetings – it’s a billion dollar

business.”

“People who manage your contract change,

and this can be very difficult. You need to

understand each other’s problems. You need

to communicate constantly, particularly about

changes.”

Think the unthinkable

“A year ago I would never have thought about

outsourcing quality assurance or architecture orgovernance, but this is changing. Now I’ve met

an operator that is happy for someone else to

do due diligence that the information they are

getting back is accurate.”




In conclusion and TM Forum’scontribution to managed services

Section 4

There is no question that the communications

landscape is changing dramatically, and that

increasingly network operators and other

communications service providers (CSPs) will

have to depend on third parties to deliver even

the most basic products and services, such as

connectivity.

While this is a step-change, and ceding

control is always a tough process for

individuals and organizations, arguably this

is a negative way of looking at the situation

and a strange view for those of us within

the communications industry to take. There

is always a great deal of talk about how

operators have previously had end-to-end

control and visibility of their networks.

In fact this has not been the case from the

industry’s earliest days, when typically phone

calls were handed from one local network to

another, or onto a long-distance trunk route run

by someone else for termination, and certainly

almost all international calls rely on a third party

bearer some of the way and pretty much always

have done. Nor have they always had end-to-end

visibility, which is a huge topic in its own right.

Obviously it was much easier in the dayswhen the main product they delivered was dial

tone and phone calls, but the industry’s roots

in standardization (to ensure interoperability

between all the world’s networks and the

compatibility of the equipment deployed on

that global super-structure) and reliability (five

nines) should stand it in excellent stead to

make the next round of necessary changes.

The big challenge now is that far more

products and services are involved, and while the

standards and reliability that allowed telecoms

to become a globe-covering network developed

over decades, we need to move much, much

faster now in a more complex environment.

The business of running a successful CSP is,

as football commentators like to say, a game of

two halves.

On the one hand we need to speed up and

move away from the idea that everything we

launch is perfect and entirely reliable, instead

being prepared to get new services out there

fast to grab market share and our customers’

imagination. Once we know we’ve got a success

on our hands, we can add functions later.

This is not to say that launching poorly

thought out and executed services is the way

to go, but that our mentality needs to change:

we need to be able to launch new services,

typically with partners, without betting the farm

on them, and either be ready to expand them if

they succeed or withdraw them if they don’t.We are not Google and never will be, but its

philisophy of failing is fine, but fail fast, learn

and move on is the mantra for the Internet

age. As a number of C-level executives from

service providers acknowledged at an exclusive

“Business benchmarking is a powerful tool for large organizations where the

relationship between cost and advantage is not always apparent.”



meeting in Dublin, too many times, we have

spent months and millions ironing out every

wrinkle of a product over a long period of time

only to find the market isn’t interested.

(These themes and issues are explored in

detail in our Quick Insights report, How to

become an innovative service provider , which

will be published shortly after this report, and

will also be free to members to download from

our website.)

The second half of running a successful

communcations service business comes down

to having an adaptable, stable, smart back

office that operates across multiple domains

and partners.

Deploying standardized interfaces,

documentation and processes, and best

practices have never been more important

(rather than everyone keep reinventing the

wheel) in the interests of compatibility, speed,

efficiency, agility and keeping costs down.

As mentioned by a number of people in

Section 3, figuring out what to measure is

a challenge, hence the Forum’s Business

Benchmarking Program is looking at extending

its key performance indicators and key qualityindicators initiatives to gain a better grasp of

business outcomes, for example, for managed

services. (Also see TM Forum’s B usiness

Intelligence Quarterly , published in February

2011, Managed services: Gearing up for

moves from CapEx to OpEx , which is free for

members to download from our website.)

Business benchmarking is a powerful tool,

especially for large organizations where the

relationship between cost and advantage is not

always apparent. It works like this, businesses

agree to pool critical data on their business

performance in a particular area, which we

process as a trusted third party. The resulting

reports provide participants with a view of

the industry performance and where they

stand, while preserving the anonymity of all

participants.

Any member interested in pursuing this

for managed services should contact Tonia

Graham, Business Benchmarking Program

Manager at the Forum via [email protected]

In addition, the Forum has a service level

agreement (SLA) Management Program,

to help get you started when drawing up

contracts with managed service providers

– please see http://www.tmforum.org/

SLAManagement/1690/home.htmlfor more

information, handbooks, our charter and

templates.

Commonality of language, standards, bestpractice and understanding of each parties’

needs and abilities is something the Forum will

be working on in 2011. For more information,

please contact George Greenlee, SVP, Product

Management [email protected]

“Our benchmarking reports provide participants with a view of overall industry

performance and where they stand, while preserving the anonymity of all participants.”

We will rely on third parties to deliver even the most

basic products and services, such as connectivity

http://www.tmforum.org/SLAmanagement/1690/home.html







http://www.tmforum.org/ConvergingOSSBSS/10648/home.html

http://www.tmforum.org/TransformationUpdate/10753/home.html

http://www.tmforum.org/ExpandingCableRevenues/11058/home.html

tmforum qi managed services[1]

Documents