Many Service Providers have gone for managed services from third parties for operating their IT and Network. This enables them to defocus from non-strategic tasks and focus on strategic priorities of their business. However, care has to be taken to ensure that these purposes are really achieved.
When Operations of a business is brought into third party management, what is being given away may be those activities that are commoditised and not a core component of the business.
What is meant by commoditised?
This refers to those activities by doing which the Service Provider cannot create differentiators with respect to their Competitors.
For e.g., in the Manufacturing industry, factories give away packaging and transport of finished goods to third parties. Good packaging and safe delivery is important but not one that can change the fortunes of the business in the market. Third Party Logistics(TPL) sign up to SLA’s and deliver these services thus freeing up the bandwidth of the factory to manage their manufacturing process better. One can also see how this is not a core component of their service.
So, in the context of telco Service Providers, what would be those activities that can safely be considered as commoditised & as non-core?
The network and IT applications are obvious candidates. Nothing in terms of the network or the IT estate can be made into a differentiator that can provide significant advantage to a Service Provider in the medium to long term.
It is thus, fairly easy and conceivable that in these two areas, operators have outsourced O&M. Typical SLA’s around up-time and availability can be tied in and, if the maintenance activity is being taken up by an equipment vendor, capacity assurance can also be contracted.
It is also common to have customer contact management aka Customer Care could be taken from a managed services provider.
What would then be the list of activities that cannot be given away?
While customer contact can be managed by a third party, the decisions that affect customer experience – handling complaints, billing errors, equipment failure etc. – should be handled by the operator themselves.
The operator, along with the managed services provider, should have a committed plan for innovation and bring in new services.
So, what do we mean by innovation?
In the context of Service Providers in the Indian telecom industry, my view is as follows.
- Today, almost all telecom equipment are imported. This leads to higher costs. What efforts can be initiated to enable import substitution?
- In the rest of the world, the operators are losing their turf to OTT providers of services. To survive, many operators have had to reinvent what their service stood for in the lives of their customers. What investments have been made by the operators to provide valve beyond network connectivity (which, as we observed earlier, is already a commodity)?
- Last, but not the least, what efforts have been put to create an ecosystem to deliver value addition beyond connectivity? For e. g. has there been efforts to create a cloud delivery capability within the country that would make use of telecom network? Has there been an attempt to create an ecosystem of app-developers?
In conclusion, I would say that when a telco gives away non-strategic work to a Managed Services provider, they ham to keep their promise to the market by having redoubled efforts committed towards Innovation. Failing to do so will lead to big problems for the Operator because their service will only be as good as that enabled by the Managed Services Provider, which by itself is not going to help them differentiate.
To do this successfully, operators should retain some amount of critical talent and should not try to transfer the cost of all resources to the Managed Service providers. They should also ensure that the Managed Services partner commits into co-investing into innovation through a joint-up arrangement.