Outsourcing and managed services: Trends and successful approaches for network operators

Andrew Dodsworth, director of operations and voice business for BT Global Telecom Markets (GTM), discusses the current market and how partnerships can help operators compete and thrive.

Business models are under constant pressure as network operators aim to consolidate legacy cost structures and take advantage of new opportunities. So operators now consider partnerships and sourcing that they would not have considered in the past. Another reason for them to take a closer look is that sourcing for integrated processes and value chains is much more attractive than it used to be. Flexible wholesale and outsourcing offerings can now connect process steps and interfaces instead of connecting chunks of infrastructure. Especially with managed services, telcos can outsource selected parts of their operations – they don’t have to take an all-or-nothing approach.

Does the pace of technology change influence the trend toward more outsourcing and managed services for operators?

Yes, because rapid technology change has made long-term investment cases for operators very difficult. In the past, operators could rely on long-term use to ensure that large investments paid off. Today payback is less likely. Compare the lifecycles of the copper phone line and a mobile 3G network. With LTE (Long Term Evolution) just around the corner, it’s a challenge to get payback from 3G. This payback challenge has changed operators’ view of network investment and influenced their approaches to outsourcing. Operators need partners to complement their portfolios. No operator can go it alone anymore. (For more about the critical importance of collaboration, see “Talking telcos with BT Telconsult: Collaboration is key“.)

Does the new sourcing impact the ownership of networks?

In the past, the party who owned the network ruled the value creation. The services were all based on one network, preferably end-to-end. This was seen to prevent competitors grabbing a share of an operator’s business. Only the international voice business was different, mostly because not everybody could maintain a global end-to-end voice network with national footprints everywhere. Fortunately for operators, IP networks changed all that: the public internet created a global-to-local over-the-top infrastructure which is not facilities-based. It allows almost everyone to compete on a level playing field. And the service provider rules the value creation. Against this background, although ownership remains a key factor in the core of an operator’s business, the accessibility of networks becomes a major consideration. This means that interoperability between networks is far more important than it used to be. The myriad services, devices and changed user-patterns arising from fixed-to-mobile convergence, global roaming, social networks and smart devices are another reason that no operator can go it alone anymore. So we see most tier-1 operators moving to create IP exchanges and look for federated partnerships. And the creation of innovative IP-based solutions which are interoperable now define the competitive edge.

How can wholesale players serve the outsourcing and managed-services needs of their telco customers?

Wholesale can be a key enabler for operators to address the changing requirements of their customers, who want to follow the trends in networked IT services toward cloud computing, smart grids and integrated ICT services. In BT we think that wholesale should support telcos end-to-end in their evolution:

  • Helping operators and service providers consolidate their legacy infrastructure and maximise output from traditional services at the end of the lifecycle.This involves taking costs out, preventing unnecessary investment and innovating to defend the traditional business as long as it is viable and until migration and substitution are possible.
  • Supporting operators in their transformation to next-generation networks and next-generation access.Most operators are in this stage now, but they can’t complete it alone. Wholesale can help by providing professional services and sharing expertise.
  • Creating an IP-based portfolio of wholesale services to help carriers and providers in the new-wave space.These services have to be interoperable and provide a guaranteed quality of service. All parties must receive a payment for their services and payback on their investments to ensure that their businesses are sustainable.

To support telcos in cost consolidation, business transformation and IP innovation, the wholesale market will change. Already some wholesalers are concentrating on consolidating legacy, while others are focusing on the next-generation IP world.

Besides wholesale telecoms companies, who else offers outsourcing and managed services to operators? Will the competitive landscape change for them, too?

Hardware and infrastructure vendors have a strong history of equipment-based outsourcing. To expand into the new landscape, they will have to change to service-based outsourcing, based on the cloud model. With the convergence of classic IT, software and applications – and the networks to connect them – different industry segments are aiming to offer the best combination of services. Vendors, IT companies and over-the-top players may offer some of their services on a wholesale basis. Carriers will continue to predominate, and may boost their wholesale offerings by partnering with the new players to offer them network access. Interoperability and partnering will be key factors to success.

You mentioned the cloud model. How do cloud services relate to outsourcing or managed services in the carrier market?

Cloud computing will make outsourcing more flexible, scalable and quickly adaptable to business needs than it has been in the past. Outsourcing will become more like a service or utility which providers can upscale or downscale and provision in hours or days as required. Public cloud computing gets a lot of hype, mostly from public-cloud players. Over-the-top providers get a lot of exposure here. Vendors also use cloud computing to depict themselves as innovators. Carriers and operators do less self-promotion. They listen to what their customers say they need and engage with them from a position of trust. One area where carriers and operators can score is secure private cloud delivery. BT GTM’s Virtual Data Centre is an example. Wholesale plays a role in enabling carriers to offer the cloud components: Infrastructure as a Service (IaaS), Platform as a Service (PaaS), and software and applications as interoperable services (Software as a Service – SaaS). In BT we will combine our wholesale VDC offer with managed network services and IP Interoperability. This will enable operators to create viable cloud portfolios. If you want to see cloud really happen, I think you have to look at operators, carriers and service providers.

What drives an operator’s decision to outsource?

Operators usually base the decision to outsource on two factors: cost and the need to transform a function through innovation. The cost of providing a service is always a factor when operators decide whether to provide it themselves or buy it in. They consider how to focus their capital expenditure (CAPEX), how to get maximum efficiency from operational expenditure (OPEX), and whether they have the right resource working on the right things. However, operators must balance cost considerations with the need to innovate. A simple cost transformation or an isolated innovation approach will never deliver the powerful results of both together.

If they are looking for transformation, how can network operators make sure it happens?

Let’s face it – this is not easy. A lot of operators struggle with this question. They need to set goals and objectives and track performance against them. Transformation affects the entire organisation, so appropriate metrics are crucial to identify and ensure the benefits for the organisation, its business processes, systems and infrastructures. These metrics should include key process indicators such as financial performance, total cost of ownership, return on investment, working capital, speed to market, etc. Most operators say that they learned from the transformation process and that their transformations gradually gained momentum. Wholesale can help by sharing expertise. During our own transformation process at BT, we developed insight that we now share with others via professional services from BT Telconsult.

Some companies may fear that outsourcing could result in lack of control over important elements of their operations. Is this justified?

The issue of control may be a consideration in outsourcing decisions, but should not prevent the establishment of successful partnerships. Sometimes the customer wants to hand the control – and all the issues – to a third party in exchange for a delivery commitment. That is what managed services are about. In such an arrangement, service level agreements (SLAs), process steps and interfaces can replace internal controls. The main issue is trust. Do I trust the party I will source this service from? Do I believe they are competent and will deliver all I need? Am I certain they will use my information appropriately, keep it safe and ensure its integrity? Carriers and service operators traditionally have very strong relationships with their customers based on trust. Both sides can take advantage of these relationships and create an environment that inspires confidence – whether the context is outsourcing for business processes or service delivery in a private cloud.

When setting up an outsourcing arrangement, what can the supplier and customer do to make it succeed?

At the contract level, due diligence must define the scope of the arrangement. Contracts must be flexible enough to allow for amendments. The architecture of the agreement and the priorities of cost, transformation and innovation are key. On the operational side, service descriptions, SLAs, reporting and monitoring are essential. Both parties must adapt their operational models to reflect the outsourcing agreement. To address any problems that may arise, they should be able to change the parameters of the arrangement and mitigate the impact of any disruptions in a pragmatic way. A strategic change in the environment that sparked the decision to outsource can affect the success of the partnership. Market conditions change. Mergers and acquisitions alter the portfolio and infrastructures available. Not all outsourcing agreements are flexible enough to address all potential future changes. Ultimately it may be necessary for one party to unravel an outsourcing agreement. Of course, the relationship between the parties is very important. A good relationship can help prevent problems and, if issues do arise, make their resolution easier.

What is BT’s approach to wholesale outsourcing and managed services?

At BT, our strategy is to enable our wholesale customers to succeed in a constantly changing world. The major trends in the telecoms industry – cost consolidation, business transformation and IP-based innovation – keep the environment in flux. This means that our customers must constantly change in response. We need to support their change from end to end. We can help them consolidate their traditional business. We can share our experience of how to transform. We can concentrate our investments on serving them with wholesale IP solutions, including outsourcing and the managed services in our portfolio. This approach embeds us deeply in the evolving business of our customers and creates a winning proposition for both sides.

For more information about outsourcing and managed services from GTM, contact your account manager.


Andrew Dodsworth
Director of operations and voice business
BT Global Telecom Markets (GTM)

As director of operations and voice business, Andrew Dodsworth manages the overall GTM business and voice in particular. Andrew joined BT in its graduate programme right after completing his studies and has spent the past 25 years in the company, earning experience in client relationship management, communication, commercial and financial management, risk assessment and negotiations. Coming from the Concert joint venture between BT and AT&T, Andrew’s first role in GTM was head of international wholesale voice sales. Andrew has a BA (Hons) in business and marketing from Plymouth University and Diplomas of the Market Research Society and Chartered Institute of Marketing. In his spare time, besides cooking, collecting wine and looking after his garden, Andrew enjoys supporting organisations for disabled and disadvantaged children.


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Looking ahead, what are BT Global Telecom Markets’ priorities for its portfolio?

Cost efficiency and innovation. In a rapidly changing world, you need to remain agile. BT Global Telecom Markets (GTM) therefore continues to evolve its portfolio of products and services to help customers succeed in the competitive global marketplace.

BT GTM has already introduced several frameworks and propositions to help specific target groups achieve more innovation and cost efficiency.

The BT GTM roadmap helps lay out the approach for developing our portfolio and helps us drive its evolution.

Can you tell me more about the BT GTM roadmap?

Our roadmap shows our commitment both to implementing services to help customers leverage new wholesale capabilities and to continuing innovation to enhance our portfolio.

Three objectives drive the evolution of the GTM portfolio:

First, we aim to offer our customers a best-in-class cost base for traditional services, helping them consolidate their assets and services and maximise cost efficiency. Customers can then afford to invest in innovation and in targeting new markets.

Second, we want to help customers transform towards IP-based next-generation networks (including a consideration of business processes, portfolio and operational improvement) with a broad offer of consultancy and professional services.

Finally, GTM looks to offer a comprehensive range of IP-based wholesale services so that, when customers are ready, they can make a full migration towards IP. This includes enabling innovation and quick entry into new markets and segments to meet increasing customer demand.

IP-based communication continues to offer new opportunities to operators. How is BT GTM helping its customers exploit them?

One way we are helping our customers exploit the wealth of new IP-based business opportunities is our Interoperability framework. By enhancing connectivity among operators, it enables them to offer more value-added services and to enter new markets.

Our global IPX services enable communication providers to connect to each other, to connect their end users to other operators’ end users, and to pay and get paid for doing it. Because the IPX aims to enable true interworking between providers, the approach is independent of the technology, networks or devices used. Therefore it creates that seamless experience customers want when they use communications services.

What about traditional services such as voice – how do you see these developing?

To help businesses extend the functionality of their voice offerings, we’ve introduced Ribbit-based voice applications. Ribbit’s Platform-as-a-Service (PaaS) allows carriers to innovate and derive new value from their current networks. Ribbit helps corporate customers drive more of their voice traffic via the web and integrated user experiences, thereby making the most of their voice network investment.

We intend to make Ribbit available to the wholesale market to enable all operators to compete head-on with companies delivering internet TV over the public internet (“OTT” -over-the-top- players), social networks, etc. Ribbit’s PaaS is similar to a cloud computing model.

So BT GTM is interested in cloud computing?

Yes, certainly – because cloud computing helps customers who want to cut costs, innovate faster and deploy services flexibly and without high up-front investments.

An example of a BT cloud application is our Virtual Data Centre service. VDC is a pre-provisioned, data centre-hosted infrastructure that delivers the next generation of data centre service. It enables you to create, deploy, monitor and manage your own Virtual Data Centre infrastructure through a secure self-service portal. Automated provision of storage, computing and access ensure maximum efficiency. VDC is rolled out in the UK and across Europe, with more international launches ahead.

Have you made changes in any other areas of your portfolio?

Yes, for example we’ve also made changes in our reseller and white-labelled portfolios.

Our services for resellers enable them to offer their customers attractive products based on BT infrastructure. One is our Switchless Reseller Service, which enables reseller and brand extender companies to offer voice communication services without setting up their own switches or interconnections to other operators. With our new Wholesale VoIP offerings we allow resellers to migrate to IP when and as they need it. So we can offer them an end-to-end portfolio maximising the potential of traditional and new-wave reseller voice platforms.

And we extended our white-labelled portfolio with Global Inbound Services. They help operators and communication providers to serve their corporate customers more efficiently on a more resilient and feature-rich platform. They also help those corporate customers reduce their costs (for example, BT offers several caller-pays options) and to meet increasing end-consumer demand for higher-quality service.

By making Global Inbound Services available as a white-labelled reselling solution, GTM helps operators boost their portfolio without the requirement to invest in the time, hardware and global capabilities required to sustain such an offer. Readers who want more information can read the article about Global Inbound Services in this issue of Global Telecom News.

With your focus on innovation, what is happening to BT GTM’s traditional portfolio?

We’ve also increased the pace of innovation in our traditional portfolio to offer new services such as Sigtrans for RoamConnect, which enables mobile network operators to offer their customers enhanced roaming. We also offer SMS Hubbing to simplify the delivery of SMS messages, avoiding the need for operators to have agreements with individual network operators around the world. SMS Hubbing also provides ensured delivery of SMS messages within 15 seconds to 75% of all destinations, with proof of delivery provided from the called party’s handset. This enhancement is generating a lot of interest; many operators have been waiting for it.

Is there anything you would like to say in closing?

Yes, I’d like to add that I’m always eager to listen to our customers who want to talk about their needs and how GTM can help them. We put customers at the heart of our portfolio. Their opinions are very valuable to me and help me ensure that customers stay at the centre of our business.

And of course they are welcome to call me or send me an email.

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