Not so long ago, communications service providers (CSPs) had large IT staffs to manage massive infrastructures, designed to support a small number of products and services sold to large volumes of customers. Now, the dynamics have changed and IT must do more with less staff and stagnant budgets, writes Alam Gill.
The uptake of digital services by consumers is staggering and continues to surpass all projections. Today, almost three billion people – that’s 40% of the world’s population – are using the internet, with many accessing this superhighway of content through their smartphones and other communication devices.
Nowhere is the growth trajectory more impressive than in the developing world, where, according to the International Telecommunication Union, nearly twothirds of the world’s internet users – 1.9 billion in 2014 – are from. And while the figures continue to skyrocket, so too do the challenges and opportunities for CSPs. As they transform into digital service providers (DSPs), CSPs are faced head-on with the challenge of managing the two speeds of IT.
As research firm Gartner puts it, two-speed IT is the conundrum that many IT organisations in telecoms and other industries face in today’s accelerated digital world. On one hand, they must continue to optimise and maintain legacy systems that are responsible for the very fundamentals of the business: from billing to order management, mediation, network management and beyond.
But they must also focus on implementing new IT infrastructure and business processes that can deliver a seamless customer experience, manage increasingly complex partner relationships and rapidly launch new digital services to seize market share.
Gartner’s 2014 poll of CIOs showed conclusively that businesses now face the challenge of straddling a second era of enterprise IT and a new, third digitalisation era – moving from running IT like a business within a business, into a period characterised by deep innovation beyond process optimisation, exploitation of a broader universe of digital technology and information, more-integrated business and IT innovation, and a need for much faster and more agile capability.
And while there is pressure internally to innovate within IT to support new services, Gartner’s CIO survey showed that IT budgets are only marginally growing. All of this begs the question: how do CSPs continue to innovate in this rapidly evolving digital world? Can cost cutting the legacy environment fuel the investment required on its own? If so, is that a long term sustainable funding model?
There are many questions without straightforward answers, but one emerging response is to give anything that is not a core competency to trusted partners.
Not so long ago, the telecoms industry had large IT staffs to manage massive infrastructures, designed to support a small number of products and services sold to large volumes of customers. They had the resources internally – and often complemented by an off-shore strategy – to manage existing systems and add new ones as the business demanded. Their teams had unique skillsets so they could support the specialised applications humming along in their infrastructure.
Now IT must do more with fewer staff and stagnant budgets. It’s no wonder that many CSPs are moving to a managed services model as they evolve into DSPs. Managed services has become a viable model for many CSPs as they look to free up internal resources to innovate new revenue-generating services.
A study led by Technology Business Research shows the appetite for managed services will continue to grow – in fact, TBR predicts that the IT outsourcing managed services market in the telecoms industry is expected to exceed US$12 billion by the end of 2016. TBR’s research shows the trend toward managed services is growing worldwide, driven by the need to innovate faster to retain customers, deepen the variety of products and services, and often to expand the reach of services to new geographic markets.
Telecoms providers from across the world are also looking for outside experts to offer skill sets that are often in short supply – those needed to optimise, manage and maintain existing key systems like wholesale, retail and enterprise billing, data mediation and beyond. Because managed services partners are often tapped to handle a CSP’s critical systems like billing, they must be a proven and trusted partner. After all, if you can’t bill for a new service properly, driving a profit becomes nearly impossible. Managed services partners deploy and operate new environments to help underpin their rapid growth into digital services – often the key to future growth for the CSP. As a result, today’s managed services partnership is becoming re-imagined as more of an integrated business partnership than the old school vendor vs customer relationship.
At a time when IT organisations are trying to push the pedal to the metal while simultaneously stepping on the brake, the re-imagined managed services partnership provides a viable model that gives CSPs agility like they’ve never had before. Some key benefits to this model that we are hearing from CSPs are:
• Lowered capital expenditures and other costs. With shrinking profit margins and costly rollouts for new digital services, lowering capex continues to be a big push for CSPs in moving to a managed services model. In fact, nearly 73% of those polled in TBR’s survey said that reducing costs through outsourcing was a key driver for shifting to this approach. The evidence is clear that lowered capex costs is a real benefit to managed services. With lowered costs, CSPs can implement new services and the systems to support them; invest incrementally in other business priorities and reinforce their bottom lines.
• CSPs want partners in transformation. While lowering costs is an integral part of managed services, it isn’t the only one. Managing change effectively is a critical component as well while CSPs are experiencing business transformation at all levels – from business models to people, process and technology. CSPs say they are looking for experts to not only run core systems, but also to help manage this wave of change. As a result, they are increasingly looking to partners to play this role. And it makes complete sense. Why not entrust the companies that actually make the platforms to operate, optimise, maintain and evolve them?
Through these managed services partnerships, CSPs gain trusted partners who can play a long-term role in supporting their business today while planning for the future and helping to manage future risk.
• Freedom to innovate. A common theme we hear with our clients and prospective clients is ‘we don’t have time to innovate.’ This sentiment is echoed by the TBR survey, in which 53% of CSPs surveyed said that the managed services model frees up additional resources within the company to support new initiatives.
With new services, the ecosystem of partners and content continuing to grow at great speed, innovation is critical to the success of a CSP. Time spent on managing existing systems could be better spent on planning for the future, accelerating the rollout of firstto-market services and collaborating with internal stakeholders like marketing and customer service to create a differentiated offering.
It’s clear that it’s a new world, and traditional models are breaking down. In their place, exciting new opportunities are emerging. These new models promise to put CSPs in the driver seat for delivering new services in this digital world – but not without skilled partners as their trusted co-pilots.
By Alam Gill, senior vice president of international managed services, at CSG International
