LightReading Insider has recently published a paper on the trend of mobile network operators outsourcing operational tasks to external service companies. This includes maintenance of existing core and radio networks, network monitoring and operation, performance monitoring, capacity management, new network rollouts, introducing and running services and many other things. Very interesting to me, and since LightReading was kind enough to send me a copy, I took a closer look.
LightReading chose the term “Hollow Operator” for their paper. Interesting wording and it makes me wonder about how many operational tasks can be outsourced before the term “operator” no longer applies!? What is a network operator that doesn't operate its network anymore? A network owner?
One of the main reasons for companies to outsource work that is not at the core of their business to reduce cost, which, if it works out, makes them more competitive. Global services companies taking over operational tasks such as Alcatel-Lucent, Ericsson, Nokia Siemens Networks, Huawei and others add to this that their global structure allows them to grow the business by improving net subscriber revenue, making the network more operationally efficient, and can develop the right plan to evolve a network for future consumer demands. And a global structure they truly have. Ericsson states for example […], that they have 37.000 people working for them in their service division, 28.000 close to the customer and an extra 9.000 globally). Many of those people are likely to come from network management deals were network operator staff joined the service company when the contract was signed. From a technical point of view, a big advantage is that information and knowledge on how a network can be operated efficiently can be shared, for example by continuous streamlining of company wide processes as a result of what is learned by operating many networks.
Skeptics argue that outsourcing itself does not improve anything on its own. In the end, funding has a lot to do with how things develop. If not funded appropriately, outsourcing can quickly turn into degrading standards. Also, outsourcing is difficult to reverse in case one day the network owner wants to take back operation. Once employees are gone and operational procedures integrated into a different company, it's difficult to get employees and procedures back in house. Unless of course, the outsourcing contract contains clauses for such a circumstance. Also, outsourcing increases complexity. Any extras that would previously have been handed down the internal hierarchy is now an external business matter between two companies. That means such requests are answered with a quotation as it wasn't included in the original calculation in the contract. That doesn't help to speed things up. On the technical side, there is no network that is like any other. Each network operator has different components in different configurations and uses different software versions. In short, while processes for network management inside a service company are probably similar, each network requires dedicated experts to deal with that configuration which in turn limits to port the lessons learned from one network to another.
Many more things can be added to support and counter network operation outsourcing and I can highly recommend Lightreading's paper for further reading. I'll leave it at that for the moment but please feel free to add your thoughts by leaving a comment below.
12 thoughts on “The Hollow Operator – From Operator to Owner”
The operator I work for which has already outsourced large parts of the business prefers the name “service provider” to describe what we are.
What I often wondered is how lets say an operator that has a Nokia RAN can bring in Ericsson to manage it. Surely there must some competitive advantage there for Ericsson as they can see the full implementation of a competitors solution (features, parameters, counters, hardware architecture).
A successful case of network outsourcing is Bharti in India. It has managed capacity and managed services deals with Ericsson and NSN for GSM infrastructure and IT outsourcing deal with IBM. For the infra deals with Ericsson and NSN, there are stringent KPIs with financial penalties in place to ensure that quality of the network doesnt degrade and rewards for better performance. They have consistently outperformed their competitors in India and are the leading wireless operator with 100 million plus customers and now are in the process of a deal with MTN South Africa. It all depends on how clear the operator management is about what their core competency is, their ability to build a relationship of with their partners (i.e., suppliers) and backed up a good contract document and ultimately the inter personal relationships between people on both sides.
As someone who has worked in IT, and see outsourcing/off-shoring, and managed services deals, and has been working in telecoms for the past number of years, and has first hand experience of outsourcing in telecoms, I believe success stories in these types of deals are in the minority.
The 3rd commenter said “It all depends on how clear the operator management is about what their core competency is” I’d go further than that and say it depends on how clear, and competent the op. management is.
Outsourcing all your core technical management people, is *not* a good idea.
Just some thoughts.
No it isnt a good idea to outsource all your technical management people. That’s why the smart operators (Bharti for instance) do keep a thin layer of technically competent people to ensure compliance. Cheers
An interesting topic indeed. I think full outsourcing is inevitable, but in operations only. Technology and technolgy-interworking it’s becoming so complex that will be impossible for each operator to have people with intimate knowledge of each equipment they have in the network. To optimise a wireless network (the core is included here) you really need to know your gear. Most engineers working for operators are afraid to touch any live machine; seting a wrong value to a wrong field in the element manager can cause a whole area, not just a cell, to go down.
I said outsourcing in operations only, because for all the rest, each operator needs engineers to decide the future business, new services, supervise tests, control and measure network performance and manage the outsourcing companies.
Think that you are a business man and have a fancy aircraft, something like a space shuttle; not many people can flight that, you have to outsource piloting the machine.
To conclude, I think outsourcing will happen with tight control, detailed procedures and competent supervision.
yes, bharti is a success in india… but how does their service compare to the global standards in terms of reliablity, call completion, dropped calls etc… in my personal experience they have a *lot* of dropped calls.. poor call completion during busy hour etc…
Given the constraints of limited GSM spectrum all operators in India have, i think Bharti’s network is pretty good as compared to some of the european ones with lots of spectrum available. Those KPIs are there for a purpose.
the companies I mentioned are network infrastructure vendors and they are not only operating equipment they manufactured themselves but also the equipment of other vendors. There are also non-vendor service providers but they seem to deal with other types of network equipment, i.e. billing.
Is this spectrum or outsourcing causing this…
Interesting articles…While it is true Indian operators are relatively spectrum starved, it is also true that they are *always* lacking in network capacity due to this outsourcing model.. All they need is one of the newcomers to focus on network quality and not bollywood or cricket stars in their marketing..
Guess if they were lacking in network capacity, the operator in India that has outsourced both its network and IT ..ie., Bharti wouldnt be the No1 operator in India today. The model allowed them to take leadership position in the market.
ok by lacking i meant not having enough capacity to provide a quality experience. they have barely enough capacity and so the user experience is not hassle free or quality in any respect. as the survey shows.
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