Carrier Network Outsourcing A realistic Alternative or a new Hype?

Transcription

1 Carrier Outsourcing A realistic Alternative or a new Hype? Member of

2 Content Lessons learned from lean and efficient Industries The sandwiched Telco s Current Telco s Reactions on Restructuring Pressure Example 1: Out-tasking Business of Detecon Al Saudia Example 2: Outsourcing Deal of Alcatel with One in Austria Out-tasking/Outsourcing Hype or Alternative? Page 2

3 1. Lessons learned from lean and efficient Industries Automotive Industry Highly Automated assembly and integration Just-in-time principles for standard parts Fast, cheap, flexible, efficient Competition on features and brands/image 70%-90% of key parts from external sources Low-cost Airlines Intense use of IT and customer self-service Demand based pricing schemes High load factors Intense use of outsourcing Banking Highly automated capital flows Intense customer self service Fast changing financial product life-cycle Elimination of manual back-offices High level of customer oriented interworking Retail Highly automated flow of goods and parts Just-in-time stock control and order logistics Management of cost-based end-end Highly flexible product life-cycles Page 3 Significant Lessons: High levels of end-toend automated process flow Rigorous elimination of manual or ineffective processes Intense use of highly qualified (outsourcing) partners Very high business flexibility Just-in-time capacity management Demand based pricing Source: Inputs from K.J. Willets, Chairman TM Forum

4 1. Lessons learned from lean and efficient Industries Example Smart Roadster Assembly: 95% external sourcing Page 4

5 2. The sandwiched Telco s Telcos are under high pressure because they just started their way towards a lean and efficient industry Operations costs as % of revenue Multiple downward pressure on tariffs Over- Overcapacitcapacity OPEX remains on high level 85% BT 80% 75% Tariffs Deutsche Telekom New technologies Competition Regulation 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 The lean & efficient Telco CAPEX Fixed Line Operators US ($bn) CAPEX & buying boom exhausted financials Drive up customer service Several Improvement areas at the same time Drive up revenue Drive up business flexibility Drive down costs Page 5 Source: Inputs from K.J. Willets, Chairman TM Forum

6 2. The sandwiched Telco s Hot topics on Telco s management agenda Too much staff expenses Poor time-to-market cycles Low level of customer services Slow growth Slow introduction of new services Low level of economics of scales Low level of automated process work flow Rigid and inflexible business processes Non-appropriate systems, poor system integration level, inaccurate data Processes and systems cannot scale High risks and cost of changes Supplier zoo Sales & Marketing Customer Services IT Operation Service Operation Planning Core Netw. Operation Access Netw. Operation Field Installation Most Operators have pillar organizations with a low level of process integration Page 6 Source: Inputs from K.J. Willets, Chairman TM Forum

7 3. Telco s current Reactions on Restructuring Pressure Stabilizing OPEX and reducing cost seems to be main drivers What is the main value of a telecom operator? The customer base Never differentiate by Telecommunications network technologies IT technologies OSS/BSS technologies Integration & Architecture But always differentiate by Service features quality Process optimization Data intelligence Customer service Service packaging Page 7 Telcom s is the largest industry with the lowest realization level of outtasking and outsourcing! Cost reduction, OPEX stability and concentration on customer value are the main reasons why network outsourcing/out-tasking to professional partners is presently under broad discussion and realization

8 3. Telco s current Reactions on Restructuring Pressure Telco s try to get rid of tangible assets, network O&M, tactical network planning and related staff in the network area Page 8

9 3. Telco s current Reactions on Restructuring Pressure Outsourcing/Out-tasking in the network area is a current main stream in the Telco scene Siemens closed a contract with Brazilian fixed line operator Telemar in 2002 to maintain the network in 6 states. Deal size: US$ 13 million a year. Savings: approx. 10% Ericsson operates and maintains the whole mobile network of Telecom New Zealand Ericsson closed a deal in 2002 with Brazil Telecom to operate and maintain the network in the southern provinces. Ericsson closed a deal in 2002 with O2 Netherlands to maintain and operate the whole mobile network including planning, design and implementation Alcatel continues in 2002 the maintenance of KPNQwest pan-european network Ericsson closed a deal in 2002 with Hutchison Telecommunications to manage the outsourced mobile network in Australia. BT closed a deal with national fixed switched network provider Redstone. The whole network was outsourced to BT for operation and maintenance. Redstone keeps strategic control. Alcatel closed a deal with mobile operator One in Austria. One outsourced the transport network and the technical planning. Alcatel executes planning, operation and maintenance for the whole network. The deal size is 472 million for 7 years. New Zealand Telecom announced in 2003 expansion of relationship with Alcatel by outsourcing planning, development, operations, design, buildings and fault units in 2004 Page 9

10 3. Telco s current Reactions on Restructuring Pressure The Telco outsourcing landscape and main areas of activities System Integrators BPO providers Core Operation Support Applications Games, news, ringtones, , chat, messaging and portals Project management, forum management and system integration Back office Middleware Provisioning, billing, churn management, CRM, office IT, network management, activation, authentication, assurance, roaming and system integration Specialized Vendors MMS-C, SMS-C, core network, radio access network, transmission links, masts/towers and buildings maintenance, network build, network planning and design, site acquisition, civil works Fixed telcos Telcoms vendors Construction/support service companies Source: Ovum 2003 Page 10

11 3. Telco s current Reactions on Restructuring Pressure Current outsourcing short-term drivers for carrier network outsourcing/out-tasking Benefits Economics of scale Convert fixed costs into variable costs Predictability of cost Economics of scope Access to skills Sharing risks Focus mgmt. attention Application Main driver Not yet important Major driver Should be significant, but hard to measure Significant Major driver Limited Back office/ Main driver Not yet important Major driver Limited Could be important for smaller operators Important both in operation and future proofing of NT Important Page 11 Source: Ovum 2003

12 3. Telco s current Reactions on Restructuring Pressure Current results on willingness to outsource Focusing on Core Business Outsourcing % Interview Results from 100 Executives in the German Telecom Industry: More than 50% are interested in outsourcing Specific high interest from mobile operators All Mobile Operator All 14 Mobile Operator Planned No Plans Page 12 Source: Mummert Consulting F.A.Z.-Institut 2003

13 4. Example 1: Out-tasking Business of Detecon Al Saudia Basics of Out-tasking Business Basis: O&M out-tasking contract Detecon al Saudia Contract package for SLAs and KPIs to operate and maintain the nation-wide transport layer Provisions on number of billable staff, support staff & materials, skills, education, locations, local staff, training Operation and maintenance of a clearly defined part of the customers network (mainly transport layer): long-distance network, junction network, rural communications network, incl. buildings, maintenance centers, towers Detecon is responsible for repair, spar parts, facilities, buildings, set-up of own car fleet Detecon integrates new network parts or equipments (contract amendments) Transport Ownership is with the customer Customer monitors network performance Responsible for network planning and extension, traffic routing, procurement Clear reporting (compliance of network performance, billable staff, training, etc. ) and interfaces Payments according to billable staff, compliance with KPIs and SLAs, fulfilment of training requirements, etc. Saudi Telecom (Fixed Nework Operator) Page 13

14 4. Example 1: Out-tasking Business of Detecon Al Saudia Out-tasking Landscape Development Rollout Operation Maintenance Design Site Acquisition & management Service Provisioning TAC Maintenance Level 1 Radio planning Construction NOC TAC Maintenance Level 2 Transmission planning Installation & Commissioning TAC * TAC Maintenance Level 3 Facility Management Logistics (Spare Parts & Terminals) Central support functions (Quality, Reporting) Page 14 Saudi Telecom Responsibility Detecon al Saudia Responsibility * TAC= Technical assistance centre

15 4. Example 1: Out-tasking Business of Detecon Al Saudia Various client benefits Client Benefit #1 Client Benefit No 1 Predictable yearly OPEX budget for the contract period (benchmark: US$ per main line/month) Client Benefit No 2 Contract is based and defined on network performance parameter according to SLAs and KPIs Client Benefit No 3 Contractor responsible for recruiting, training and skill building of local staff Client Benefit No 4 Incorporation of best practice experience and results through re-tendering and competition after 3 years period Page 15

16 5. Example 2: Outsourcing Deal of Alcatel with One in Austria Basics of Outsourcing Business Basis: Outsourcing and O&M contract Contract package for SLAs and KPIs to operate and maintain core and radio netw., exec. tact. planning Outsourcing of transmission network assets, tactical planning department., O&M department Alcatel Operation and maintenance of whole core and radio network, incl. facility PCU mgmt., network management centres, maintenance MS centres, BTS towers BSC etc. Alcatel is responsible for tactical planning, Site acquisition Alcatel is responsible for repair and spar parts UE Node B RNC Alcatel integrates new network parts or equipments (contract amendments) MSC VLR Deal EIR Size: 472 Mio SCP HLR over 7 SMS years including 200 staff from One SGSN IP Backbone GGSN BG GMSC AUC (except transmission) PSTN Ownership is with the customer Core Ntw. Plng. Radio Ntw. Plng. Site Acquisiton Customer monitors network performance Core Ntw. O&M Radio Ntw. O&M Transm. Ntw. O&M ISP Responsible for strategic network planning One (Mobile Operator) Clear reporting (compliance of network performance) and interfaces Payments according to compliance with O&M KPIs and SLAs, fulfilment of planning tasks, etc. Page 16 Source: Alcatel Austria

17 5. Example 2: Outsourcing Deal of Alcatel with One in Austria Outsourcing Landscape Development Rollout Operation Maintenance Design Site Acquisition & management Service Provisioning TAC Maintenance Level 1 Radio planning Construction NOC TAC Maintenance Level 2 Transmission planning Installation & Commissioning TAC * TAC Maintenance Level 3 Facility Management Logistics (Spare Parts & Terminals) Central support functions (Quality, Reporting) Page 17 One Responsibility Alcatel Responsibility * TAC= Technical assistance centre Source: Alcatel Austria

18 5. Example 2: Outsourcing Deal of Alcatel with One in Austria Various client benefits Client Client Benefit Benefit #1 No 1 Client Benefit No 2 Client Benefit No 3 Client Benefit No 4 Client Benefit No 5 Predictable yearly OPEX budget for the contract period (benchmark: per mobile customer/month) Contract is based and defined on radio-, transmissionand core network performance parameter according to SLAs and KPIs. No Alcatel equipments in the network Contractor responsible for recruiting, training and skill building of staff. Focus of management team on customer and services, no more management power and attention on tactical planning and daily O&M issues. Transmission layer outsourcing frees the operator from a burden. Transmission is not an essential part of the production and service platform Page 18

19 6. Out-tasking/Outsourcing - Hype or Alternative? Pro s Operator is refocusing on customers and services Predictable OPEX stabilizes the financials, cost per subscriber are going down Operators and vendors could build an ideal partnership because of long common history Operator can rebuild a lean and efficient organization Quicker introduction of new services Con s Management of out-tasking/outsourcing partner could cause a high level of attention (contract adaptations, interface and process tuning, performance assessment, etc.) Scaling, growth, changes and not foreseeable new network elements could increase OPEX later Vendors are not used to operate and maintain networks. The influence from the operators on utilization of professional tools and methods is limited Pillar organization is mostly unchanged. Chances for improving business flexibility are not taken - - Flexibility of outsourcing partner is limited; process flow-through is not optimized A clear strategy to implement higher business flexibility, high level of process automation and a customer oriented organization is the imperative basis of considering out-tasking/outsourcing Careful selection of the partner and careful contracting are essentials Out-tasking and outsourcing offer operators chances to become leaner and more efficient. Page 19