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Telecom Managed Services: Network Outsourcing Enters Its Third Phase
Pyramid Research, Inc., April 2010, Pages: 41
This report analyzes the three phases in the development of the network outsourcing market, providing the drivers for the industry’s evolution into its third phase. By analyzing the experience of three operators from a combination of developed and emerging markets (E-Plus, BASE and Bharti), this report assesses the impact that network outsourcing has had on performance of telecom operators, both from a financial as well as a competitive point of view. To uncover trends in network outsourcing, Pyramid Research examined all telecom managed services deals announced since 2002 by the top three suppliers, Alcatel-Lucent, Ericsson and NSN — in total 191 contracts. The report concludes by analyzing these three network outsourcing players separately.
Key findings include:
- Following several years of adoption by operators looking for major cost savings, network outsourcing is now in its third phase of development. This phase is characterized by a greater focus by operators on how to adapt to the changing dynamics of the industry and position themselves better for future opportunities.
- Drivers of third-phase outsourcing include network sharing and the emergence of over-the-top applications such as social networking that can, if allowed, bypass operators almost entirely.
- Western Europe leads the world in the sheer number of network outsourcing deals announced. More than one-third of signed contracts have been in Western Europe, with certain countries such as the Netherlands at the forefront of the industry’s development. Nevertheless, the mix of outsourcing operators is beginning to widen. Western Europe will remain the leader in the short term, but emerging markets such as Africa and the Middle East,
Central and Eastern Europe and Latin America are falling in step. Even more exciting in terms of the overall credibility of the model is the openness of US players such as Sprint.
- To date, outsourcing is still mostly about the mobile business. Of the deals analyzed, 70% involved a mobile player, and mobile challengers outnumbered mobile market leaders by a factor of nearly 4 to 1. This, however, is changing, which promises to inject more excitement into the competition among the suppliers of these services, and Ericsson’s leadership will come under greater assault by its more diversified, convergence-minded competitors.
- On a competitive basis, trends generally favor Ericsson to maintain its market lead as third-phase outsourcing draws on the Swedish company’s credibility in network sharing deals. That the market has so far been largely mobile and West European plays quite nicely to Ericsson’s strengths. Pyramid Research believes West European mobile players will continue to drive the market. Moreover, the fact that Ericsson was able to sign the Sprint deal — which calls for it to manage multiple networks, including the operator’s wireline network — suggests that Ericsson may be successful at branching into wireline outsourcing, a key area going forward. NSN and Alcatel-Lucent must differentiate the value they offer customers, not simply their technology portfolios. Finally, we look forward to seeing how Huawei will position itself in this market, one that asks significantly more of its providers than cost savings.
Key Questions Answered
- What are the key drivers for growth in the telecom managed services business? What benefits does the use of independent third parties to perform network infrastructure management provide?
- How are mobile operators using network outsourcing to drive growth and profits?
- What are the characteristics of successful managed network service providers?
- What are the core strategies successful managed network service providers rely on to boost revenue? How do the top three players — Ericsson, Nokia Siemens Networks and Alcatel-Lucent — compare?
- Where is the network management outsourcing business going? How is it changing?
- What can network services providers do to differentiate their practices?
Case studies
- E-Plus (Germany)
- BASE (Belgium)
- Bharti (India)
- Ericsson
- Nokia Siemens Networks
- Alcatel-Lucent
Target audience
Telecom network outsourcing providers:
Gain a fresh perspective on where the telecom managed network services industry is going and the challenges that lie ahead. Identify successful strategies for introducing and promoting advanced, high-margin services to network operators; draw on the experience of others in helping your clients grow and prosper. This report will help you position your telecom manage services optimally and choose the strategies that have proven successful with the various types of carrier. Learn how the outsourcing market is shifting from mobile toward wireline.
Network operators:
Learn how managed services and network sharing can offer cost benefits and revenue opportunities. Understand how network outsourcing can provide a number of other less direct benefits, such as faster time to market. Anticipate changes in the telecom managed network services industry and indentify which services vendors have the global skills and capability to deliver the optimal value proposition. Understand why outsourcing your network management allows you to shift your focus to the areas that matter the most, particularly your relationship with the customer, and why it can help offset the consequences of over-the-top applications.
Investors:
Receive a thorough grounding in the salient issues facing managed network services in both mature and emerging markets today. Use this analysis to understand who is best positioned to succeed and to assess upcoming opportunities. Compare the services businesses of the top three suppliers and assess whether they are addressing the real needs of particular markets.
Equipment and application providers:
Develop an understanding of how the role of telecom managed network services is evolving in the global market, and how this will affect your market leverage over both the short and long terms. Use these insights to successfully position your offerings and enhance your value proposition.
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