Anthony Braham, Lucent Technologies
Competition and changing market conditions have prompted service providers worldwide to adopt new support models that will allow them to continue to boost revenues. They have to drive cost efficiency, leverage economies of scale, consolidate workforces, and implement new technologies to meet customer expectations for high quality network services.
Reducing costs is very important as service providers need ample funds to invest in next-generation technologies to attract new customers. In fact, according to the preliminary results of IDC's IT/Managed Services Survey 2006, the single biggest business issue for companies over the next 12 months will be cost reductions. Most service providers make cost reductions their second or third business priority.
To reduce costs, service providers have to improve internal efficiency and productivity. Ensuring an optimal support structure is critical to this. But while this may generate some internal savings, it does not address the greater issue of how to reduce operations costs from myriad suppliers or original equipment manufacturers. Ironically, in a sea of too many choices, a simple model is emerging for network support - single point of contact (SPOC).
The evolving market
The telecom industry is evolving. Pressure from wireless operators, cable companies and alternative service providers has rapidly changed the competitive landscape. To prevent erosion of their customer base and to attract new customers, service providers are investing heavily in next-generation networks that incorporate new technologies such as fiber to the premise and VoIP.
This pricing pressure has driven a number of mergers and acquisitions within the service provider segment, and has also pushed the need to strengthen internal operations and drive out inefficiencies.
Mergers and acquisitions are also occurring in the OEM segment, which may ultimately have an impact on maintenance and support as companies reevaluate their strategies and discontinue certain products and services.
One may conclude that the solution is for service providers to simply migrate all their customers from a legacy to a next-generation network. Unfortunately, this is a tough proposition. There are no next-generation networks currently in place that can handle millions of customers.
Besides, legacy networks still contribute significantly to service providers' revenues, which means these will continue to exist for quite some time. The question now is how to cost-competitively support both legacy and next-generation networks.
Possible solutions
To be as cost-competitive as possible, service providers are negotiating lesser maintenance contracts and seeking lower-cost third-party suppliers to maintain selected parts of their networks.
But these measures can sometimes jeopardize the availability and reliability of the network, which requires support across all technologies, elements and applications on a 24x7 basis. Cost reductions here may also be insufficient to keep up with continual revenue erosion and cost pressures.
Attempting to do more with less, service providers have also re-engineered their maintenance operations by reducing their staff. However, loss of expertise and capability has shifted the burden to the suppliers who, in return, seek compensation for extra effort. Besides, staff reductions often result in coverage gaps, skills dilution and poor performance.
Many service providers tap OEMs to augment internal support and provide higher levels of support. This requires relationships with each of the tens or even hundreds of OEMs in the network - something that is complicated and difficult to manage as each OEM agreement usually has different terms and conditions, service levels and cost structures.
Service providers may attempt to solve this by negotiating lower prices and mixing and matching services from different vendors. But what seems like a more cost-effective solution may actually end up requiring more overhead and cloud overall network efficiency. This individual OEM approach also creates unpredictable maintenance spending and service level agreements.
The simplest answer
The simplest solution is the SPOC support model, which uses a single maintenance provider for a full range of services, including remote technical support, repair and exchange services, on-site technical support and preventive services for multiple technologies and OEM equipment in the service provider's network.
This is a popular approach in the government market where contracts appoint a "prime contractor" for a project, who then engages several subcontractors to provide a complete suite of services.
Many service providers have already adopted the SPOC approach with some of their maintenance operations. A local example is Innove in the
This structure allows the SPOC to leverage economies of scale and generate operations expense savings of between 10% and 40% for the service provider, depending on the size of the network, types of products, services scopes and current mode of operation.
Savings in capital expenses may also be generated as the service provider can rely more on the SPOC to deliver critical "same-day" spares on an as-needed basis.
With the SPOC model, customers will receive a more predictable service level delivered with common processes - having parts delivered by the same company, stocked in a common place and returned through the same repair process. They can also verify their trouble tickets on the same system and receive common metrics, allowing them to focus on growing their business.
Most important decision
The key is selecting a company that can successfully deliver the SPOC maintenance solution - a difficult decision to make.
For this, extensive due diligence is necessary. Service providers must evaluate the prospective advisor to ensure high quality of service as well as a good business fit. They should also select a company thathas the experience, breadth of OEM capabilities, and state-of-the-art systems and tools to deliver a cost-effective solution.
These characteristics will allow SPOC solution providers to efficiently support a service provider's legacy revenue-generating network and maintain key infrastructure for its major customers. The service provider can then focus its internal resources on new technology deployments or leverage the SPOC solution for new technologies while using internal resources to maintain its legacy network.