Managed services the road to operational efficiency

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Join them and other key players as they unwrap the who, what and how of communications enabling digital life. Speakers include:

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David Gurle, GM & VP Skype Enterprise, Skype

Erik Hoving, CEO, NetCoMember of the Board,KPN International

Steffen Roehn, CIO, Deutsche Telekom

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Managing services:the road to operational efficiency?

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Page 4 Executive summary

Page 5 Section 1the need to move from tactics to strategy – and the inhibitors

Page 10 Section 2Sensible steps towards successful managed services

Page 14 Section 3What can tM Forum do to help?

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MAY 23-26, 2011 | THE CONVENTION CENTER DUBLIN, IRELAND

Join them and other key players as they unwrap the who, what and how of communications enabling digital life. Speakers include:

Olivier Baujard, CTO, Deutsche Telekom

David Gurle, GM & VP Skype Enterprise, Skype

Erik Hoving, CEO, NetCoMember of the Board,KPN International

Steffen Roehn, CIO, Deutsche Telekom

Kevin Peters, CMO, AT&T

Rajeev Suri, CEO, NSN

Ben Verwaayen, CEO, Alcatel-Lucent

Stephen Shurrock, CEO, O2 Ireland

Industry heavy-hitters to speak at Management World 2011

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It’s disconcerting and unrealistic that so many people in the communications industry are still viewing managed services as primarily being a way of saving money. It is understandable, though, given that gartner expects average revenue per user (ARPU) to decline by up to 25 percent by 2014, as the likes of google and Skype continue to prosper and disrupt the network operators’ established business models.

google is already the fastest growing telco and world’s third largest (in terms of cable, fiber infrastructure, WiMAX and global cache centers) while Skype became the biggest carrier of international minutes back in 2008 and now carries 13 percent of international telephony traffic.

As traffic volumes and revenue diverge, costs will overtake income unless radical action is taken, and soon. however, as shown in Figure 1-1 on page 5, growth opportunities are limited.

the central argument of this report is that in the next few years we will see radical changes in the structure of the industry, with none of the larger operators continuing to offer all the services they do now, end-to-end. Rather they will provide perhaps two of the following functions: run the networks including broadband, act as an aggregated services provider or become a digital life enabler, providing customers with services and applications.

In this scenario, the big question is how managed services will evolve – both in terms of what communications service providers (CSPs) choose to outsource and what managed services they offer others. Both will be deeply affected by the changing shape of the communications

industry. It is clear that managed services, and how you use and/or provide them, need to be a fundamental part of strategy, rather than deployed in the tactical way they are today.

Section 1 looks at the inhibitors to embedding managed services into a CSP’s strategy, which vary from organizational structure to perhaps out of date ideas about what could and should be outsourced.

Section 2 suggests lots of new ways of thinking about managed services and some sensible steps to take toward their successful adoption as part of the company’s strategy. It demands a great deal of both the service provider and the organization paying for the service – not least of which is giving up control of what have been seen as core activities and allowing a third party to run them in a different way.

Section 3 puts forward ideas about the role that tM Forum could play in moving managed services forward, as suggested by some of its members, what it is doing in this area to help, and what it is planning to do.

this Quick Insights report is based on the executive roundtable debate on managed services that took place at Management World in Orlando in november 2010. tM Forum would like to thank all the senior executives who attended for sharing their insights, and in particular we are grateful to Mary Whatman, executive advisor to tM Forum and founding partner, Parhelion global Communications Advisors, for moderating the event, and to Alice harris, director, Billing Services, Qwest Communications, and Ralph Brown, CtO, CableLabs, for acting as provocateurs.

executive summary


Without radical action, costs will overtake income

The coming scenarioClearly the CSPs’ business model needs to evolve. the average revenue per user (ARPU) will be declining by 25 percent in 2014, according to gartner, as the likes of google and Skype continue to prosper and disrupt the network operators’ established business models.

google is already the fastest growing telco and world’s third largest (in terms of cable, fiber infrastructure, WiMAX, and global cache centers) while Skype became the biggest carrier of international minutes back in 2008, growing by around 41 percent according to telegeography, and now carries 13 percent of international telephony.

As traffic volumes and revenue diverge, costs will overtake income unless radical action is taken, and soon. however, as shown in Figure 1-1, opportunities for growth are limited. Consequently, in the future, few organizations that are network operators now will be operating at all three levels, described in Figure 1-2, according to Parhelion.

Parhelion’s Mary Whatman says, “the core services operators provide now will change quickly. they are not likely to be providing things like IPtV and advertising themselves, they’ll need partners. there are a lot of small organizations emerging that provide specialist services like advertising. they don’t necessarily have networks, they sometimes don’t have a direct relationship with the customer, just the content.”

All of which will focus operators’ minds on how and who they are going to partner to do the parts they cannot do economically

the need to move from tactics to strategy – and the inhibitors

Section 1

Figure 1-1: Strategic mapping of market opportunities, worldwide (millions of dollars)

Figure 1-2: a CSP’s business model will need to evolve

Source: Parhelion-GCA

Fixed

Broadband access enablement

Utility Wireless CAtV

networkservicesprovider

Service enablement

Service aggregation enablement

Content enablement

Aggregatedservicesprovider

Lifestyle product provider

Digital life enablement (customer/partner)

Lifestyle management Personalization

Digital lifeservicesprovider

healthcare Finance homesecurity

Mobilecommerce

Socialnetworking

Machine to machine

Home community Business community

Source: Gartner, Inc., Management World Americas Executive Roundtable, Managed Services & Operational Efficiency, Mary Whatman, October 2010

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responsibility as a strategic method for improved, effective and efficient operations. The person or organization who owns or has direct oversight of the organization or system being managed is referred to as the offer-er, client, or customer. The person or organization that accepts and provides the managed service is regarded as the service provider.

Typically, the offer-er remains accountable for the functionality and performance of the managed service and does not relinquish the overall management responsibility of the organization or system.”

One of the big questions is how managed services is going to evolve – both in terms of what CSPs choose to outsource and the managed services they offer others. Both will be deeply affected by the changing shape of the communications industry.

themselves, which will mean using managed services very differently. the trigger point will be the changing business model, with a country perhaps having only two networks that everyone else will run their businesses over. Already it makes sense to see the network almost as a separate organization, with its own profit and loss. In future, network operators won’t just be providing services for themselves, but will be offering the networks through a managed services arrangement too. telstra is already moving in this direction.

An emerging role for operators is as service aggregators, whereby they expose network elements and services to third parties so they can be used by customers and aggregate content from many different providers to make its carriage as economic and efficient as possible.

the digital life services providers will also partner with others to deliver their services. to succeed in this area will demand considerable marketing skills and the ability to launch a lot of new offers quickly.

Ralph Brown, CtO, CableLabs, comments, “this implies transformation at a number of different levels. not just individual companies, but regulatory issues around network neutrality, the whole rights to content for example. What we are seeing today is a lot of experimentation, not only on the regulatory front. how you navigate that is a big question.”

Definition of managed servicesthe immaturity of managed services within the communications industry is reflected in the fact that there is considerable confusion about exactly what they are.

For the purposes of this report, we have adopted the Wikipedia definition:

“Managed services is the practice of transferring day-to-day related management

“The immaturity of managed services within the communications industry is reflected in the fact that there is considerable confusion about exactly what they are.”


Better communication structure could eliminate duplication

“Operators tend to have five or six teams that look after different contracts, each has grown its expertise and knowledge base separately.”

Strategy versus tacticsIt is not clear how many operators are looking at their sourcing strategy thinking about what they’re going to provide in-house, what they’re going to own and what they’re going to provide through third parties. there is evidence to suggest that few are looking at it holistically.

Before the roundtable discussion, tM Forum asked attendees to fill in a short survey, asking what services they were outsourcing already and what they planned to outsource. (See Figure 1-3). While the number of attendees was not big enough to be a scientific sample, it did include network operators from around the world, and their response to this question seems to bear out the general lack of a strategic approach to managed services.

When asked what they were planning to outsource in the next 24 months, the results were similar, with only slightly different percentages.

Curiously billing didn’t feature at all in either, although Whatman says that billing (beyond simply printing bills) has been outsourced to a greater or lesser extent by a number of operators and that a large number of CSPs are going through billing transformation now. this is in part because as the value chain develops and operators update their billing systems, it involves new technology, structure, and processes, so many are wondering whether to hire and train people or determine that billing really is not a core competency so why not hand the whole thing over?

Organizational structure creates difficultiesOperators tend to have five or six teams that look after different contracts, each has grown its expertise and knowledge base separately and they are often ignorant of each others’ role. there is a lot of duplication when they could help each other greatly and save much time and energy.

Figure 1-3: What areas have you outsourced already?

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Source: TM Forum roundtable survey Nov. 2010

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Qwest Communications‘ Alice harris acknowledges, “I have always been responsible for billing and my peer in the payments area is responsible for her vendor relationships. Unless we decide to partner, and we are both in the CFO organization, it might not happen. At the moment, we make each other aware of the deals that are happening but aren’t required to partner on an overall strategy.”

One delegate thinks this is not true in his organization’s case, saying, “For our large customers, we will start to put together those advanced services so that we can provide the cloud. We are starting to offer Software as a Service and some managed services such as security or hosted services.

“We are trying to understand how cloud services will work and also how to provide those services, especially to our governmental and big corporate customers. We are looking at the interfaces and technology to enable the cloud in around three years from now. that is our vision. Some customers are demanding it, so we have to move fast.”

this is an aggressive schedule by any standard.

Qwest’s harris says, “that’s a really good point. We always partner for our external customers. We’re part of the networx contract; that’s part of the U.S. Federal telecoms fulfillment process. the contract is very rigorous; you have to be able to supply many services. Qwest is a big operator; and we did have to build the digital life and service aggregation layers for certain products using supplier partnerships, so we had to build that type of relationship.”

the group largely agreed that the big question was why can’t service providers make this a standard way of doing business with lots of partners, rather than an exception?

Capital avoidance

Customer satisfaction

gain new skills

Improve quality

Lower costs

Figure 1-4: What are the top three reasons for choosing to outsource them?

0 0.5 1.0 1.5 2.0 2.5 3.0

Source: TM Forum roundtable survey Nov. 2010


Beware biting off more than you can chew

Cost is a barrierJim Matthews, VP enterprise architecture and strategy, Charter Communications, has an answer to that. he says, “For us cost is a barrier. Setting up these kinds of services to offer them properly, whether internally or externally, may require a certain level of capital investment and to make the business case you’ve got to be saving some money or offer something cheaper or better. We’ve done multiple layers of cutting costs through rationalization over the last four years and now we’re looking at what could be a capital intensive process to get to the necessary level of automation and optimization around this.”

this is a most interesting comment, given that capital avoidance was given by attendees as the most common reason for engaging in managed services. If outsourcing contracts are negotiated on a departmental level, then it can become an expense instead of capital investment. naturally this depends on how a company’s balance sheet works but another delegate argues, “It’s an accounting trick. It’s an artificial wall that makes your CFO happy. Maybe they want to write off capital assets every year rather than depreciate them over several years.”

Or maybe many of those who make the outsourcing decisions do so because they can outsource a function because it is cheaper, faster and easier to pay for it from the departmental budget than have to stand in line for capital. A powerful reason why outsourcing decisions should be made at board level as part of an orchestrated strategy.

Scaling up stretches core infrastructureYet another attendee adds, “When you’re deploying 1,000 computers, it’s a different ballgame and we’re deploying 100,000 computers, so it’s a more complex ballgame. We’re rolling out Ethernet, and some of the network requests we’re getting have over 1,000 legs. Provisioning them, getting it activated, doing it properly, getting the whole order right is a huge task.

“to get to the level of being able to offer these types of services, at this scale, requires an organizational will and restructuring as well as the logistical capabilities. telcos pride themselves on being very technical, but when it comes to their management systems and OSS/BSS, sometimes what they consider adequate is ridiculous. Doing this stuff requires a complete shift in how they’ve done business. the telcos aren’t in charge any more, it’s the It people.”

they conclude, “the case in point is when At&t finally gave up and gave it all to IBM and Accenture to do. how can you offer a sophisticated service at a price that makes sense for you and others?”

Or as another delegate put it, “If you get to the point that you’re responsible for providing managed services across the network, if you’re struggling with It, you’ll struggle more when you’re providing services to someone else.”

“If you’re struggling with IT, you’ll struggle more whenyou’re providing services to someone else.”

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“You cannot have a true partnership and insist the partner does the exact same thing the way that you did it.”

The definition of insanityOperators need to make strategic decisions, at board level, not departmental level. the dollar value of some of these deals is just so high and the impact on business is so real that they have to be prepared to change. Arguably operators need to make more changes than their managed service providers. For a start, they need to accept them as a true partner, rather than see them in a subservient role.

Also, operators will need more than one strategic partner. As Qwest’s harris says, “If I’m a service provider, I need more than one broadband access enabler. If you’re providing it for me, I’m just one of many, but I need to be number one in your eyes so you look after me first. Otherwise how do I differentiate myself?”

Whatman replies, “We are asking those who get into managed services to own it – move it into their big data centers, use cloud, virtualization or whatever else is needed to make it the best it can be. If you do that, I reap the reward. We, collectively, don’t do this today. Instead the attitude is ‘You’re taking over my operations and you have to get my agreement about every single change you make. I might not be the expert in your way of working, but I’m going to force you to do what I want to do even though I don’t understand the implications for the way you operate and how that will affect me’.”

As one delegate observes, “the only reason service bureaus can be more effective than you is because they manage very tightly; they

Sensible steps towards successful managed services

Section 2

manage change well and they control churn. In an internal economy, your business is to put a rush on It – ‘ I need this tomorrow’. then they go to an outsource provider and they say, ‘You’ll get it in three months’. If an outsourcer is going to be effective, they cannot react with the same spontaneity that internal people do. the same politics cannot prevail, or they can’t be any more successful than you can.”

Put another way, you cannot have a true partnership and insist the partner does the exact same thing the way that you did it. It’s a definition of insanity as inevitably the outcome will be the same, and where is the advantage in using the managed service?

Operators have always had control of their own networks, believing that networks are their differentiators, and have been able to set their own priorities. hence, handing these decisions over to a third party is against their deepest instincts. there is also a great deal of resistance to institutional knowledge no longer being held inside the institution.

Yet unless we allow our managed service providers to operate in a different way to the practices of operators, the whole thing won’t work.

Whatman asserts, “We will become dinosaurs and we’ll fade away, and the googles and Apples and companies we don’t even know about yet will be there instead because they don’t have the baggage we have. We need to get rid of it, but it will only work if we map this into our strategy. It’s an emotional issue.”


transparency is needed to manage operators’ expectations

Think the unthinkableAt least part of the answer to this vexed question is that as operators look at how to make the shift to the three-tier model (see Figure 1-2, page 5), they are going take a much more realistic look at what their core competencies really are and be prepared to outsource functions that once would have been considered far too high risk. Anything that can be seen as a commodity has potential, such as billing, which at the moment is often viewed as a core competency.

the question is, does it make more sense for senior management to be concentrating on something someone else can do, or to be concentrating on growing revenue by developing skills and resources in the digital life sector and raising ARPU? It will be a part of the process of moving towards the three-tier model, and whichever parts a particular service provider wants to operate in, they will have to give up some other aspects that they won’t want to. It’s important that is understood from the start.

You can’t automate what you can’t repeatOperators need to have a better idea of what they want to get out of an outsourcing deal. Richard McDonald, technical executive and distinguished It architect, IBM Canada, comments, “Service provider customers often have no idea what they want when they start out. An old adage from service management is that you can’t automate what you can’t repeat. So, if you haven’t got repeatable processes, if you haven’t got a repeatable documented way of doing things, it’s difficult for someone to take

it over and run it. Both parties have to adapt to figure out what’s going on, find that common ground, and establish what the right mix of processes and activities are.”

Jay Selva, chief consultant, managed services department, gtS, huawei, supports this saying, “Using [tM Forum’s integrated businesses process architecture] Frameworx as a base line helps us to understand what’s there and where the gaps are. then we can say, sorry we can’t provide this service to meet this service level agreement because you haven’t got these processes, for instance. then there’s also the benchmarking piece of the tM Forum, you need to standardize how you do your business and use a common language.” (See Section 3.)

Be realisticOne outsourced It service provider says, “the operator should be willing to come to the table, almost from the outset, and say candidly, ‘here’s what we don’t do very well or think we don’t do very well’, then we can help them assess that and figure out what the transformation is going to look like. A lot of assumptions get made early on, maybe that we change everything and fix it for them, and it can lead to a mismatch of expectations. that needs to get sorted out early. It will come, I’ve seen it happen every single time, but it usually takes too long, probably two to three years into the contract, and my experience of It probably applies in other areas of managed services.”

On the other hand, it is a common occurrence that the buyer decides on which partner to

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choose too soon, and so ends up defining the solution in terms of what the partner is able to provide, rather than what it needs.

You can’t manage partners in isolationIf a strategic approach is not taken, a company ends up with different length contracts running concurrently that it can’t get out of. Yet, according to Whatman, only about 10 percent of CSPs have an operational agreement in place; that is an agreement between the partners that are running different functions about how they work together and who is responsible for what. Without it, how can an operator function as a single, integrated organization?

A service provider does not want to spend a lot of time acting as an arbitrator between warring outsource suppliers. An operational agreement ensures consistency across all the partners, and how the consumer of managed services deals with changes, disputes and other events. If agreements are in silos, something is bound to be missed.

Buy in talentOften the people making decisions about managed services don’t have the knowledge they need to make them. Operators need to buy in the talent to move to managed services from people who understand it well. A very small team can be highly effective. the team should comprise old hands from within the company who understand how it functions and new blood that understands how outsourcing works. the combination of the two is the key.

Cost is a complicated issuethe perception often is that outsourcing a service will reap savings of 25 to 30 percent. More typically, it works out at 5 to 10 percent cheaper, but the buyer should have a lot of additional reasons for outsourcing, such as greater flexibility.

If price dominates the selection of partner, disappointment is inevitable. Yet procurement and supply chain people in organizations are often mandated to go for the lowest price deal and while they aren’t the decision makers, it can be very difficult to push a higher cost one through because they run the purchasing processes.

Interestingly, when we surveyed attendees again, with the same questions after the roundtable, customer satisfaction had moved into first place, above capital avoidance, as the primary reason for outsourcing, although capital avoidance and lower costs were a close second and third.

Penalties and incentivesthe operators need to understand the outsourcers’ business almost as well as the partner does because if they fail, the operator fails too. It also means they can negotiate on a level playing field. If the partner’s lever is using cheaper labor in another country, the operator has to understand that’s a big transition and transformation that will have a huge impact on its business. Perhaps it will mean that the helpdesk won’t work well for a little while. how important is that? Will it damage the business and reputation?

how do you manage that risk? how do you monetize it? how does the customer build a mechanism so that it feels it is sharing that risk? the usual way is through a complicated set of penalties and incentives.

the group agreed that it is naïve to think that all providers can deliver what they claim they can: often suppliers come in with one or two seed people and the rest of the organization doesn’t know anything about it. As Whatman says, “One supplier’s first contract cost it $1.2 million in penalty fees. Clearly it hadn’t been ready, but such a heavy penalty encourages fast learning. We need to figure out what the


Paying heavy penalties speeds up learning

“The last 10 years has taught us we need tobuild flexibility and adaptability into managedservice contracts”

operators are going to look like going forward. how do we get them to learn as much as they can as quickly as they can without spending $1.2 million?” We have to get this right as providers of managed services as well as consumers, because if the provider fails, its customer(s) fail too.

One delegate says, “You put in incentives and penalties, but few companies have much appetite for the things that hurt. It’s hard to find a partner who is willing to put some skin in the game and has something substantial to lose.”

Acting on business outcomesPerformance indicators related to business outcomes are a more sensible base for evaluating contracts drawn up that today rely on often arbitrary metrics and unrealistic penalties. Whatman says, “Operators’ attitude is, ‘I want, I want, I want,’ but they don’t understand the cost and typically they are poor at knowing what is critically important – a server for an application that is not customer or business impacting being out of service might not matter, but the accuracy of the bill is essential.”

An attendee observes, “If I have to pay a lot of money to get the sort of backup I have, why am I going to outsource?” Very simply, if the buyer insists on big penalties, the contract will be expensive, and lots of those penalties might not accurately reflect the potential damage a particular failing would do to the business anyway.

If it costs half as much to have a service guaranteed to be up again within eight hours, rather than four hours after failure, is it a good decision to go for the cheaper option? Of course it depends on what the delay would cost the business in terms of revenue, reputation and customer satisfaction, and striking a balance between them and cost.

Value added servicesA new use of the managed services construct is presenting itself in the aggregation layer of the new telecom business model, but rarely are the lessons learned from established managed services applied to these new opportunities.

For example, healthcare is most often is most often cited as a managed service that could be enabled by operators, such as a service whereby the patient sits and puts their arms on the chair arms so that their diabetes, heart and other vital signs information is sent to the healthcare provider.

there are lots of verticals, like healthcare, and lots of possibilities for operators to enable specialized apps that cut across a lot of subscribers and sectors. Applying what is learned from managed services, particularly regarding risk management and mitigation, and penalties based on business outcomes will be critical in meeting the expectations of all parties.

Allowing for unforeseen eventsIn the last 10 years, we have experienced two major crises, the dot-com bubble bursting in 2001 and the global financial crisis in 2008. At the time of negotiating its human resources contract with PwC and engaging CSC to look after its other applications, nortel employed over 100,000 people and the contracts were based on continuing growth. Instead the company hit hard times and never recovered. It was forced to renegotiate and pull the contracts back in-house.

the last 10 years has taught us we need to build flexibility and adaptability into managed service contracts to take account of unforeseen events, but this is very difficult. From the beginning, we need to think about how to introduce additional resource or reduced resource credits, and consider at what point we agree to renegotiate – five years into the contract or 10?

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the message is loud and clear. Managed services have to be part of an overall, coherent strategy, rather than deployed tactically. they have an important role to play in reshaping the communications industry into one that is economically sustainable and more fitted to the radically changing marketplace discussed in Section 1.

Parhelion’s Whatman states, “A sourcing strategy as part of an overall business strategy is the foundation of where you want to go and it will transform your business and who you are. It is out of necessity we as an industry have got to get together and sort this out. Patience is required by all parties.”

her suggestion is that the Forum is well placed to look at both the vendor and operator side, to foster understanding of what both sides need and want, and try to bring them together. At the moment, neither side is getting to common ground and there’s a lot of frustration.

Charter’s Matthews says,” tM Forum can expose this for what it is – no free lunch. When you get into agreements, if we had a really good template that means you can come up with a service level agreement that makes sense, that measures it from a service perspective, not a component perspective, then you could reach a workable agreement. And if you can’t, at least you know what you’re getting into. If you sign up for it with your eyes wide open you understand the risk.”

Jay Selva of huawei, says, “Vendors and service providers speak a different language – we need commonality. huawei is also heavily involved in the Forum’s benchmarking program, and we need input from operators at different

What can tM Forum do to help?Section 3

locations using business metrics to develop more understanding of what’s important.”

While the Forum has already undertaken a good deal of work on guidelines for service level agreements, all the participants agreed that they would like more help with how to address the issues they’ve talked about. For example, to explore to what extent the Business Process Framework (etOM) deals with with business-to-business processes that need to be included in a managed services contract.

Another suggestion was that the Forum should look at areas of most interest concerning outsourcing and help define a request for proposal. While this wouldn’t have to cover every point, many felt that it could provide a very helpful starting point.

Most of all though, the delegates thought that the biggest thing the Forum could offer would be a place for people to share their experiences and best practices. One attendee from a service provider in Latin America explains, “It is important for us to have more trained people in terms of the concept itself, not just It or network guys, but the business guys and top management to be able to see exactly what is happening in the U.S. and Europe where is has happened first. It’s understanding and training we’d like from other countries.”

their view was echoed by many of the delegates who would like to keep up to date with what is going on in other countries, to see how the roadmap to the three-tier model is unfolding. In particular, the delegates would like to be able to share stories of success and failure, and from this to devise ways


In language, standards, and best practice, commonality is key

of supporting the decision-making process, how to measure offers from vendors, how to assess risk and establish what processes are required. In short, to help people get through the initial process so it’s as good as it can be.

there is also the question of applying standards to infrastructure you don’t own, or as one attendee put it, “If I deploy the Business Process Framework, how does it apply differently when I own the interface compared with when someone else owns it?”

An executive from a service provider acknowledges, “At the moment we tend to deal with vendors with a strong arm but we have to involve them more to take them to my customer with me.”

Commonality of language, standards, best practice and understanding of each parties’ needs and abilities is something the Forum will be working on in 2011.

Already tM Forum’s Benchmarking Program enables its service provider members to measure their business performance, completely confidentially, against the best-in-

class. Operators are then in a position to tie performance metrics to operational costs and make a well-informed decision about whether a particular function or service should be outsourced.

Once that decision has been taken, based on empirical evidence rather than assumptions, the benchmarking information can be used to draw up effective service level agreements (SLAs) for the managed service or services in question.

tM Forum’s Business Metrics Program offers around 100 standardized key performance indicators and key quality indicators that can be used to monitor and measure business performance on which to build SLAs. Others will be developed over time because it is essential that all parties use a common language about what needs to be measured between customers and suppliers.

Once tM Forum’s Benchmarking and Business Metrics Programs are more highly developed to support managed services, the Forum intends to produce a best practice guidebook.

“If I deploy the Business Process Framework, how does it apply differently when I own the interface compared with when someone else owns it?”

16 www.tmforum.orgQUICK InSIghtS

Service providers today have little choice but to invest in the customer experience.

Rising customer expectations and convergent competition put a premium on a positive customer experience across all channels at every stage of the relationship.

Driving an exceptional customer experience is no simple task. Success rests heavily on the right systems, processes, governance, and continuous improvement.

typically, service providers attempt to meet the challenge with a combination of in-house resources and point solutions from different vendors. however, the results often fall short.

Working with a managed services partner provides a compelling alternative. Although cost control has dominated the managed services discussion, a growing number of service providers have begun to view managed services partnerships as opportunities to enhance the customer experience as well.

Customer experience challenges in the connected worldthe new competitive landscape for service providers puts a tremendous premium on customer experience as a key driver of customer loyalty and competitive advantage. With so many choices available, customers are one bad experience away from dropping their subscriptions or pre-paid programs and jumping to a better offer.

All too often, inadequate systems and inefficient processes for marketing, sales, service, and support lead to uneven service operations, inconsistent customer experience across different channels,

and costly workarounds. In this context, customers suffer from too many service interruptions, overly long billing cycles, slow resolution for service queries, a lack of customer-friendly tools, and too many problems with ordering and activating new products and services.

the end results include reduced consumption of existing services, missed opportunities for growth, reduced ARPU, declining margins, and customers more prone to complain and churn.

Many service providers try to improve, or at least maintain, the customer experience with a combination of in-house resources and vendors of point solutions. It’s understandable – they know their own systems and processes best and they try to fill in with different hardware, software, and service vendors as the need arises. they want to serve as their own general contractor.

Unfortunately, this go-it-alone approach too often falls short of what is needed to succeed.

The managed services alternativeManaged services provide a compelling alternative to traditional in-house approaches to improving the customer experience.

Over the past decade, service providers (and others) considered managed services primarily as a way to control and reduce costs.

More recently, a growing number of service providers have begun to view managed services partnerships as opportunities for dramatic improvements in service quality and consistency, launching new operations, and executing modernization and

transformation projects, as well as cost savings and efficiencies. With managed services, service providers can take advantage of four critical enablers of customer experience that are so often hard to develop and optimize internally:

•Globalbestpracticesandmethodologies•Customerexperience-focusedtools•Businessprocessautomationand optimization•Systemsinnovation.

Enhancing the customer experience through service level improvement and optimizationImproving customer experience through managed services is based on a process which starts with mapping the customer-experience-related processes, the underlying systems, integration touch points, and the measurable impact on the end customer. then, these factors are translated into performance measurements (KPIs) and service level targets that the managed services provider can be held accountable for as a single point of accountability.

Customer benefitsDone right, managed services can deliver substantial benefits around the customer experience:

• Increasedreliability• Improvedquality•Enhancedchoice•Acceleratedinnovationandtimeto market.

to learn more, please visithttp://gss.amdocs.com/customerexperience

SPOnSORED FEAtURE

Stop going it alone: Use managed services to enhance the customer experience


Customer case study:

Surge protection: Amdocs managed services ensures smooth handling of top priority product launch

The challenge

•Tier1serviceproviderinNorthAmericacounts down the days to a highly anticipated launch of a new smartphone.

•Providerconductsextensiveteststoensure its network and sales application can handle double their normal volumes.

•Onlaunchday,however,customerdemand surges to four times the normal volume, overloading a channel partner system and diverting even more traffic to the service provider’s main sales application.

The solution

•Amdocsreal-time,proactive monitoring tools and communication processes flag the problem immediately and provide constant transparency and control to the service provider; responding to immediate need, Amdocs adds capacity to minimize delays with the overloaded sales application.

The result

•Monitoring and standby capacity from Amdocs managed services enables a smooth and successful launch experience amid the risk of substantial failure.

•Firstdaysalesbreakallrecordsforthecompany, matching the total sold by two previous bestsellers combined over their first three days.

•Astrafficeasesinthefollowingdays,Amdocs initiates a rapid design review with the service provider to explore potential upgrades that would ensure future success at even higher levels of demand.

Takeaways

•Handlingthesurgeinsalesandactivation traffic for major product launches is a big test for customer experience management. Minimizing any problems means you’re off and running with happy customers, a positive buzz in the market, and an important new revenue stream. Let those problems take center stage, however, and the hoped-for big day can easily become a long-term drag on revenue, reputation, and renewals.

•Maintainingsurgecapacity,responsiveness, and follow-on planning capabilities with in-house resources for the biggest hits is extremely difficult for most service providers. With an effective managed services partner, however, the challenge can be met confidently, affordably, and with clear accountability.

About our sponsor:For nearly 30 years Amdocs global Strategic Sourcing has been a strategic partner for leading service providers worldwide, helping them to accelerate business growth, enhance their customers’ experience and reduce costs.We deliver cost-efficient business and operational management services by combining flexible financial and delivery models with industry-specific expertise and an unmatched delivery record.

Amdocs global Strategic Sourcing offerings provide a wide range of managed services to support business and operational support systems (B/OSS), service delivery platforms (SDP) and directory publishing for the media and communications industry. Our flexible and tailored outsourcing solutions include support for It infrastructure management and hosting, application management and business process operations (operational and It oriented).

In addition, Amdocs provides managed transformation services, enabling service providers to modernize or consolidate their systems while saving on operational and capital costs.

Our services are designed to provide value across all environments, based on Amdocs or legacy in-house or third party systems.

For more information, please visithttp://gss.amdocs.com

DO MORE IN THE CONNECTED WORLD

ARE YOU SURE YOU’RE DOING EVERYTHING POSSIBLE TO IMPROVE YOUR CUSTOMER EXPERIENCE?For nearly 30 years, Amdocs Global Strategic Sourcing has been the strategic partner of leading service providers and directory publishers worldwide, helping them enhance their customers’ experience and optimize operations through best practices, best-in-class products and tools, and unparalleled industry expertise. Learn more at gss.amdocs.com/customerexperience.

© 2010 Amdocs. All Rights Reserved.EXPERTISE. FORESIGHT. VALUE.

Managed services the road to operational efficiency

Business

Transcript of Managed services the road to operational efficiency