Three different models can help CSPs lower costs, improve time to market and boost overall efficiency.
January 14, 2016
Large enterprises and smaller organizations have been outsourcing IT functions for years as a way to lower costs, minimize downtime, increase operational efficiency and reduce reliance on keeping up with the latest products and services. This has more recently spread to communications service providers (CSPs) who have been squeezed tight through competition, regulatory hurdles and keeping up with the ever-changing demands of customers.
But while the term ‘outsourcing’ has been used as a catch-all to encompass almost any situation where a business sends functions off-site – including business process outsourcing, offshoring, application service provider services and even the more modern cloud services – it’s lacking in real meaning, value and expertise being provided by the trusted partner.
Why Managed Services?
Unlike traditional outsourcing, managed services include a lot more behind the scenes, including longer-term contracts; a more diverse scope of work; and strong service level agreements (SLAs).
But organizations that might have been skeptical of the benefits of managed services in the past, and in fact were more concerned by the risks and negatives of sending out critical functions, are looking at it in a whole different light.
The primary driver of managed services today is the extremely rapid pace of change of technology, which can be extremely challenging for organizations to keep up with. This includes upgrading software licenses, enhancing hardware platforms, and ensuring support staff is trained on the relevant software and up-to-date with the most recent versions. This can result in significant expenses on the part of an organization and in many cases is starting to become a very real burden to the bottom line.
Another key driver is an aging IT workforce, which may be well versed in current technologies but may not always have an eye toward what’s coming next. Organizations may also have trouble retaining knowledgeable staff, and this turnover leads to less expertise within the IT department. There’s also an inherent cost in maintaining a IT department, an expense that many companies are looking to trim.
Technology and workforce challenges are only two areas of concern for organizations. For CSPs in particular, reasons for outsourcing services include:
- Improve process efficiency
- Lower operational costs
- Improve customer experience
- Deliver added value
- Improve retained staff productivity
- Improve service portfolio
- Provide customer-facing services
- Meeting forecasted capacity demands
To achieve those goals, CSPs can choose from several different business models, depending on their needs and expectations.
Hosted Managed Services
In this model, all client processing needs are handled by the managed services partner’s professional teams within a data center to provide management of the hardware and other network assets supporting the software and platforms. The platforms supported can either be owned by partner or the client.
A hosted managed services implementation includes license, implementation and hosting revenue as a managed service implementation is completed. The client agreement in these cases typically produces long-term contracts averaging from 5 to 7 years. This long-term relationship is a strength that can be leveraged to pursue opportunities to grow the business and meeting additional client needs through increased professional services. It also creates stickiness with the client due to the business and operational knowledge gained as well as the relationships that are built over the contract term.
Cloud Managed Services
In this model, the client owns the data center infrastructure and the managed services partner provides onsite management and support of the platforms for the client.
The managed services partner establishes, operates and maintains the solution within the customer premises, interfacing with other customer applications. The remote managed services model gives CSPs the ability to run, manage and optimize business and operational applications onsite by using its partner’s experienced teams and processes. This is ideal for operators that own the infrastructure but are looking for help with onsite management and support.
In this model, the solution is initially built and operated by the managed services partner, and then, when required, responsibilities are transferred to the client. This offering helps CSPs that are looking to leverage their current IT infrastructure and maintain day-to-day control of operations. This model allows providers to access assistance in planning, designing and building data center and network infrastructure; training in how to manage day-to-day operations of the systems; and fully compliant solution support, management and maintenance services.
Market research indicates that global IT managed services spending will continue to grow for telecom and cable clients. As such, there is a tremendous opportunity to leverage the managed services capabilities.
A major future opportunity will come from SDN/NFV and cloud-based implementations. As CSPs continue to look for ways to lower expenses and consider virtualization and cloud technologies to reach those goals, it will require a major rethinking and re-architecting of the network. Managed services can help reduce this complexity as network functions move into the cloud and the location of resources becomes less important to CSPs.