New opportunities in managed services.pdf

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12/9/2011www.informatm.comConfidential 1

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11/09/2009

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New opportunities inmanaged services

Trends in network services, supportsystems, data & applications services

and network sharing

Kris SzaniawskiPrincipal Analyst

[email protected]

twitter: @kszaniawski


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Agenda

Market status and forecasts

From network to service management & transformation

Data and applications services trends

The impact of network sharing, tower company and wholesale models

New opportunities in energy management

Conclusions

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Market status and forecasts

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Demand for managed services is growing

There is a healthy and growingenthusiasm for outsourcing.

According to an Informa survey, the

overwhelming majority of operators, 71%,

expect to outsource some aspect of their

operations over the next 12-18 months, by

contrast with 61% in 2009.

The appetite for services associatedwith network operations is particularlystrong almost a third of operators planto outsource some aspect of networkoperations.

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Source: Managed Services & Outsourcing Survey 2Q11

n = 117 operator responses

Operators planning to outsource services/activities in next 12-18months: 2011 vs. 2009


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What do operators expect to outsource in future?

Operators reveal an impressivewillingness to outsource a

broad spectrum of services inthe medium term.

Outsourcing maintenance, repair

or construction still top in 3 years

time

but there is also strong

interest in outsourcing almostevery other operational areanine of the 15 areas received ascore of over 50% and 12 ascore of over 40%.

The only area where there is

minimal operator appetite for

outsourcing is business planning,

which only got a score of 12%.

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Areas of an operators business likely to be outsourced in three years

time compared with those currently outsourced


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The addressable market is growing The total spend associated with

all telecoms services (i.e. totalservices spending by both thefixed-line and mobile telecoms) isexpected to grow steadily overthe forecast period (2011-2016)with CAGR of 8%.

Growth rates will be constrained in

the short term by current economic

conditions.

Professional services of whichmanaged services are a subsetwill experience 12% CAGR overthe forecast period.

Professional services will outpaceinternal services in the medium to

longer term due to continuing

internal savings by operators +

increasing impact of outsourcing.

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Source: Informa Telecoms & Media


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An increasingly fluid market: Managed-servicesdefinitions

Informas definitions have

been adjusted to reflect thechanging nature of themarket.

In contrast with previous

forecasts, managed

OSS/BSS services are now

included in total managed-

services revenues.

Project-based planning andconsulting is included ineach of the three managed-services segments asappropriate.

But strategy consulting and ITintegration are excluded from

the managed-services

forecasts

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.


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Strong managed services growth led by newmarkets, support systems and services

Managed-services revenues willgrow from US$15.67 billion in2011 to US$28.06 billion in 2016,a CAGR of 12%.

Network-focused managed services

will dominate revenues over theperiod. New markets and new types

of MS will help to breathe fresh life

into the market (12%)

Managed OSS/BSS is a growthopportunity for vendors (14%)

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NOCs currently focus on network operations, but will increasingly carry out value-add

service-layer operations, boosting the data and applications segment.(14%)



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Growing importance of Asia and thedeveloping markets

The fastest-growing managedservices markets over theforecast period will be AsiaPacific, Latin America, Africa andthe Middle East.

All developing markets will

experience strong managed-servicesgrowth, but the developing regions in

Asia that will have the biggest impact

because of their size.

India will continue to offersignificant managed-servicespotential for vendors especially inthe context of network sharingand network rollout.

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Western Europe was an early leader but its share of global revenues will decline as the

market matures, although Europe will still be the biggest regional market in 2016.



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Who will be working with the operators?

The managed-services market is dominatedby a few players. The top four vendors

Ericsson, NSN, Alcatel Lucent and Huaweiwill account for over half of revenues in 2011and 2016.

Competition from the likes of Accenture, IBM,

HP and Infosys will blur the dividing line between

telecoms managed services and IT. We will also

see competition from OSS/BSS vendors andVAS and apps specialists.

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Who is best-positioned to do what?

Network equipment vendorsare still first choice for

technical/operational

management.

But IT/systems integrators

are growing in importance.

Also, the increasing

willingness to outsource

business strategy or

business management will

create a bigger role for

business/managementconsultants.

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Which player do you believe is best positioned to deliver each type of service?


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From network to service management& transformation

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Network management is turning into servicemanagement Transformation of the major network

vendors into solutions providers andservices companies shows no sign ofslowing down.

Reducing costs and improving operational

efficiency were big drivers of first

managed-services wave. But now anincreasing emphasis on services and

customer experience management (CEM).

There is the potential to transformGNOCs into service operation centersand eventually into centers of CEM

(e.g., NSN is considering moving out ofmaintenance as part of its restructuring).

Alcatel-Lucent: Managed services solutions are moving from

network-centric to service-centric

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Measuring end-user experience has also become a defining issue as operatorsstruggle with the need to correlate real-time data and KPIs with actual customerexperience.


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Transformational outsourcing is a potentiallylucrative opportunity

Major vendors are putting increasing resources into transformational outsourcing;encouraged by the changing role of CxOs and strategic partnerships.

Transformational opportunities will be driven by: next-generation broadband networks;

convergence of fixed and mobile markets; triple- and quad-play services (e.g., the

VIVACOM/ALU deal in Bulgaria).

The move towards all-IP networks will also feed the demand for end-to-end solutions

which include access and backhaul as well as value-added content.

The number of contracts will never be large but the rewards will be substantial.

Transformational outsourcing scenario

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Overlap with OSS/BSS managed services

The divide between networks, supportsystems and service enablement is blurring.Both telecoms & IT vendors will increasinglypursue OSS/BSS MS opportunities, makingthis one of the fastest-growing managed-service segments.

Ericsson planning heavy focus on this spacefollowing acquisition of Telcordia

Transformational opportunities e.g., such asthat between Huawei and KPN where the ITarchitectures of five KPN MobileInternational subsidiaries being broughttogether. KPN wanted one partner tomanage the OSS, BSS and other functions

and create value-added services The radical outsourcing approach pioneered by

Indian operators will also provide opportunities

for combined telecoms and IT outsourcing

strategies.

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What is your preferred strategy for procuringOSS/BSS systems?


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Data and application services trends

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Hosted VAS market is still small but growing

While the market for hostedVAS is small, a series of canny

firms are proving there aremarket opportunities to providehosted mobile VAS services orhelp reduce their complexity.

The most prevalent hosted VAS

are on mobile networks:

Consumer offerings include:

mobile marketing & advertising

solutions, mobile CRM & loyalty

programmes, mobile portals,

mobile payment, mobile site

traffic analytics & mobile social

networkingBusiness market services

include: mobile PBX, call-

recording services and setting

up MVNOs on an operators

network

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The major infrastructure vendors are focusingon enabling VAS with tools needed to trial,publish, search and pay for applications andservices, rather than providing the servicesdirectly.

A sample of hosted mobile VAS players


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Data and applications services in the cloud

Many of the services mentioned in theprevious slide are offered to operatorsmostly as hosted managed services, butsome players (e.g., Acision and Momac)are now adding cloud-based support.

A cloud-enablement strategy for major

vendors can be seen as an extension of their

growing interest in the service layer.

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Cloud deployment models

Three layers of cloud computing

Operators are well placed to play a central role inthe cloud with their data-center assets, fixed andmobile networks and security expertise but willrequire assistance.

This presents vendors with the opportunity to use their

expertise in infrastructure and services to enable

operators to integrate and deliver content in a

multiscreen environment.


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Airtel Africa: A VAS case study

Indian operator Bharti Airtel has a radicaloutsourcing strategy which it is taking toits African operations.

In May 2011, Airtel Africa and VAS solutions

provider Comviva signed a five-year VAS

managed-services deal that covers Airtels

operations in 16 African markets.

Comviva is responsible for themanagement of Airtels VAS network;

SLAs between solutions providers andAirtel; as well as revenue growth andcapacity utilization.

Comviva already has MS relationships with

Airtel in the Indian subcontinent: in India,Airtel reported higher VAS revenues and

25% decrease in VAS capex; in Sri Lanka,

Airtel claims it has cut VAS opex by 20% as

a result of its Comviva deal.

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Airtels goals for VAS managed services


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Network sharing is a growth opportunity

Healthy appetite for sharing:survey suggests two thirds do itor plan to

Network sharing is not just a

complementary business model, itwill also increasingly help to drive

managed services, especially in the

context of active RAN sharing.

Active RAN sharing becomingincreasingly common.

Global breakdown of network sharing announcements to end-3Q11

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Regional split of global network sharing announcementsto end-3Q11


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Active sharing as a driver of managed services

Active network sharing works bestwhere management is separated

out. As active network-sharingdeals become more common, theuse of MS partners as neutralarbiters to support JVs will alsoincrease.

When operators just partner up, there

can be a lack of clear project focus,

managerial and cultural differences or

an unequal relationship between the

partners

a problem that can be addressed

by combining the network sharingwith a MS relationship.

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The MBNL JV in the UK is a good measure of what can be achieved, with the prospect,

once three networks are combined, of cost savings of more than 50%.


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MBNL: Network sharing and outsourcing combined

This is an active 2G/3G RAN network-sharingdeal under a managed-services umbrella.

T-Mobile and 3 UK originally formed the network-

sharing JV, which is now being extended to Orange

following its Everything Everywhere link up with T-

Mobile.

Almost 13k sites were consolidated, 5k were

decommissioned.

Shared consolidation Ericsson is responsible for

network management and NSN is providing

hardware and related services.

Cultural alignment and executive sponsorshipwas important as well as the lock-in of the JV to2031nothing like a good pair of handcuffs.

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Network management was outsourced to allow a smaller team to concentrate on key issues.

Soft issues are crucial.


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Tower companies an integral component of theradical outsourcing approach

In addition to ad-hoc sharing or JVs between operatorsthere is also the option to divest or lease from a thirdparty:

This can include selling towers to an independent tower

operator and then leasing back, creating a cash injection.

Tower companies increasingly active in a number of markets

and tower-company deals will become more popular as anintegral component of radical outsourcing strategies along

similar lines to Bharti Airtel.

Bharti has two tower-company programs in India:

Bharti Infratel Limited is a passive infrastructure service

provider owning/managing 30,000+ towersA 42% stake in Indus Towers, a JV with Vodafone Group

and Idea Cellular with 110,000+ towers.

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The tower-company model used in India where more than one-third of towers arealready shared is becoming increasingly attractive in Africa and Southeast Asia.


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The transition to LTE will alter market structures

With a near-universal commitment to LTE as the next-generation mobile broadbandtechnology, Informa expects over 360 LTE networks to have been launched by 2014.

Transition to LTE will have an impact on the structure of the wider marketplace and

accelerate consolidation.

LTE will also drive operators to experiment with new business models includingwholesale, MVNOs and a variety of LTE partnering relationships and, as aconsequence, create new managed-services opportunities.

LightSquared in the US,

although an untested

business model, is already

encouraging others to

experiment. The complex

web of relationships betweenEricsson, Sprint,

LightSquared and multiple

wholesale partners is a sign

of more to come.

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New opportunities in energymanagement

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M d t it i ll


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Managed-energy opportunity especiallyin developing markets

Energy-efficiency is already a focus,

especially in developing markets where

energy-associated costs can be 50% of opex.

Operators willing to adopt both energy-saving technologies + MS = anopportunity to combine both as amanaged-energy offering.

Energy management and consulting is being

increasingly promoted by all the major

vendors.

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Which of the below is the biggest challenge facing mobileoperators in the adoption of services in rural areas?

Examples of different approaches include Vodacom Tanzania/NSN and BhartiInfratel, which is working closely with IBM.

Bharti Infratel/IBM shows there is more than one way to tap this market. IBM is actively

building a presence in smart energy across a range of vertical markets.

Network vendors will have to move fast if they are to seize the managed-energyopportunity as a complement to their managed-services portfolios.


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Vodacom Tanzania: A managed-energy case study

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Vodacom Tanzania is banking on

outsourcing to reduce opex and increase

competitiveness.

NSN is expected tomanage/operate/expand Vodacoms

network + also introduce energy-efficient solutions to address highenergy costs

This MS relationship is expected tosave 30% in opex over the contract

period, or about US$11 million a year.

Fees depend on the energy Vodacom

Tanzania saves and include both fixed-

price and SLA-based elements.

Tanzania, mobile service revenue by operator, 1Q09-1Q11


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Conclusions and recommendations

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Conclusions and recommendations (1)

There is growing operator appetite to outsource a broad spectrum of services thiswill create opportunities for vendors and managed-services providers to expand

their portfolios into new areas.

Managed services will continue to outpace internal operator spend the managed-services

market will experience CAGR of 12% over the next five years.

Managed services around network operations will continue to dominate the market

due to growing interest in emerging markets, especially the developing regions ofAsia, Middle East, Africa and Latin America. Vendors not already targeting theseregions with NOCs will lose out and should not be regarded as serious partners byoperators.

Network sharing, new forms of wholesale relationships, IP transformation and managed

energy will all breathe new life into the managed-services market. Some of these will also

provide opportunities for players from other segments such as IBM.

Transformational outsourcing will be a potentially lucrative opportunity for some,but deals will be few and far between. Even major vendors will need to partner withIT companies in order to deliver end-to-end services on this scale.

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There is growing operator appetite to outsource a broad spectrum of services this

will create opportunities for vendors and managed-services providers to expandtheir portfolios into new areas.




due to growing interest in the developing regions of Asia, Middle East, Africa andLatin America. Vendors not already targeting these regions with NOCs will lose outand should not be regarded as serious partners by operators.







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There is growing operator appetite to outsource a broad spectrum of services thiswill create opportunities for vendors and managed-services providers to expand

their portfolios into new areas.




due to growing interest in emerging markets, especially the developing regions ofAsia, Middle East, Africa and Latin America. Vendors not already targeting theseregions with NOCs will lose out and should not be regarded as serious partners byoperators.





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The increasing importance of the service layer will generate opportunities for NOCs

to play a role in service-layer operations. This will also create opportunities in CEMand managed OSS/BSS services. However, network vendors will need to move fastto enhance their portfolios if they are not to lose out to IT or OSS/BSS vendors andoutsourcers.

Hosted VAS will continue to be an opportunity for small agile players while cloud-

enablement will be one for the bigger players.

LTE will encourage operators to experiment with new business models andoutsource a broad range of operations. Operators need to seize this opportunitybefore their rivals do.

The wholesale genie is out of the bottle the complex web of relationships around

Ericsson, Sprint, LightSquared and their wholesale partners is something that will become

more common. Managed-services providers have the potential to become central dealbrokers in such relationships if they dont blow it.


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09/12/2011

Thank you!

Questions?

Kris Szaniawski

Principal Analyst | Networks

[email protected]

twitter: @kszaniawski

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