December 2009
Achieving excellence in network operations is critical for communications service providers looking to drive profitable growth through new, network-based services. Reliable, cost-effective network operations are essential to support today’s service introduction, delivery and assurance needs. The question facing all operators is whether they have the internal resources necessary to achieve high-quality service delivery as efficiently as possible. For many such operators, network outsourcing is emerging as an important way not only to meet that challenge but also to achieve long-term sustainability and profitability.
Outsourcing itself is not new to the communications industry; companies have frequently teamed with external providers to manage business processes such as finance and human resources. Based on that success, and on the need to achieve even greater efficiencies, more companies are looking to outsource select network operations and related business processes—which, Accenture experience has shown, may reduce network operations costs between 25 percent and 40 percent.
Feeling the squeeze
Network operations are critical to the competitiveness of communications companies. The network can account for as much as 30 percent to 50 percent of an operator’s annual costs—and, as companies invest in new, high-speed broadband infrastructures, those costs are likely to remain high. At the same time, certain types of network revenues, especially in the wireline business, are in decline.
The result is that network operators’ budgets are being squeezed, even as third parties are forcing additional expenses onto the network by driving over-the-top traffic. Companies are struggling to retain and maintain legacy networks and services, while dedicating the resources needed to support next-generation services.
During the past decade, a growing number of communications companies have leveraged outsourcing strategies to stimulate cost-effective growth, especially for selected back-office business processes. Other operators, especially in Europe, have expanded their use of outsourcing into field operations, call centers and the IT function.
Accenture believes, however, that to maintain a competitive advantage, communications companies must expand their outsourcing strategies to further enable greater cost effectiveness and profitable growth. This means identifying previously unconsidered areas of network operations for potential outsourcing.
The expanding capabilities of network outsourcing
Based on our experience in the communications industry, we recommend leveraging an outsourcing or managed-services model for any of the following network processes and activities:
Provisioning
Services are changing rapidly, and service delivery may require several manual steps. Network operators face significant activation expenses that frequently include the labor costs for manual provisioning and order fallout management. These expenses can be significantly reduced by outsourcing the manual provisioning and activation elements of the work.
Network engineering and planning
An outsourcing provider can help companies plan and design network expansions and capacity augmentation (for example, fiber build-outs), optimize network capacity, monitor network performance and optimize the costs of network topologies. A provider can also assess and reduce network expenses, manage leased circuits and provide support in third-party billing reconciliation and negotiations with wholesale network suppliers.
Network applications
Application outsourcing can reduce costs and enhance the value delivered by the network IT function. Building upon a foundation of labor arbitrage savings, operators can leverage outsourcing to industrialize application development, maintenance and support activities to align IT investments with strategic imperatives.
Inventory data management
Companies often find themselves managing multiple data models that are not supported by consistent standards. The accelerated and ongoing rollout of new technologies adds to the complexity of services, devices and configurations. Limited or outdated integration architectures and non-optimized management functions often mean that manual data entry is required, which is then replicated across multiple data stores. An outsourcing provider can manage these areas more cost-effectively, often with higher quality.
Testing and certification
The number of consumer electronic devices—as well as the range of types and complexity—is rapidly increasing, causing operational and resource constraints for device manufacturers, service providers, and content and application developers. Outsourcing the device- and network-testing process is proving to be a highly effective and cost-efficient way to get reliable, properly functioning products to market quickly.
Field workforce
A managed service for field workforce activities can enhance productivity, decrease costs and improve customer satisfaction by standardizing in-field service and providing the field workforce with advanced dispatch, scheduling and messaging applications and tools. Network executives may encounter organizational resistance as they seek to expand their use of outsourcing. Some may fear that cost reductions achieved through outsourcing may have a negative effect on service delivery and quality. However, Accenture experience has shown that moving to a network outsourcing model can actually increase the predictability, reliability and quality of the service being delivered to a network organization and its end customers. It can also simplify the operations environment by putting a single provider in charge of multiple processes.
Network outsourcing success stories
A number of leading operators around the world have significantly reduced costs and improved business performance by outsourcing select network functions and processes. For example, at SFR, the leading fixed/mobile alternative operator in Europe, more than 100 new mobile phone models are introduced into the market each year. According to Didier Sibille, head of mobile device qualification testing at SFR, “The mobile device is a pivotal component of the mobile service we deliver to customers. A phone that works perfectly helps to nurture customer loyalty and improves average revenue per user.” Outsourcing the testing of these increasingly sophisticated and personalized devices has enabled SFR to reduce unit costs by at least 15 percent, as well as industrialize the device qualification process.
The use of skilled workers at offshore locations is also a key to improving performance while lowering costs. With the increasing maturity of global sourcing, communications companies can transition much of the service delivery process offshore. For example, KPN, the leading service provider in the Netherlands, was challenged to invest in new, higher-bandwidth networks while concurrently maintaining its legacy networks and offerings. To maintain cost-effective management of its legacy network, KPN outsourced the operations of its narrowband service.
KPN has already achieved impressive results, including an increase in customer satisfaction, significant cost reductions and a 9 percent increase in quality of service. Employee motivation has also been strengthened, with those previously dedicated to narrowband provisioning reallocated to new technology projects.
These companies, and others around the globe, are discovering the value of network outsourcing in delivering business advantage through economies of scale, improved network performance and transaction-based pricing models.
Advancing a network outsourcing strategy
The best approach to extending a company’s use of network outsourcing is a strategic phased approach. Companies can start by outsourcing routine processes and work up to outsourcing more complex areas and operations as they become more comfortable with the new sourcing model and the quality of their network outsourcing provider.
To get started, think about how to apply network outsourcing in your organization. Initial conversations will most likely be centered on how outsourcing can support operating budget reductions. In this situation, companies should:
- Set new headcount and network operations budget targets and identify potential savings.
- Identify business processes that are no longer considered a core activity or a differentiating capability.
- Evaluate organizational changes that can enable valuable internal resources to focus on core activities and the generation of new revenue streams.
- Consider the specific network functions where outsourcing will have a meaningful impact on the budget and that are most likely to receive support from your company culture.
- Identify parts of the network organization that are unnecessarily fragmented and might perform more effectively in an outsourcing model.
When a preliminary plan has been developed, begin conversations with reputable network outsourcing providers. Ideally, find an outsourcing partner with broad experience and a strong track record in outsourcing across all functions, deep knowledge across telecommunications processes and operations support systems, established offshore delivery capabilities and a demonstrated ability to deliver operational excellence.
Creating the space for innovation
For network executives open to thinking outside traditional organizational boundaries, outsourcing has enormous value-creation potential. In provisioning, testing and more, network outsourcing can significantly reduce costs while improving network performance and quality. Network outsourcing can advance an operator toward high performance, making it more nimble and customer-centric, enabling a greater focus on product and service innovation, and keeping it a step ahead of its competitors.
About the authors
Gerardo Canta is the Europe, Africa and Latin America lead for Network Outsourcing in the Accenture Network service line, Communications, Media and Technology.*
Sebastiano Pardi is a manager with the Europe, Africa and Latin America Network Outsourcing team, Accenture Network service line, Communications, Media and Technology.*
*formerly Communications & High Tech
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