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"Operators should conduct a structured approach to renegotiating their contract well in advance of its expiry."
Phil Irvine, PA network sourcing expert

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Getting lasting success from managed services: a renegotiation plan for network operators

The last five years have seen an ever-increasing focus on network efficiency as the telecoms industry faces greater competitive and regulatory pressure. A ‘data wave’ triggered by consumer demand, and the availability of new spectrum, have prompted costly investments in new capacity and technology.

In the drive for cost-efficiency and performance improvement, the network environment now typically encompasses a range of bespoke relationships with third parties who provide ‘managed’ services. These services range from the provision of a managed application for a new multi-media service, for example, through to the operation of a full network.

The factors driving this evolution are gathering pace and this new network environment is here to stay. Both operators and vendors have learned from their experiences in the last few years. Operators’ businesses and what they need from their networks have undergone great change. Likewise, some equipment vendors have prospered and others suffered in the transition from providing equipment to providing services.

Today we are witnessing a new phase in this evolution as many of the initial, ground-breaking managed service deals come up for renewal. So, if so much has changed and your contract is due for renewal, choosing the right path is not necessarily straightforward.  

PA’s experience in this market suggests operators should conduct a structured approach to renegotiating their contract well in advance of its expiry. There are five dimensions to achieving this:

  • Conduct an audit of your supplier relationship. It is all too easy when supplier relationships appear to be failing to look only at the contractual metrics. However, supplier relationship problems can often occur because you are not sure about the most appropriate way of engaging with the service provider. Other causes are usually complex, involving a mix of misaligned objectives, organisations and operating styles, contractual shortcomings and a service offering that has not evolved to reflect the shifting business landscape.

  • Develop your sourcing objectives, strategy and options. The sourcing objectives for a legacy managed sourcing arrangement need to keep pace with business needs and supplier capabilities. In some instances, this may mean you will need to bring some aspects of scope back in house – but, in all instances, this should be planned by you, not led by your vendors.

  • Engage your supplier market on your agenda. The vendor community engages with operators constantly whereas, as an operator, you may only go to market for managed services every five years. This gives vendors an advantage unless you take steps to make sure you are in the driving seat. 

  • Conduct a market assessment and an audit of your capabilities. A market scan of the supplier environment is essential to understanding all your options. In addition, an internal capability assessment will help you define any new skills you need to support your supplier strategy, such as transformation programme leadership. 

  • Evaluate your risk and benefits; develop a plan for market/vendor engagement. A key component in executing your supplier strategy is to define the vendor engagement approach. In this emerging environment, you may have to coach some bidders to ensure a fully competitive field.

PA’s works with many different organisations to get the best results from their managed services contracts. Our clients include all the major fixed and mobile communications companies, equipment vendor and regulators. 

To speak to one of our experts about maximising the potential of your managed service contracts, contact us now.

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