Mobile network operators face an increasingly difficult market. Challengers such as Google and Apple threaten to turn operators into commodity suppliers of cheap high speed mobile broadband.
A common response from operators is to radically reduce costs and push their networks to the limits treating them as commodity assets. However, the network should also be used to drive service innovation and be a source of competitive advantage.
To achieve cost reduction, many operators outsource or share some part of their networks. However, delivering innovation from an outsourced or shared asset is often difficult. This is evidenced in the IT industry, where our International Outsourcing Survey found that only one third of outsourcing providers deliver on their innovation promises.
Delivering innovation in a mobile network is significantly more challenging than in an IT environment. For example, to enable a network to support real-time tariffs that change depending on the traffic load is a complex undertaking. This requires capabilities that often do not exist with sourcing providers and therefore innovation essential to the business is hindered.
So is the reliance on a few existing supplier arrangements hampering innovation? Could embracing a wider set of supplier relationships help? We advise operators to:
Review the costs and benefits of your sourcing strategy to ensure an effective approach to innovation. Assess this across the key dimensions of geography, business function, technology and product lifecycle stage. For example, you can gain efficiencies and encourage innovation by creating a separate function, working across multiple geographies, with responsibility for the design and build stages of the product lifecycle
Assess the case for bringing aspects of your sourcing arrangements in-house or engaging a specialist supplier. This will allow you to establish whether current performance could be improved upon by creating a mix of external, in-house and specialist sourcing arrangements
Match the type of contract to the relationship required. For example, a different type of contract will be required to manage complex services that help the operator differentiate itself in the market versus commodity services.
How the operator differentiates itself must not be lost in the sourcing agreement and contracts should reflect the need to foster innovation
Ensure your retained organisation has the necessary resources, skills and capabilities to manage a more complex mix of suppliers. With operators increasingly depending on the services of suppliers, the retained organisation becomes ever more important in managing the supply arrangements. This will guarantee that functions are carried out cost effectively and the operator remains agile and innovative.
It is necessary for all operators to reduce the costs of running their networks, but this is not sufficient in itself. Networks also need to be the source of innovation and competitive advantage.These potentially conflicting goals can be resolved if operators take action to optimise their outsourcing arrangements.
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