Over 80 telecoms operators worldwide have outsourced elements of network build, maintenance and operations in the last three years as they chase cost savings essential to combat margin erosion.
However, the experience of both operators and vendors in contracting and successfully delivering managed services is in its infancy. There are risks in the contracting process that endanger a successful, best-value deal for both parties, and threaten the performance of the service.
To outsource network build, maintenance and operations successfully, you must be clear about the potential pitfalls of the process, and understand what steps you can take to avoid them and achieve network outsourcing success.
Our experience shows that a number of common factors contribute to the failure of network outsourcing:
Unclear requirements – the supplier may not understand your requirements, making it harder for them to deliver meaningful proposals that match the business need
A flawed business case – this may make outsourcing appear attractive but lead to disappointment when benefits fail to materialise
Reluctance to hand over responsibility to suppliers – this undermines accountability and creates opportunities to abdicate responsibility for under-performance
Poorly defined and complex performance mechanisms – these make it difficult for suppliers to implement the service effectively
Contracts that conceal extra costs – suppliers can take opportunities to charge you for additional services if the contract scope is misaligned to actual business requirements
Unrealistic expectations – it can be hard to develop and sustain a collaborative relationship based on common objectives if the service lurches from crisis to crisis
Loss of control over the customer experience – this can have an impact on profitability if managed incorrectly.
There are several keys steps you can take to avoid these pitfall and implement an outsourcing strategy successfully:
Understand what you hope to achieve through outsourcing, and include this in the sourcing business case. Decide whether the programme is about cost savings or getting close to customers. Consider whether partnership with another operator is a better option than outsourcing to a third party. And work out which processes should be outsourced and how you can package them to ensure a clean handover of responsibility
Front-load your effort in the early stages of the process to articulate your requirements clearly and make sure suppliers understand your objectives. Be explicit and prescriptive with the supplier about what you want and when
Collate a base set of data for suppliers. This enables you to take a consistent approach and avoids unnecessary work to reach a sound commercial model
Think of this relationship as a strategic and trusted partnership, rather than a transactional contract. The supplier you chose should have a close cultural and strategic fit, and both parties should take a collaborative approach throughout the process. Choose KPIs that allow the supplier to take responsibility and risk for the service
Get the outsourcing programme and contract right. Using a proven process for running the outsourcing programme will ensure you select the most appropriate supplier and have a robust contract in place
Get the best price by maintaining competition tension to the end of the process. You can lose 10% in contract discount if only one supplier is short-listed
Ensure that a robust contract is in place. Make sure you build in flexibility to avoid nasty surprises, with mechanisms to reinforce partnering behaviour
Maintain your relationship with the customer. The contract performance mechanism should track KPIs that have a fundamental influence on the customer experience.
To ensure that your network outsourcing arrangements are successful, contact us now.