BSS Applications Managed Services for CSPs. November 2012

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BSS Applications Managed Services for CSPs

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BSS Applications Managed Services for CSPs

This research programme analyzed the BSS managed-services market, exploring

applications-led services targeted at communications service providers (CSPs). The research has a

particular focus on application development and management (ADM) and application

operations (AO) trends and looks at a broad area encompassing billing, mediation, CRM,

ordering, self service, revenue assurance, fraud management and partner management.

The report evaluates CSP requirements for BSS managed services and provides an analysis of

global market drivers and managed services trends, with a particular focus on Asia Pacific,

Europe and the Americas. Research for the report included an online survey of 120 senior

executives within CSPs as well as in-depth interviews with over 30 companies including CSPs

and managed services providers (MSPs).

Because of the sensitive nature of the information, the identity of the CSPs has been kept

anonymous. The MSPs profiled in-depth include: Accenture, Amdocs, Atos, Ericsson, HP,

Huawei, IBM, Infosys and Tech Mahindra. The report includes a competitive vendor landscape

study and analysis of individual MSP’s market positioning, SWOT analysis and differentiators.

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CSPs Develop Appetite for BSS Managed Services

•Managed service model grows in popularity: In a global online survey conducted by ITM,

87% of respondents said that they already work with or intend to work with a managed

services provider (MSP) in the next three years; 46% of respondents are already in an active

relationship with an MSP for BSS.

•

•There is more to managed services than cost cutting: Cost reduction and management of

capex and opex, of course, are important market drivers for CSPs using the managed service

model. But service quality, innovation, domain expertise and the experience and

understanding of the CSP business is as important as cost-related drivers.

•

•Managed service providers as partners, not suppliers: CSPs need to see their MSPs as

trustworthy, transparent and flexible so as to create a holistic and agile approach to their

application and product development. But responsiveness is also important – the ability to

respond with speed to competitive action or negative customer feedback is vital for CSPs.

•

•CSPs prefer to work with an MSP that is able to act as prime to manage multi-vendor

relationships: Growing perception of CSPs that it is important for an MSP to be able to

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Testing the demand for CSP appetite of BSS

managed services

Online survey of CSP requirements for BSS managed services, May 2012 – 120 respondents

Region

No of CSP interviews and countries

Asia Pacific

Five: Malaysia; Indonesia; India; Bangladesh

Europe

Seven: Germany; UK; Netherlands; Switzerland; Finland

Americas

Six: USA, Brazil, Chile

Rest of the World

Two: Israel; South Africa

Profile of CSP interviews, June/July 2012

Split of respondents, by company type Split of respondents, by job type

Source: Informa Telecoms & Media

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Key themes from CSP interviews

•Cost, quality and speed need

to be considered together, and not in isolation.

•Growing perception of

CSPs that no one supplier will deliver best-of-breed in everything and they generally accept the management of multiple relationships.

• A mature MS market has to

be built on a partnership approach, which, in turn, is built on trust. Result of partnership must be development of roadmap.

• “Your mess for less” is a

principle of the past. Domain expertise and an

understanding of the CSP business are now as important to CSPs as cost.

More to

managed

services than

simple cost

reduction

Trust,

partnership and

transparency

are pivotal to

CSP-MSP

relationship

Managed

service

demands have

evolved and

matured

A place for best

of breed

solutions as

well as

integrated

supplier deals

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6

Regional differences in CSP attitudes

North America

 CSP maturity in use of MS and IT environment

 Understanding of CSP-MSP partnership approach and how this can develop joint application development, testing and implementation

 Greater flexibility in funding models, development speeds and product lifecycles

Europe

 Use of MS has been more about drive for efficiency

 Culture that remains nervous/ suspicious of an MS approach with customer data too valuable to “outsource”

 Perception that use of MS can hold back differentiation

 Use of MS is still widespread, and it is up to MSPs to show they can be responsive and act as a flexible partner rather than a supplier to change this perception

Asia Pacific

 More aggressive attitude to MS is more likely in this region where legacy systems care often less mature

 CSPs have appetite for MS so that they can concentrate on core business issues, i.e., strategy/marketing

 Intense competition across the region, and especially south Asia, means there is a need for CSPs to reduce costs while maintaining quality and, most importantly, speed to market

 Enthusiasm for working with a single integrated MSP to work with “best-of-breed” suppliers

Latin America

• CSPs held back by risks involved in major transformation programs because of legacy systems

 Culture is to keep operations in-house, but this is changing as CSPs consider new business models and services

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Survey findings on managed service drivers

Do you currently outsource or use managed services providers

for any of the following areas of BSS? In which areas of BSS are you most likely to work with an MSP in the _{next three years?}

Question: Using the two statements below, can you describe which best fits your company’s approach to managed services?

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View from Malaysia

Managed services market has played its part in operator growth:

• Improved billing system • Segmented marketing strategy • Focus on mobile broadband • Partnering with MVNOs

Investment in IT infrastructure is pivotal to the above.

Why work with a MSP?

1. Allows CSP to focus on core business

2. Improve IT operations with help of best practice experience and expertise

3. Economies of scale

MSP must have the following skills:

1. Vendor management skills 2. Risk sharing commercial model 3. Long-term strategic partnership

A relationship purely driven by cost reduction is less likely to deliver service quality improvements.

“There must be more emphasis on service quality improvement and less on cost reduction.”

“We would like to shift as much to a managed services provider as possible and focus instead on marketing and strategy.”

The CSP would like to outsource more BSS operations and shift more internal resource towards marketing and strategy. A typical requirement of a Tier 3 operator.

The CSP would prefer to work with a single partner to help streamline its BSS processes and reduce time spent on partner management, but the reality is that it works with multiple partners because vendors vary markedly in terms of their strengths.

Why work with a MSP?

1. Allows CSP to focus on core business

2. Dynamism of technology evolution means enhancing IT operations is an important market driver

3. Working with an effective MSP should help to control capex management

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View from UK

Questions CSP should ask itself before entering into MSP relationship:

1. How strategic is the service that is being outsourced? 2. How useful would it be for CSP to retain control?

General view: this CSP is largely against MSP relationships as it wants to protect its differentiation. Service delivery is

important in terms of providing the best platform for services and the best content; this group feels working with an MSP can affect this differentiation. Managed services can lead to

standardized solutions and platforms, which is in direct contrast to the group’s goal of differentiation.

Managed services works better with Tier 2 CSPs that need to catch up with market leaders, or greenfield operators.

This quad-play operator had a culture that was once opposed to “outsourcing”. This view changed as it became clear for the need to respond to market changes quickly became vital, which drove a company-wide automation and efficiency initiative. During this transition, managed services became widely used as it became clear for the need of a holistic approach to IT projects.

Requirements of an MSP:

1. Flexibility is crucial: There is not always a rigid formula to application development and management.

2. Success of managed services is not simply about time to market: Responsiveness to market is more important. 3. MSPs must be flexible around pricing: Would an MSP

respond to an extra year on contract for a lower annual fee?

“During a business transformation, if you go down the managed services route, you will not transform the business.”

“We work with vendors that have a partner attitude. If the relationship helps to save money and helps the customer experience, then there is value in a managed services relationship.”

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View from USA

• This CSP is a heavy user of managed services. Its use of managed services does not follow a rigid policy: each project is evaluated at the outset and the best approach to the development cycle is assessed. This might mean the project is developed and run by a managed services provider,

developed in-house and handed off to a managed services provider or developed and run in-house.

• The operator’s IT environment is very mature and it is this maturity that makes a holistic approach possible. That said, detailed oversight of any such relationship is vital: however much the provider may be trusted, vendors may make different decisions from operators.

• The only areas for which the CSP would not currently consider using an MSP are revenue assurance and fraud management. These areas are deemed to be too “close to home”.

A managed service solution should always feature a roadmap for every development and management cycle.

Middleware is and will be kept in-house in this CSP’s highly-integrated environment where a best-of-breed attitude is prevalent. In order to support the flexibility that is now needed as part of a company’s strategy, contracts are being renegotiated early in order to build this in. Five-year contracts are difficult to justify in the current uncertain climate.

Cost reduction is the main managed services driver. But the relationship between CSP and MSP will only work if there is trust. The reason trust is so important is because, if a service has been outsourced, it makes it very difficult to move or bring that process back in-house.

“When it comes to operations, job management, billing cycles and management of customer databases, we treat MSP staff as our employees.”

“At the moment there is a tendency towards bringing processes in-house, mainly because of the very strict SLAs around availability to which vendors are unwilling to sign.”

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View from Brazil

• This CSP has started to work with MSPs on CRM and OSS; CRM solution to support fibre network recently became first of the group’s IT service to be outsourced. As the business evolves, it is likely that it will implement MS across other functionalities.

• Brazil is an ultra-competitive market and all interviewees referred to the importance in improving time to market for new products and services as an important driver for MS. Other main drivers include cost reduction and enhancing IT operations through the use of best practice and the domain expertise of the MSP.

• Working with an MSP can lead to the fragmentation of the CSP’s IT infrastructure with different solutions, platforms and vendors creating a difficult legacy process to transform. But it must be transformed to something that is more agile – the question is whether CSPs should leave it to third parties to lead this transformation.

It is important that MSPs are global with the knowledge and global presence to base its agility, project management expertise and IT services knowledge.

• CSP is aware that if it is to be more technically competitive, transformation of architecture is necessary, and especially if it is to enhance customer experience. However, this will not happen without C-level support: problem is whether C-level will support this transformation.

• As a policy on managed services, this CSP prefers a single supplier for ease of negotiation and management.

• Cost reduction is important to managed service contract but only if it also delivers value in terms of service enhancement.

It must be evident early in negotiation with an MSP that the vendor truly understands the nature of the CSP’s business and its particular objectives and challenges.

“The ability to be agile and the existence of proven project management expertise across many different types of markets are key differentiators for any MSP.”

“Increasingly, the ability for an operator to be agile will become paramount to its success....there is an opportunity for MSPs to help telcos evolve and meet changing consumer demands.”

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CSP trends in summary

Knowledge

BSS managed service model becoming more popular with CSPs: 46% of SPs work with an MSP for BSS. The most common applications are CRM, billing and mediation; self

service has strong growth potential.

There is more to BSS managed services than cost cutting: service quality, innovation, domain expertise and the experience and understanding

of the CSP business are as important as cost-related drivers

MSPs are partners, not suppliers: trustworthiness, transparency and flexibility are all

important MSP traits but responsiveness is key. Ability to respond with speed to competitive

action or negative customer feedback is vital for CSPs

Single integrated solution may be ideal, but general perception that best of breed is a more realistic

approach: CSPs becoming flexible as to what is outsourced

and what stays in-house, and whether to move to unified

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Market drivers

•The emergence of BSS applications managed services has to be seen in the wider

context of network and service management, mirroring trends in the network domain

where operators, faced with increasingly complex infrastructure and the need to control

investment spending, began looking to the network equipment vendors (NEVs) to

manage their network hardware.

•Recent developments, such as all-IP networks and the rollout of LTE in particular, have

created similar pressures within the service domain; however, the range of potential

outsourcing suppliers is more diverse than it ever was in the network domain.

•Technical complexity and cost control and the investment required to build a new BSS

infrastructure are major considerations for operators looking for differentiation in

saturated markets. In addition, the uncertainty that services supported by these new

systems will actually prove profitable adds further weight to the attractiveness of the

BSS managed-service model in terms of risk reduction.

•The new market for managed BSS services is not just about managing platforms,

however. The need to incorporate legacy systems as well as develop and roll out

bespoke services has given rise to the concept of application development and

management (ADM) and application operations (AO), both of which are becoming

increasingly important capabilities in vendor offerings.

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BSS managed services market definition

•Informa’s definition of BSS managed

services for the purposes of this report

excludes both BPO and IT

infrastructure-related managed services, including data

center services, data management and

delivery systems such as service delivery

platforms, and hosted telecoms enterprise

apps.

•Informa’s definition of BSS managed

services includes not only ADM and AO but

also some associated planning, consulting

and integration. BSS managed services

business is predominantly made up of ADM

and AO but also includes some closely

associated planning, consulting and

integration business. Stand-alone

consulting and SI revenues are not

included.

BSS Managed Services definition excludes:

- BPO

- IT infrastructure services

- Data center services

- data management/delivery systems (service delivery

platforms etc)

- hosted telecoms enterprise apps (eg workforce

management, supply chain etc)

Categories of BSS Service included:

-Billing

-Charging

-CRM

-Ordering

-Self service

-Partner management

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The rise of ADM and AO

•Application development and management (ADM) and

application operations (AO) are concepts which many –

although not all – MSPs use and recognize as key

parameters.

• Amongst CSPs there is a greater propensity to use MSPs

for ADM in most categories of BSS although the variance

is not large other than with billing. CRM an exception

where CSPs keener on AO than ADM

BSS Applications

managed services

ADM

All non-operational activities related to management & maintenance of BSS applications, including: - Design - Development - Testing - Support - Training - Migration/conversion

AO

IT-oriented operational activities related to the management of BSS,

including:

- Monitoring and control of IT systems

- Ongoing IT support

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Applications managed services focus

• Within the Managed Service Provider (MSP) community ADM and AO are

particularly popular as concepts where an MSP is ‘application-led’ but less so where

the MSP is chiefly concerned with systems integration or consulting.

• The rough proportion of revenues derived from ADM and AO indicates the extent to

which each player is ‘application-led’ or ‘services-led’ While this can only give an

indication of the focus of a given player, it is useful as a guide to the style of operation

and also to the positioning of the MSP.

• On this basis, the application-led managed services providers include companies

such as Amdocs, Tech Mahindra, Infosys and, to some extent, Wipro and Tata

Consulting.

•On the other hand services-led managed services providers include companies such a

Accenture, IBM, Atos and HP.

• All of the above MSPs are profiled in the report.

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MSPs moving away from traditional model of

platform-specific management

•Increasingly, BSS MS are moving away from the

concept of outsourcing a single entity (such as a

billing system or CRM)

•Instead moving towards developing and managing

applications which extend the capabilities of those

platforms and support a variety of different

services + improve customer experience and

enable interaction with customers in real time

•The range of MSP outsourcing suppliers in OSS/BSS

space more diverse than in the network

outsourcing domain:

•

Telecoms IT players building on dominant position in

billing, CRM and fulfilment systems

•

Network vendors, hardware vendors strengthening

OSS/BSS positioning

•

Pure IT & services companies repurposing existing IT

expertise

•

Consultancies & SIs capitalizing on lack of clear

standards for interoperability

This partly reflects CSP

preference for a single supplier

with an integrated solution

although in a mature MS

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Big Beasts dominate the BSS MS space

•A small number of players account for a large proportion of BSS MS revenues: The BSS

software market may be fragmented but, from a MS perspective it is dominated by small

number of players

• Some MSPs are telecoms industry-focused such as Amdocs or Ericsson. Others are SI and

IT generalists such as Accenture, IBM or HP

• 2 main approaches:

•

Solution-driven strategies: where a suppliers platform is the starting point for a broader MS offering.

Familiarity with the platform & product lifecycle are a plus but potential issues around application

responsibility or vendor lock-in

• Consulting-led approach: where apps development is part of strategy-level rolling process aimed at

transformation. Has advantage of starting from a vendor-agnostic standpoint but: i) potential lack of

specialist knowledge, ii) impact on efficiency of integrating point solutions, iii) difficult for client to

influence the development roadmap

•In the BSS space the functionality of software has rarely been the be-all and end-all:

much of the value of a typical contract has always resided in integration and product

support rather than the software itself, hence importance of global reach, telecoms sector

expertise and service flexibility.

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MSP trends in summary

MSPs move away from traditional model of platform-specific management: Increasingly, BSS MS are moving

away from the concept of outsourcing a single entity, such as a billing system or CRM, to developing and

managing applications which extend the capabilities of those platforms and support a variety of different

services, as well as improving customer experience and enabling interaction with customers in real time.

The rise of ADM and AO: Application development and management (ADM) and application operations (AO)

are concepts which many – although not all – MSPs use and recognize as key parameters. They are particularly

popular where an MSP is “application-led” but less so where the MSP is chiefly concerned with systems

integration or consulting.

Two main MSP strategies predominate in the sector: Solution-driven strategies where a suppliers platform is

typically the starting point for a broader MS offering and a Consulting-led approach where apps development is

part of strategy-level rolling process aimed at a broader transformation.

Big Beasts are best positioned to dominate BSS MS space: A small number of players account for a large

proportion of BSS MS revenues. The BSS software market may be fragmented but, from a managed services

perspective, it is dominated by a small number of players. Some are focused on the communications industry,

such as Amdocs and Ericsson, or are SI and IT generalists, such as Accenture, IBM or HP.

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Thank you

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