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Offering network management and applications performance services

Service providers must deploy next-gen technologies and put network management and application performance services in place if they plan to stay competitive and increase revenue as enterprises look for help from third-party providers to transform their own business models.

As companies deploy next-generation technologies to support more efficient and effective business operations, their IT networks are becoming highly distributed and increasingly complex. But with budgetary pressures forcing organizations to justify every dollar spent on IT, businesses are becoming more creative in how they deploy new technology and manage their enterprise infrastructures.

One result of this shift in thinking is that more businesses are becoming comfortable with the concept of outsourcing tactical IT functions to a trusted third party while they maintain internal control of strategic technology initiatives. This has produced a sharp up-tick in demand for managed technology services. This is a tremendous opportunity for telecom service providers with the underlying technology, expertise, economies of scale and existing customer relationships to provide the economical services their business clients need to help them compete and win in often-challenging markets.

This SearchTelecom.com Expert Lesson examines how telecom providers can exploit the growing desire for managed services by delivering the right network management and application performance services to support the kind of transformative business models their customers are building.

 In this series:

  Enterprise challenges provide managed services opportunities for telecoms
  Traditional vendors turn to managed services tools for transformation
  Managed services require service provider/vendor interdependence
  Telecom carriers drive business revenue with new mix of managed services


  Enterprise challenges provide managed services opportunities for telecoms  

The talk of limitless economic growth that once dominated water-cooler conversations has given way to rumblings about challenging economic times. Concerns about how the credit crunch will affect corporate and consumer IT spending in general and telecom investments in particular are certainly valid as businesses reassess their priorities and reverse course on some expensive projects.

Despite this general belt-tightening, or perhaps because of it, many companies are going ahead with ambitious technology plans to remake their organizations into more resourceful, agile and responsive businesses. The Telecom Industry Association (TIA) estimates that the U.S. telecom industry will expand at a compound annual growth rate of 9% between 2006 and 2009, hitting the $1.2 trillion mark by next year.

The impetus behind this expanding investment in telecommunications is clear: Facing competition from new fronts in a global marketplace, firms across all industries and sectors are reshaping their operating models to take advantage of the flexibility the Internet and associated technologies offer.

Established companies are exploring new avenues in wireless and wireline technologies in order to erase geographic boundaries, slash costs, improve processes and react faster to shifting market dynamics. The very definition of what makes up an enterprise is changing as organizations open up access to internal resources to third-party partners, contractors and customers to lower costs, improve response times and accelerate their time-to-market with new products.

Outsourcing non-core IT functions

As enterprise networks become even more distributed and complex, wrapping in converged communications, more and more companies are looking to outsource the non-core IT functions that traditionally have been handled internally, or to use third parties to provide the value-added capabilities they lack the resources or internal competence to manage themselves.

Managed and IT services resources
Best practices for service delivery: Translating customer needs into network services

Deploying next-gen applications beyond video

Selling the CIO on the service provider as business continuity partner

The result is soaring demand for managed applications and other technology services that telecom providers are uniquely equipped to offer. This growth is expected to continue into the next decade, when -- industry estimates project -- as much as one-fifth of all IT operations will be outsourced to a third party.

This presents a unique opportunity for service providers that can step up to the plate with the right portfolio of managed services. These services run the gamut from classic hosted server support and collocation services to remote network monitoring, from managed applications delivered via a subscription-based Software as a Service (SaaS) model to specialized delivery of video and other dynamic content to consumers.

New companies just coming online are being built from the ground up to tap into the Web to create almost a virtual operating model where everything but their most strategic capabilities are out-tasked to an external provider, including most of their IT functions. Concepts like cloud computing, where a company accesses files stored at a remote location over the Internet, and on-demand application services, where software is hosted at a provider's data centers and delivered over the Internet, make it possible for businesses to tap into the latest and best technology without having to make a sizable capital investment in the hardware or enter into a lengthy and expensive licensing deal.

Seizing the opportunity

Service providers ranging from the smallest regional business to the largest international carrier are trying to seize this opportunity to build a business around managed services that cater to customers looking for expert third-party support to help them. Managed services in areas including managed security, where businesses need protections from threats but too often lack the appropriate internal expertise to defend their resources, are in high demand. Similarly, many managed service providers find that their best customers are other providers that need support to help them enhance some aspect of their own offering. For example, a hosted Microsoft Exchange provider may seek out a content delivery network provider that offers application acceleration it can use to expedite mail delivery.

The number of providers getting on the managed services bandwagon seems to grow by the day. But establishing a successful managed service requires much more than a carefully crafted marketing message around a hot service area. IT service providers also need to have the technology foundation and the right technology tools to support the kind of stable, secure and high-performing service delivery that enterprise customers require. And of course service providers will need the back-end tools to provision those services quickly and handle the billing and account management necessary to support clients.

To this end, telecom equipment and software vendors supply the solutions that providers need to make a go of it in this intensely competitive space. These products include everything from appliances to high-end switches and sophisticated software. Naturally, providers need to follow the same rule as their customers in adapting third-party solutions versus building and maintaining it themselves: Only go to a third party for a piece of equipment or a software application if it is more economical than creating, deploying and maintaining that aspect of the service internally.

These investments can pay big dividends to providers able to deliver the services the market demands. But first, managed services providers need to make sure they have the groundwork in place to support these new services.



  Traditional vendors turn to managed services tools for transformation  

Any telecom provider that wants to be a serious player in the higher-margin managed services space and steer away from commodity services needs to make sure it has the solid and secure foundation to supply the kind of personalized solutions the market demands. Today, many of these services are focused specifically around content, including the delivery of bandwidth-intensive video and voice. Established players have an obvious advantage over greenfield providers in that they have the existing infrastructure to build on to offer managed services around content. But the dynamic nature of much of this content and the continual changes in their customers' needs are pushing providers to find ways to work new technologies into their existing networks to provide the flexibility, speed and control they need in order to thrive in what can be very competitive markets.

In an effort to capitalize on the demand for next-generation managed services while preserving their legacy investments, service providers are looking to their equipment and software vendors to supply them with more than just products. Operators expect their vendors to act as partners, offering them expert guidance on how to coalesce new technology around their existing infrastructure. Service providers often turn to vendors that possess complete end-to-end solutions that can support the kind of transformative services operators are launching, extending beyond switches that can support SLA-based Ethernet services to include network management applications, operations support systems (OSS), professional services and consulting help. The end goal is not just to get new managed services to market faster in order to gain an edge over rivals, but also to effectively leverage much of the software and other technology already in place to deliver managed services using a cost-effective model.

Service delivery platform flexibility

This means having a service delivery environment that provides stable support for secure, high-performance applications with enough flexibility for providers to make rapid changes in response to evolving market issues. Increasingly, telecom operators are turning to vendors and consulting partners to help them implement a service-oriented architecture (SOA) in their service delivery platforms to support this kind of agility. SOA takes a more efficient and flexible approach to software design than conventional models, typically using Web services to get individual software components responsible for discrete processes to work together to facilitate more effective and rapid end-to-end application development. Service providers can actually reuse existing components to accelerate software development and deploy new managed services, helping them beat rivals to market with new offerings.

The necessity of good OSS/BSS

Getting to market ahead of the competition also requires that operators have a sophisticated onboarding solution -- automated software to quickly provision services for new users. These solutions allow carriers to tap into their own internally developed applications and third-party software. Providers rely heavily on their operations support systems/business support systems (OSS/BSS) that link into legacy systems and applications to optimize internal systems and processes to launch new services, provision new users, and provide differentiated support for customers through a variety of mechanisms, including the kind of personalized Web portals that give clients an element of control over their services.

OSS/BSS give operators a mechanism for streamlining device and content management in order to meet service level objectives that support optimal content delivery and minimal service interruptions. Operators also depend on their business support systems for efficient billing and payment processing. At their best, OSS/BSS give operators a way to automate service delivery and the underlying operations that support those applications, lowering service provider costs and helping ensure maximum customer satisfaction and retention.

Operators also seek out vendor partners for consultative guidance ranging from network assessments to evaluating what changes in their current network infrastructure are required to support next-generation service delivery to architectural design. Many vendors also play a role in helping their operator customers enlist other third-party vendors and service providers to help deliver services to their customers.

Providers working with providers

One of the more interesting aspects of the fluid managed services environment is the fact that operators themselves may opt to use another operator's offering to enhance their service delivery or even outsource some elements of their services to a third party. For example, an SaaS provider may sign on with a content-delivery network that offers IP application acceleration services to expedite hosted messaging delivery. A managed services provider targeting the financial services industry might enlist a hosting partner that provides PCI-compliant services.

Most operators today carefully craft their own ecosystem of partners who will help them fill in their own service gaps and extend their reach by enhancing their native capabilities. Third-party partners, whether they are service providers or vendors, can also supply some important client connections and even guidance on where their best opportunities are. Through these alliances and this expert advice, operators have the best chance to exploit demand for the kind of next-generation services that will help them meet their profit targets.



  Managed services require service provider/vendor interdependence  

No operator succeeds in the managed services arena as a solo act. This interdependence among partners holds true whether the service provider is a Tier 1 carrier or a fledgling regional provider. To reach their full potential in this fast-changing and often cutthroat market space, operators rely on solid partnerships to target the right customer set, accelerate time to market with the appropriate set of services, and deliver personalized content in a rapid, reliable and secure fashion.

Operators rely on relationships with both independent software vendors and other service providers to expand their managed services portfolios, reach customers in new markets, and adjust quickly to continuously evolving demands. These services can run the gamut from mobile offerings aimed at the so-called "millennial" consumers born between 1980 and 1994, to standard desktop productivity software delivered using an on-demand model, to high-end vertical industry applications. Large operators often turn to third-party providers to plug a geographic or capability gap in their own portfolios. Smaller operators look to third parties to help them expedite the launch of a new service, often with an extended network reach or prepackaged applications that can help them cut down on development and deployment time.

SaaS lures providers with financial appeal

On the Software as a Service (SaaS) front, the financial appeal is clear. Industry estimates peg the market for on-demand applications jumping from about $8 billion this year to more than $16 billion in just four years. This is producing a huge influx of providers from the telecom space eager to capitalize on swelling demand and the potential for thick profit margins. Hosting providers looking to capitalize on their data center facilities and alliances with telecom operators are following suit, rolling out new managed applications services. Most of these new services focus on the small and medium-sized enterprise customer, but a number of operators are also testing the waters, both at the higher end of the scale and with consumers.

So with the trend moving away from the conventional licensed software model toward a subscription-based service delivery model, software vendors are also beginning to move outside of their traditional comfort zone to use operators as another increasingly important channel for their products. Vendors including Microsoft have gone as far as building specific platforms that cobble together collaborative and communications applications in areas like messaging and presence management for hosting providers to use to deliver on demand as managed services. Software vendors often make it easier for operators to deliver different tiered packages to their customers based on different features or service level requirements.

SaaS enablement offers packaged business apps

A specialized subset of companies offer SaaS enablement solutions, which provide operators with packaged business applications along with supporting billing, provisioning and other tools to help speed up new service deployments to enterprise or consumer end-user customers. SaaS enablement providers often target smaller regional telecom providers looking to move up the value chain by offering more advanced services. This not only helps them increase their average revenue per user (ARPU) and pad their profits, it also expands their base and reduces customer churn.

These and other new managed services built on IP, high-speed wireless and other important enabling technologies are helping establish an entirely new paradigm for both existing and startup businesses by providing a new way to communicate internally and with customers, partners and suppliers. Not only do these offerings alter the way companies manage data, they also supply the foundation for entirely new operating models where much of what used to be managed within the confines of the enterprise is now outsourced. Companies can also leverage next-generation services to deliver goods and services quickly to customers, many of whom are located in geographic regions that would have been beyond reach with more traditional distribution mechanisms.

In today's rocky economic landscape, businesses are looking for every opportunity to improve their operational efficiencies and find new, still untapped sources of growth. Operators are seizing on this demand to launch new managed services they hope will help them retain their existing client base, expand their customer bases and build out new revenue streams.

The most successful of these services offer personalization, often through a customer portal that gives clients an important sense of control over their services and helps minimize some of the administrative functions that can be handled by the provider. The telecom providers that are most likely to thrive in this marketplace harness this personalization, along with a careful blend of underlying infrastructure technologies, tools, methodologies and carefully cultivated partner relationships to create a stable, high-performing and secure managed services portfolio built for the new millennium.



  Podcast: Telecom carriers drive business revenue with new mix of managed services  

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Offering a new mix of managed services from the usual suspects to IP-enabled services gives telecom service providers new ways to increase revenue as well as use their network capabilities to differentiate themselves from their competitors. In this podcast, Current Analysis Internet/Managed Services Principal Analyst Amy Larsen DeCarlo discusses why managed services are a growth market, even in a down economy, especially for carriers who can offer quality of service (QoS) guarantees to enterprise customers of any size.


About the author: Amy Larsen DeCarlo has covered the telecom and IT markets as an analyst and journalist for more than 15 years. She is currently the principal analyst of Internet/Managed Services at Current Analysis, where she focuses on the managed services sectorm including hosting, security, applications and storage. She also tracks Internet services including streaming media, CDN, and messaging.

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