In part one of this blog I looked at the drivers for the transformation of service provider businesses. I laid out the case for reviewing and revisiting their approach to the market, and how strategic outsourcing can transform how they operate.
I really believe the time is right to use outsourcing to develop new and nuanced business models. Service providers need to refocus on creating agility in their businesses, and look at how they are going to address new market opportunities.
Deciding what to outsource and who to partner with is central to making the transformation a success. Service providers should look at what is really core to their business, then choose transformation partners that can support the other elements of their businesses.
So, what should service providers focus on when transforming their businesses?
- Strategic Redirection – Service providers should look at lines of business that are no longer core to their strategy. These lines of business may have been maintained for either top line revenue or margin contributions. Service providers should decide if investment in these lines of business can be redeployed elsewhere, and whether it’s possible to reduce costs and risk by outsourcing these lines to a partner. This approach frees the service provider to focus on its core business while maintaining the positive contributions of these lines of business.
- Transition from Legacy Infrastructure – Service providers should accelerate migration and transition from legacy network platforms. This enables them to control and reduce costs, whilst driving a faster pace of platform change. As the network moves to both virtualised and software-defined environments, service providers are faced with operating TDM and IP networks at the same time. They need to serve customers on both infrastructures, but operating them in parallel is inefficient and costly. There’s an opportunity here to bring in a partner to manage the transition of the network. Crucially, they can offer a service evolution strategy to support these changing market requirements. Transformation partners take ownership of legacy infrastructure whilst providing the scope to deploy new services.
- Global Operations – Beyond infrastructure management, service providers should focus on core operational costs: PoP management, remote vendor management, provisioning, and customer support. Outsourcing these elements reduces costs while enabling efficient geographic growth and an end-to-end customer experience that is consistent with the partner’s home market service offering.
- New Service Deployment – Developing and integrating new services can be resource intensive and time consuming, including the full quote-to-cash process. Today there are a lot of opportunities to look for the support of a transformation partner to support the deployment of services like unified communications and network security. With the support of a partner, service providers can rapidly monetise new services and increase time-to-market.
Transformation programmes are about service providers deciding what is non-core in their business and finding a partner they can trust. For most service providers this requires significant mind-set shift. Ultimately, it leads to a better competitive edge, based on the strength of their decision making and partnership strategy.
I see a new wave of service providers emerging that are ultra-lean, with a portfolio of trusted partners to support them. They own the customer relationships and are responsible for executing but have the long-term support of expert partners to manage component parts of the infrastructure and technology platforms.
Each element of the business has to be evaluated as either a core competitive differentiator or determined to be critical business component. The rest should be assigned to a transformation partner. Service providers that are built to succeed in the long term will look at what they do best and what is essential to their business, and then selectively outsource the things that aren’t creating value.
This will all lead to an agile, cost-efficient and sustainable business; outsourcing will be the defining characteristic of service providers that are successful in the future.
What potential do you see being opened up by outsourcing? Let us know in the comments below.