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Network equipment providers Changing the Communications Ecosystem?

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  • 1. Network Equipment Providers Changing the Communications Ecosystem?Rebecca Watson, Program Manager Communications Infrastructure and Convergence October 27, 2010

2. Contents1.Introduction 2.Network Outsourcing Description 3.Outsource Business Model 4.Outsourcing Drivers and Restraints 5.NEP Outsource Strengths 6.Network Outsourcing Wins and Observations 7.NEP Outsource Challenges 8.Service Provider Outsource and NEP Outsource Considerations 9.Long Term Implications of Network Outsourcing 10. Final Observations2 3. Introduction3 4. Network Outsourcing - A DefinitionStratecast defines network outsourcing as an arrangement between the CSP and its network outsource vendor whereby the NEP is responsible for total network operations and maintenance. Other facets of a total network outsource arrangement may include: Planning, design and build out of new networks Planning, design and implementation on existing networks for capacity builds, new technology implementation and/or complete outsource of portions of the networks 1st level network operations support functions 2nd level and above support functions Long term contractual arrangements Asset and personnel transfer Risk and Revenue Share Arrangements4 5. The Traditional and New Outsource Arrangement 5 6. Business Model ComparisonTraditional Outsource DetailsTotal Outsource DetailsCSP is decision maker for content of and timeline forOutsource vendor is responsible for network upgrades and network upgrades and patches maintenance CSP is responsible for negotiation with and managing ofOutsource vendor is responsible for re-negotiating and/or network, IT, hardware, software other the entire vendorassuming other vendor maintenance contracts and maintaining ecosystemother vendor equipment Outsource arrangement is typically for new network,Outsource arrangement is for management and maintenance of network expansion and/or upgrade legacy infrastructure and may include network upgrade Short term contract length; 1 to 2 years Long term contract length; 3-10 years or more Outsource contracts with multiple vendors; one for network,The CSP has a contract with one or two outsource vendors are one for billing, etc.the primary outsource vendors are responsible for other networkand/or back office vendor equipment, contracts, and SLAenforcement, etc. CSP is ultimate decision maker for network design andOutsource vendor has ultimate responsibility for network design implementation and implementation CSP network and IT personnel perform various planning, Outsource vendor provides entire staffing for management, installation and other dutiesmaintenance and upgrades. CSP network operations staff and outside contractors are Outsource vendor may hire CSP staff as well as employing the responsibility of the CSP including payroll, benefits, and internal staff and/or contractors other human resource functions. Contract negotiations with other network and back office Outsource vendors either assume existing contracts with other vendors are the responsibility of the CSP and payment is the vendors and/or renegotiate new terms and are responsible for responsibility of the CSP. payment. CSPs provided all customer-facing support functionality. The outsource vendor may have one or all level customer-facingsupport responsibilities. Disparate customer support systems were used; one by the Single system back office systems are used by the outsource CSP and one by the outsource provider. vendor and CSP. 6 7. Outsource Drivers Ranked in Order of ImpactRank Driver1 - 2 Years 3 - 4 Years5 - 7 Years1 Reduction of costsX X X 2 Acceleration of revenue and X X time to market3 New technologyX X implementation4 Sharing and reduction of risk X X 5 Ability to bring next-X generation networks, applications and technologies to market quicklySource: Frost & Sullivan. 7 8. Key Drivers SummaryCostsRevenue GenerationImplementation NewBringing of TrendsTechnologyRisk Sharing Applications to Market Quickly Source: Frost & Sullivan.8 9. Outsource Restraints Ranked in Order of ImpactRank Restraint1 - 2 Years 3 - 4 Years5 - 7 Years1 Internal culture X X 2 Cost effectiveness X XX 3 Due diligence requirements X XX 4 NEP risk assessmentX XX 5 Ability of NEP to provide X services effectively and efficientlySource: Frost & Sullivan.9 10. Key Restraints Summary CostEffectiveness Due DiligenceCSP Culture NEP Risk AssessmentNEPCapability Source: Frost & Sullivan. 10 11. NEP Strengths in Network Outsourcing Ability to support a multi-vendor environment Global infrastructure Expertise Personnel availability and capability to acquire personnel Credit and funding facility Research and Development Experience and References 11 12. NEP Outsource ChallengesContractual IssuesRelationship FactorsAsset transfer of equipment or networkoutsourceCSPs wanting to continue to have control and input into outsourced networks NDA arrangements with CSPequipment vendorsUnion and personnel issues withtransferred personnel Availability of software licensetransfers for other vendor productsOngoing relationships with vendorsthat are competitorsContract negotiation with othervendors on competitive networkelementsCommunication between CSP and vendor after transfer on network upgrades and outages 12 13. NEP Outsource Challenges Equipment IssuesMajor Equipment Supplier Issues Inconsistent adherence to maintenanceNDA arrangements and proprietary dates equipment information Software and other license transfers,Equipment operated outside ofnumber seats and other software specificationsrelated itemsObsolete or non-supported networkOld equipment, due to be replaced, not elementsoperating at peak capacity Uncooperative vendors and/or limited Cost to bring equipment to operatingaccess for maintenance, product orderdocumentation, and equipmentupgrades13 14. Network Outsource Arrangements14 15. NEP Outsource Arrangements - 2010 OutsourceOutsource ClientDescription of Outsource ArrangementProvider Nokia-SiemensLightsquared United NSN and LightSquared signed an 8-year, $7 billion agreement. NSN is Statesresponsible for the design and deployment, maintenance, management, and operation of LightSquareds terrestrial mobile network. The network build includes deployed approximately 40,000 cellular base stations by 2015Nokia-SiemensNII, operating as The agreement covers the management of NIIs networks across Nextel, Latin America markets in Argentina, Brazil, Chile, Mexico and Peru. The scale of the contract makes it the first of its kind in Latin America and is one of NSNs largest, multi-vendor, multi-country managed services agreementsAlcatel-Lucent Vivacom - BulgariaOutsource of end-to-end mobile network including transferring approximately 600 employees to ALUEricsson Vodafone GermanyManagement of field services for Vodafone's fixed and mobile access and transmission network, and fixed core network nodes in Germany. The deal includes a personnel transfer of approximately 600 Vodafone employeesEricsson Telefonica O2 UKField maintenance services for radio and switch sites, spare parts management logistics support, network optimization and facilities engineering servicesEricsson Telefonica Brazil Operation of Telefonica's network operations center in So Paulo which is an extension of an existing agreement where Ericsson operates and maintains the new optical fiber network in So Paulo15 16. NEP Outsource Deals - 2009 PreviousOutsourceOutsource ClientDescription of Outsource Arrangement Provider Nokia-SiemensOrange United Operations, maintenance and optimization of Oranges 2G/3G mobileKingdom network including transfers of 470 line level employees to sub-contractors and/or to NSN direct employee status Nokia-SiemensOrange - SpainFixed and mobile multi-vendor network operation and managementNokia-SiemensEmbarq, Ltd. United Ownership of Embarqs (now CenturyLink) voice network and networkStatesoperations center with employee transfers Alcatel-Lucent Sunrise - Switzerland Mobile, fixed and broadband network outsourcing and employee transfersAlcatel-Lucent BhartiFixed network outsourcing and IP transformation Alcatel-Lucent Reliance Telecom This outsource arrangement involves a new joint-venture arrangementIndia between the two parties. The arrangement includes ALU providingnetwork outsource services to Reliance as well as Reliance and ALUpartnering to provide outsourcing services to other CDMA and GSMnetwork operators Alcatel-Lucent Global Crossing Operations, management and maintenance of Global Crossings IP/MPLSGlobalnetwork infrastructure Ericsson Yoigo Spain TeliaSoneras mobile operator in Spain has entered into an agreementthat Ericsson is responsible for the operations management andmaintenance of its 3G network. The operations management includesfield services, the NOC and support of the hardware and software. Ericsson SprintWireless and wireline network outsourcing including employee personneltransferEricsson 3 ItaliaExtension of an existing network outsource arrangement for managementof 3 Italias 3G network and its IS & IT infrastructure. The extension alsoincludes provisions for Ericsson to upgrade the 3G mobile broadbandaccess and core network. 16 17. Service Provider Outsource Considerations There are many considerations for outsourcing:CSPs have made a strategic decision to support next- Services generation services and technologies, legacy portions of theBusiness Model network are outsourced to the NEPCSPs do not have the expertise to run next-generationExpertise networks and/or do not want to assume the risk of next- generation products CSP networks are widely dispersed and there are geographicGeographyareas that are far from the CSP core service area Mergers and acquisitions may drive CSPs to outsource a Acquisitionsportion or all of an acquired asset if bottom line profitability CSPs have multiple vendors and vendor products and Multi-vendordete

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