Managed services have net effect

It sounds, on the surface, a little suicidal for an mobile network operator to outsource operation of its network to another firm. What does a network operator have left to do if it's not operating its network?

Well, for starters, that network operator is also a service provider, and having another firm take responsibility for many network functions can leave more time and energy to devote on service delivery and customer relationships. The "non"-network operator also can take more time to count its dollars and pennies, since by outsourcing networking management, the company can save and average of 10% to 15% of annual operational expenses, according to Lance Wilson, analyst at ABIresearch.

"The savings that can be gleaned is about 10% to 15%," he said. "That's what most vendors are telling service providers. I've heard of savings up to 30% or 40% that could be attained, but that was probably for management of a single network function."

The opportunity to manage a carrier's network is an easy decision for network infrastructure vendors. Equipment spending has been declining overall for several years, and vendors are looking into new lines of business that can make up for the slide. Since in many cases vendors have long-standing, trusting relationships with their carrier customers, managing the network they helped build isn't a real stretch of logic for them.

Though Ericsson has been more publicly aggressive (not to mention more successful) about pursuing managed network contracts than some other vendors, Wilson said the trend is top of mind for every infrastructure vendor in the market.

But for the service provider, going with managed network service can still be a difficult decision. "One of the conundrums of managed services is knowing what you're buying--it's very non-physical thing, unlike buying equipment," Wilson said. "You're not going to order managed services and have something arrive at your dock. That's why the relationship between the vendor and carrier, the trust and confidence is so important."

Wilson acknowledged that most of the world's largest mobile carriers haven't bought into outsourcing network management the way upstarts like Europe's 3 and sunrise have. He said bigger carrier likely will experiment by outsourcing isolated network functions. "They are very reluctant to relquish control of the whole network, but they will start somewhere."