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Business is for profit. Ownership does not make any sense. That's why global telecom service providers' network and other areas are run by telecom infrastructure companies such as Ericsson, Nokia Siemens Networks and Alcatel-Lucent.

The managed service deals are creating a new breed of network drivers. Earlier, telecom infrastructure providers used to create their networks for SPs. Following the flood of large outsourcing deals in the past few years, the ownership of running the network is with the vendors.

A recent The New York Times article said: Companies such as Vodafone, Telefonica, T-Mobile or Orange are not running the biggest wireless networks in the world with a combined 355 mn customer base. Instead, Ericsson and Nokia Siemens Networks are running the network. In the past six years, these wireless equipment makers have become two of the largest mobile network operators in the world. SPs hire them to manage the flow of voice, text and data among their users.

Managed services deals are on the rise in India too. Besides Ericsson and Nokia Siemens Networks, the key vendors are Alcatel-Lucent, ZTE and Huawei. The business of running and maintaining networks is a prime business for them. Ericsson generated $1.7 bn revenue from managing networks globally last year. There's a significant rise in Nokia Siemens Networks managed services revenues in India.

The potential is huge. According to a recent research by Forrester, the managed services opportunity in India is $8.7 bn by 2013, with a total CAGR of 19%. Some recent industry reports reveal that almost 40% of Indian businesses outsource their infrastructure managed service. In India, the managed services sector will witness tremendous growth in the next five to six years.

What is prompting telcos to opt for managed service deals though they intend to hand over their lifeline to a third party? Besides the urge to become more profitable, the current economic environment is forcing telcos to go for managed services. Operators and enterprises are fast realizing the potential and putting special focus on their core deliverables, while trimming operational cost. By outsourcing network infrastructure, operators are becoming more competitive on a global scale.

Last year BT and BSNL have partnered to provide a complete range of managed telecom services. Commenting on the same Kuldeep Goyal, CMD, BSNL says, “As BSNL transforms into a premier integrated comuunication service provider, a robust managed service offering is key to our future operations.”

The Indian telecom market is one of the few markets which has kept its growth story intact in spite of the economic slowdown. With new policy led avenues like 3G, WiMax, MNP, NGN and m-commerce about to be unveiled, it is proving to be an exciting future for managed service players. “Today more and more focus is being put on newer pricing models which are linked to revenue, milestone or gain shares which tightly couple a service provider's growth with the operator, and create a common platform for partnership,” Kiran Desai, VP, manage IT services, Wipro Infotech, says.

Even though the managed service space is moving at a good pace in India, there are certain challenges that need to be tackled by both the operators and managed service providers. One of the major technological challenges associated with adopting and using the managed service model is the breakneck pace at which mobile technology has evolved in the last few years, which requires heightened involvement in assessing the relative merits of various technologies.

Key Hurdles
A key skill needed for any managed service provider is the ability to manage multiple technologies and platforms. This requires significant investments and takes time to build and scale up.

Some of the operational challenges include: operators need to devote significant resource in assessing applications, negotiable agreements, integrating applications and measuring performance of applications as well as planning for service upgrades and expansion.

The major challenges associated with adoption of a managed services model is the realization by operators that what they really own is business and subscribers. “And the fundamental shift that operators must make in focusing on their core business and subscriber base, while comfortably letting go of the network operations management,” Sameer Sandhir, head, business development, managed services, Alcatel-Lucent says.

In an effort to grow business, the operator is constantly faced with choices of which service to deploy and in which territory, and with each choice comes risk. According to Amber Sur, CMO and EVP, managed services, Comviva, understanding the opportunity cost associated with each decision requires analysis. Market expansion, whether in terms of extension into new markets or development of new products for existing markets, involves risk. Involving an experienced party or parties in the decision making and sharing the risk and rewards with that party generally mitigates risk.

The skill and service levels of the managed service provider are critical. There can be a lot of vapor ware in the claims, so customers need to carefully evaluate the options. “Lowest price may not mean the lowest TCO,” says Alok Bardiya, VP, managed services and marketing, Tata Communications.

Service providers face an ongoing challenge of identifying the best metrics to describe the customer's perception of QoS and develop an infrastructure that enables the measurement of these metrics-starting from network performance data. Says Sudhir Narang, MD, BT India, “The key challenge for a service provider in a multi-play network is the fact that multiple applications (services) with very different QoS requirements and properties have to share a single transmission infrastructure.”

Some of the prominent reasons of customer dissatisfaction are low quality voice, dropped calls, slow data connection, non-or delayed SMS/MMS delivery, and blocked or non-satisfactory roaming. Pricing for data-related services does not map to current performance in terms of speed of access, continuity and clarity of contents. User experience is impacted by the combined actions of such impairments, including pricing.