network outsourcing

8/6/2019 Network Outsourcing

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Network Outsourcing

July 2011


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Contents

verall NW outsourcing perspectives Key Design Principles for NW Outsourcingarrangements

Possible next steps

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2

3


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Network outsourcing should follow best practices forhow to approach outsourcing

ypical realized value byapproach

~ -20 40

, %Spend reductionAverage ~ -8 20%romise 30 ~ -5 15Approach onsolidate and Squeeze ptimize interface ollaborative open bookProvider -2 4 -6 8 >10

, %arginDescription Reduce vendor margin and

capture scale economies ( . .,Adjust sourcing strategy e g

, )insource offshore and pricingmodel whilst squeezing vendor

margin

- -Optimize end to end deliveryand consumption process to

realize lowest cost solution Joint effort to maximizevalue

ev er s u se d Vendor margin squeeze andminimize unit price Economies of scale

Vendor margin squeeze Economies of scale /Process streamlining Lean

Vendor margin squeeze Economies of scale Process streamlining Technology management Demand management

ocus on getting large hare of the vendors pie ocus on optimizing all-endor side aspects of thecontract

-ocus on win win solution- -ptimizing end to endprocesses


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An open book process requires significant timeand resources to complete

ProjectKickoff onstructionfbaseline va lua ti on of t end ers efine business Principles

ow nSelection ointdiscussions Negotiationsinalizingfcontract

Action Definescope andgatherbaseline

material

Workshops withvendors

Evaluatetenders Evaluate

capabilitiesand

referencecase

Alignmentwith vendors

Reviewprocess of

tenders

Discussionbetweenstrategic

partners

Functionalworkshops Commercialnegotiation

Legal review

End Product Keybusiness

principles

Baselinematerial -Improve mentlevers

Businessprinciples

&Q A -DownSelection of

vendor

Contractcontent

MaincontractSchedules

-Recommendation to

BoD Signing ofcontract

PreparationPhase

-Down selectionphase

Negotiationphase


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The process follow 4 key principles in order tomaximize value

, ,nderstand business objectives scope and implications for operatingmodel ( . ., % )Define measurable targets e g 35 of savings in year 1 aligned with overall

-business objectives guiding trade off discussions and decisions( . . , , ,elect the preferred operating model i e scope responsibilities.)endor configDefine and detail operating model options Evaluate options against business objectivesaximize the value potential by exploring all levers to improveperformance ( . ., )Consider entire business system e g including segments to ensure maximum value , ( )Build internal case then exploit all improvement levers with vendor s to

maximize benefits /i ni miz e am big uit y a ro un d o pe ra to r v en dor r es pon sib il iti es i n v alu ecreationEstablish full transparency around prerequisites of value capture upfront -Understand both parties economic model to build confidence and define win win

pointnsure deal mechanisms are aligned with business objectives

Include clearly defined mechanisms that ensure realization of strategic, . ., , , ,objectives e g competitive pricing SLAs continuous improvement proactive

remedies

stablish business principles to structure negotiations , ,Focus on business impact not technicalities through negotiations of businessprinciples and services

nsure clear interfaces as well as roles and responsibilities for, , , ,operational tactical and strategic issues between provider customer and other

( -)sub providers ,n cl ud e m ec ha nis ms to ma na ge in te rna l de ma nd . ., ,e g capacity planning

,clear order points project prioritization

ey imperativesfull transparency

around business objectives

loit all improvement levers and reduce ambiguity

ft a deal that accelerates value capture

-world class service management and governance


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The scope should be sufficiently large to includeend-to-end processes

StrategicPlanningOptimizePlanning

Operationalplanning

Site Acquisition Installation Engineering &

Installation test ,Measure Quality tune 3G

Integration

StrategicPlanningMonitoring Core Capacity

Operationalplanning

&Installation Engineering data transcript

&Installation testIntegration

StrategicPlanning

Operationalplanning

Monitoring &Error registration analysisErro

r correction/Integration

/change managementsite cost

Support

StrategicPlanning

.Develop techn Road map

Operationalplanning

-Imple mentation

&test

Pilot Rollout

Developroad map

Monitoring OSS capacity

Operationalplanning

-Imple mentation engineering- &

Imple mentation test

Integration Support

In scope - -End to end

responsibilityfor network

- ,build out,operations,maintenance and

software

Out of scopeStrategic control

and strategicplanning of the

networkVAS platformIN platform

. -R ad io A cc ess N etw or k bu il d ou t

. -C or e Ne tw ork b uil d ou t

. Network operations

o ft wa re u pgr ad e a nd u pd ate

SS implementation

Strategic planning and Developing Road map are out of scope


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If done right, operators can use network outsourcingto create a competitive advantage

%090

100

60

Current FutureInternal

Improvement

FutureAfter

outsourcing

Total Costof Ownership

( )TCO

TCO

o llo w pr ic e t re ndsith currentolution r changeelecomstrategy

: /Note Estimates based on 5 detailed business cases telecom sourcing clients: ;Source Accenture Ericsson

nalysis anduccessfulase examplesndicate thatf done orrectlyhere is roomor cost eductions%pto 40

,otal cost*ndex


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As a result of outsourcing, the operator willpurchase turn-key rollout based on geographicalcoverage (output)

perator Purchaseseographical coverageit h s pe ci fi c s erv ic elevel1

perator uses KPIs tonsure that vendorelivers expected qualitynd ot he rw is e i ssu espenaltiesperator uses a Coverageodel to ensure thaten dor u se s e ff ici en tollout and ensures siteav ing s a nd o th erw is eets cash compensations

perator uses Technologyefresh to ensure thatew equipment and sites "re state of the art

ptr does not acceptroprietary equipment orolutions to ensure lowwitching cost

4

5

2

3xampleOperator purchasesGeographical

coverage withspecific servicequality level and

KPIs


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Retained activities

Service Management

Defining the required capabilities and designing theorganization is the key to the success of thepartnership

c ti vi ti es g oi ng f or wa rd

prise architectureStrategy

Strategic control Monitoring SLAs and KPIs Retained platforms

BSS layer

Mediation layer

VAS layer

Network

RA N OSS

Interfaces overnance

etained organization The quality ofthe retainedorganization iscritical for

the transitionand continued

qualityassurance

Lock in the Stars early as

they possess

key knowledgeof the networkthat also hasvalue to the

vendorThe retained

organizationmust have astrong contract

mgmt team whooptimally has

been part of

negotiating thecontract

The right seniordevotion isrequired in the

-governance setup to keep

senior focus atvendor

CSCore

PSCore

utsourced scope etainedplatforms

RAN OSS


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Contents

Overall NW outsourcing perspectives

ey Design Principles for NW Outsourcingarrangements Possible next steps

1

2

3


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Scope

Key design principles (1/5) - Scope

The Scope should be in a baseline and should cover all network components for thegiven geographies

,The Contract shall apply a partnership mindset where both operator and vendor arefocused on achieving the same vision

,The operator should aim to sign with a single vendor and the Contract term should be+5 years

,During the term of the Contract the vendor should have first right to submitproposals for any additions to scope

,The operator and the vendor should jointly define a Governance structure and model( ) , , ,which includes but is not limited to cooperation escalation innovation planning

and contract implementation

, - Within the agreed scope the vendor shall handle outsourced processes as a whole end- , . . ( )to end i e the vendor is the single point of contact SPOC for the entire scoopeand vendor is the owner and responsible party for all operations

, ,The operator defines interfaces to other Bus systems and processes and the vendorhas to take ownership to make the interfaces work

The vendor will be responsible for challenging and improving the operator s current,topology and design principles by continuously validating new technologies

processes and methods -The vendor must always apply a time horizon beyond the term of the Congract to

maximize long term value for the operator ,Furthermore the vendor is required to take on additional services or products as

, . .these are needed e g as a result of market pull

Overall Scope

Partnership

Governance

- -End to endoutsourcing

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&Pricing Finance

Key design principles (2/5) Pricing & Finance

.The overall pricing model should be based upon an agreed set of rules These rules( )must guarantee the vendor ocmpetitive prices minimize total cost of ownership

throughout the contgract period and savings from day one A substantial part of the total fee must be linked to the value cretion of the

. /operator A way to support this could be to make a risk reward model ( )The price model should include the following priciples but not limited to

/ ,To the largest extent possible be volume usage dependent with no minimumpayment commitment

) /Include guaranteed unit price reductions as a result of i scale volume, ) / )increase ii productivity increase and or iii technological price

erosion Cap unit prices during the period of agreement ,Include agreed pricing principles for new technologies additional

services or changes in general

, , , .The vendor guarantees that their prices services products deliveries etc are at. . .all times in e g top quartile Benchmarking should include the following

:principles The operator must be able to benchmark the cost and quality performance of

.each service and product agrea against predetermined peers The opeartorshould exclusively select part of the peer group

,The operator and vendor together defines rules processes and procedures,for benchmarking including who may perform independent benchmark report

,Benchmarking must be operational transparent and realistic The operator should have the right to a second opinion to the benchmarking

report Contract should include a most favored customer clause

A model for business dirven gain sharing mechanisms shall be established to ensure, ,that the operator and the Vendor are motivated on a continuous basis to improve

. ,each others business case Additionally all synergies not directly implemented into, . : )this contract must be shared among operator and Vendor Examples include i

, / ,realization of further improvement of processes technologies and or products and)ii synergy between this contract and other contracts between the vendor and third

parties

Price model

Benchmarking

Gain sharing

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&ervice Managmt Technology

Key design principles (3/5) Service Managementand Technology

, .A service catalog will be defined by operator with input from the vendor The, -activities services and products listed in the baseline material will be non.exhaustive

,Operator and the vendor to agree on a change management process describing how to, ,decide both changes in the contract and changes in functionality interfaces use

/of network third party network etc )The Vendor is required to provide any relevant data if i the operator takes over

, , , )networks products obligations or customers from third parties ii the operator, )chooses to investigate an acquisitions of any fixed network assets iii if the

operator chooses to investigate a potential divestment of parts or all of its/ )business to a third party and or iv in case data is needed for regulator

.purposes All personnel used in fault handling or other processes which require direct

contact to the operator s customers must be adequately trained in customer

dialogue and must master the language of the customer Build out of Network must take place according to a set of high specifications

, ,defined by the operator covering items like output design environmental, , .requirements fire prevention security and physical access

.The Vendor must continuously maintian relevant documentation of the network ,The Vendor has to develop maintain and ikmprove a set of detailed

.specifications which controls the build out Detailed specifications areavailable to the operator at all times

The Vendor will guarantee that detailed specifications are aligned and comply.to the high level specifications beyond the term of the Contract

, .,Continuous technology refresh is expected in the network ie at the time of

, .the contract termination the network must represent modern technology

A KPI and SLA catalogue will be defined by the operator in partnership with theVendor

/ / .SLAs KPIs must continuously improve the given price productivity quality metrics

Baseline

Network Design and build out

SLA s

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&Pricing Finance

Key design principles (4/5) Legal

Only the operator shall before normal expiration of the contract be entitled to, ,terminate the whole or parts of the contract for convenience In such a case the

,vendor is entittled to receive a termination fee for the terminated part which is,either a contractually predefined fixed termination free or calculated as vendors

fixed estimated profit for a reasonable period plus the vendor s unavoidable,unrecoverable costs relating to the remaining period which ever calculation method

.is the lowest ,On termination and without additional payment the vendor will provide with all the

,necessary and appropriate termination assistance in order to ensure an orderly safe,and uninterrupted provision of services to the service recipients including the

provision of service products and service documentation in sufficient detail and, format allowing operator to take the service back in house or transfer the services

.to a third party without payment in a seamless and uninterrupted fashion Saidservices shall include continuation of the services for a period of no less than one

( ).year irrespective of expiry or termination The operator shall be entitled to terminate services and platforms whidh the operatordecides not to continue Principles for compensations to vendor for up front

investment not paid back reductions in payment to vendor due to lower production.cost must be agreed in the agreement

( ) , , ,All transferred employees if any should be offered the same comparable or better.terms and conditions as those they are subject to at the time or transfer

.Due diligence must be completed before contract signature With an appropriate,threshold the operator should warrant that to the best of its knowledge the due

, .diligence information is true accurate and complete

Termination

Employement terms

Due Diligemce

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Regulatory

Key design principles (5/5) Regulatory

,The operator should maintain responsibility for all regulator obligations, .processes and contracts that follow from the telecommunications regulation The

operator must be able to answer to the regulatory authorities as required from theregulations and as deemed necessary in order to maintain orderly relations with

.the authorities The partner shall comply with all processes and procedures that.the operator maintains in order to fulfil the telecommunications regulationsOperator obligations

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Contents

Overall NW outsourcing perspectives

Key Design Principles for NW Outsourcingarrangements

ossible next steps

1

2

3


18/18

Possible next steps

Ensure value creation through best

practice contract Select deal breakers and nice

to have elements in contract

based on today s discussion

Ensure long term value by: designing retained organization

(and recruiting key personnel if)required

network outsourcing

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