Chinese networking company Huawei is merging its IT services business into its managed network services operation in a reflection of the growing importance of value-add IT services to carriers.
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The company, which manages networks in the UK for the likes of mobile operators O2 and Three, is increasingly providing carrier customers with IT to offer value-added services to users. These might include network analytics tools to enable the carrier to offer services tailored to their customers' use, or equipment for IPTV.
The IT services operation provides: IT outsourcing, which is any IT that supports the delivery of carrier services to users; application outsourcing, which includes applications to add value to user services, such as automated prompts when usage limits are reached; and business process outsourcing (BPO), which provides any support to customers, from signing up to leaving, that is not network related.
Boost to managed services
Leroy Blimegger, global head of managed services at Huawei, said the merger will immediately add 15% to its managed services turnover. “Over the next five years, we expect this to lead to a 40% increase in revenues from managed services.”
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The growth is expected to come from communication service providers (CSPs) transforming their businesses. Research from Informa revealed that almost all CSPs will start to transform their businesses in the next five years as revenue related to non-data services continues to decline.
“While efficiency and cost controls are still identified as the most important issue for CSPs, our research indicates that these organisations are at the brink of a complete change in strategic focus, driven by the need to pursue new revenues," said Kris Szaniawski, analyst at Informa.
"Business agility, customer experience and new digital service developments will all come to the fore in this increasingly pressurised and competitive industry, and managed services are the natural way to implement these changes,” he said.
Outsourcing contracts are changing
Blimegger at Huawei said carriers are moving towards being more customer centric than network centric, with less focus on outsourcing just to cut costs, but more on gaining value-added customer services.
The first major managed network agreements were about cutting costs, but the new ones will be about adding value to the customers and revenue to the carrier
Leroy Blimegger, Huawei
“The first major managed network agreements were about cutting costs, but now these contracts are over the new ones will be about adding value to the customers and revenue to the carrier,” he said. “Most carriers still buy managed network services to cut costs, but this is changing.”
He added that a major challenge for carriers is to provide customers with a service that moves from fixed to wireless seamlessly. It takes time to change the outsourcing services, he said, because contracts become very complex. Rather than just setting SLAs around cost-cutting, it introduces things like extra revenue for hitting various performance targets. “The reason to outsource has changed, so the contracts have to change, which takes time," said Blimegger.
Over the next couple of years, Huawei’s managed services business will increase its UK workforce to about 15,000, from 8,000 today. It has already invested £1.3bn in the UK through setting up operations.