08 May 2009

Service Providers : Reinventing for Success

05 05 2009 - The slowdown is forcing service providers and vendors to look at technology and innovative business models to reduce operational costs in an ever-changing market environment.

Today, telecom operators across the world are under pressure to develop next-generation technologies such as next-generation network, 3G, WiMax, etc, to meet the changing market demands. The situation is compounded by the slowdown which is leading to issues like inadequate liquidity and credit crunch.

“There is a definite interest on the part of service providers in the country to reduce the capital expenditure (capex) as well as operating expenditure (opex). They are looking at various technologies as well as business models to bring down the operational expenditure. There has been a lot of interest in the arena of data centers, contact centers as well as other technologies,” says Vish Iyer, vice president, service provider, West, Cisco India.

Though Indian telcos are not as severely hit by the slowdown as their American and European counterparts, there is certainly an interest in upgrading technologies as well as business processes, which will help them in bringing down opex. It is not just the slowdown but other factors such as quality, and the need to efficiently manage the ever-increasing traffic, which is leading operators to seriously think of innovative ways and means to reduce costs.

“Our consulting business is seeing a lot of traction and customers seek professional consultancy in efficiency consulting. In 2050, communication service providers will need to be ultra-efficient. The CSP of the future will need to serve a worldwide population of 9.1 bn. It will need to process and carry a proportion of more than 200 tn minutes of voice traffic free. It will need to develop, process, distribute, and support many advanced applications such as interactive remote video and biometry. It will have to be an integral part of a sustainable ecosystem,” says Michael Kuehner, head, sub-region India, Nokia Siemens Networks.

Tech Up
There has been an increase in the adoption of technologies that can help in the reduction of operational cost for a service provider.

“Needless to mention, the choice of technology plays a significant role in the success of telecom operation. Hence, besides cost of operation, other factors like standard based worldwide deployments, future-proof also play an important role in technology selection,” says Prasenjit Khuntia, country manager, Tellabs India.

“Since ARPU is decreasing while minutes of usage are increasing, there is no option for service providers but to look for means and ways to reduce cost, which would ultimately help them in increasing their profit. Apart from that, every new operator is looking at faster rollout of services and how to save maximum in this rollout,” says Tuhin Mukherjee, associate vice president, telecom business, Emerson Network Power (India). Emerson is one of the leading power management firms in the country and has recently come out with various solutions to help service providers combat the effects of recession. The company is also currently working with three greenfield operators

Recently, it launched a power management solution, Power System and Environment Monitoring (PSEM) in the Indian market. It claims that the solution is already deployed at 10,000 sites in China. “It is basically a monitoring system which can remotely help in power management. Diesel misuse is one of the major problems for service providers. With this system they can see actual consumption in real-time. A service provider can save up to 20% of opex with the deployment of this system,” says Mukherjee.

The company feels that there is a strong interest in alternate sources of energy and this is likely to become a strong trend in the coming two years. “We are planning to launch a charger unit that can alternate between solar and wind energy, depending on the availability and requirement. This is mainly considering the interest of service providers in the country,” Mukherjee added.

These apart, there is a movement towards IP-based networks, which goes a long way in reducing costs for service providers. “There is a definite movement toward IP-based networks from TDM, which also helps in reduction of opex. IP-based networks are simpler and easier to handle. There is an increased demand for IP-based architecture,” says Iyer. “There is also a strong interest among service providers for interactive voice responses and data center technologies, which can help in overall cost reduction,” he adds.

While Chinese telecom company, ZTE has recently come out with Software Defined Radio (SDR) base station, which supports GSM and WCDMA simultaneously within software rather than requiring separate hardware components like current base stations. The company claims that this is contributing in reducing opex. With SDR technology, mobile operators will be able to extend the lifespan of their network systems, hence, decreasing total cost of ownership and significantly lowering investment risks.

Ericsson also recently came out with Tower Tube, an innovative construction that houses base stations and antennas, encapsulating in aesthetic, energy-efficient and low environment impact towers. “It is basically a concrete tower which has a lower environmental impact than traditional steel, consuming up to 40% less power from a life cycle perspective,” says P Balaji, vice president (marketing & strategy) at Ericsson India Pvt Ltd.

New Models
Business models are also undergoing a sea change to meet newer demands.

Outsourcing and infrastructure sharing are two prominent business models which have evolved in the recent past and are likely to gain popularity in the coming time.

“Most service providers have shown increasing interest in outsourced O&M services. Active and passive equipment O&M outsourcing services on site is helping the service providers to reduce opex,” says DK Ghosh, CMD, ZTE. Moreover, infrastructure sharing is going to be a reality soon, with greenfield operators also looking at infrastructure sharing with new and existing operators.

In its recent report, Ovum states that network operation is not core to the network equipment providers' business and these recent contracts show that managed services have come of age.' The move suggests a major shift in the telecom space with operators no longer seeing their networks as a core function of their business.

“Managed services have come of age for tier-I operators to feel comfortable stepping back from the day-to-day management of the network, provided they have a strong relationship with a trusted supplier,” says Kuehner of NSN.

Another development is the recent initiative by ZTE to offer a portion of the $15 bn credit line from China Development Bank to the Indian telecom operators. This move will help ZTE partner with global telecom carriers and will go a long way in enhancing its market competitiveness and ultimately achieve a win-win situation in key focus markets like India. It goes without saying that this initiative holds special significance for telecom operators in a fast growing market like India, where a large number of new players are all set to launch services and the existing players have drawn up large-scale expansion plans to offer 3G services and penetrate rural markets. Industry sources say that the company has already committed a part of its fund to Indian service providers, and Reliance is one of the beneficiaries of the scheme.

The Indian telecom industry is also witnessing the emergence of Asset Light method, which implies that companies can use equipments for a rent instead of purchasing them. This is likely to appeal to new operators, who would like to reduce their financial risk, especially in the current economic environment.

It would suffice to say that operators are fast realizing the importance of technology in reducing the overall operational cost. Emerging business models are further helping them in this regard.

Source: Voice & Data

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