For new operators, such as the MVNOs, outsourcing is all about speed-to-market and expensing non-core functions that can be purchased in the marketplace. Owning an entire network and all of its operations is no longer a necessity; building services from the ground-up can exhaust years of effort, during which time the market moves stranding capital assets.
Moreover, the complexity of operational architectures and the variety of services being offered (wireless, Internet, VoIP, and cable) means intricate brokering functions must be performed when interconnecting carriers. Hence, OSS interconnection clearinghouses and other types of interconnection services will emerge in the years ahead. In this study we document the potential to build network operations from purchased piece parts including SS7 clearinghouse, directory assistance, billing, and OSS inter-connection services.
Report Excerpt
1.1 The New Business Paradigm
A market-based approach became the dominant principal in telecommunications sector reform during the 1990s and, though often painful to stakeholders, the transition to increasing levels of competition continues today. Technology and market dynamics are radically transforming the provisioning and pricing of services, as well as service content. Thus, the business model based on providing transport facilities for voice service that are time and distance sensitive is fading fast, and incumbent carriers are looking for new business models.
Given the gradual demise of the public switched telephone network (PSTN) and lower margins associated with Internet protocol (IP) services, a fundamental strategy for carriers as they go forward must be cost reduction. This will require carriers to revisit all cost components of their business, putting outsourcing on the front burner.
Until now, carriers have considered outsourcing to be little more than a tactical form of reducing the cost of acquiring ancillary services. This must change, however. Carriers need shift focus from achieving incremental cost improvements in the 10- to 20-percent range to evaluating the entire range of their capabilities in order to define a winning outsourcing strategy in terms of a strategic process. This requires carriers to accept the need for unbundling their value-chain and for focusing on optimizing operations so as to achieve transformational cost savings between 30 and 60 percent, thereby securing future revenue growth.
The legacy models are being replaced by models based on the delivery of integrated services where content will be value priced. While transport will be a commodity priced on a time and distance non-sensitive basis, it will include video, data, and voice in “triple” or “quadruple”
If this bundled services model comes to pass, it will amount to a complete reversal of today’s business reality. It’s analysis suggests that the delivery of content-rich service based on bundled delivery/access packages is the one most likely to succeed in the future, resulting in a momentum that favors the mobile and Internet service providers (ISPs). Despite the efforts of the telephony community to extend the life of the PSTN, it is now become clear that PSTNs are moribund and designed to fade into history.
IP networks are taking over, though in a more sophisticated form than that of the Internet version. It is in this context that it is important to emphasize that VoIP does not represent a new revenue stream for incumbent carriers and international carriers, but is instead a replacement for existing circuit-switched voice services with significantly lower margins.
In the context of the continued growth of VoIP, incumbent operator voice revenue declines are irreversible. In order to stay ahead of voice revenue declines, cost reduction is a necessity. Carriers thus have little choice but to take radical cost action. It is precisely this need that drives the market for outsourced services.
As this report will suggest, defining a comprehensive and successful outsourcing strategy is not easy, but when accomplished it can result in more than just revenue increases.
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