In the space of three days Nokia has announced deals involving managed/outsourced services worth a cool US$630mn. Today, with close to 60 managed services contracts, the Finnish company is laying claim to being one of the major players in the global managed services business.

In the earlier of two deals reported this week managed services formed part of a US$400mn contract placed by India’s Bharti Airtel Ltd. Additionally, Nokia is to expand Bharti’s GSM/GPRS/EDGE networks in eight circles and deploy a pan-Indian WAP solution across its networks.

As per the three-year contract, Nokia will provide managed services and expand Airtel networks to cover all towns and cities in the eight telecom circles of Mumbai, Maharashtra and Goa, Gujarat, Bihar (including Jharkhand), Orissa, Kolkata, West Bengal and Madhya Pradesh (including Chattisgarh). The network monitoring operations will be carried out from Nokia's Global Networks Solutions Center in Chennai.

Nokia says in the past two years, it has signed two contracts collectively worth US$400mn with Bharti for the supply of equipment and managed services.

The Bharti Airtel deal was followed in rapid succession by news that the Finnish company had signed a US$230mn, seven-year managed services agreement that includes engineering, operations and maintenance of Vodafone' Australia’s HSDPA, 3G, GPRS and GSM networks. Nokia will be responsible for managing Vodafone Australia's ongoing network operations and core networks infrastructure, including the detailed design, engineering, optimisation operations as well as network management, monitoring, fieldwork and maintenance services for the networks.

”Outsourcing the management of the networks to Nokia makes good business sense for Vodafone Australia. It delivers cost efficiencies and, at the same time, allows us to control the quality and technical direction of our networks so that we can deliver the best and most advanced technology available to Australian customers,” reasons Vodafone Australia ceo Russell Hewitt.

Rewards and risks
Hewitt’s take on cost savings echoes the line taken by Pyramid Research in its recent report ‘The New Frontier for Vendors: An Analysis of Network Services and Outsourcing’. In this analysis Pyramid suggests that while operator savings vary depending on the scope of the outsourcing relationship, outsourcing can reduce the cash costs of a typical mobile operator by 20% to 25%. “Operator savings stem from reduced CapEx through network sharing and effective asset management, as well as from OSS and network management outsourcing,” asserts report author Elizabeth Bramson-Boudreau.

Pyramid Research expects mobile operators to increase their consumption of outsourced services, forecasting that the total outsourcing opportunity for vendors – worth US$51.5bn in 2005 - will increase to US$55.3bn by 2010.

Also predicting great things for managed/outsourced services is research company visiongain. As well as CapEx and OpEx savings, visiongain identifies increased complexity – and in particular that associated with the IP Multimedia Subsystem (IMS) – and the possibility of risk reduction as future drivers of the managed services market. In its report ‘Managed services and hosting 2006-2011: Rationalising network and content outsourcing’ , visiongain reckons that over 40% of all operators will adopt some form of managed services strategy by 2011, and that the complexity of IMS will stimulate much of this growth from 2007 onwards.

“Operators want to launch a wider range of data services such as mobile IM, mobile TV and push-to-talk over cellular (PoC) to tap into new revenue streams. However, these applications currently do not have a mass-market appeal and often remain niche services appealing only to a few customer segments,” adds visiongain analyst and the report’s lead author Prachi Nema. “As all data services require huge investments from operators, there is high level of financial risk involved in case the services are not valued and adopted by subscribers. Our research suggests that a number of mobile operators realise that outsourcing in such a scenario eliminates their up-front investments and fixed costs, while also speeding the time-to-market process.”
John Williamson