re: Mobile Communications on mmO2 outsourcing to Ericsson
Mike at Mobile Communications says:
>> You can’t please all of the people, all of the time, but that doesn’t stop plenty of big corporates from having a damn good try. Trying to keep track of whose fingers are plunging into what pies can at times be bewildering. Virgin wants to run trains, Microsoft wants to play games, and Ericsson is trying its hand at being a network operator. The performances of the first two have so far been less than spectacular – Microsoft has just been forced to slash Xbox prices by 40% in Europe – but Ericsson is surely well placed to manage Dutch telco Telfort’s infrastructure, not least because it will be working with its own kit (see this week’s Spotlight). ...
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Spotlight
Telfort -- When Is An Operator Not An Operator?
mmO2 continued to demonstrate this week that there was more to its spin-off from parent BT than a desire to pacify investors. Independence has clearly given freer rein to the ‘ideas men’. mmO2’s much talked about contract re-negotiations came to an impressive conclusion on Monday, with savings of E600m being wrung out of Nokia, Ericsson and Nortel on contracts that had apparently already been settled -- a valuable reminder to other operators that infrastructure is now very much a buyer’s market. And of potentially even greater significance was Tuesday’s announcement that mmO2’s Dutch business, Telfort, is to outsource its network operations (that’s 2G, 2.5G and 3G) to Ericsson.
It is surely a fundamental shift for an operator to decide to retire from doing any actual operating. Telfort will continue to own the infrastructure, but the network’s planning, development, operation and maintenance will now all fall within Ericsson’s remit, and most of Telfort’s 240 network people will become Ericsson employees. The five-year contract is expected to be finalised in July.
“It seemed to us that the operation of the network is not our core business,” mmO2’s David Nicholas told A Week In Wireless. “It’s not our core skill. We’re about offering a service to the customers.” In other words, anyone who thought that being an operator was about running a network had better think again. It’s all about service provision nowadays. Curious, then, that only last week BT Cellnet, mmO2’s UK arm, announced that it would be outsourcing its CRM management systems -- a key customer service element by any standards -- to IBM.
It is also notable that, despite its disavowal of network operating in the Netherlands, mmO2 has no plans to outsource its other three network operations for the foreseeable future. So why have Telfort play the guinea pig? Nicholas cited the suitability of the Netherlands as a small and manageable market as the main reason. In that case, mmO2’s Irish network, Digifone, could well be expected to follow suit -- the Irish market is under a third of the size of that in the Netherlands.
The move does seem to set an important precedent. “I think we’re the first operator in Western Europe to outsource the network,” Nicholas suggested. But, confusingly, the press release mentioned that “Ericsson has signed 34 managed services agreements in total.” Agreements for what exactly? Ericsson’s media relations director Ase Lindskog had a remarkable answer: “These are agreements with operators for [outsourcing] the whole network.” Lindskog refused to name names, but she did say that Ericsson is indeed managing networks, 34 of them, in Europe and elsewhere.
This has all been strangely hush-hush. Jason Chapman, senior analyst at Gartner Research, admitted that this was news to him too. “Outsourcing is certainly something that smaller operators have looked into,” he explained, “but I’d have thought mmO2 was the first large-scale operator to be making this step.” He suspected that mmO2’s decision would become part of a growing outsourcing trend and that the move could also elicit public admissions from those operators which, if we are to believe Ericsson, have been outsourcing their networks all along.
So hands up if you’ve been busy outsourcing. It’s really nothing to be ashamed of. <<
- Eric - |
