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MANAGED

SERVICES

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WHATS HOT
AND WHATS NOT?
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MANAGED SERVICES:
WHATS HOT AND WHATS NOT?
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Page 4

Executive summary

Page 5

Section 1
How we got to where we are

Page 7

Section 2
Where do we go from here?

Page 16

Section 3
Recommendations and conclusions

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MANAGED SERVICES:
WHATS HOT AND WHATS NOT?

Executive summary
The last five years has seen a gradual increase
in the use of managed services to achieve
business growth, rather than just reduce
operational costs. Customer experience has
become a powerful driver for these new types
of managed services partnerships.
This trend has been tracked by prima facie
research undertaken in spring 2013 by
TM Forum (see page 6). This report follows on
naturally by establishing and explaining some
current best practice, based on interviews with
managed service providers.
Partnering and associated metrics are a key
strand in TM Forums strategic Open Digital
Program (www.tmforum.org/digital). This report
provides information about relevant Forum tools
and best practices throughout, and how to get
involved in their development.
Managed services are activities and business
models which are managed proactively by
specialist third party managed service providers.
They perform activities, processes or functions,
which in a classical operator/vendor model
had previously been carried out, or could
have been undertaken, within the operators
own organization. It is closely aligned with
outsourcing and the two terms are often used
interchangeably.
As managed services engagements move to
become more business-outcome focused, and
service providers become more sophisticated at
governance of these engagements, a number of
new approaches are emerging.
Open Digital Ecosystem: Business Partnering
Guide, Practical guidelines for Partnering in the
Digital Economy, TM Forum, September, 2013
says that in todays digital services economy
no single company can now survive as an
independent entity and succeed for a sustained
period. It is crucial that organisations focus on
core competency, and partner to gain access to
the competencies outside of that.
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QUICK INSIGHTS

In Section 1 we look briefly at how managed

services have changed and how the drive to
save money is less hot than it was originally.
Operational and especially business benefits are
the hot buttons now.
Section 2 explores some of the hot practical
issues to be considered when developing
a strategy and preparing to enter into a
partnership. These include the scope of the
partnership; how to measure the performance
achieved in the operators business as a result
of the partnership; the business model upon
which each party shares risks and benefits; and
how best to govern the relationship.
Section 3 offers pragmatic recommendations.
An effective, managed services partnership is
likely to embrace the following features:
n It

is designed to achieve measurable growth

in the operators business revenues, not just
cutting costs.
n It improves the quality of the operators core
competencies, not just taking over non-core
activities.
n The managed service provider is responsible
for a broad part of the business, including
infrastructure and services provided by third
parties, and parts of the business that it
cannot directly control.
n The partnership is measured using business
key performance indicators, not just
operational ones.
n It incorporates a process of continuous
improvement throughout the term of the
partnership.
n It brings the latest innovations in business
practices and technology to benefit the
partnership.
n It involves the chief executive and other senior
managers in governing the relationship.
n It builds trust and transparency between the
partners.
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Fierce competition, the incursions of over-the-top players and

emphasis on customer experience are all drivers for managed services

Section 1

How we got to where we are

Managed services started off in the early
1980s, mainly as outsourcing the IT function.
Internal staff, data centers, systems,
infrastructure and application development
were transferred to a specialist third party,
usually for a period of five to seven years. The
entire function would remain dedicated to the
operator and run from the same premises with
the same systems and staff.
The idea was that the function would
be largely unchanged, but managed more
efficiently and effectively by the managed
service provider. That provider would bill each
month, ideally for an amount less than the
previous internal operating costs. The deal was
often referred to as your mess for less.
The systems and infrastructure transferred
were generally highly proprietary and
customized. There was no modernization or
fundamental changes, other than replacing
old equipment and upgrading software. These
costs were built into the contract and saved
the operator incurring one-off capital costs.
Offshoring and global sourcing
The desire for further cost savings was met
in the 1990s by offshoring, in which entire
business processes were transferred to a
facility operated by the managed service
provider somewhere overseas that paid lower
rates for labor. It was often described at
exporting jobs. Again there was little change
in the actual processes.
Over time, labor rates rose in response to
the increase in business and offshoring was
replaced by global sourcing, in which the
managed service provider transferred business
processes from emerging economies to more
undeveloped economies, in order to combat
inevitable increases in labor costs.
These early approaches are sometimes
described today as Managed Services 1.0.
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The second wave of managed services,

Managed Services 2.0, emerged in the mid2000s. It was aimed at using the providers
skills to improve efficiency in the processes
to realize a further set of cost reductions.
There was a particular focus on the network
infrastructure and related processes, which
is the largest portion of an operators cost.
It included an element of modernization of
systems provided by the managed service
provider.
Operational excellence
The focus on operational excellence often
led to a number of different contracts being
awarded to vendors specializing in different
parts of the infrastructure or process. The
multiple relationships caused complications,
as the operator had to manage interfaces
between managed service providers and
inevitably incurred a degree of additional cost.
Contracts were technical in nature and based
on operational service level agreements (SLAs),
such as system availability, responsiveness,
defects, and so on.
Operators faced increased competition, both
from within the established communications
industry and from over-the-top (OTT) Internet
companies, like Amazon, Apple, Facebook,
Google, and latterly Twitter. This was
combined with operators beginning to make
the transition from being carriers to digital
service providers, offering an ever-widening
range of services on more and more platforms.
This was the driver for the formation of
partnerships with managed service providers.
The aim was to the improve the operators
business performance by enhancing the overall
customer experience, in order to protect and
grow revenues. This is referred to by some
players as Managed Services 3.0.
However, to add to operators challenges,
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MANAGED SERVICES:
WHATS HOT AND WHATS NOT?

customer experience is itself evolving, which

TM Forum is working hard to help service
providers progress through the efforts of
members in the Collaboration Community with,
among other thing, a Customer Experience
Maturity Model (see panel on page 9). These
evolutionary issues are explored in depth,
in the Insights Research report, Customer
experience: Hitting a moving target1, published
by TM Forum in September 2013.
Adding value for customers
Customer experience is a measure of how
products and services meet or surpass
customer expectations in a single interaction.
In contrast, total customer engagement is the
ideal situation, if some way off. It embraces
the entire customer lifecycle across all their
interactions with the operator, including: the
technical quality of the service/network; billing
accuracy; relevant spread of products and
services; and contact through the website, retail
stores, call centers, and other channels such as
social media.
With these goals in mind, the best managed
services partnerships build on the operational
excellence of the previous wave, rather than
replacing it. In this scenario, the focus has
moved beyond cutting costs and operational

excellence in the network to adding value for

customers, through new lines of business,
applications, platforms and content.
Responsibility for business outcomes
This involves managed service providers taking
responsibility for entire parts of the operators
infrastructure and business processes, to meet
the major business objectives of the operator,
not just its operational objectives.
The managed service provider acts as a
business partner, with each partys strategy
and objectives being aligned with those of the
other. Key performance indicators (KPIs) and
SLAs are much more business-oriented than in
the past.
Managed service providers have learned
much about managing infrastructure during
the previous waves of managed services and
are able to take on the additional business
responsibilities. Some have always been
managed service providers, serving a variety of
industries for many years.
Others started out as telecoms technology
vendors, initially providing professional services
to support their products. They then developed
skills to integrate them with other systems and
the best have the expertise to manage those
other systems, as well as their own.

The best managed services partnerships build on the operational

excellence of the previous wave, rather than replacing it....the focus
has moved beyond cutting costs to adding value for customers.
The report, researched and written by Rob Rich, Managing Director, Insights Research, is available to download free to all employees of
TM Forum member companies by registering on the website and for non-members to buy from www.tmforum.org/insightsCEM2013

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Managed services should be about achieving business

goals as well as better operations at network level

Section 2

Where do we go from here?

Managed services are becoming more about
helping the operator to change its business
at the strategic level, while continuing to
improve its operations at the network level.
It is bringing about major changes in the scope
of partnerships, how success is measured,
how benefits are shared between the parties,
and how the relationship is governed.
Expanded scope
Hot managed services relationships are now
focusing on supporting the operators business
strategy. They are becoming much more like
a partnership than a service contract, with the
managed service provider committing to bring
about measurable change in the operators
business. This could include increasing average
revenue per user, reducing churn, increasing
subscribers or introducing new lines of
business. As such, the scope is now set by the
objectives of the operators management team,
not its network engineers.
Managed services: Assuring customer
experience from end-to-end 2, published by
TM Forum in April 2013, is based on a survey
of 58 service providers from around the world,
covering 100 managed services engagements,
as well as 14 in-depth interviews with executives
from 12 service providers.
The survey revealed (see Figure 2-1) that the
main drivers for managed services still prevail
from the previous waves objectives with
improving operational excellence way out in
front with 88 percent. In our previous research,
reducing operating expenditure, which came
second (54 percent) this time, had always been
as high or higher than operational excellence.
However, other factors are getting hotter
and rising up the agenda (improving customer
experience weighed in with 52 percent and

Figure 2-1: Overall drivers for managed services engagements

Improving operational
excellence
Reducing OpEx
Improving customer
experience
Enabling new business
opportunities
Improving network/
service performance
Reducing CapEx
0% 20% 40% 60% 80% 100%
Source: TM Forum, 2013

The survey revealed that the main drivers for managed services still
prevail from the last waves objectives, with improving operational
excellence way out in front with 88 percent.

The report, researched and written by Rob Rich, Managing Director, Insights Research, is available to download free to all employees of TM Forum
member companies by registering on the website and for non-members to buy from www.tmforum.org/IRmanservices2013

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MANAGED SERVICES:
WHATS HOT AND WHATS NOT?

enabling new business opportunities at 50

percent).
The research concluded that many operators
feel they have already lowered costs
significantly and dont expect further huge
reductions. They recognize that simply striving
to lower costs is no longer enough.
Improving network/service performance
was third with 44 percent. This too is a hugely
important factor in customer satisfaction,
as we explored in the Quick Insights report,
published in 2013, Customer experience:
Leveraging the wealth of network data3.
The new objectives of This [customer
experience] phenomenon has been developing
for some time, as we have formally followed
it for nearly five years at TM Forum, says
the 2013 report. While there has been no
epiphany moment among service providers,
interest has gradually increased, especially as
markets have matured and customer retention
has approached acquisition in importance.
With more and more service providers
using managed services in customer-facing
functions, the rise of customer experience as a
driver of managed services engagements was
inevitable.
Real-life strategic examples
Examples of actual strategic relationships that
were quoted by managed service providers in
the research include:
n opening

a new line of business for a mobile

provider in the pay TV domain;
n setting up, operating and managing a
wireless line of business for a cable
company;
n finding the most sensible way to integrate
the cloud in the operators infrastructure;
n establishing and managing a supply chain for
new content;
8

QUICK INSIGHTS

n bringing

a machine-to-machine product to
market; and
n designing and operating a new line of
business for eWallet and digital payments.
Big challenges
Hot managed service providers are now
engaged with operators at the strategic
level, planning the future of the business.
They have to take on responsibility for areas
which they cannot directly influence, working
in partnership with the operator to change
the business. They are more of a business
enablement partner, whereas in the past they
were more like a service fulfilment provider.
They must be able to take responsibility
for the operators entire legacy environment,
including that provided by third parties. This
means that if the managed service provider
started as an equipment vendor, it must now
take responsibility for managing equipment and
systems sourced from other vendors.
If the managed service provider acts as prime
contractor to manage these other suppliers,
with different technologies in different lines
of business, the operator is able to deal with
just one party, often graphically referred to as
one throat to choke. It results in better overall
performance, because the managed service
provider is able to prioritize and align all available
resources from among all the vendors.
This is crucial in simplifying a complex set
of relationships, adds value, and reduces the
operators time, risk and costs associated with
managing multiple suppliers and their interrelationships.
One of the most powerful aspects of the
best current managed services partnerships
is the expectation that the managed service
provider will transform the business for
which it takes responsibility. It can take
over responsibility for aging legacy systems,

This report is free for all employees of

TM Forums member companies to download
by registering on the website from
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Only managed service providers and the largest operators can

monitor new technologies and other emerging trends globally

sometimes in their hundreds. This makes

it responsible for moving the entire part
of the business, including the underlying
infrastructure, onto a simpler modern platform,
involving fewer vendors and the latest
technologies.
Send in the clouds
This may involve replacing dedicated systems
on the operators site with shared systems
hosted by the managed service provider in
its own data centers. It could also involve
replacing manual systems with automated
hosted systems. These new platforms are
accessed over communications links, usually
the Internet, in the cloud model.
With the rapid advances in technology,
only managed service providers, and the
very largest operators, are able constantly
to monitor developments in business and
technology around the world. Operators should
benefit from the up-to-date knowledge and
expertise of the managed service provider,
giving them access to the latest business and
technical innovations.
Just as importantly, the hot managed
service provider will have invested
considerable time and money in building its
shared platforms. These are based on its long
experience of the industry and understanding

the importance of economies of scale and

deploying standards and best practices.
This allows them to keep customization to
a minimum without sacrificing the ability
to differentiate their offerings to different
customers. It is key that the underlying
platform is sufficiently flexible to allow some
degree of customization, at an affordable cost.
TM Forums members are currently
developing a Digital Services Reference
Architecture to help all types of service
providers and their partners achieve just that
see page 17.
Importance of metrics and benchmarking
Managed service providers must be able to
benchmark processes and establish realistic
goals for efficiency and cost reduction.
Knowing what to measure to achieve specific
business outcomes is essential and an area in
which TM Forums Business Benchmarking
program in has invested a lot of effort and
resources. Frameworx 13.5 (see page 18)
includes many ready-to-implement new metrics
for our members for example, see the panels
below and on page 11).
Sharing a platform, instead of paying for a
dedicated infrastructure, brings further cost
savings, and the best practice ensures that the
operator is not at a competitive disadvantage.

Ready-to-go metrics for customer experience

The latest version of TM Forums new Customer Experience Management Guidebook
represents the first step in documenting the recommended approach for transitioning from
managing the customers experience at any given instant in time at touch points to proactively
managing engagement that is every interaction with a customer over time.
A new Customer Experience Lifecycle Model defines interactions with the customer across
multiple phases, and 250 new metrics enable actionable insight.
Both can be downloaded by all employees of TM Forums member companies by
registering on the website from www.tmforum.org/customerengagement

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MANAGED SERVICES:
WHATS HOT AND WHATS NOT?

The managed service providers should

monitor future trends in the industry and its
markets. They need to anticipate opportunities
and problems, and invest in advance by
developing packaged solutions, including
appropriate partnerships, tools and business
models.
This means that they can act quickly and
effectively when the operators needs change.
Managed service providers should be able to
advise on when to include, or exclude, specific
functions from the scope of the partnership to
gain maximum efficiencies and economies.
Measuring performance
Measurement of performance in these new
partnerships is based on business metrics,
not operational ones. Originally measurement
was in terms of volume of transactions, then
developed into the availability of a certain
platform or network element or even the
overall end-to-end network performance. Now
all aspects of growth in top-line revenue and
profit, and the customer experience that drives
it, must be measured.
New business-based key performance
indicators (KPIs) or metrics might include
quantified customer satisfaction, customer
churn, or the number of customers signing
up for new applications or services offered by
the operator. One managed service provider

pointed out that an operator can have excellent

network performance and operational KPIs,
but have dwindling revenue and customers,
because of poor customer experience in other
areas (see panel on page 9).
KPIs are not hierarchical, as different layers
of the organisation have influence over
different aspects of the business. However,
each layer in the organisation has KPIs on
issues they can control and that contribute
to achievement of KPIs at a higher level.
Business and operational KPIs are therefore all
interlinked and connected.
Managed services: Assuring customer
experience from end-to-end, says that
a business outcome for a faster (better)
experience in customer order fulfillment
might spawn a set of business metrics around
elapsed time per transaction in a call center,
a retail shop or a website. This in turn might
spawn operational KPIs around customer
service agents, sales representatives, web
response times, and order fallout resolution
times. The clear top-line goal though is faster
fulfillment from the customer point of view.
Another managed service provider gave
the example that in order to improve
customer experience by reducing customer
order cancellations, it would need to meet
operational KPIs that might include fewer
software defects, more availability, better

Immediate access to more than 400 standard, quantifiable metrics

TM Forums Frameworx Metrics Repository includes over 400 business metrics typically
found in a balanced scorecard. It also includes measures specific to cable operators, cyber
security and fraud management. The database is searchable online, and direct access is
available via Apigees API machine interface access is free to all employees of TM Forums
member companies from www.tmforum.org/Frameworxmetrics by registering on the
website.

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TM Forum has developed more than 400 metrics to help all kinds
of service providers achieve their desired business outcomes

Using established tools and best practices saves time, effort and money
This release of TM Forums Service Level Agreement
Management Handbook (GB917 3.1) builds on previous
versions and provides a full set of harmonized definitions of
terms used in the field of SLA management to simplifies the
wide range of interpretations in use today.
This single volume is designed to offer pragmatic,
comprehensive guidance and can be applied to SLA lifecycles
of any type of service or product. The updated edition
includes support for modern, complex services, especially
those that are not inherent in networking services and
services that are provided through a value chain of partners.
The Handbook provides a full set of definitions, updates on

performance, and a higher proportion of

automated handling.
TM Forum has developed more than 400
new metrics to assist service providers of all
types gain the business outcomes they require
they are free for all our members to use
immediately. See panel on page 10.
In addition, TM Forums members have also
updated the widely-used SLA Management
Handbook (see panel above), which points out
that modern communications products have
led to a requirement for indicators that are
focused on product quality rather than network
performance. The focus of customers has
become Quality of Experience (QoE).
These Key Quality Indicators (KQIs) provide
a measurement of a specific aspect of the
performance of the product, and draw their
data from a number of sources including KPIs.
The document provides an overall
methodology, including definition of terms and
processes, which is consistent with the
TM Forum Frameworx, which include the
Business Process Framework (eTOM), and
Information Framework (SID) see page 18.
www.tmforum.org

rules and methodology for the specification and development

of SLAs, as well as useful tools such as matrices and
checklists for use in SLA management. It can be used by
customers, users, user communities and other consumer
groupings, as well as by service providers and solution
vendors. In particular, the standardization of measurements
and methodology provides for more meaningful comparisons
between service providers and makes it easier for service
providers and customers to exchange SLA reports.
All employees of TM Forums member organizations can
download the Handbook free of charge from www.tmforum.
org/SLAHandbook3.1, by registering on the website.

The Handbook and previous versions

were developed by service providers that
have gained experience of SLA issues and
have invested in developing methodologies,
technologies, templates, tools, dashboards,
and other means of ensuring appropriate and
accurate measurement.
It is essential managed service providers
know which KPIs are key to a particular
business process, how to define them and
how to measure them. They also need to know
which underlying operational KPIs must be met
in order to contribute to achievement of the
business KPIs. Most of all, they know how to
improve the KPIs.
This is all built into their intellectual property,
ideally giving them the confidence to commit
to business KPIs and meet them.
It should also allow the operator to
efficiently, effectively and cheaply set up the
partnership and measure, monitor and report
the managed service providers performance in
contributing to that partnership (see panel on
page 13 for help with doing this).
Managed service providers have the
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11

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MANAGED SERVICES:
WHATS HOT AND WHATS NOT?

experience of dealing with hundreds of

operators. They should understand the links
between business and operational KPIs so they
can commit contractually to business KPIs that
work for both parties.
Measurable business changes
Managed services: Assuring customer
experience from end-to-end, gives some
examples of real measurable business change.
They include a 25 percent decrease in its order
fulfilment time, including a steep reduction in
the time it took to resolve fallouts; a 28 percent
improvement in time-to-market for complex
services; and a reduction of one-third in the
volume of calls to call centers related to billing
accuracy.
It is important to remember that the
managed service provider must commit
not just to KPIs that relate to the legacy
environment. It must commit before entering
the partnership to KPIs relating to the time and
cost of transformation of the business and to
the desired performance of the business after
it has been transformed.
Pricing/business models
Closely related to measuring performance of
the partnership is the way benefits are equitably
shared between the parties. In previous waves,
operators were charged a fixed monthly cost,
sometimes with a volume-related variable
element, and usually with a penalty for underperformance.
One managed service provider estimates
that 80-90 percent of contracts currently in the
market are still on that basis.
Managed service providers were always
under pressure from operators to keep as
much of the contract fixed as possible, to give
the operator predictability in its operating costs.
It also avoided endless discussions between
12

QUICK INSIGHTS

the parties on the detail of how it operated

on a day-to-day basis and who was at fault for
events outside the managed service providers
control. Fixed costs also meant that if a degree
of modernization was involved, the managed
service provider would bear the cost and risk of
any delays.
A focus on joint commitment to revenue
objectives is leading to development of
innovative new business models. Revenuesharing is one of the obvious ways in which
the partnership benefits can be fairly shared
between the partners.
Some operators and managed service
providers have found revenue-sharing to be a
rather blunt instrument in the past. However,
many managed service providers believe
that they have learned the importance of
a partnership approach. They also say that
operators are now more willing to give their
managed service provider partner more
influence over their own internal business
processes in order to improve the operators
business performance.
Carrots better than sticks
One managed service provider described how
the fee in one contract is fixed for a range of
revenue. If the partnership exceeds the top of
the band the managed service provider gets
an additional reward, based on a percentage
of the additional revenue. Likewise, if revenue
falls below the band, the fee is reduced by
a percentage of the revenue gap. Note that
revenue-sharing replaces penalties, as the
concept is enshrined in the revenue-sharing
model.
Another managed service respondent
described a pay-as-you-grow business model
for new operators with few subscribers and
limited funds. A packaged cloud solution is
provided, based on its own and third party
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For the risks and benefits to be shared, the strategies

and means of executing them must be aligned

technology, to get the operators new lines

of business to market in a few weeks. The
operator pays a lower fee in its first year, which
rises in subsequent years as the number of
subscribers to the new line of business rises.
This gives the operator the revenue to pay
proportionately more in subsequent years.
Compared with the operator, the hot
managed service provider has a broader
knowledge, experience of multiple contracts,
high quality staff, and conducts regular
research and benchmarking. It has also built
a broad range of tools, statements of work,
contract templates, builder methodologies and
other intellectual property.
This should give the managed service
provider greater precision, certainty and
predictability than the operator, enabling the
company to manage and mitigate risk better
than an individual operator can. For the
risks and benefits to be shared, both parties
strategies and means of executing them are
fully aligned.
In the past, operators frequently complained
that as long as managed service providers met
their SLAs, they took little interest in improving
their customers businesses.
The mutully agreed business model
must encourage both to strive for constant
improvement see panel below.

Flexibility is red hot

Flexibility is key to an effective business
model, as over a five to seven-year term, the
business environment will undergo constant
changes. The parties must be able to react
quickly to important changes in the market; an
attribute that must be embraced by governance
structures (see below).
If the business model is fully effective, the
partnership will increase efficiency and reduce
cost through operational efficiencies. This
will allow the operator to invest some of the
money saved to adopt innovation and grow
new platforms. The ability of managed service
providers to bundle third-party products and
services with its own enables it to bring about
more change in the operators business.
Governance what good looks like
Governance is the contractually specified
framework for managing the relationship
between the operator and the managed
service provider that is laid out in the managed
services contract. As partnerships generally last
from three (but more commonly five) to seven
years, governance has always been important
to achieving success over a long period.
As the latest wave of partnerships
concentrate on changing the business, the
issue reaches from engineering right up to

How to set up and manage successful partnerships

TM Forums members have produced a series of guidebooks and other documentation,
including metrics to govern best practices regarding partnerships as part of our Open
Digital Program (www.tmforum.org/digital). They are available free for all members to
download and implement immediately from Accelerators to APIs from www.tmforum.
org/B2B2Xpartnerdownloads. If you have any questions or would like to participate in any
of the projects or programs, please contact Dave Milham, Chief Architect, Service Provider
Engagement, via dmilham@tmforum.org.

www.tmforum.org

QUICK INSIGHTS

13

Report prepared for Mahmoud Gomaa of Microsoft Corporation. No unauthorised sharing.

MANAGED SERVICES:
WHATS HOT AND WHATS NOT?

the chief executive. Governance is now not

just important, but critical to the success of
partnerships.
Good Governance Best Practice Guide,
National Outsourcing Association 4, says that
effective governance provides significant
benefits to all parties by providing the focus,
pragmatism and direction to drive value.
It sets out some key objectives of the
governance process:
Focus on the strategic business objectives
and imperatives.
n Nurture and enhance the relationship
between operator and managed service
provider.
n Enable the delivery of quality services to
meet business needs.
n Satisfy the expectations of the stakeholders.
n Enable effective decision-making and
mitigate risk.
n Foster the creation of value and enable
innovative practices to flourish.
n Enable effective communication.
n Establish trust and confidence between all
parties.
n Provide oversight and direction.
n Maintain stewardship, responsibility, and
accountability.
n

When setting up the partnership, the

market is moving away from the traditional
model. Operators used to produce a detailed
statement of their needs and issues in a
voluminous and highly-detailed request
for proposal (RFP). Instead, they are now
producing a broader request for solution.
This sets out the operators overall business
objectives, general needs and the problems
it is facing. It provides a basis for prospective
4

managed service provider partners to suggest

the best solution to meet those objectives.
The more flexible the definition of the need,
the greater is the probability that managed
service providers can innovate to find the
right customized solution to meet them. The
managed service provider may even advise that
it makes good business sense to expand the
anticipated partnership to embrace related areas.
Putting the right people in place
Managed services: Assuring customer
experience from end-to-end, says that a welldefined scope helps the operator and the
managed service provider to understand the
problem and develop an appropriate solution.
In addition, it educates and sets expectations
among stakeholders, enables a realistic and
practical budgeting process and result, and
provides a basis for meaningful dialogue for the
managed service provider and other vendors
and partners of the service provider who may
be impacted.
Another managed service respondent warns
that entering a managed services partnership
can be very hard for some of the operators
staff, especially senior managers. They are
giving away responsibility for ever larger parts
of their business, so they enter into the new
partnership with doubts, concerns and risks.
Managed service providers advise paying
close attention to the people selected by
each party to represent it in each area of
governance, from chief executive down to
engineers, including finance, procurement,
commercial and legal. The people on each
side should be matched with equivalent jobs
and have common experience, language and
culture. The governance structure should
ensure that whatever the problem, each

See http://www.noa.co.uk/knowledge-centre/best-practice-guides/

14

QUICK INSIGHTS

www.tmforum.org

Report prepared for Mahmoud Gomaa of Microsoft Corporation. No unauthorised sharing.

Strong relationships can often fix a situation
thats not working against all the odds

party knows the most appropriate person to

approach in the other partys organization.
Relationship Management Art and
Science? 5, the National Outsourcing
Association, says that if things are going
badly, and you have no people and relationship
focus, the chances are you are dead in the
water. If things are going badly, but you have
a strong people and relationship focus, your
people will pull it around and make it work
often against all of the odds.
The National Outsourcing Association also
says that trust develops over time and can
initially be very fragile. Trust can be created
as the parties concentrate on reviewing
opportunities for improvement, rather than just
discussing problems.
The governance procedures must be written
to be flexible, so the emphasis is on finding
solutions to problems, not allocating blame.
That flexibility must also allow for continual
review of the operators business performance
and the role that the partnership is playing in it.
It is essential that the partnership changes as
the business environment changes. As stated
above, it is also essential that the partners
both strive for continuous improvement and to
harness new innovations.
If the governance structures are well
designed and the people are well selected,
the parties will build the trust, transparency
and communications that are essential for
the partnership to succeed in changing the
operators business.
Managed services: Assuring customer
experience from end-to-end, found that
critical success factors for managed services
engagements (see Figure 2-2) are seen
as being a well-defined contract scope (47
percent), continuous improvement strategy by
the vendor (43 percent), shared goals between
the partners (39 percent), joint innovation focus
www.tmforum.org

Figure 2-2: Critical success factors for managed services engagements

Well-defined contract
scope
Continuous improvement
strategy by the vendor
Shared goals between
the partners
Joint innovation focus
Knowledge transfer/
transition planning
Clear joint governance
process
Strict SLAs and penalties
Lowest cost delivery
mechanisms
Vendor track record
Contractual incentives
for the vendor
0% 10% 20% 30% 40% 50%
Source: TM Forum, 2013

(35 percent), and knowledge transfer/transition

planning (33 percent).
A clear joint governance process is only 28
percent, which might seem relatively low.
However, this is likely misleading, as the
process is essential to achieving the other
success factors.
Governance impacts everything around it
in each partys business. If the governance
structures, processes and methodologies are
not well designed, clear and flexible the whole
partnership fail, with negative consequences
for both parties businesses.

See www.noa.co.uk/knowledge-centre/
best-practice-guides/

QUICK INSIGHTS

15

Report prepared for Mahmoud Gomaa of Microsoft Corporation. No unauthorised sharing.

MANAGED SERVICES:
WHATS HOT AND WHATS NOT?

Section 3

Recommendations and conclusions

Given the current state of intense
competition from both within and outside
the communications industry, operators
are concentrating on improving customer
experience with their existing services, as well
as enhancing it by providing an ever-broadening
range of new services. This means they need
to focus on their critical customer relationships
and enter into new managed services
partnerships to help grow the business.
In the past, managed services was purely
operational. It is now developing into a
strategic tool that can change the business by
transforming operations, opening up new lines
of business, bringing new products to market,
and harnessing innovation and expertise to
achieve and maintain competitive advantage.
According to the National Outsourcing
Association, the modern business
environment is an outsourcing economy,
where the major focus of firms is on leveraging
external capacities, capabilities, competences,
knowledge and skills why do it yourself,
if another provide can do it faster, better,
cheaper?
Primary business goals
The primary focus of operators is not
necessarily to operate their infrastructure
(depending on their business model and longerterm goals some operators ambitions are to
be super-efficient providers of infrastructure
on a huge scale), but to get the best possible
infrastructure and performance from an outside
partner.
Those wanting to compete as digital
service providers/enablers can then leverage
this operating infrastructure to achieve their
strategic business objectives, which are
predominantly to position and future-proof
themselves as digital service providers

16

QUICK INSIGHTS

delivering a broad range of applications and

content into the new digital ecosystem.
Operators need to understand how managed
services are changing and how they can help
them achieve their overall business objectives.
This means starting with a good understanding
of all their current business and technical
processes, and how they interrelate with each
other.
The Business Process Framework, along
with the other elements of Frameworx (see
page 18) can play a key role as demonstrated
in real-life success stories in the brand new
TM Forum Case Study Handbook 2014 which
anyone can download free from
www.tmforum.org/CSH2014.
They must then analyze their business to
establish where and how value is created. This
will help them to develop a strategy for utilizing
managed services strategically and provide the
basis for a request for solution.
Hot managed service providers can now
deliver rapid innovation and transformation.
They are investing huge sums in developing
industrialized automated operational delivery
platforms and associated tools, templates,
methodologies, and techniques. These
incorporate TM Forums Business Process
Framework (eTOM) and also the Information
Framework (SID) for a common language/
model. They also employ highly qualified
engineers and technicians see the managed
services case study on page 8 of the
TM Forum Case Study Handbook 2014.
Further, in support of this industrialized
approach to economic, agile and effective
multi-service provision, TM Forums members
are developing a Digital Services Reference
Architecture, including alignment with ITIL
see panel on page 17 and read more at
www.tmforum.org/introDSRAMay2013

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Report prepared for Mahmoud Gomaa of Microsoft Corporation. No unauthorised sharing.

Architecture designed for high-quality user,

developer and operational experience

The Digital Services References Architecture and ITIL

TM Forum is developing a Digital Services Reference
Architecture (DSRA) for emerging digital services, designed
to cater to multiple business models. It leverages work in
TM Forums Business Partnering Guide (see page 13), which
rationalizes the many different types of business models to
three key concepts: sell to, sell through and sell with.
DSRA in intended to deliver on three key value
propositions:
n A

high-quality user experience Users can access

business applications or see content in the manner they
expect.
n A high-quality developer experience Developers are
able to more quickly create applications in a consistent
manner that can be easily incorporated into service-oriented
architecture (SOA) Service Compositions that are readily
manageable from a quality of service (QoS) and servicelevel agreement (SLA) viewpoint.
n A high-quality operations experience Service providers
are able to provide a great user experience because they
have the information necessary to measure what is going
on, quickly assess root causes and impacts, and react to
problems in a proactive manner.

While there is little question that digital services are an
important step forward for service providers, it may be less
obvious exactly how they are supported by Frameworx. Some
new insights, released as part of (Frameworx 13, published
May 2013), show how to apply the Business Process
Framework (eTOM) in such scenarios.

www.tmforum.org

Applying the Business Process Framework and ITIL

The Business Process Framework material for Release 13
includes a new document (TR206) on Exploring SES Service
Development Scenarios through ITIL and the Business
Process Framework. This has been developed as a worked
example against the DSRA for development and deployment
of digital services.
It uses a combination of ITIL practices and Business Process
Framework process elements. The chosen methodology is to
use ITIL to identify steps in the digital service life cycle and
to map these into the Business Process Framework in the
appropriate areas of the enterprise.
This can be accomplished by examining representative
scenarios in this life cycle and modeling process flows that
address the scenarios.
The TR206 document provides a tutorial on this
methodology alongside the development of the example
scenario concerned, which centers on an upgrade of a digital
service.
Both ITIL and the Business Process Framework relate to
the scenario and demonstrate how the design methodology is
applied in practice.
TR206 also shows how any issues in the detail of alignment
between ITIL and the Business Process Framework can be
identified and recorded for action.
Please visit www.tmforum.org/IntroDSRAMay2013 for
more information about the Digital Services Reference
Architecture.

QUICK INSIGHTS

17

Report prepared for Mahmoud Gomaa of Microsoft Corporation. No unauthorised sharing.

MANAGED SERVICES:
WHATS HOT AND WHATS NOT?
Whats new in Frameworx 13.5 and how can it help you?
Frameworx 13.5 centers around the crucial issues facing
service providers of all kinds in an open digital economy
which are reflected in TM Forums three Strategic Programs:
n Agile

Business and IT Program focuses on improving

operational agility while reducing cost and risk;
n Open Digital Program is designed to drive new digital
services revenue growth; and
n Customer Engagement Program targets better market
share retention and greater growth.
Frameworx was created by and is constantly evolved to meet
changing needs by TM Forums members. They include all
sorts of service providers, software suppliers, integrators,
universities, and enterprises. Members set priorities and
lead collaborative project groups to implement the work and
create updates to the standards and best practices.
While Frameworx major releases are published every six
months, some features in Frameworx 13.5 were developed
in short term agile-style development projects and have been
made available to the broader membership several months in
advance.
Frameworx releases cover the full suite of TM Forums best
practices and standards including our core Frameworks
Business Process, Information, Application, and Integration
as well as our Business Metrics and our broad range of best
practices. Frameworx 13.5 is no exception with 47 new items
introduced across the full range.

Facts about Frameworx 13.5:
n 27 projects were chartered to create this release;
n 141 companies participated in creating the deliverables;
n About 380 individuals joined projects in the community
approximately 40 percent of them were active contributors,
while the rest had the opportunity to observe and review,
comment or ask questions.
New B2B best practices and APIs
TM Forum has defined a comprehensive set of Accelerators
tools, methodologies and standardized interfaces for creating
and managing partnerships in a B2B2X environment with
multiple partners, in a repeatable manner, and at industrial
scale. They include new REST 2 application program
interfaces (APIs) for catalog management, trouble ticketing
and partner ordering.

18

QUICK INSIGHTS

Big Data Analytics Guidebook

Unleash the power of big data held by service providers using
the new reference model, methodology and more than 30
use cases. This document defines a crucial linkage between
business value that analytics can unlock and the big data
technologies and information sources represented in the
documents Big Data Reference Model.
Threat Intelligence Dashboard and ROI Calculator
The Cyber Security Readiness Dashboard uses newly defined
metrics to communicate Cyber Security readiness for C-Level
management. The dashboard reduces risk by providing
insight into issues that could have financial, legal/compliance
and human safety impacts.
Customer Experience Management
Take a new approach to managing customer engagement
with integrated Maturity Model, Lifecycle Model and Metrics.
This new version of the Guidebook (incorporating 250 new
metrics) marks the first step in the transition from managing
customers' experiences in a snapshot piecemeal way toward
managing engagement with the customer across their entire
lifecycle.
Core Frameworks Enhancements
There have been key new additions to all four Frameworks
to extend their application and make them more immediately
useful. For more information about how they apply to you and
your business, please see www.tmforum.org/Frameworx13.5

www.tmforum.org

Report prepared for Mahmoud Gomaa of Microsoft Corporation. No unauthorised sharing.

Have you seen our other recent TM Forum publications?

TM Forum's research reports are free for all employees of our member companies to download by
registering on our website. The reports are also available for non-members to purchase online.
Customer experience: Hitting a moving target
This latest, in-depth Insights Research report looks at how service providers are working to
improve customer experience to differentiate themselves, increase profitability and expand their
businesses. The heart of this report is unique insights from in-depth interviews with service
providers, and survey results, from around the world. The author, Rob Rich, focuses on mobile
users, discussing mobile and digital services trends as drivers.

INSIGHTS
RESEARCH

September 2013 | www.tmforum.org

Free to tmforum members $495 where sold

In previous annual Insights Research reports on customer experience, operators top priority has
been cost cutting. Now they are the differentiating strategies in terms of outcomes, and longer
term profitability and impact on brand.
The report offers pragmatic recommendations about how to get the biggest benefits from
investment in customer experience across the organization. It also explains TM Forums ongoing
work on customer experience, including the Maturity Model, to help service providers move
from piecemeal customer experience to engagement throughout the customers lifecycle.

Customer experience:
Hitting a moving target

All employees of TM Forums member companies can download it free by registering on our
website from www.tmforum.org/CEtarget

Sponsored by:

Digital Life After the hype, wheres the money?

This is a clear-eyed analysis of how the digital services market is shaping up after the initial hype
and identifies some great opportunities for service providers to develop new, sustainable lines
of business. Expectations around the profitability of machine-to-machine (M2M) communications
are shifting, but network operators can compete by adding value, and we look at some
examples.

October 2013 | www.tmforum.org

Analysis:
What weve
learned from
real-life lessons

The regulatory and legal framework will also have a big bearing on the profitability and viability of
M2M services of all kinds as detailed in the second section.

Insights:
Digital disrupters
from diverse
industries
Viewpoint:
KPN Groups
Erik Hoving on
living in a world
of screens

Sponsored by:

AFTER THE
HYPE, WHERES
THE MONEY?

Exploring the evolution of digital services

www.tmforum.org

HANDBOOK 2014

Agile IT
Less risk, less
cost and less
time-to-market
Customer
Engagement
Greater growth
and loyalty
Digital Services
Partnerships
secure fast
new services

SHOWCASING
INNOVATION
AND SUCCESS

Everyone can download this new edition of Digital Life free from www.tmforum.org/DL2013

TM Forum Case Study Handbook 2014

This brand new edition is packed with innovative and inspirational success stories from different
kinds of service providers around the world. All have used TM Forums assets and activities in
many different ways to achieve a variety of different business goals.

CASE STUDY

Everything that can be digital will be.

Weve seen the future. And its digital. In just
ten years, the way we communicate,
consume information and entertainment has
been changed forever. And thats just the start.

The third element looks at how a number of digital disruptors are changing lives and business
models. Courseras mission is to offer a free college education to everybody and make money.
It signed up its first million customers faster than Facebook. We explore a model to enable
mobile universal payments without merchants even having to belong to any mobile money
schemes, and how big brands digital and physical can bring more imagination to emerging
markets to reap huge rewards.

There are five core principles of the Initiative:

From Argentina to New Zealand

The Digital Revolution is transforming our

personal and professional lives. We demand
simplicity, but the complexity behind our
interconnected digital lives is only growing.

Read how Telekom Malaysia used Frameworx to help it launch Metro Ethernet services within
10 months and how GuangDong Mobile is saving $3.3 million a year in operational costs while
improving customer experience. Commonwealth Bank of Australia leveraged cloud technology to
excel at customer service while slashing costs. BT for Life Sciences cloud-based model speeds
research in pharmaceuticals and the platform is sufficiently flexible for use by other verticals.
Wellink helped Russias biggest communications operator, Rostelecom, automate and resolve
service level agreements to improve service to enterprise customers and strengthen its position
in that sector. Indias Reliance Communications worked to identify and fix the causes of service
violations to ensure, for example, service closure was improved to handle 95 percent of instances
within 30 minutes.

Sponsored by:

These and many more success stories are available free to everyone to download from
www.tmforum.org/CSH2014

TM Forums Digital Services Initiative focuses

on overcoming the end-end management
challenges of complex digital services,
enabling an open, vibrant digital economy.
For more information on the TM Forum Digital Initiative visit www.tmforum.org/digital
DigitalServicesAD2012.indd 1

11/23/12 10:51 AM

Visit www.tmforum.org/researchpublications to find out more

www.tmforum.org

QUICK INSIGHTS

19

Report prepared for Mahmoud Gomaa of Microsoft Corporation. No unauthorised sharing.

Sponsored feature

Q&A with Andreas (Andy) Herzog,

Vice President of Managed Services, Comverse
Q: How do you define communicationsrelated managed services?
A: A managed services provider (MSP)
in the telecom space is the fulfillment
partner of the communications service
provider (CSP) for activities that CSPs
typically used to perform themselves.
Thats distinct from equipment
vendor services such as integration,
implementation, deployment and
maintenance.
Q: How have managed services evolved
over time?
A: The big shift in managed services is
from a focus on sheer cost-cutting to a
focus on the CSPs business outcomes
and customer experience.
The first generation of managed
services now referred to as Managed
Services 1.0 was predominantly based
on labor arbitrage services. They often
involved the transfer to the MSP of a
significant number of the CSPs network
deployment and operations personnel. The
main value was cost reduction, created by
improving and streamlining processes and
developing synergies between projects.
Later, in Managed Services 2.0, the
value-add resulted from the introduction
of software tools and the changing of
methodologies. Headcount transfer was
still included, but the real value-add came
from the introduction of managed services
methodologies and business processes
focused on improving CSP performance,
although cost reduction remained and
remains part of the deal.
Managed Services 3.0 started to
appear in 2012/13. Predominantly focused
on the CSPs business outcome and on
the customer experience, it requires a
meaningful partnership between the CSP
and the MSP.
Shifting emphasis to improving the
business results and the customer
20

QUICK INSIGHTS

experience means a greater attention

on value-added services platforms, on
billing systems and on customer care, as
these are the areas that directly impact
the business, rather than pure network
performance. The customer experience
is affected if, for example, a YouTube
clip does not stream well, a voicemail
message has been deleted or there is a
mistake in the bill.
In todays managed services, the
success of projects is measured by a
business and customer experienceoriented set of key performance indicators
(KPIs) in the related Service Level
Agreements (SLAs).
Comverse managed services
engagements focus on parameters that
contribute to CSP business success
such as:
n Agility:

Enabling the CSP business

departments to realize new plans
quicker for a competitive advantage and
faster time-to-revenue
n Precision: Increasing invoice accuracy
and clarity, to enhance satisfaction (and
reduce churn), decreasing the number
of bill-related calls to the call center (cut
cost) and enable faster order-to-cash
n Innovation: Sharpening the competitive
edge with innovative use-cases and
advanced offers.
Q: From a CSP perspective, what factors
have driven the changes in focus from
Cost Reduction to Business Outcomes?
A: The change is driven by multiple
catalysts, such as: market saturation, OTT
competition, regulations that impact CSP
revenues and the transformation by CSPs
to IP-based networking.
To fully leverage an IP-based network
in an era of increasing competition and
decreasing revenues requires changing
ones business approach including

what to sell to customers. Moreover,

IP-based networks require a different way
of management because the source of
potential errors and faults are not so much
in the network, but are now in the service
platforms, the content platforms and the
applications. Thats where the value is and
where the risk is.
As a leading BSS, Policy and Digital
& Value Added Services vendor, CSPs
leverage Comverse Managed Services
domain and product expertise, as well as
our global experience and innovative tools,
to improve business outcomes.
Q: What does the evolution of managed
services mean for the providers of
such services in terms of their required
experience, competencies and skill sets?
Where does all this leave traditional
network equipment suppliers?
A: Some CSPs are still looking for basic
cost-saving managed services. However,
to deliver business outcomes, the MSP
such as Comverse must be able to bring
specific knowledge of certain areas of
the CSPs business and we see that
big legacy end-to-end managed services
providers are not necessarily geared up to
provide that. The creation of value and the
improvement of the customer experience
in terms of BSS can only be accomplished
by a company that has in-depth technical
and business expertise in how CSP billing
systems and processes work, that is,
application vendors.
End-to-End, Customer-Centric View
Today, it is crucial that a credible MSP
can provide an end-to-end, customercentric view extending from the customer
premise environment right across the
network, through all applications, content,
value-added service platforms and
customer care. This requires partnering
with companies with end-to-end
www.tmforum.org

Report prepared for Mahmoud Gomaa of Microsoft Corporation. No unauthorised sharing.

customer-centric competencies, with the

partner acting as a prime for additional
applications in a specific domain. It is likely
that specialist MSPs such as Comverse
will play to their strengths in particular
segments of the managed services value
chain, and CSPs in the future will multisource (and mix-and-match) their managed
services requirements, creating a much
richer managed services landscape.
Customer Experience
There are many facets of Customer
Experience, Order Backlog is just one.
Failing to process correctly a customer
order, is a main cause for customers
churn. To handle stuck orders, a holistic
view of the process is required. Comverse
assists CSPs to significantly reduce orders
stuck in the process, shorten the resolution
time, and reduce the number of calls to
support centers and eliminate churn.
Q: Technology and competencies aside,
have the responsibilities of managed
services providers altered?
A: Today, everything is about risk mitigation.
CSPs want to see more skin in the game.
The question now is: can CSPs transfer a
certain part of their own business risk to
and share this risk with somebody who
has more experience and capabilities?
Risk Mitigation
Risk mitigation brings us back to
specialized players.
If in the past KPIs were mainly operational,
today we must understand the business
of the CSP and its specific strategy. We
need to contribute our product expertise
and global experience, gained through
hundreds of engagements with CSPs
worldwide, to help the CSP meet its goals.
Looking forward, I believe that MSPs
will need to create a correlation between
CSP business results and their revenues.
www.tmforum.org

Q: How do you measure the value added

by managed services? How have KPIs
changed?
A: Everything is more customer-centric
and more strongly aligned with the
business objectives of the CSP and
not just focused on the bottom line. The
KPI regime reflects this shift and the
involvement of the specialized managed
services providers that I mentioned.
For example, the MSP that specializes
in BSS will be committed to KPIs that are
not just measuring if a Billing Cycle went
well, but rather how effective the BSS is
in advancing the CSPs business goals,
including those in adjacent areas, such as
running marketing campaigns.
Beyond the examples mentioned above,
we are also measured on our ability to
contribute to business departments, by
fostering service innovation from ideas
to successful and timely fulfillment.
Q: How relevant is the cloud to all this?
A: Very! CSPs are becoming less involved
with their technology. While the Tier-1 CSPs
once developed many of their technologies,
over time they began buying off-the-shelf
technology, later let others operate it and
in the future they will prefer that others
will own it. The Software-as-a-Service
(SaaS) model, based on the efficiencies
enabled by the cloud technology, plays an
important role in managed services.
SaaS actually has two key benefits for
CSPs. It allows them to:
n Align

their expenses with their revenues

and/or service consumption
n Enjoy advanced business models made
available by the MSP
Q: How has Comverse positioned itself to
meet the new demands of the managed
services marketplace?
A: We work hard to become the first-

choice trusted partner of our customers by

adopting and investing in a business- and
customer-centric mind-set.
As specialists in BSS, Policy and Digital
& Value-Added Services, and with the
intellectual property and experience
Comverse has in those domains, we are
well positioned to provide the kind of
managed services CSPs expect.
As an expert in the BSS and VAS
domains, we wish to prime the operations
of other vendors applications (AOs),
serving as a single focal point to the CSP.
Comverse recently enhanced the
portfolio of its specialized Managed
Services business unit with SaaS and
professional services, combined with
business transformation to deliver the risk
mitigation capabilities that CSPs seek.
We work with clear, best-practice
methodologies, such as TM Forums
eTOM Frameworx to help CSPs align
business processes, and with the
Information Technology Infrastructure
Library (ITIL) methodology for the
governance and service management
aspects of our services.
Q: Looking forward, how do you see the
managed services market developing in
the near future?
A: I think well see greater attention
paid to value-added services, content,
applications, customer experience- and
business objective-centricity.
In a world of big data, MSPs with
advanced analytics will have a significant
advantage. But more importantly, they will
be able to prove the value of their services
in achieving CSP business outcomes. They
will assist monitoring and improving the
customer experience and will drive new
revenues via better-tailored plans.
This is relevant for both in-network
managed services and for those provided
in the SaaS model.
QUICK INSIGHTS

21

Report prepared for Mahmoud Gomaa of Microsoft Corporation. No unauthorised sharing.

Everything that can be digital will be.

Weve seen the future. And its digital. In just
ten years, the way we communicate,
consume information and entertainment has
been changed forever. And thats just the start.

There are five core principles of the Initiative:

The Digital Revolution is transforming our

personal and professional lives. We demand
simplicity, but the complexity behind our
interconnected digital lives is only growing.
TM Forums Digital Services Initiative focuses
on overcoming the end-end management
challenges of complex digital services,
enabling an open, vibrant digital economy.
For more information on the TM Forum Digital Initiative visit www.tmforum.org/digital