To outsource network maintenance or not

Zhao Ming Ming
30 Jan 2015

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The rapidly growing popularity of smartphones and the upgrading of home broadband services are driving the fast development of mobile and fixed broadband(MBB & FBB). On one hand, the network structure is getting more and more complex with the use of new technologies like LTE and FTTx. On the other hand, operators need to establish and maintain better and steadier networks to support the higher requirements from customers.

Considering that, operators need a professional managed service provider to help them maintain their networks. This will allow operators to pay more attention to value-added services and study to the ever-changing behavior of their customers. It also can help operators save opex as well.

Generally, there are two modes for managed service provider — outsourcing mode and non-outsourcing mode.

In outsourcing, managed service providers will outsource part of the maintenance work (like field work) to the third-party qualified companies after they win the bid from operators. Providers will assign one experienced project manager or management team to guide and manage the third party to carry out the maintenance work. This mode is chosen by most for small-scale projects.

In non-outsourcing, managed service providers will carry out the whole project with their own resources including employees, tools, vehicles, etc. This mode is applied mostly in large-scale projects.

Let us compare these two modes in four aspects.

First, on resources investment. In outsourcing, providers just need to assign one experienced project manager or team to guide and manage the third party. It needs very few resource input. In non-outsourcing, providers need to spend a lot for the initiation at the beginning and continuously input for OPEX (for salaries, business trips, etc) during the processing of the project delivery. Providers also need to finance the project platform establishment and purchase tools and cars and other facilities, etc.

Second, on project management. In outsourcing, the capability of the third party is the key point to the project. If the third party is capable and experienced, then the project manager from provider just need to be responsible for communication and coordination. If not, it will take a long time for adaption. In non-outsourcing, all works and resources are controlled by the project manager. The risk is lower than outsourcing mode.

Third, on risk. In outsourcing, the capability and execution of the third party determines the outcome of the whole project. The project may be out of control. In non-outsourcing, the provider will be directly exposed to the risks including financial loss.

And fourth, on the objective. In outsourcing, the third party pays much more attention to short-term profit. If payment is delayed, they may encounter cash flow difficulties. In non-outsourcing, the provider is not only focused on the profit of single project and has less cash flow stress.

Based on the comparisons, we need to consider the following factors seriously when choosing mode of managed service of network maintenance.

Regarding the budget of project and business conditions, if the business conditions are good with abundant budget, we can choose either of two modes. If not, outsourcing mode is preferred.

Regarding the capability of the provider, we can choose non-outsourcing mode if the provider has enough resources and can take high risks.

Regarding the capability of the third party, we can choose outsourcing if it is qualified and experienced.

In 2014, when FiberHome won the bid for PLDT’s — the biggest operator in Philippines — fixed network implementation and maintenance service, Fiberhome decided to choose non-outsourcing mode.

The reason was that, first, the business conditions were good. By complying with the SLA of PLDT, it can make a good profit for both two companies.

Also, local third parties don't have strong project management capability. And they also charge high prices of outsourcing.

Moreover, Fiberhome is long-term partner of operator PLDT with close business cooperation between two companies. And finally, Fiberhome is experienced on managed service of network maintenance. Fiberhome has a great number of experienced and qualified project management experts.

Till now, the project runs well and customers are very satisfied with the project delivery, proving that the non-outsourcing mode is suitable for that project.

After half a year's cooperation, the project has made great achievements. The failure rate of the network is significantly lower than the rate before project deployment. The number of customer complaints decreases by almost 50% percent. Fault tickets closed under SLA are at 99% from the previous close rate of about 60%.

Choosing the right mode produces much better customer experiences, and both operator and provider are satisfied.

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