In the recent past, CSPs owned the value chain – they “owned” the interface with the customer, defined the services to be extended to their customer, deployed and ran the network and billed the customers for the services they consumed. In this marketplace, the CSP deployed many variations to their business model to achieve expressed objectives including, for the past few years, an increase in managed services and outsourcing. Even from their position of command and control the CSPs had marginal success in developing proper relationships (maximizing equitable value) with their managed services “Partners” and, in return, the “Partners” provided only a standard level of service. So the target of a “win-win” relationship has ended up being more of “use-lose” relationship.
With the transformation of Communications Services Providers into Information Enablement Providers (See Colin Orviss’ blog at http://www.telcoprofessionals.com/browse_blogs.php), CSPs are no longer in a command and control position when developing these relationships and are now JUST part of a digital eco-system where they, with many other partners, will deliver services to customers. The introduction of OTT players the likes of Apple, Google, Amazon and Facebook has eroded the CSPs interface with the customer and will continue to erode it further. In addition, the creation of communication like services bundles offered directly to customers by health providers, insurance companies, utilities companies, car manufacturers and more have removed CSPs from being the only provider of communications services to a waiting population. But it’s not just the network that IS or SHOULD be the core strength of a CSP with its increasing traffic and high demand of QoS. For CSPs to partake in this new marketplace and become Information Enablement Providers (IEP) rather than dumb or “smart pipes, one of the most critical elements to their new success is changing their understanding and approach to partner relationships, most specifically, understanding why they need to partner differently, their new role in the changing ecosystem and how to readjust their expectations of their partners in order that value can be maximized and rewards shared within the ecosystem partners. Should CSP’s not change, ALL of the key success measurements will decline and decline quickly and AT BEST, a CSP will be marginalized to being a dumb pipe.
What is a Partner - Changing CSPs Expectations of their Partners
A partner is, by definition, someone whom you trust and with whom you can share and exchange thoughts and ideas and, as a result, create an outcome that is valuable to both parties This is, however, an increasingly well worn term in the CSP world these past years BUT in reality, MOST CSPs have “serfs” rather than real partners. The “Partner” (serf) is contracted to perform certain functions and is paid for defined actions. They are also often the scapegoat when things go wrong (whether it’s their fault of not). Things are, fortunately, starting to change (and fortunately there are a number of our clients who are at last listening to us on this topic). Where expectations of a partner by a CSP used to be maximum server uptime, cheaper prices and the occasional new idea; expectations today are far more top line and bottom line driven for both the CSP and the partner. Partners will target the CSPs in the geographical regions that will yield the best return on investment, specific CSPs that have the highest probability of joint success and with whom they can easily do business (read that as being fair, reasonable and open minded). With limited resources, partners must target to be successful and if CSPs do not meet partner needs, partners will seek other CSPs. For CSPs, partners must drive revenue, differentiation and ongoing innovation while integrating where necessary, into the internal ecosystem of the CSP easily and effectively. When the product or service stops adequately contributing to the top line and bottom line, CSPs will seek to decommission this product in light of another. Long-term relationships are nice to have but the length of contracts is no longer based on the number of years documented but the value both partners receive in the relationship.
(Re)-Creating CSP agility and innovation - Changing Why CSPs Partner
CSPs need to provide more innovative and directed experiences, applications, products and services quickly to compete in the marketplace and meet their customers’ ever changing demands. Most CSPs have developed cultures, processes and decision models that inhibit the creation, nurturing and evolution of innovation outside small incremental change in existing solutions. The only chosen partner for CSPs, the Managed Services companies, have therefore tended to deliver capabilities that align with this model, very often “doing as they are told or requested” rather than partnering with the CSP to create a step change and exposing their complete portfolio of advanced solutions to their partner. The transformation to bring forth and share a culture of innovation while delivering ongoing services has been marginally successful at best where tried and as such, CSPs are looking to partners to bring forth this innovation that is then integrated with the CSP offering and channeled to waiting customers. These new solutions span a variety of areas of expertise from new business operating models through gaming, health, science, utilities and much more. Companies developing these products bring with the product a vertical expertise that is rarely found in the current CSP resources but, when the knowledge is combined, brings forth the necessary understanding of the ecosystem to maximize value – BUT ONLY if the CSP is open-minded. This new breed of partner is not only from a Managed Services company but may also be an organization with a large constituency needing solutions, a niche product supplier, a services company, a device manufacturer and a CSP that together provide a full customer solution.
Another reason why CSPs are changing why they partner is the need to be able to switch solutions fast and efficiently as new ideas arise, bringing back the agility that CSPs have been lacking for some time. It is critical that CSPs maintain flexibility in their partnerships, their existing/traditional environment and the M2M marketplace as new devices, solutions and services surface daily. Parhelion-GCA has begun to support our former CSP clients in using partnerships to transform into an IEP. Stay tuned, the fruits of this labor will be seen in our customers soon.
CSP role in the extended eco-system - Changing How CSPs Partner
Lengthy contracts requiring months of negotiation with complex terms and conditions where the CSP is in the power position are now being replaced with agreements that drive business outcome where all parties share in the risk and the reward. The challenge for CSPs and the existing negotiation teams is that they continue to negotiate using their old terms of reference (price for headcount or per SLA with penalties) not yet embracing the terms that are relevant to the new world (fair price based on role and demonstrated/contributed value linked to business outcomes). We’ve been involved in negotiating/re-balancing “old-style” contracts on numerous occasions and although most have been “fixed” to some degree, ALL of them would have benefited with setting it up right the first time. Going forward, solutions will be managed with several partners in an eco-system where the CSP may or may not lead and provide the network infrastructure, aggregate one or more services from Partners and be the face to the consumer of the product or service. Such elements as role, contribution in the eco-system, demonstrated value, dynamic value sharing and accountability have to be defined up front for the new world of multi-partner services to succeed. Examples of the extended eco-system environment include mHealth, where many insurance companies are leading the initiative; telematics, where in many instances car companies are leading the initiative; smart cities, where governments are leading the initiative. For each case, CSPs have a critical and, depending on vertical, differing roles to play – their choice of role will be determined, in part, with the partners they choose, how they choose to partner and how they can establish a commercially fair business relationship.
There are many factors involved in creating successful partnerships and we at Parhelion-GCA have a full package of elements that have a proven track record in the marketplace (we’ve socialized some of these through our leadership of the TMForum Managed Services initiatives and other TMForum publications). The key to establishing such a mutually beneficial relationship starts with defining an appropriate sourcing strategy (socialized and agreed to internally within the CSP) that defines the boundaries of responsibility, the roles and scope of the participants and the business outcomes.
Failure to create a successful relationship does not have to be an option – you just need to understand the strengths, weaknesses, expectations and needs of both parties and work on making it work! Through our experience in most parts of the globe, Parhelion-GCA can assist with establishing the appropriate prenuptial agreement, acting as a counselor should things be going badly or negotiate the separation of the parties. Come visit us at www.Parhelion-GCA.com to find out more!