Ericsson's recent deal to effectively run Sprint's wireless and wireline network shows the continued value that some service providers place in having vendors help them handle their daily network operations.
Under the terms of the seven-year, $5.5 billion deal, Ericsson will assume responsibility for the day-to-day services, provisioning and maintenance for the Sprint-owned CDMA, iDEN and wireline networks. Still, Sprint maintains that it will retain full ownership and control of its network assets, while 6,000 Sprint employees will become Ericsson employees in Q3 2009 under the Ericsson Services Inc. brand.
Okay, the idea of a vendor providing professional services and even managed services is nothing new. Ericsson itself has been providing managed services for a number of smaller wireless and wireline operators in the U.S. for a number of years.
However, you'd be hard pressed to find two service providers who will agree on whether it's a good idea to outsource their network operations to an outsider, and those telcos and wireless providers that do choose this route see various shades of gray in these arrangements.
On one hand, there's BT, which awarded Alcatel-Lucent a deal to run some of its global operations, while the former EMBARQ awarded Nokia Siemens Networks (NSN) a contract to manage and operate its voice network.
When I asked Jim Hansen, who was then EMBARQ's senior vice president of network services, during last year's SUPERCOMM, why EMBARQ decided to outsource its voice network to NSN, his answer was simply that it would help the tier 2 ILEC focus more of its attention on becoming more of a data and IP services company.
"As we re-badge, we took that particular functional business unit and Nokia Siemens Networks is adding a good injection of capital to really improve the systems that that function relies on, which is nice because now we can divert that investment toward our other needs," he said.
Other carriers, however, remain steadfastly against the idea of outsourcing their network to an outside source. Amid the excitement over the Sprint/Ericsson deal, Verizon Wireless' senior vice president and CTO said the operator has no desire to outsource its network operations to an integrator.
Regardless of whether carriers want to outsource their networks to a vendor, it's hard not to notice that professional services have become a bright spot for the telecom vendor community. It's not the easiest time to be a vendor supplier in the telecom service provider industry, and the latest earnings reports from players like Nokia Siemens Networks and Cisco's announcement to cut jobs show how carrier capex slowdowns are taking their toll on the vendor community.
Ericsson and competitors Alcatel-Lucent and Nokia Siemens Networks have continued to garner network deals in both the U.S. and with international carriers.
While Nokia Siemens Networks reported a strong dip in sales during the recent quarter, Nokia's CEO Olli-Pekka Kallasvuo cited services as a major growth area. "The telecom infrastructure market is evolving, and the most effective growth opportunities are in services -- in particular managed services, consulting assistance in operations and care services," he said.
For telecom vendors the message is clear: if you want to survive this downturn, you'll need to be flexible and think less about selling just fancy boxes, but how you can be an ally to your carrier customers with services and advice that help them meet their business and technology roadmap needs.