Same same but different. It is a cute Thai phrase that implies goods that are different but functionally the same. While a fun phrase, communications service providers (CSPs) that outsource with the intent of being same same but different and winning purely on cost savings will have little to cheer about. Commodification in the global economy isn’t pretty.
“Today, engaging a managed service provider (MSP) is no longer just about running a network cheaper,” noted Jack Zatz in a strategic white paper, Building An Outsourcing Relationship, by Alcatel-Lucent (News - Alert). “MSPs must now help deliver rapid innovation and transformation that can successfully address fast-paced changes in technology and the marketplace. These transformational capabilities will provide a competitive advantage — both for MSPs that can deliver the services and for CSPs that want to stay ahead of major trends and end-user demands.”,
Zatz outlined 12 crucial areas that CSPs should consider when outsourcing part of their business.
It starts with going into the outsourcing partnership with clear understanding of what matters and why outsourcing makes sense. CSPs need to focus on the metrics that matter most to their business, advised Zatz; they need to take a holistic view of TCO—and they need to understand that outsourcing offers more control for the CSP (News - Alert), not less.
“On the surface, this conclusion appears counter-intuitive,” wrote Zatz. “In fact, a properly structured managed services engagement can give a CSP more control over the things that really matter to the business: more control over costs, delivered levels of service, on-time delivery to market and use of scarce resources to grow its business.”
Next, finding the right partners is important. This means assessing the MSP’s approach to people resources because innovation almost always starts with good people liking their work. It means looking for innovation strengths and a vision for the future and the types of featured services they would like to offer. It also means investing in an initial consultation to get things right at the outset.
“A consulting engagement with the MSP gives the CSP the opportunity to assess whether the MSP is truly the right partner for a long-term outsourcing commitment,” according to Zatz. “In many ways, it is like dating and going out as a couple to get to know one another, before committing to a long-term relationship. CSPs need to become familiar with the mindset of the MSP and evaluate whether a long-term managed services partnership will work.”
Once partners are in place, there is then the business of working together well and innovating. In the paper, Zatz recommends being flexible on the scope of an agreement, combined structured governance and open communications, starting with a partnership mindset and working toward a transformational vision of the future. He also suggests leveraging industrialized operations delivery and including ongoing improvements to customer experience.
“As long as the end users’ experience meets expectations, they will be content with their services—and likely to continue doing business with their current CSP,” noted Zatz. “However, if the end users’ experience does not meet expectations for any significant period, they will get frustrated, and the likelihood of churn increases dramatically.”
He pointed to research by Convergys (News - Alert) that suggests 40 percent of end users will consider switching a CSP after a bad customer experience. He also noted that a Bain & Company study showed that a 5 percent improvement in customer retention rates can yield as much as a 75 percent increase in profits across a range of industries.
So firms that are considering outsourcing should keep these 12 crucial areas in mind. Unless they want to be same same but different while their competition takes all the attention and sales.
Edited by Peter Bernstein