donprice

Don Price, Director Of Technology, Bharti Airtel

Don Price is director of technology at the largest cellular carrier in India, Bharti Airtel. He talks to telecoms.com about his managed services relationship with Nokia Siemens Networks and his belief that, going forward, operators need to focus on deploying a common network.

Can you outline the extent of your managed services relationship with Nokia Siemens Networks?

The background to this is that four years ago we were in a situation where we were operating six licences in the country, with the potential to go increase that to 23. We were after a new supply model which was based on consumption. I sell minutes, or erlangs, and I wanted a supply model where that was what I bought – rather than me buying the boxes and managing them.

So we came up with a ‘pay as you grow’ model for the supply side. In this case, Nokia Siemens Networks, as well as our other strategic partner in this area, felt happy discuss the managed capacity model, but only if they were actually running the services.

What was the thinking behind their standpoint?

If I’m running the company, and you’re going to give me supply as and when I require it, then you’re only going to get paid based on consumption. So there is then a likelihood of me running it in an inefficient manner, because I have no skin in the game and no exposure.

If NSN do the managed services side of it then they can see to it that we deploy capital in the most effective means possible and actually try and operate it at an acceptable level of utilisation. Therefore, these two elements were really clubbed together as a package which was managed capacity plus managed services.

So how do the two elements of the package break down in terms of responsibilities?

The scope of the deal in terms of managed capacity is equipment supply, initial planning, installation and commissioning, and a one-off optimisation at the time of integration.

Then with the managed services, it’s the ongoing planning and operations and maintenance relative to the active infrastructure, the NSN kit as well as the transmission network. And that covers what was already in place as well as any future equipment to be delivered.

Under the managed capacity scenario, how quickly can you get access to more capacity?

In February this year [2008], we have put up 3,166 sites – which is more than 100 a day.

It’s more or less a cashflow mechanism than it is anything else. The equipment is an asset of ours, it’s on our books and then we pay either by consumption or ring-fence.

So the motivation is really efficiency?

Yes, it is. If I was to plan a new network in Mumbai, I would put my engineers in the room and they would tell me that we needed 750 sites. Then I’d go to NSN, with the old model, and they would say I needed 1,000 sites. Now I tell them, the size of the footprint and the game for them is to provide the capacity in the most efficient means possible. The more boxes go in, the more it costs them. So they want to provide the same capacity with fewer boxes. Now, with the new model NSN comes and says: “You know what? We can do it with 500 boxes.”

And has this allowed you to reduce your headcount?

Absolutely. Basically I don’t have any operations and maintenance staff any more. I have a group of roughly 200 people who are managing a subscriber base of more than 60 million and a base station count of roughly 70,000.

Do you see a trend towards growth in managed services across the globe?

I think managed services makes sense for all operators. But the motivations differ case by case and depending on geography. When I have people from the Asia Pacific region come meet us to gain an understanding of the model, I find that they’re interested in it for core competency.

So say there’s an operator running a 2G network in this part of the world. He has 60 per cent of the corporate market in his country, he’s staring at 3G deployment and he doesn’t have any 3G experience. He’s got to get it right first time and he’s got to uphold his brand image as he deploys his 3G services. So he says to NSN: “Give me managed services for 3G because I need the core competence.”

People coming from Europe are more likely to have a legacy network, to be worried that their staffing has ballooned, their costs are high. They want to know how they can create efficiencies and reduce cost? So there are different drivers coming from different parts of the world.

From my perspective, managed services gives you core competency, predictability, commitments relative to KPIs, quality customer experience, and SLAs. It takes the huge administrative burden from the management and frees them up to think about other things.

So what has been the impact on network quality?

It has absolutely improved but there are still things we struggle with internally sometimes. From time to time find yourself in a situation where the network quality has deteriorated. You want to purchase some one off optimisation services from your supplier. So you get a proposal, you spend a couple million dollars, they come in and make some commitments to quality movement and they deliver on them in order to get paid. To deliver that they have a set of proprietary tools that they apply to your network to quickly drive these improvements.

Now those tools that I used to use once every year or two and pay money for are applied to my network every day, 24/7. And a derivative on that is an improvement on network quality. Congestion has improved significantly, dropped calls have improved.

Primarily, the customer is interested in whether is there coverage, whether they can get on the network and whether there is retainability (resistance to dropped calls). And all of these parameters are improved.

But some people argue your managed services supplier should definitely not be your infrastructure supplier, don’t they?

There’s one argument that says your managed services partner should be vendor-agnostic, because he will bring you the best in breed kit. Then there’s another argument that says there’s nobody better to operate and maintain the network than the guy who designed and manufactured it.

But as an operations person having done this for a number of years, I would tend to say go with the latter, because there are benefits.

If I was providing you with a suite of managed services, and I didn’t have a supply relationship with you worth billions of dollars, what are you going to do to me if I don’t deliver my KPIs and SLAs. As a pure services provider I don’t have any real skin in the game. At most you could take a percentage of my profitability because I wouldn’t agree to taking a loss. And assuming my profitability is somewhat limited, the opportunity for you to penalise me is also somewhat limited. But if I’m also supplying you with billions of dollars’ worth of equipment, if I get hit with a two per cent penalty, all of a sudden it’s a meaningful number.

Is there any area of operations that you feel should never be outsourced?

My feeling is that it’s a function of your ability to have proper governance. The things you would want to retain are things like market planning. I want my business guys to draw my cloud for me in terms of where they need coverage. I wouldn’t just leave that up to a third party because ultimately they have to deliver a P&L.

So the market planning needs to be done by the business. I think that then it’s a matter of governance. You need to govern the design, the kit relative to specifications, towers, shelters, antennae etc – they all need to be governed. But that’s easy to do because you just set up some frame agreements with your suppliers and you let your managed services partner just call off against those frame agreements.

To what extent is the move to outsourcing an emotional decision for carriers?

This is the most difficult part of the entire exercise because people feel that network is their core competence, their key differentiator. Ultimately what the customer is buying is a network experience. They’re buying a service experience, a point of sale experience but at the end of the day you can give the phones away for free, you can have a very low airtime rate but if the phone doesn’t work, the customer is going to churn.

So in a lot of organisations, the CTO will be the biggest opponent to this type of initiative. People start to worry about job security, there’s a whole set of emotions that come in and just trying to get alignment in the boardroom to do this is the most difficult thing.

I was screaming the loudest about not outsourcing. How could anyone do this better than us? This is our core competence. But the board took a decision, we executed it and now I’m the converted. I absolutely believe in this model. But we debated it internally for 18 months, it was the longest time taken to reach a decision in the history of our company and I still argued to the end against it.

So when did you change your mind, when did you realise it was the right thing to do?

Probably the first time I actually felt that this was a good thing to do, personally, was even before we started seeing improvement in KPIs, because these things take time. What happened immediately was that rather than me getting 30 messages an hour relative to network performance, sites being down, trouble tickets being raised, with my phone ringing off the hook, that was all happening to my managed services partner. We were having dinner together, my phone was relatively quiet and he was on the phone constantly. And I’m saying ‘this model is great!’

That happened within a couple of months. But after about a year we really did start to see a movement in the KPIS. When I was building sites I was building 400 a month, now my partners are building 3,000 a month.

Even if the network is not necessarily viewed as a core competency any more, do you think it remains a core asset for carriers?

It’s interesting because this is really the discussion that we’re having these days. My thinking on this is first of all, the network is important. But if you look at the relative importance today versus a few years ago, it’s changing. A few years ago network was a potential delight factor. Somebody got their phone, they pull it out of the box, they make their first call and they are absolutely thrilled. Now if they pull the phone out of the box, pop the SIM card in it and if it doesn’t work in the parking garage in the basement, they get pissed off.

So network has moved form a delight factor to a dissatisfaction factor because expectations have increased. Second, look at impact scores relative to customer satisfaction. A few years ago network might have been 70 per cent of the impact score, then you’d have service, sales and marketing, billing all below that. Today the impact of network has reduced and the others have come up. Customers are more concerned that their bills are accurate, they’re on the best plan, customer services answers the phone and quickly and resolve the problem. Network is still the most important factor, but relative to the others it has less impact today.

Having said that I believe that we are all in the business to make money. As a network person I can do very little do drive the top line but I can certainly do a hell of a lot to drive cost out of the middle. So therefore I believe things like passive network sharing, site sharing, co-building of sites and ultimately even the active network sharing is the right path to go down.

If you and I are competing in the same market, it doesn’t make sense for both of us to do the build out. We have an expense that we can’t reduce, you’re left with an expense that you can’t reduce. You’re on the left side of the highway, and I’m on the right side of the highway. What did we do? We crossed the finish line six weeks apart. So as we go forward in the industry, as a network community, let’s build one highway, one common infrastructure and let the sales and marketing guys compete on the cars.

Have there been any real problems for you in your experience of managed services?

There is a pain point that comes up quite often. If you are a managed services partner, you have a business of trying to drive growth in terms of your revenues and profitability. You’re getting a fixed amount from me for services. But beyond that you’re somewhat limited. So what do you do? You try and figure out ways that you can take cost out of the middle as well. So you start outsourcing to other agencies.

So you get double and triple hop outsourcing. All of a sudden I come into a meeting, look across the table at the other people. They’re not my guys, they’re not NSN guys, they’re a third party. The guy’s been out of school six months. He can barely spell RF and he’s designing my network. So there’s a part of me that doesn’t like that. And we get into a lot of debates around it.

But at the same time a part of me says that as long as you’re meeting my KPIs and SLAs, why should I be bothered? But the guys I work with, it’s an emotional thing, it drives them absolutely crazy. I have to pull them back and say: “Are the KPIs better? Are the site deployments better? Is the customer satisfaction better?” If the answer is yes to all three then there’s really nothing to discuss.

It’s a risky proposition, right? But it’s a risk worth taking, absolutely.