Hollow Operators: Know any?

While working on a FP7 Call 5 project proposal last year, I came across a new term that I hadn't heard of before - the Hollow Operator. I was instantly intrigued. What could that be I asked myself? I quickly realised that it refers to Network Operators who have decided to outsource the running of their network to a third party, referred to as a Managed Service Providers. The telecoms equivalent of a landlord handing over the running of his property portfolio to a management company.

As Network Operators seek to continuously reduce Operations Expenditure (OpEx) in order to remain competitive, outsourcing network operations to a managed service provider is a certainly a viable option on the table for negotiation. In fact, the last few years have seen tremondous growth in this new sector, so much so that all the major network equipment vendors have added a professional services arm to their portfolios. While the global economic crises hit bottom lines, it inevitably led to a slow down in Capital Expenditure (CapEx) by the operators, it was the managed services business that often propped up the ailing network infrastructures sales for the vendors allowing them to report a somewhat healthy balance sheet in some cases.

Why do operators want to do this in the first place? As I mentioned before its because running a network is complex and in telecoms - high complexity equals high cost while reducing complexity through innovation is not easy and won't happen anytime soon. Managed Service Providers are betting that they can run the network more cost effectively than the operators themselves and so the operators hand the running of their network to a third party and are henceforth known as 'Hollow Operators'.

Who are the Hollow Operators? To date as far as I'm aware they are new entrants to the markets, and not the traditional incumbent operators that have a long history in investing in their bespoke management systems. However that may be about to change. (See MWC2010: Will KPN Go All the Way)

So how big is this business? Last year Nokia-Siemens Networks predicted that it would grow to a €200B per annum business. (See NSN Sees Managed Services as $277B Market). Of course, its no coincidence that NSN do happen to have a very healthy professional service division so there is a vested interest here. The elephant in the room in this case is that the network infrastructure built by the vendors are simply too complex and too costly to run and that cost is ultimately passed on to the consumers in one form or another.

Outsourcing to a managed service provider only moves the problem to someone else - the function of managing the network remains the same. Only through innovation can this be really solved. The challenge therefore to the industry and research communities alike is to find news ways to deliver innovative communications infrastructures solutions that can be run cost-effectively, a major driver for the Next Generation Management Network's Self-Organised Networks initiative.

For more on Hollow Operators (See Network Operators: Hollow Be Thy Name and The Substance of 'Hollow Operators')