#2 – Operators enter closer relationships with their outsourcing partners – enabling radical transformation across the entire value chain

Multiple trends are pushing operators to change the way they are working and deliver value to their customers. The increased demands on customer experience and fast time-to-market is causing them to embrace agile ways of working, DevOps delivery models, and analytics-driven decision making. However, these trends are not only affecting operators, but also other players further down the value chain. Parts that have traditionally been outsourced for cost reasons (e.g., back-end IT systems) are now being brought home, as operators build in-house capabilities in strategically important areas. We believe that operators will prefer outsourcing partners that can adapt to these trends and move towards closer, more collaborative relationships, rather than traditional models with a focus on cost and risk reduction.

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Customer expectations are higher than ever. Consumers expect services to be smooth, fun and easy to use. Customers are the true kings of the market, and they are not very loyal. In this new environment, established companies struggle to keep pace with the Ubers, Facebooks and Googles of the world and want to become faster, leaner and more customer oriented.

Therefore, many operators are embracing trends pioneered by software companies. They adopt agile ways of working to become faster and closer to their customers. They switch to DevOps to ensure that they have a sustainable architecture that enables constantly changing product lines. They use analytics to get insights and make decisions based on a deep understanding of their customers.

To serve customers quickly, it’s not enough to have fast purchasing processes or marketing campaigns – the whole value chain needs to be fast. A herd of buffalo can only move as fast as the slowest buffalo. In the operator world, the slowest buffalo is often the legacy back-end IT systems. Traditionally, this part of the company has been outsourced, as software development was considered a non-core activity. In addition, operators are becoming better at decoupling the fast-moving customer interaction from the stable BSS. With these new trends, operators are taking back responsibility, building in-house competence and reducing handovers through insourcing.

However, there is no contradiction between being a fast-moving, customer-centric company and having outsourcing partners. In fact, the right partners can be an enabler rather than a disadvantage. Thanks to their size and exposure to many different clients, some outsourcing companies have strong capabilities within the aforementioned trends. At the same time, other outsourcing companies are stuck in traditional ways of working. Due to their size and long contracts, they have become complacent and unwilling to change.

In 2020, we believe that many operators will realize that they are being held back by their outsourcing partners and that they need to choose a way forward. One way is insourcing. Another way is to find a partner that understands them, their needs, and can support them on their journey to becoming fast-moving and customer centric. This path means having a closer relationship, with more collaboration and joint responsibility, rather than a relationship focused on avoiding risks and costs. We believe that the nature of outsourcing relationships with operators will change in the future and move towards close partnerships.

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