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62 | BROADBAND COMMUNITIES | www.broadbandcommunities.com | JANUARY/FEBRUARY 2014 TECHNOLOGY Outsourcing Innovation Managed service providers aren't just business process outsourcers anymore – they are evolving into innovation partners. New technology facilitates that kind of partnership. By Masha Zager / Broadband Communities N etwork operators once were famous for the "not invented here" syndrome. For decades, in-house centers, epitomized by Bell Labs, developed much of the technology that powered the world's telecommunications, with relatively little contribution from outside vendors. Today, telecom, along with other industries, increasingly relies on specialized technology partners. Te nature of those partnerships is evolving almost as quickly as the technology itself. In addition to purchasing hardware and software that "wasn't invented here," operators also outsource some management of those assets. Richard Ullenius, vice president for managed services at CSG International, a software vendor, explains that in the traditional IT outsourcing model, companies own their IT assets but hire a third party – a managed service provider – to manage them. Tis model still works well for companies that have difculty maintaining highly skilled technical staf. A more recent model involves outsourcing the entire IT infrastructure – data centers equipped with hardware, software and IT staf – and buying it back as a service. Tis model has the advantage of transferring IT assets to the managed service provider's balance sheet; its drawbacks include loss of control over a vital function and lack of incentive for the managed service provider to invest in keeping IT infrastructure up to date. Tis inherent confict in goals led to some well-publicized lawsuits between managed service providers and their clients. During the last few years a third model has emerged – software as a service (SaaS), in which a software developer hosts its product in the cloud and acts as a managed service provider. Tis model better aligns the interests of the two parties because, as Ullenius explains, "Te vendor's success pretty much depends on evolving its software." CSG, which develops billing and charging software and related products, uses the SaaS model to deliver software to many of its customers, which include network operators. However, Ullenius is even more excited about the next evolving model – sometimes called an innovation partnership – in which managed service providers assume some of their clients' operational risk. He says, "Customers want their suppliers to put skin in the game." In this emerging model, a vendor supplies a solution for a fxed price and also receives a performance bonus if its client achieves revenue increases or cost reductions as a result of implementing the solution. "Tis changes the conversation from one about cost to one about big-scale transformation," Ullenius says. "[Te client is saying] 'I want you to be my innovation partner and help me grow my business or be more successful as a business. … We've evolved from SaaS and PaaS [platform as a service] to business outcome–based transactions." Find out more about new technologies for service delivery at the Summit April 8 – 10 in Austin. BBC_Jan14.indd 62 1/29/14 10:32 AM