Making network-services deals: Sourcing and service-delivery strategies that work


The days of the blockbuster deal to outsource the IT department and the company’s infrastructure assets are long gone.

IT outsourcing deals are now much more targeted.  Most enterprises prefer transactions that cover discrete service towers and functions on an increasingly granular basis. This is particularly prevalent in modern network infrastructure deals where enterprises increasingly acquire a complex mix of managed network services sourced from multiple providers. 

When structuring managed network service arrangements, enterprises are selecting providers based on their capabilities and expertise in specific network technologies and functions such as legacy voice services, unified communications, WAN, wired and wireless LAN, and security. To optimize service delivery in these multi-sourced settings, enterprises vary the degree to which functions are outsourced or kept in-house. They keenly focus on retaining responsibility for important processes that are supported by strong and capable in-house resources, and then purchasing from the market the technology, expertise and resources that are either unavailable internally or sufficiently commoditized that they can be delivered cheaper and more efficiently by external suppliers. 

The service-provider landscape has also shifted. Carriers and large system integrators continue to feature strongly, but a range of smaller and nimbler providers specializing in individual technologies and services are growing their market share. Several network-equipment OEMs are starting to push their managed-services offerings (not least Cisco), and some SD-WAN providers are selling fully managed solutions.

With this increasingly complex use of managed network services, the upfront strategy, sourcing process, transaction structure and contract negotiation approach employed by enterprise buyers must evolve to meet the demands of flexible, numerous and interconnected service arrangements. Success in this new environment requires specialized and mature sourcing and contracting capabilities and processes tailored for managed network services. 

Clearly define the deal

Precisely defining the scope of the managed network services that you need is a crucial step. The most common cause of confusion and disputes in managed network services contracts relates to whether a particular function or activity is in or out of the provider’s base scope of services. If it’s in-scope, the base charges apply to the provider’s performance of the function or activity, whereas if it’s out-of-scope, the service provider can charge you an extra fee for the work.

Avoiding such issues begins at the start of your sourcing process, by clearly and comprehensively defining and describing the required in-scope services in the request for proposal (RFP) document that you issue to potential providers. Spending the time to get this right will reap dividends later. The process employed to document the scope creates a shared understanding and alignment internally for the sourced services. It also helps ensure that the proposals you receive cover all the functions and scope you need and can be evaluated on a like-for-like basis to facilitate an efficient and objective down-selection.

As enterprises have become more familiar with integrating managed services from multiple service providers, they have also developed mature standard working practices, operating procedures and policies that they expect to apply to all of their major service providers. The practices, procedures and policies cover areas such as change management, incident resolution, asset management, integration with and use of customer tools, reporting and invoicing requirements, personal data processing safeguards, contract compliance management and minimum security controls. Imposing the same processes and procedures on major suppliers makes it easier for companies to integrate a diverse mix of managed service providers into a holistic network infrastructure operation. 

Not all service providers are readily willing to conform their processes to the customers’ policies and procedures. Instead, they prefer to apply their own approaches, tools, procedures and conventions, which may not align well with those of their customers. Where service providers have invested in training their personnel on specific processes and tools and are proposing to deliver managed network services via shared network operations center (NOC) resources, they will naturally resist customizing their processes for you.

But seemingly minor differences between a service provider’s process and the equivalent customer process can sometimes cause unforeseen problems and friction between the parties during service delivery. Accordingly, you should provide the processes and procedures with which you expect service providers to comply at the start of the sourcing and service provider selection process, not after you start negotiating contracts. (For example, include a copy of your change-management policy and procedures in the RFP document.) That way, you can pick service providers that best fit your processes and, as a result, can integrate more seamlessly with any other managed network services providers in your environment.

Determining which service providers best meet your needs and priorities involves a thorough comparative analysis of each prospective provider, including the niche service providers that only bid on a subset of the managed network services covered by the RFP, such as supporting only a particular network technology or geographic scope. To help define the optimal service-delivery arrangements from the available proposals and meet any regional requirements, enterprise customers should fully scrutinize and evaluate each bidder proposal independently, and also assess certain combinations of managed network services from multiple suppliers on a best-of-breed basis. To do that properly, you must solicit proposals via procurement documents that structure the service scope into discrete standalone lots or modules, which can be evaluated both in isolation and in combination with other lots or modules.

Key solution and service-provider differentiators

With the proliferation of managed-network-services providers, the differences between them and their solutions has grown exponentially. The relative importance of these differences can vary dramatically depending on the deal context, the state of the customer’s existing network environment and the customer’s technology roadmap. For each potential deal, identifying, understanding and assessing the relevance of these

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