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With increasing network complexity, spiraling security issues, the constant demand for new services and pressure to maximize efficiency and cost effectiveness, taking advantage of managed and hosted services offerings from equipment vendors is beginning to gain traction in the market.

The driving force behind this shift is new market innovations, such as the convergence of voice and data services, as well as the move to the IP multimedia subsystem (IMS) architecture, both of which are adding to the complexity of network operations. Managed and hosted services are also appealing to virtual network operators (xVNOs) that repackage network capacity and lack the infrastructure to deploy or add advanced end-user services.

Thus, taking strategic advantage of network managed service solutions enables service providers to focus on customer growth and retention by developing new and enhanced services, while still maintaining the reliability, security and efficiency of a next-generation network.

At the very heart of today’s advanced network managed services are the resources and technology that only a world-class Global Network Operations Center (GNOC) can provide. One advantage of a GNOC-enabled managed service is that each customer gains immediate access to a growing menu of new services designed and tailored to meet the voracious appetite of their specific customers. For example, managed service vendors with GNOCs can provide a diverse set of services to service providers, including diagnostic performance, troubleshooting, security, network restoration and contact management.

GNOCs offer service providers 24/7/365 Level 1 Network Monitoring and Surveillance, which means a managed services provider will monitor, analyze, manage and often improve customers’ networks with a suite of services called Remote Network Management Services (RNMS). RNMS detects network irregularities, ensures network service requests are completed in a timely manner, measures usage of network services and determines costs, evaluates the effectiveness of networks and uses security tools to monitor and control network access.

So advantages for the managed and hosted services provided by GNOCs are tipping the scales for the appropriate network operation scenarios. And when service providers combine the cost-effectiveness--some customers have experienced savings of 25-30 percent--with the ability to immediately offer hot new services, the choice to move to managed and hosted services is becoming clearer every day.

In particular, the value of voice over Internet protocol (VoIP) to the enterprise has dramatically altered the hosted services arena during the past five years.

Initially, corporate interest in the technology was driven by VoIP’s potential for reducing communications costs. Today, VoIP’s value proposition is based on the use of IP private branch exchanges, or IP PBXs. IP PBXs help reduce overall operating expenses and also provide new end-user services and features. Using IP PBXs for VoIP and other new services opens up a much broader perspective with new opportunities for service providers to capture new revenue, while helping their enterprise customers reduce costs and expand services.

Until recently, the value of VoIP to enterprises was in reducing toll charges for on-net calls, or as a toll bypass tool using local gateways for terminating off-net calls. When calls were being incurred around ten cents per minute, an alternative that could reduce this to almost nothing spurred early adopters to deploy IP trunks, or even IP PBXs, in their own corporate networks. But in today’s competitive operating environment of a few cents per minute for toll calls over circuit-switched facilities, this value proposition no longer applies.

The newest generation of IP PBXs are software-based and run on a number of computing platforms and open architectures. VoIP is becoming another enterprise application that can be operated and managed within existing data center processes. And by leveraging the VoIP infrastructure, personnel and processes, enterprise IT departments can lower operating costs. By using IP PBX platforms, operating costs can be reduced by about 30 percent when compared to circuit-switched PBXs.

Service providers realize they must support enterprise VoIP adoption or ultimately risk losing customers and revenues. They are still expected to offer traditional service bureau functions--such as local number portability, site provisioning, and 911/E911 services--while also providing VoIP interoperability into public and private circuit-switched networks. And they have to be far faster to market with these new offerings.

Competition is coming not just from traditional telephony services, but also from numerous new entrants in the IP data center market. Cable companies are also expanding their VoIP offerings into the business segment. And, the same companies that are providing consumers with VoIP services independent of the carriers are branching into business-class VoIP services with feature-rich PBX capabilities, resulting in lost PBX/IP PBX service revenues to the underlying carriers.

To meet this increased competition, service providers have several options. These include:

Traditional transport

One option is to continue to provide low-cost IP transport and circuit-switched access and termination services to enterprises that purchase, deploy, and manage their own IP PBXs. However, the service provider is being used only for transport--the traditional model--with risky customer retention and little value-add capabilities.

Managed IP PBX services

Another model is to provide the enterprise with IP PBX service, in which the IP PBX is owned, operated and maintained by the service provider on the customer premises. This results in lower capital expenditures and staff operating expenses by the enterprise customer, and increased value-added service revenue for the carrier.

However, this model also means the service provider has to carry the customer’s capital equipment and operating expense. Also, this solution may not scale across multiple customers, or even a single customer’s multiple locations, due to the dedicated IP PBX equipment needed for each set of locations--a drain on the carrier’s margins.

IP Centrex

The use of IP Centrex or IP-enabled Centrex, another VoIP option, provides a type of hosted VoIP capabilities through local exchange carrier Class 5 switches.

IP Centrex addresses some of the enterprise customer’s telephony management operating costs, such as self-management of adds, moves and changes. But IP Centrex installations do not match the features and operations of a pure-play IP PBX. When a carrier adds IP Centrex capabilities to its Class 5 switches, the carrier assumes the associated capital and operational expense, and must also integrate the platform into its existing infrastructure.

Hosted IP PBX: A better alternative

Compared to the options described above, a better approach is to use a network-hosted IP PBX partner to provide VoIP features and services to the service provider’s enterprise customers. Hosted IP PBX services significantly reduce the service provider’s financial, technical and operational risk. It also improves the service provider’s time-to-market and ability to rapidly generate revenues. Plus, it is a viable solution for providing services to Virtual Network Operators who may be purchasing and reselling/rebranding excess network capacity.

The hosting partner owns, manages, and hosts the IP PBX platform in its facility and connects with the service provider network. This approach allows the service provider to focus on its core competency of network connectivity and service bureau capabilities, while also retaining control of the enterprise customer relationship.

In addition to VoIP, other hot areas of growth for hosted/managed services include a wide variety of communications applications, including unified messaging, security and mobile IP extensions, which allow common PBX office phone features be ported to cell phones.

Given today’s competitive and operating environments, the benefits of the managed/hosted services model provides compelling reasons for service providers to work with a hosting partner to deploy enterprise IP PBX services. Lower operating expenses, shorter time-to-market, improved customer service and security, and enhanced customer retention are just a few of the compelling reasons why service providers should explore this new operational model when offering VoIP and other IP-enabled services to their business customers.

David Dial is Lucent Worldwide Services Vice President, Managed Services.

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