Are CSPs and suppliers aligned on future procurement models?

The ease with which a telco can procure and deploy new technologies and source skills has an obvious impact on how quickly and profoundly they can transform the way they operate.

Telcos’ procurement practices, however, can be slow and burdensome, with it often taking months for an RFP to wend its way to completion. Small wonder that Lester Thomas, Head of New Technologies and Innovation at Vodafone Group, would like to see TM Forum’s Open Digital Architecture (ODA) help “kill the RFP”.

Despite a desire for change, a recent TM Forum survey about procurement finds there may be plenty of life left in the RFP for now. The survey, answered by nearly 80 procurement leaders and experts at telecom vendors and more than 50 from CSPs, points to a strong appetite for change but also flags up areas of friction.

Vendors’ concerns about time and costs

For vendors the biggest issues are the slowness of CSPs’ decision-making processes and the expense they incur, as the chart below reveals. Other concerns are the time suppliers spend dealing with procurement departments as opposed to the people who will deploy the technology.

New digital tools and greater automation could help CSPs improve the process of buying technology for everyone involved, but many still have work to do.

Of the CSPs that took part in our survey, 22% say they have evolved their procurement processes for the cloud-native era; whereas 62% said “they are improving but still need better approaches in agile and cloud native”, while 16% admitted they need a radical overhaul.

BT’s dedicated procurement arm, BT Sourced, is one example of how telcos are reinventing procurement. It has invested in tools that have helped it reduce ordering time from weeks or days to just minutes in some cases. It is also striving to put procurement applications in the hands of the wider business so that stakeholders outside procurement can take a more active role in purchasing.

Other issues, however, cannot be solved with tools alone: 35% of vendors say CSPs’ expectation of them to go above and beyond what they are contracted to do is a major source of frustration. In addition, a total of 62% of suppliers point to the problem of CSPs not knowing what they want.

CSPs want cloud-native solutions

These findings could help explain CSPs’ complaints, which include having to spend too much money on change requests and disappointment with the speed and quality of support.

Clearly it is in telcos’ interests to have suppliers use cloud-native, standardized technologies that support the implementation of modular, componentized IT systems and the move to software-based networks. This allows them to use off-the-shelf equipment and swap out software elements as and when they need to, rather than try to carve up a monolithic legacy system, or replace it completely. Some CSPs, however, see vendors dragging their feet when it comes to either enabling the move to cloud-native systems, or in supporting greater collaboration between their supply partners.

As the chart above illustrates, 32% of telcos say it is a major frustration that vendors “want to tie us into their legacy products and services rather than helping us embrace cloud native principles”, while 44% say it is a moderate frustration. And 30% of CSPs flag as a major frustration an unwillingness (or inability) “to work with our other vendors in a collaborative way”, with a further 44% classifying it as a moderate frustration.

The vendors themselves, however, take a more positive view of their openness to change: 83% say they are happy to embrace the tendency of adopting standards and cloud-native principles.

This would put them ahead of CSPs, 57% of which say they are fully embracing cloud-native principles, with a further 27% saying they are moving slowly into cloud-native principles.

The survey also revealed some key differences in opinion on how future procurement models will unfold.

Whereas CSPs and vendors can both agree on the importance of ‘as-a-service’ pricing models, 76% of CSPs see the shift from capex to opex as an important or moderately important trend, only 50% of vendors cite it as a tendency.

Even greater divergence arises when it comes to outcome-based pricing, which would place greater performance constraints on suppliers: 85% of CSPs see this as an important or moderately important trend, whereas only 46% of vendors view it as such, as the chart below indicates.

“When we consider the challenges that CSPs face in transforming their businesses we sometimes overlook the procurement process and the relationship between CSPs and their technology suppliers and partners more broadly," says Mark Newman, Chief Analyst, TM Forum. "The curious thing about it is that both CSPs’ technology teams and their vendors recognize that the process is not working but transitioning to new partnership models and working relationships seems incredibly difficult,” adds Newman.