The managed services concept represents a paradigm shift for the telecoms industry, transforming decades-old business models. Magnus Mandersson, Vice President of Managed Services at Ericsson, says: "A quarter century from now, a vast majority of telecom companies will have their networks managed and operated by a different company.

"We help bring cost efficiency to the operators by running their networks efficiently. When we manage their IT infrastructure and their business support, such as billing systems, we support them by giving them more time to focus on their core business, which may be selling, marketing and focusing on the needs of their customers."

With managed services, an operator's competitive edge should shift from network and service management to innovation and product packaging. Operators will be free to profile themselves through attractive pricing, handsets and service innovation. Outsourcing and the shift in responsibility should help operators to focus their resources on revenue generation rather than network management.

Such was the case when Belgian operator Mobistar, a member of the France Telecom group, chose Ericsson to manage parts of its network activities during 2007. The five-year agreement, which also includes the transfer of 150 employees from Mobistar to Ericsson, is expected to be in commercial operation from the second quarter of 2007 and has a value of about EUR 300 million.

The agreement will enable Mobistar to lower its operational expenses and focus on further improving its position in the Belgian telecommunications market, while Ericsson will provide top-quality network performance for Mobistar customers.

Managed services were first brought to market in the mid-1990s and began gaining traction as a service offering following the financial pressures resulting from the telecom crisis of 2001-2002.

These pressures led operators to consider the potential cost reductions and operational efficiencies of entering a managed service agreement. The need to reduce costs is ongoing, especially as competition increases.

"Taking care of their network can be an expensive part of operators' business," Mandersson says. "They have to focus on equipment maintenance, training and keeping employees up to speed on the latest and greatest technology. But with a managed service agreement, we move to the background, take care of those jobs, and they focus on their core goals."