Telecoms and a Second Generation of Outsourcing
by Dr Bharat Vagadia, Founder and Director: Op2i and Governance Director. Board member NOA
The telecom business is marked by volatility – there is continuous technology innovation, competitive clashes, price wars, and changing consumer behaviour – in this environment, forecasting even a few years ahead is impossible.
With the network increasingly regarded as the underlying “plumbing” for telco services, all are asking if they want to be a plumber or something else (you will have noticed, plumbers can actually earn good money, so it’s not that you shouldn’t be a plumber, but it’s a different trade, and you may need different skills and scale to compete in that game).
Being anything other than a plumber, you need ask whether it’s still important for you to own, invest and control the network in-house (which requires you to invest in and keep your tools maintained) or pass on the responsibility for investment and the risks associated with that investment to another supplier.
On the whole, we have seen operators large and small increasingly turning to outsourcing both network and field services operations. The industry now (and will increasingly) exists in a complex web of deep alliances. In many cases, people who were once arch-rivals are sitting down to collaborate. Old adversaries are forced to do so, given the significant financial, operational and strategic pressures they face, and the format that such collaboration is taking place, is in the form of an outsourcing alliance or some shared service solution.
In many senses, the telco sector was a leader and innovator of outsourcing, both as a buyer and a supplier.
There are today more than one hundred major network operators both mobile and fixed (oh and the in-between Wimax), that have outsourced at least part of their networks to one of the major telecommunications equipment suppliers. The outsourcing supplier scene is also rapidly changing, with new players on the block emerging from the East, as well as old telco competitors getting in on the act.
Outsourcing not only delivered those all important cost savings, but occasionally transformed the operator from being a product centric dinosaur to a customer focused eagle. For both existing telcos and new entrants to the sourcing and shared services market, the key word for successful outsourcing has been flexibility. Managing the change process with the supplier is more vital than the ability to negotiate a robust contract in the first place.
However, it may now be time for the sector to consider a second generation of outsourcing – most outsourced the underlying plumbing – great – no more worries around network upgrades, performance etc but in a fiercely competitive market where your competitors have done the same – the real differentiator can only be content, and not many telcos do content. Maybe a more strategic approach is required to the sourcing of content, maybe even some form of shared content centre?