Telecommunications is one rare industry where the Europeans are ahead of their American counterparts. According to the statistical findings of the International Telecommunications Union (ITU), Europe had a telecom penetration of 111.76 per 100 inhabitants as compared to America’s penetration of 76.66 in 2004. The gaps are even more glaring in the more happening and highly competitive areas of broadband and mobile. While at least half a dozen major European countries are ahead of the U.S.A. in broadband penetration, the situation is markedly different with mobile telephony. In this market, Europeans not only lead in terms of penetration (71.6% as compared to about 42.7% in America), but also in terms of competition, which is more mature and deployment of technology, with 3G picking up rapidly.
For the players in this industry looking at outsourcing, one thing is for sure. Unlike other industries such as financial services, healthcare and retail, European telecom companies cannot look to North America for lessons in outsourcing. They will have to set, and not follow, the rules in telecom outsourcing.
That is exactly what the telecom analysis and consulting firm, Analysys, urges them to do in its latest report titled Outsourcing by Telecom Operators: Strategic and Commercial Options. The report asks all operators to “seriously consider more aggressive outsourcing strategies,” while acknowledging the advances that some of the operators have made.
“It can potentially deliver cost savings up to of 30% in individual areas of activity, and a reduction in overall annual operating costs from 4%–9%,” says the report.
The Analysys report says that some operational functions such as IT, logistics, building and facilities, network build, maintenance and repair, mobile content sourcing and development have already been outsourced by several operators in Western Europe. While leading operators are now beginning to outsource some more back-end functions like HR, finance, procurement and IT applications, infrastructure-related activities like applications platforms, network design, network operations, and service-related activities such as hosting, telecom service delivery, and content packaging apart from other areas are still in-house. Areas such as data warehousing, telecom operations and sales and marketing are still not outsourced, says the report, while emphasizing the need to look more innovatively at outsourcing.
For example, the report advises that the operators who deploy next-generation networks should seriously evaluate the value of operating the legacy networks as well. “A third party could be used to manage legacy networks, until they are decommissioned, freeing resources to drive implementation of new systems,” it says. It also urges the operators not to look at outsourcing as an after-thought but plan for it from the day they enter a new market.
